31 March 2004
interview
Miss Azuka Ogo is a Maritime Lawyer. She was called to the Bar in 1980. Since then she has been struggling very hard to use her intellectual wealth to contribute, in government, to the growth of the economy. One of the challenges of her career in government was as a prosecutor for the Ministry of Justice in the Drugs&Miscellaneous Offences Tribunal. Ever since then, she has been at various times, a Nigerian delegate to the International Maritime Organisation (IMO); a member of Nigerian delegation on the International Oil Pollution Compensation Fund among other duties.
Before moving over to run the Cargo Defence Fund as the executive the Fund's first executive secretary in 2001, Ogo headed the Legal Unit of Nigerian Shippers Council. In this interview with Ifeanyi Ugwuadu, she defends the imperative of establishing the Fund. She also highlights the role of insurers, banks, importers and exporters themselves.
Excerpts:
Why the need for cargo Defence Fund?
What has informed the setting up of the fund is due to concern over the rate of abandonment of legitimate cargo claims. We discovered that many small and medium sized import/export companies were closing down operations because of the fact that they were not able to pursue their legitimate claims on time. And these claims could be within or outside Nigeria. So, we began to receive a lot of complaints from the affected companies. The problem may perhaps, be in Taiwan, or somewhere in Europe and it centred on their not being paid or cargoes were damaged and they could not get compensation. Often they say they have made several trips overseas to retrieve their money and came back with nothing. And this transaction may have happened over two years.
The difficulty with international claims is that it must be within a specified time frame and in a lot of jurisdictions, they have to be pursued within a year. Even though developing countries made efforts to negotiate another convention that would allow a 2-year time frame which is popularly referred to as the Hambarg Rules. But if the transaction is already three, four years, there is little any one could do unless by way of negotiation and the parties agree to sort out.
So what we decided to do at the council was to carry out a series of studies on this to, first determine how many claims that were actually abandoned and secondly, to try to quantify the amount of money Nigeria is losing as a result of abandonment of these claims. If you aggregate the totality of these claims, whatever loss the shippers suffered is a loss to Nigeria's economy.
And another thing is that if the losses are collosal, the businesses wind up and when this happens, they have to sack their staff which puts pressure on the job market. This is what informed the research.
So, based on the report of the research, the Fund was set up. The consultants that handled the study actually advised the Nigerian Shippers Council to set a Fund that would address the problems. They advised we set up two Funds; Shippers Litigation Fund and Shippers Protection and Indemnity Fund. The Litigation Fund is to take care of claims arbitration while the Protection and Indemnity Fund is like a mutual scheme for importers and exporters. So, they put their money together to help themselves.
But at the point of implementation, we felt that operating the two schemes will be too heavy in terms of financing. What we did was to merge the two schemes to one Fund which we now named Cargo Defence Fund.
Don't you think that the two schemes should have remained separately? For simple accounting reason, you need to know which money is going to litigation and compensation to shippers:
No! No! No! For purposes of enforcement, there is not much difference because everyone has an insurance scheme anyway. That is, the Institute cargo clauses they normally take. And then, they will enjoy the same benefit. What we consider is the case itself; we look at the merit of the case and handle it appropriately. But for purposes of enforcement, it doesn't really make much difference because if you are a member, you remain so and enjoy all the services of cargo Defence Fund, whether is litigation, insurance or whatever.
Like its parent, the Nigerian Shippers Council, the cargo Defence Fund is a child of government; funded and maintained by it. What has been the commitment of shippers themselves?
As you are probably aware, we hosted five awareness seminars in the year 2002. In setting up the fund, the council did not stop at that, we had to take the fund round to shippers in their various locations. One, to know whether they want the fund because if they don't want the fund, they are the beneficiaries, then we would have ended up wasting our time. Secondly, in the implementation of the Fund, they are the ones wearing the shoes, they know how, where it pinches most, their suggestions were taken during the interractive session of the seminars. However, they said instead of asking them to contribute voluntarily, we should levy them as they are the beneficiaries. They wanted a situation where there is always enough money in the Fund to assist them.
Of course, the council had made the initial contribution into the fund and it continues to do so yearly. The shippers are grateful for this, and have embraced the Fund. Therefore, they have insisted that those of us who work in the Fund should be well trained and versed in international business and law.
What of the issue of levy or contribution. Has it been sorted out?
Well, we have been reluctant to levy them because, the council picks up the administrative expenses of the Fund which means the Fund's account is only used for the beneficiaries of the Fund. Already, there has been a general complaint that there is too many levies on Nigeria's export /import trade. One, government is reluctant to levy export trade because it wants Nigerian exports to be competitive. They do not want to put much levies that would increase their export prices in the international market. And on the import trade, they are complaining now that there are so many levies. Therefore, we have been reluctant to do that at this stage. Maybe in future that may become necessary. But the strategy we are pursuing is to get them contribute voluntarily. The president of the shippers association is quite happy with that. We have a few of them on the Board of the Fund representing a zone.
Does the level of shippers' contribution or commitment to the Fund at the moment indicate that they favour the initiatve.
Oh' yes! What happened is that initially, even after the awareness seminars, we didn't send out the subscription forms for contribution until a few months ago. This is because here at the secretariat, I feel that it is important we set up a proper structure because we are not going to collect directly from those outside Lagos. We are going to rely on the Council Area Offices to collect on behalf of the Cargo Defence Fund. So we have to spend time to train the officers to know what the Fund is all about; to understand the workings of the Fund; to understand the relationship between the Council and Cargo Defence Fund and not to think of it as another department of the Nigerian Shippers Council. It is for them to understand that the Fund is an autonomous and independent organ. And for the forms, I have to print the forms specially. I didn't want them to use Shippers Council documents. One, I had to design the forms, receipts and everything else and get the board to approve them before printing. This means anyone who subscribes to the Cargo Defence Fund would have a number and if they pay to the Fund they will get a receipt from the Fund. Of course the money would have to be paid into a Cargo Defence Fund account. We had to take time to do all these and I think it was worth it because we believed that there was no point in rushing to collect money from importers and exporters in a disorderly manner.
So you strongly believe that in no distant future the Fund will truly become autonomous?
As things are working out I believe so. So far it has been so good and we have progressed even much better than I had expected. And in many matters that concern the Fund, I don't have any recourse to the Managing director of the Shippers Council and I do not even discuss with the MD except to brief her. It has worked out well and all parties had honoured their own part of the understanding.
What are the areas that shippers have incurred more losses?
It cannot really be assessed for now. What we are looking at now is where our shippers are vulnerable. We are focusing on our major trading partners in terms of countries or goods. For example, the largest percentage of claims or complaints we have received where do they originate; from which trade; is it from commodity; is it a particular route; is it a particular country. And so based on the statistics, we state categorically that this is where we have problems. So we are still working on that. But I can tell you countries that have been exonerated; we have not received any complaints from Japan. We have received complaints from Taiwan, Hongkong, Italy, Spain and from other parts of Europe as well. But that is not to say that we have problems with Europe. No! But I'm just telling you where we receive most complaints. Also there is a lot of problems that are tied to the Nigerian end so that at the end of the day you find out that we also need to sort ourselves out locally. In addition, we have received complaints from shippers on their trading with UK.
What is the nature of the Fund's relationship with insurers over special risks that are excluded from standard insurance policies?
What we have done at the Fund is to provide a cover for these areas. In addition to the Institute Cargo Clauses, we decided, for the purpose of Nigerian market, to set up this mutual scheme for exporters and importers so that the areas they are vulnerable, the areas they are not covered at all, then the Fund can provide a cover. But if we have problem with regular policies, then we can agree with the insurance companies on the best thing to do. There is a role for the insurer to play and there is a role for the insured to play. For the insured, we have told them they must take an appropriate policy. It is not enough for your broker to give you a cheap policy; your broker has a duty to explain to you the particular cover to take for specific goods. For example, if you are importing wrist watches, if they are things that can get lost easily; if you importing perishable things or you are exporting them, you have to take the 'A' policy which is the comprehensive cover so that in the event of damage or loss, your chances of recovery will be very good. Of course, there is an exception to all those policies. For goods like grains, you have to use the 'B' policy. But for things like steel, probably, you take the 'C' policy because even if the steel goes down in water, it can still be brought out and it retain its usefulness. The only thing you may have to do in the circumstance, is to clean it up for whatever purpose you want to use for.
In the case of the regular policies, we felt the only way to go is for the insurer to honour its obligation while the insured pays the appropriate premium to fund the market if they want them to pay you. That is one aspect. Then, the other aspects we identified are other areas or risks that are not covered in the Nigerian market. The insurance policy may not necessarily cover litigation costs and the social costs. And for the small and medium scale Nigerian entrepreneur, the cost of litigation in the UK, may be unaffordable for him; he may equally not be in a position to pay the cost of arbitration in New York. And we said come together, pool resources so that when you have to go into arbitration in New York, the Scheme would be able to pay it.
If you have to go for litigation in the UK, the shipper will be able to pay it. It's something similar to the P&I cover which the shipowners have established for themselves. We are working out a system that will be convenient for importers and exporters. For instance, where the shipper was an innocent victim of fraud probably investing all the money borrowed from a bank in a transaction and everything goes, then what happens. If you don't help him out, he will fold up. So, we decided to have something similar to import trade just like you have it in NEXIM for exporters.
In the case of banks who release money to non-existent manufactures, how do you sort it after compensation with the banks.
You now have to find out what happened. In some cases, an official of the bank may connive with the fraudster to present a fake Bill of Lading. And on the citing of the Bill of Lading, they release the money. Sometimes, it may work like that. Or the man may be a fraudulent person who may deceive a bank including officials and then he ships nothing and brings a fake Bill of Lading. When the bank pays , the man clears the money and they will have no trace of him. The banks have a role to play in ensuring due diligence in transactions. But where the bank has been negligent, they have to refund the money and they do make refunds.
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