- Introduction
Regulatory agencies frequently use fines to enforce compliance and punish the violation of regulations. This piece questions the legality of fines prescribed and imposed by the insurance regulatory agency, NAICOM. The first question is; Whether or not NAICOM has the power to prescribe and impose fines for civil regulatory infractions? The further question is; Assuming that NAICOM has the power to do so, can the fines be challenged and on what grounds?
- Recent Case Law
2.1 One recent case on this point is the 2018 Court of Appeal decision in National Oil Spill Detection and Response Agency (NOSDRA) v Mobil Producing Nigeria Unlimited (2018) LPELR-44210CA. There was an oil spill at a terminal owned by Mobil. NOSDRA commenced an action against Mobil at the FHC claiming N10m fines for failure to report the spill and clean up the damage. Mobil challenged the jurisdiction of the court to hear the case on the ground that NOSDRA did not have the power to impose the fines not being a judicial but an administrative body. The trial court upheld the objection and NOSDRA filed an appeal.
2.2 The Court of Appeal affirmed the decision of the trial court and held that only a judicial body can impose fines. Nwosu-Iheme JCA said,
“By the imposition of the fine, the Appellant acted in a judicial capacity which they are not imbued with under the Constitution. By so doing, the Appellant became a Judge in its own cause, the Complainant as well as the Judge, contrary to the maxim “nemo judex in causa sua”. The Courts will not allow any authority to act ultra vires its powers under the Constitution. ……… I am of the firm but humble view that the imposition of penalties by the Appellant was ultra vires its powers, especially where no platform was established to observe the principles of natural justice. Penalties or fines are imposed as punishment for an offence or violation of the law. The power as well as competence to come to that finding belong to the Courts and the Appellant is not clothed with the power to properly exercise that function.”
- Contrary Decisions of the Court of Appeal
The decision of the Court of Appeal in, CAC v Seven-Up Bottling Co. (2017) NWLR (Pt.1558) 258, held that CAC has the power to impose fines prescribed by CAMA. See also the similar decisions of the Court of Appeal in Moses Ediru v FRSC (2016) NWLR (Pt.1502) 245 and Ebong v SEC (2017) LPELR-53547CA, where the Court of Appeal held that regulatory or law enforcement agencies had the power to impose fines set out in their enabling statutes. Now and as things stand we must therefore have to wait for a decision of the Supreme Court to finally settle the controversy. It must be noted that in those decisions the enabling legislation gave the statutory body express power to impose fines. The power to prescribe and impose fines must be expressly granted by the enabling statute of the regulator. See for example BOFIA which grants the CBN power to impose fines.
- Can NAICOM impose fines ?
4.1 One major lacuna in the NAICOM Act is absence of the express power to impose civil penalties and fines. Therefore, I propose the introduction of provisions in the NAICOM Act granting the regulator the express power to impose fines and observe fair hearing before imposing fines. NAICOM, being an administrative regulatory body, cannot act ultra vires its powers to impose fines. Furthermore, NAICOM and does not have the capacity to act as a judicial body and impose fines without adherence to the principles of fair hearing. See section 36(2) of the Constitution FRN. The NAICOM Act does not contain provisions for fair hearing on allegation of regulatory violations before the imposition of fines but in practice NAICOM does not impose fines without giving insurers the opportunity of being heard on any allegations against them.
4.2 There are offences created by the Insurance Act and the NAICOM Act and fines (which are not civil penalties) are prescribed by the statutes for the violation of those offences. In such cases, NAICOM cannot directly impose those fines but must prosecute the offenders for the criminal offences. Sections 7 and 8 of the NAICOM Act which prescribes the functions and powers of the regulatory body do not contain any express provision granting the power to prescribe or impose fines or penalties not stated in the Act.
- Can fines be challenged?
5.1 The Eighth Amendment of the United States Constitution prohibits the Government from imposing excessive bail, excessive fines, or cruel and unusual punishments. In United States v Bajakajian 524 US 321 (1998), the U.S Supreme Court granted an order of certiorari to quash the forfeiture of the defendant’s money and reduced the penalty. The court held that the penalty was excessive and the 8th Amendment prohibits penalties that are so grossly excessive as to amount to a deprivation of property without due process of law. There is no similar provision in the Nigerian Constitution and there is no known statutory or judicial authority by which any subject can challenge fines or penalties on the ground that they are excessive or oppressive or unreasonable.
5.2 Section 36(2) of the Constitution FRN states that,
“Without prejudice to the foregoing provisions of this section, a law shall not be invalidated by reason only that it confers on any government or authority the power to determine questions arising in the administration of a law that affects or may affect the civil rights and obligations of any person if such law:
- provides for any opportunity for the person whose rights and obligations may be affected to make representations to the administering authority before that authority makes the decision affecting that person; and
- contains no provision making the determination of the administering authority final and conclusive.”
5.3 The danger in granting regulatory bodies the power to impose fines is the abuse of power. A legislative fine or penalty goes through the process of consultation and law making whereas an administrative penalty or fine may be imposed arbitrarily by the regulatory agency. Section 36(2) of the Constitution FRN appears to give regulatory agencies the power to prescribe and impose fines. However, on the authority of section 36(2)(b), the decision of any regulatory agency in the determination of the civil rights and obligations of any person (including the imposition of civil fines or penalties) cannot be final and conclusive and can be subject to review.
5.4 It is my considered opinion that an insurance company slammed with fines by NAICOM can bring an action at the Federal High Court by way of judicial review to quash the fine. The imposition of a fine or penalty by a regulatory agency is a quasi-judicial act which affects the civil rights of the subject. Therefore, an order of certiorari can be made against NAICOM to quash a fine imposed without adherence to the principles of fair hearing. In Judicial Service Commission, Cross River State v Young (2013) LPELR-20592(SC), the Supreme Court held that an order of certiorari can be made against administrative bodies acting in a quasi-judicial capacity. Peter-Odili JSC said,
“It follows therefore that when an administrative or domestic tribunal is to determine whether an officer is guilty of misconduct or of a breach of the regulations, then a “lis inter partes” arises and so thrown up the necessity for a hearing before deciding and in such a case, the administrative body is acting judicially and the principles of fair hearing binding on judicial bodies would by the same token bind such administrative bodies.”
- Conclusion
One major lacuna in the NAICOM Act is absence of the express power to impose civil penalties and fines. Therefore, I propose the introduction of provisions in the NAICOM Act granting the regulator the express power to impose fines and also observe fair hearing in accordance with the provisions of section 36(2) of the Constitution.
