A recent Court decision, Chris vs. CBN, raises important questions regarding the doctrine of central bank immunity in Nigeria. In this case, the Court upheld a new central banking regulation (“Regulation 6a”) that requires Nigerian banks to collect customers’ social media account details as part of standard Know Your Customer (KYC) procedures. The Court based its decision on the fact that Regulation 6a was issued in good faith.
The Good Faith Standard in International Banking Law
The “Good Faith” standard in international banking law aims to protect central banks from liability. In Nigeria, section 51 of Banks and other Financial Institutions Act, 2020 provides this legal standard, exempting the Federal Government, CBN, or its officers from liability for actions or omissions done in good faith. The rationale for this standard is to ensure the independence of central banks and allow them to make policy decisions without undue influence or legal consequences.
Application of the Good Faith Standard in Chris vs. CBN
Upon reviewing the Applicant’s submissions in Chris vs. CBN, it is evident that the Applicant’s argument did not focus on whether Regulation 6a was issued in good faith. Instead, the central question before the court was whether the legal immunity enjoyed by the CBN extends to actions that violate or are likely to violate fundamental human rights. In other words, if the Central Bank violates the fundamental human rights of a bank customer , shareholder or lender, can the CBN be excused on the grounds that such violation was done in good faith? The Applicant’s position appears reasonable, as the Nigerian Constitution serves as the foundation against which all other legislation must be tested. Moreover, this argument aligns with the convergence of international banking law and regulation. For example, while the Bank of England benefits from statutory immunity based on the good faith standard, section 244(3) of the UK Banking Act explicitly states that this immunity does not extend to actions that contravene a person’s fundamental human rights. Unfortunately, the Court in Chris vs CBN, chose not to evaluate the Applicant’s submissions on the interaction between central bank immunity and fundamental human rights, thereby opening up the decision for appellate review.
Some Banking Policy Questions
There is no doubt that the interaction between fundamental human rights and the doctrine of central bank immunity is a delicate one especially within the context of bank resolutions and bail-ins. However, relying wholly on section 51 without duly considering the fundamental human rights implications of banking policy and regulation is likely a false sense of security. For one, the convergence of international banking law in this area seems to support the position that a bank resolution regime must satisfy the legal requirements of human rights protection. It also appears settled that the immunity granted in section 51 of the Act applies only when actions are taken by the CBN (including its officers), or the Federal Government in accordance with a specific regulatory power conferred by the Act. However, whether the immunity in section 51 will avail the CBN with respect to new powers, not stipulated in the Act but stipulated in subsequent CBN Directives, is doubtful. Given the decision of the Court to not evaluate the Applicant’s submissions on the interaction between central bank immunity and fundamental human rights, it remains largely unsettled whether the Federal Government or the CBN (including its officers) should be held liable for actual or potential violations of fundamental human rights, in view of section 51 of the Act. Furthermore, the question arises as to whether the Act should override the fundamental human rights of a Nigerian citizen and whether central bank independence takes precedence over fundamental human rights. In the absence of any statutory intervention, the issue may ultimately require the Supreme Court’s attention as the primary policy-making court in Nigeria.
We have provided a review of the data protection issues thrown up in this decision here.
We will continue to monitor any developments regarding this case and the broader policy implications for banking law and regulation in Nigeria. Should you have any questions or concerns, please do not hesitate to contact your usual Balogun Harold contacts or the undersigned.
