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Making Natural Resources Work for the People: Challenges and Prospects

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By Dr. Kariuki Muigua, PhD (Leading Environmental Law Scholar, Policy Advisor, Natural Resources Lawyer and Dispute Resolution Expert from Kenya), Winner of Kenya’s ADR Practitioner of the Year 2021, ADR Publisher of the Year 2021 and CIArb (Kenya) Lifetime Achievement Award 2021*

The Natural Resources (Classes of Transaction Subject to Ratification by Parliament) Act outlines some of the relevant considerations in deciding whether or not to ratify an agreement as including: comments received from the county government within whose area of jurisdiction the natural resource that is the subject of the transaction is located; adequacy of stakeholder consultation; the extent to which the agreement has struck a fair balance between the interests of the beneficiary and the benefits to the country arising from the agreement; the benefits which the local community is likely to enjoy from the transaction; and whether, in granting the concession or right the applicable law has been complied with. Apart from these considerations, it is worth pointing out that the Constitution has also laid out some national values and principles of governance which must bind all State organs, State officers, public officers and all persons whenever any of them—applies or interprets this Constitution; enacts, applies or interprets any law; or makes or implements public policy decisions.

It is noteworthy that natural resources’ exploitation and all the related activities are meant to benefit the country as well as communities that live in the areas where these resources are to be found. The Constitution of Kenya 2010 makes provisions on “natural resources” which means the physical nonhuman factors and components, whether renewable or non-renewable, including—rocks, minerals, fossil fuels and other sources of energy. While the Act may not require ratification of all the transactions involving exploitation of different resources, it is important to note that there are other legal provisions that seek to safeguard the interests of the country and the general public as far as benefit sharing is concerned and should therefore be upheld in entering these agreements. While the Act is well meaning in its mandate, there are notably some earlier exploitation agreements that were entered into before the enactment of the Act and were not revised in line with the Act.

The Act specifically in section 16 provides that a transaction that is subject to ratification by Parliament, which was lawfully entered into on or after the effective date but before the commencement date, shall continue in effect and be deemed valid and lawful notwithstanding the absence of ratification by Parliament. The implication of this provision is that there may have been some important transactions that greatly affect communities but do not get the chance to undergo the ratification process. As a result, the communities feel sidelined as far as decision-making is concerned and the environment also gets to suffer. While there are notably other statutory provisions in place to take care of some of these issues, there is the risk of complacency in some government organs and agencies which may mean that due process may not have been followed.

There are still some complaints from some Kenyan communities about how natural resources exploitation activities within their localities are carried out and the lack of inclusion in decision-making and benefit sharing. For instance, the oil and gas mining activities in the Turkana region have been facing serious challenges from the locals who have been complaining about inadequate consultations, inadequate benefits and a general feeling of marginalization from the Government and the contractors. There have also been complaints from other natural resources exploitation about environmental degradation which directly affects the livelihoods of the communities living with such areas. There is scarce information on the existing ratifications since 2016 because, although the Act provides that the Cabinet Secretary shall establish and maintain a central register of agreements relating to natural resources and other transactions which have been ratified as per the Act as well as ensuring that on an annual basis, they publish a report on the summary of the transactions submitted under this Act and the status of ratification of transactions, there are no publicly available reports or published summary of such reports. The effect of such laxity on the part of the Ministry is violation of the right to information which is useful for public participation in decision-making processes and any potential pursuit of their other rights in case of perceived violation.

Environmental laws and regulations and other laws that govern natural resources exploitation are meant to ensure that due process and other legal requirements are met but there are still instances where exploitation agreements are still challenged in courts and other forums for alleged failure to abide by the law. In order to bring the existing contracts or agreements especially in the extractives industry in line with the law on ratification of agreements, there may be a need to consider incorporating periodic contract review mechanisms. Such reviews would also be in line with international best practices, such as the principles of Extractive Industries Transparency Initiative (EITI) which set the global standard to promote the open and accountable management of oil, gas and mineral resources. Through reviews, there may be demonstrated accountability and transparency which is important for the contractors, the government and the communities at large.

Periodic contract review mechanisms, which are provisions in contracts that formally require parties to meet at particular intervals to review the terms of the contract, are mechanisms that may facilitate the process of negotiating contractual changes to accommodate changing circumstances over the term of extractive industries contracts. Some countries such as Tanzania have sought to renegotiate their extractives exploitation contracts where it was deemed necessary. The Tanzanian government enacted laws that introduced changes in the exploitation of natural resources in the country’s mining sector to ensure that Tanzania’s natural resources are exploited to benefit the citizens. Some of the laws such as the Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act, 2017 are meant to empower Parliament to review all the arrangements and agreements made by the government regarding natural resources. The Natural Wealth and Resources Contracts (Review and Re-negotiation of Unconscionable Terms) Act 2017 is meant to give powers to parliament to direct the Government to re-negotiate and rectify any term that seem to bear questionable circumstances in the contracts.

The provision for renegotiation in Tanzania is a notable departure from Kenya’s position which is that a transaction that is subject to ratification by Parliament, which was lawfully entered into on or after the effective date but before the commencement date, shall continue in effect and be deemed valid and lawful notwithstanding the absence of ratification by Parliament. The question that arises is whether, where such a transaction is later rendered unconscionable due to the prevailing circumstances, is there any legal framework to facilitate renegotiation as is the case in Tanzania. While statutory annual reporting requirements under different laws may seem like a cure for this, it is worth pointing out that there is hardly any mechanism in place to ensure that such reporting is done, and where the Cabinet Secretary in question fails to follow up or raise queries on such reporting, the lack or failure of contractors to report will most likely go unreported and unnoticed. It may thus be necessary to consider going the Tanzanian way; putting in place a separate law to govern such matters. It has rightly been pointed out that provided that the parties take advantage of the opportunity to renegotiate terms, the contract terms and conditions can be readjusted before the parties are so desperate and frustrated that the investor decides to stop work or the Government decides to terminate permits and concessions.

*This article is an extract from the Article: Securing Our Destiny through Effective Management, (2020) Journal of Conflict Management and Sustainable Development Volume 4(3), p. 1.  by Dr. Kariuki Muigua, PhD, Kenya’s ADR Practitioner of the Year 2021 (Nairobi Legal Awards), ADR Publisher of the Year 2021 and ADR Lifetime Achievement Award 2021 (CIArb Kenya). Dr. Kariuki Muigua is a foremost Environmental Law and Natural Resources Lawyer and Scholar, Sustainable Development Advocate and Conflict Management Expert in Kenya. Dr. Kariuki Muigua is a Senior Lecturer of Environmental Law and Dispute resolution at the University of Nairobi School of Law and The Center for Advanced Studies in Environmental Law and Policy (CASELAP). He has published numerous books and articles on Environmental Law, Environmental Justice Conflict Management, Alternative Dispute Resolution and Sustainable Development. Dr. Muigua is also a Chartered Arbitrator, an Accredited Mediator, the Africa Trustee of the Chartered Institute of Arbitrators and the Managing Partner of Kariuki Muigua & Co. Advocates. Dr. Muigua is recognized among the top 5 leading lawyers and dispute resolution experts in Kenya by the Chambers Global Guide 2022.

References

Economic and Social Rights Centre (Hakijamii) (Kenya), Titanium mining benefit sharing in Kwale County: HAKIJAMIIA comprehensive analysis of the law and practice in the context of Nguluku and Bwiti, September, 2017Available at http://www.hakijamii.com/wp-content/uploads/2017/09/Titanium-miningbenefit-sharing.pdf [Accessed on 11/1/2020].

Enns, C., & Bersaglio, B., “Pastoralism in the time of oil: Youth perspectives on the oil industry and the future of pastoralism in Turkana, Kenya.” The Extractive Industries and Society 3, no. 1 (2016): 160-170.

Enns, C., “Experiments in governance and citizenship in Kenya’s resource frontier,” PhD diss., University of Waterloo, 2016. Available at https://core.ac.uk/download/pdf/144149828.pdf [Accessed on 11/1/2020].

Extractives Industries Transparency Initiative, “Who we are,” available at https://eiti.org/who-we-are [Accessed on 11/1/2020].

Haufler, V., “Disclosure as governance: The extractive industries transparency initiative and resource management in the developing world.” Global Environmental Politics, vol.10, no. 3 (2010): 53-73.

Johannes, E. M., Zulu, L. C., & Kalipeni, E., “Oil discovery in Turkana County, Kenya: a source of conflict or development?” African Geographical Review 34, no. 2 (2015): 142-164.

Lax, D. A., & Sebenius, J. K., Insecure contracts and resource development, Division of Research, Graduate School of Business Administration, Harvard University, 1981.

Mandelbaum, J., Swartz, S. A., & Hauert, J., “Periodic review in natural resource contracts,” Journal of Sustainable Development Law and Policy (The), Vol.7, no. 1 (2016): 116-136.

Masinde, J., “Are Kwale residents expecting too much?” Daily Nation, Tuesday February 12 2013. Available at https://www.nation.co.ke/lifestyle/smartcompany/Are-Kwale-residentsexpecting-too-much/1226-1690904-nb7rqyz/index.html [Accessed on 11/1/2020].

Mkutu Agade, K., “‘Ungoverned Space’and the Oil Find in Turkana, Kenya,” The Round Table 103, no. 5 (2014): 497-515.

Mui Coal Basin Local Community & 15 others v Permanent Secretary Ministry of Energy & 17 others [2015] eKLR, Constitutional Petition Nos 305 of 2012, 34 of 2013 & 12 of 2014(Formerly Nairobi Constitutional Petition 43 of 2014) (Consolidated).

Muigua, K., “Promoting Open and Accountable Management of Extractives in Kenya: Implementing the Extractives Industries Transparency Initiative,” August, 2019. Available at http://kmco.co.ke/wp-content/uploads/2019/08/Implementing-the-ExtractivesIndustries-Transparency-Initiative-in-Kenya-Kariuki-Muigua-15th-August2019.pdf [Accessed on 11/1/2020].

Natural Wealth and Resources Contracts (Review and Re-Negotiation of Unconscionable Terms) Act, No.6 of 2017, Laws of Tanzania. Available at https://tanzlii.org/tz/legislation/act/2017/6-0 [Accessed on 11/1/2020].

Okiya Omtatah Okoiti v Kenya Power and Lighting Company & 10 others [2018] eKLR, Petition No. 14 of 2017.

Parliament of Kenya, the Senate, The Hansard, Wednesday, 27th March, 2019, Petitions: Iron Ore Mining In Kishushe Area,Taita-Taveta County, available at http://www.parliament.go.ke/sites/default/files/2019- 04/Wednesday%2C%2027th%20March%2C%202019.pdf [ Accessed on 11/1/2020].

Parliament of Kenya, the Senate, The Hansard, Wednesday, 27th March, 2019, Petitions: Iron Ore Mining In Kishushe Area,Taita-Taveta County, available at http://www.parliament.go.ke/sites/default/files/2019- 04/Wednesday%2C%2027th%20March%2C%202019.pdf [ Accessed on 11/1/2020].

Schilling, J., Locham, R., Weinzierl, T., Vivekananda, J., & Scheffran, J., “The nexus of oil, conflict, and climate change vulnerability of pastoral communities in northwest Kenya,” Earth System Dynamics 6, no. 2 (2015): 703-717.

Sturesson, A., & Zobel, T., “The Extractive Industries Transparency Initiative (EITI) in Uganda: who will take the lead when the government falters?” The Extractive Industries and Society, Vol.2, no. 1 (2015): 33-45.

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Brief History of the Permanent Court of Arbitration (PCA)

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By Dr. Kariuki Muigua, PhD, C.Arb, Current Member of Permanent Court of Arbitration (PCA) Representing the Republic of Kenya.

The Permanent Court of Arbitration (PCA) is a 124 Years Old Intergovernmental Organization currently with 122 contracting states. It was established at the turn of 20th Century during the first Hague Peace Conference held between 18th May and 29th July 1899. The conference was an initiative of then Russian Czar Nicholas II to discuss peace and disarmament and specifically with the object of “seeking the most effective means of ensuring to all peoples the benefits of a real and lasting peace, and, above all, of limiting the progressive development of existing armaments.” The culmination of the conference was the adoption of a Convention on the Pacific Settlement of International Disputes, which dealt not only with arbitration but also with other methods of pacific settlement, such as good offices and mediation.

The aim of the conference was to “strengthen systems of international dispute resolution” especially international arbitration which in the last century had proven effective for the purpose with number of successful international arbitrations being concluded among Nations. The Alabama arbitration of 1871-1872 between the United Kingdom (UK) and the United States (US) under the Treaty of Washington of 1871 culminating in the arbitral tribunal’s award that the UK pay the US compensation for breach of neutrality during American Civil War which it did had demonstrated the effectiveness of arbitration in settling of international disputes and piqued interest of many practitioners in it as a mode of dispute resolution during the latter years of the nineteenth century.

The Institut de Droit International adopted a code of procedure for arbitration in 1875 to answer the need for a general law of arbitration governing for countries and parties wishing to have recourse to international arbitration. The growth of arbitration as a mode of international dispute resolution formed the background of the 1899 conference and informed its most enduring achievement, namely, the establishment of the PCA as the first global mechanism for the settlement of disputes between states. Article 16 of the 1899 Convention recognized that “in questions of a legal nature, and especially in the interpretation or application of International Conventions” arbitration is the “most effective, and at the same time the most equitable, means of settling disputes which diplomacy has failed to settle.”

In turn, the 1899 Convention provided for the creation of permanent machinery to enable the setting up of arbitral tribunals as necessary and to facilitate their work under the auspices of the institution it named as the Permanent Court of Arbitration (PCA). In particular, Article 20 of the 1899 Convention stated that “[w]ith the object of facilitating an immediate recourse to arbitration for international differences which it has not been possible to settle by diplomacy, the signatory Powers undertake to organize a Permanent Court of Arbitration, accessible at all times and operating, unless otherwise stipulated by the parties, in accordance with the rules of procedure inserted in the present Convention.” In effect, the Convention set up a permanent system of international arbitration and institutionalized the law and practice of arbitration in a definite and acceptable way.

As a result, the Permanent Court of Arbitration (PCA) was established in 1900 and began operating in 1902. The PCA as established consisted of a panel of jurists designated by each country acceding to the Convention with each country being entitled to designate up to four from among whom the members of each arbitral tribunal might be chosen. In addition, the Convention created a permanent Bureau, located in The Hague, with functions similar to those of a court registry or secretariat. The 1899 Convention also laid down a set of rules of procedure to govern the conduct of arbitrations under the PCA framework.

The second Hague Peace Conference in 1907 saw a revision of the 1899 Convention and improvement of the rules governing arbitral proceedings. Today, the PCA has developed into a modern, multi-faceted arbitral institution perfectly situated to meet the evolving dispute resolution needs of the international community. The Permanent Court of Arbitration has also diversified its service offering alongside those contemplated by the Conventions. For instance, today the International Bureau of the Permanent Court of Arbitration serves as a registry in important international arbitrations. In 1993, the Permanent Court of Arbitration adopted new “Optional Rules for Arbitrating Disputes between Two Parties of Which Only One Is a State” and, in 2001, “Optional Rules for Arbitration of Disputes Relating to Natural Resources and/or the Environment”.

Reference

PCA Website: https://pca-cpa.org/en/about/introduction/history/ (accessed on 25th May 2023).

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Former KCB Company Secretary Sues Over Unlawful Dismissal

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Former KCB Group Company Secretary Joseph Kamau Kania who has sued the Bank for Unlawful Dismissal

Former KCB Group Company Secretary Joseph Kamau Kania has sued the lender seeking reinstatement or be compensated for illegal sacking almost three years ago. Lawyer Kania was the KCB Group company secretary until restructuring of the lender in 2021 that saw some senior executives dropped.

Through the firm of Senior Counsel Wilfred Nderitu, Kamau wants the court to order KCB Group to unconditionally reinstate him to employment without altering any of the contractual terms until his retirement in December 2025.

In his court documents filed before Employment and Labour Relations Court, the career law banker seeks the court to declare the reorganization of the company structure a nullity and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution. He further wants the court to declare that the position of Group Company Secretary did not at any time cease to exist within the KCB Group structure.

He further urged the Employment Court to declare that the recruitment and appointment of Bonnie Okumu, his former assistant, as the Group Company Secretary, in relation to the contemporaneous termination of his employment, was unprocedural, insufficient and inappropriate to infer a lawful termination of his employment.

“A declaration that the factual and legal circumstances of the Petitioner’s termination of employment were insufficient and inappropriate to infer a redundancy against him, and that any redundancy declared by the KCB Group in relation to him was therefore null, void and of no legal effect and amounted to a violation of his fundamental right to fair labour practices as guaranteed in Article 41(1) of the Constitution,” seeks lawyer Kamau.

Kamau says he was subjected to discriminatory practices by the KCB Bank Group in violation of his fundamental right to equality and freedom from discrimination as guaranteed in Article 27 of the Constitution and the termination of his employment was unfair, unjustified, illegal, null and void.

Lawyer Kamau further seeks the court to declare that the Non-Compete Clause in the 2016 Contract is unenforceable by the KCB Group as against him and is voidable by him as against the Bank ab initio, byreason of the termination of the Petitioner’s employment having been a violation of Articles 41(1) and 47(1) and (2) of the Constitution, and of the Employment Act.

He also wants the Employment Court to find that finding that KCB’s group legal representation by Messrs of Mohammed Muigai LLP Advocates law firm in respect of his claim for unlawful termination of employment resulted in a clear conflict of interest by reason of the fact that a Founding and Senior Partner at the said firm lawyer Mohammed Nyaoga is also the Chairman of the CBK’s Board of Directors.

“A Declaration that the circumstances of KCB’s legal representation by Messrs. Mohammed Muigai LLP Advocates resulted in a violation of the Petitioner’s fundamental right to have the employment dispute decided independently and impartially, as guaranteed in Article 50(1) of the Constitution,” seeks lawyer Kamau.

Kamau is seeking damages against both KCB Group and Central Bank of Kenya jointly and severally for the violation of his constitutional and fundamental right to fair labour practices.

He wants  further wants court to declare that CBK is liable to petitioner on account of its breach of statutory duty to effectively regulate KCB Group to ensure that KCB complied with the Central Bank of Kenya Prudential Guidelines and all other Laws, Rules, Codes and Standards, and that, as an issuer of securities, it complied with capital markets legislation.

Kamau through his lawyer Nderitu told the court that he was involved in Shareholder engagement in introducing the Group aide-mémoire that significantly improved the management of the Annual General Meetings, including obtaining approval without voting through the Memorandum and Articles of Association of Kenya Commercial Bank Limited among others.

He said that during his employment at KCB Bank Kenya and with the KCB Group, he initially worked well with former KCB CEO Joseph Oigara until 2016 when the CEO allegedly started sidelining him by removing the legal function from his reporting line.

He further claims he was transferred from the Group’s offices at Kencom House to its offices Upper Hill under the guise that the Petitioner was merely to support the KCB Group Board.

He adds that at that point his roles were given to Okumu for reasons that were not related to work demands.  He stated that Oigara at one time proposed that he should leave his role in the KCB Group and go and serve as the Company Secretary of the National Bank of Kenya Limited, a subsidiary of the Group, a suggestion which he disagreed with to Oigara’s utter annoyance.

Kamau stated that his work was thenceforth unfairly discredited, leading to his being taken through a disciplinary process whose intended outcome failed miserably, and the Petitioner was vindicated.

“More specifically, the Petitioner contends that the purported creation of a new organizational structure towards the end of 2020 was in fact Oigara’s orchestration targeted to remove certain individuals by requiring them to undergo interviews in the pretext that new roles were created, and amounted to a further violation of the Petitioner’s fundamental right to fair labour practices under Article 41(1) of the Constitution,” said in his court documents.

He further adds that this sham reorganization demonstrates how the role of the KCB Group Company Secretary purportedly ceased to be and was then very briefly replaced with a new role of the KCB Group General Counsel. The role of KCB Group Company Secretary then ‘resurfaced’ immediately thereafter, in total violation of legal and regulatory requirements.

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Court of Appeal Upholds Eviction of Radcliffes from Karen Land

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Adrian Radcliffe, the Expatriate Squatter, Evicted from Karen Property by Innocent Purchaser for Value

The Court of Appeal has stayed the decision of the Environment and Land Court purporting to reinstate Adrian Radcliffe into possession of the 5.7 Acre Karen Land by Kena Properties Ltd after eviction by the lawful owners in February 2022. Adrian Radcliffe who was evicted by Kena Properties Ltd, the innocent purchaser of the Land for value.

Before his eviction, Mr. Radcliffe had been living on the land as a squatter expatriate for 33 years without paying any rent. Since he moved into the property as a tenant, he only paid deposit for the land in August 1989 despite corresponding severally with the owner of the land. His attempt to acquire the land by adverse possession claim filed in 2005 was dismissed by Court in 2011 on the basis that he has engaged with the owner of the land July 1997 and agreed to buy the land which he failed to do. The High Court [Justice Kalpana Rawal as she then was] concluded that:

“His [Mr. Adrian Radcliffe] averments that he did not have any idea of the whereabouts of the Defendant and that he could possibly be not alive, were not only very sad but mala fide in view of the correspondence on record addressed by him to the Defendant’s wife. I would thus find that the averments made by him to the contrary are untrue looking to the facts of this case.”

On 10th March 2022, Mr. Adrian Radcliffe and Family purported to obtain court orders for reinstatement into the land. However, the Court of Appeal issued an interim stay of execution of the said orders. The Court of Appeal has now granted the application of Kena Properties Ltd and stayed the execution of the Environment and Land Court Order pending the hearing and determination of the Appeal.

The Court also stayed the proceedings at the Environment and Land Court on the matter during the pendency of the Appeal. In effect, the eviction orders issued by the Chief Magistrate Court for eviction of Mr. Adrian Radcliffe in favour of Kena Properties as the purchaser of the property for value were upheld and the company now enjoys unfettered ownership and possession of the suit property until the conclusion of the Appeal.

The Court of Appeal in granting the orders sought by Kena Properties Ltd concurred with Kena Properties Ltd that as the property owner it had an arguable appeal with a high probability of success which would be rendered nugatory if Adrian Radcliffe a trespasser was to resume his unlawful possession of the suit property, erect structures thereon, recklessly use or abuse the said suit property as he deems fit. In any case, that is bound to fundamentally alter the state of the suit property and render it unusable by Kena Properties Ltd as the property owner.

At the same time, the Appellate Court rubbished the argument of Adrian Radcliffe in opposition to the application for stay that he has been in occupation of the suit property for more than 30 years and that he and his family were unlawfully evicted from the suit property on 4th February, 2022. The Court also rejected Radcliffe’s claim that Kena Properties Ltd has no valid title to the suit property and held that as the purchaser, the company was entitled to enjoy ownership and possession of their property during the pendency of the appeal.

The Court dismissed claims of Mr. Adrian Radcliffe that Kena Properties Ltd as the property owner acquired title to the suit property illegally and unprocedurally finding to the contrary. Further, it rejected Adrian Radcliffe’s claim that Kena Properties as the purchaser cannot evict a legal occupier of a property putting paid to the claim that he was a legal occupier at the time of eviction.

As a matter of fact, Mr. Adrian Radcliffe cannot claim to be the legal occupier of the property having attempted to acquire it by adverse possession before the High Court thwarted his fraudulent scheme on 28th February 2011. Mr. Radcliffe did not appeal the 2011 High Court decision meaning it is still the law that he is not the owner of the land nor the legal occupier of the land having attempted to adversely acquire against the interests of the lawful owner who sold it to Kena Properties.

Mr. Adrian Radcliffe is a well-to-do Water, Sanitation and Hygiene (WaSH) UNICEF consultant and former UN employee (who has been earning hefty House Allowance). Many have wondered why he has been defaulting in paying rent for 33 years on the prime plot of land in Karen while living large and taking his kids to most expensive schools in Kenya. No question, a local Kenyan could never have gotten away with such selfish impunity.

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