NLNG-NIMASA Face-off: A Culture of Impunity

Nigeria’s oil industry received a big shock recently when the Nigerian Maritime Administration and Safety Agency (NIMASA) used the facilities of Global West Vessels Specialists Limited (GWVSL), to block access to the Bonny Channel, thereby hindering the vessels of Nigeria Liquefied Natural Gas Limited (NLNG) from leaving or reaching the area.

GWVSL, a firm believed to be owned by a former leader of the Movement for the Emancipation of the Niger Delta (MEND), Mr. Government Ekpemupolo, popularly known as Tompolo, has been executing a contract said to be worth about $ 103.4 million for the supply of 20 vessels for the use of the military authorities to secure the waterways.

NIMASA had on Friday May 3, 2013 used the facilities of GWVSL to block access to the Bonny Channel and it took the personal intervention of the Minister of Petroleum Resources, MrsDiezani Alison-Madueke and other top officials of the federal government for the blockade to be lifted, two days later.

The action of the maritime regulator followed the alleged disregard and unwillingness of the NLNG Limited to abide by the country’s maritime laws. With the agency’s action, NLNG vessels’ access to the Bonny Channel from the fairway buoy at the beginning of the Channel, to buoys 17 and 18 was blocked, according to the maritime regulator.

NIMASA accused NLNG Limited of utter disregard and unwillingness to abide by the country’s maritime laws especially, the NIMISA Act, which mandates payment of levies based on gross freight on exports and imports and the Cabotage Law.

NIMASA said it blocked access to the channel because statutory obligations to the agency were not met. The agency’s acting Director, Shipping Development, Captain Warredi Enisouh, accused the NLNG of disregard and unwillingness to abide by the country’s Maritime laws.

“Today, at about 11:00hrs, the Nigerian Maritime Administration and Safety Agency, using Global West Vessels Specialist platforms, blocked access to the Bonny Channel from the fairway buoy, at the beginning of the Channel, to buoys 17 and 18. By this blockade, all Nigeria Liquefied Natural Gas Company (NLNG) vessels, operating in the area are neither permitted to leave nor allowed to enter the area, until all statutory obligations are met,” he explained. “Since its inception, the NLNG has cherry-picked our laws. All efforts to get the management to meet its obligations to Nigeria have been treated with impunity,” he added.

He acknowledged that the NLNG was bruited as one of the crown jewels on the nation’s hydrocarbon industry,” but added that “its habitual violation and the utter contempt for all our laws, is unbecoming of a company of its status”.

Avoidable Losses

Though NIMASA’s statement assured that “for the avoidance of doubt, our action is carefully planned to avoid loss of lives or damage to property,” the agency’s action took tolls on NLNG’s revenue generating capacity with its attendant consequences on the Federal Government’s treasury. Nigeria LNG Limited, which is being managed by Shell, is jointly owned by Nigerian National Petroleum Corporation (NNPC) (49 percent), Shell (25.6 percent), Total LNG (15 percent) andEni (10.4 percent).

With this ownership structure, there was no doubt that the Federal Government, which also owns NIMASA, was the worst victim of the agency’s action. Barely 48 hours after NIMASA blocked the Bonny Channel three ships that belong to NLNG were reportedly stranded.

NLNG’s General Manager, External Relations, Mr. Kudo Eresia-Eke identified the ships to include NLNG Lagos, NLNG Adamawa and Stena Clear Sky. While the product-laden NLNG Lagos, heading to Pacem Brazil, could not depart due to the NIMASA blockade, the Shines, Portugal-bound NLNG Adamawa was denied entry. Similarly, the Montoir, France-bound Stena Clear Sky was denied entry as a result of the blockade.

Before this development, NLNG used to export an average of one LNG cargo daily, which is sold at several millions of dollars at the international market. In fact, the Federal Government and other shareholders of the company earned $ 51 billion in revenues from the sale of liquefied natural gas in the past 13 years. The maritime regulator acknowledged this fact when it described the company “as one of the crown jewels on the nation’s hydrocarbon industry.”

The plant also delivered $ 9 billion in dividends to the Federal Government and paid $ 10 billion to the joint venture companies during the period. NIMASA’s action also threatened the supply of Liquefied Petroleum Gas (LNG), otherwise called cooking gas because NLNG vLimited has been responsible for supply of the product to the domestic market since 2007, making available 150,000metric tonnes yearly, while actual consumption hovers below this capacity. The maritime regulator’s action actually affected the country economy and image of the country.

Legal Option

NIMASA’s blockade was hinged on alleged refusal of NLNG to pay certain statutory levies to the agency but the NLNG has consistently maintained that the Act establishing it does not empower it to pay such levies.

It should however be stressed that no international company should be allowed to violate the country’s laws with impunity, no matter how powerful. Foreign companies should respect the country’s laws as they do in their home countries, where the laws are so stringent that the chief executive officers of these companies are easily committed to prison terms for contravening the laws.

But the Shell-run NLNG claims to have been exempted from the payments of NIMASA levies by its enabling Act, which is also an Act of parliament. According to the company, the Act has provided waivers from such prescribed levies in the NIMASA Act, stressing that such payments are illegal.

With the positions of NIMASA and NLNG, which might have resulted from an apparent clash of two legislations, the appropriate place to interpret both NIMASA and NLNG Acts to resolve the dispute should have been the court.

As a responsible corporate citizen that had faith in the rule of law, NIMASA had in 2010 dragged NLNG before a Federal High Court in Lagos over the dispute which was then three-year-old. The Bonny Gas Transport Limited was the second defendant in the suit, which further hearing came up October 11, 2010.

The disputed levies, which amounted to N32.8billion ($ 350million) was said to have accrued from three percent of gross freight on all international inbound/outbound cargoes from NLNG ships or shipping companies operating in Nigeria including their agents, subsidiaries, contractors and sub-contractors for three years contrary.

The levies are said to be in line with Section 43 of the Coastal and Inland Shipping Act (Cabotage Act), CAP C51, Laws of the Federation of Nigeria, 2004 due to personal gains. The refusal of NLNG to pay was said to be contrary Section 15 of the NIMASA Act, CAP N161, Laws of the Federation of Nigeria, 2007, Coastal/Inland Shipping Act (Cabotage Act), CAP C51, Laws of the Federation of Nigeria, 2004.

Among the reliefs reportedly sought by NIMASA in the court, include a declaration that the second schedule, paragraph three of the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria, 2004 fetters the legislative powers of the National Assembly as enshrined in Section 4 of the Constitution of the Federal Republic of Nigeria, 1999 and therefore unconstitutional, null and void.

-A declaration that the second schedule, paragraphs two, three and six of the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria, 2004, are contrary to Nigerian public policy, illegal, null and void.

-A declaration that the Coastal and Inland Shipping Act (Cabotage Act), CAP C51, Laws of the Federation of Nigeria, 2004 and the NIMASA Act, CAP N161, Laws of the Federation of Nigeria, 2007, are applicable to the 1st and second defendants, their agents, subsidiaries, contractors and sub-contractors.

-A declaration that the first and second defendants, including their agents, subsidiaries, contractors and sub-contractors, are companies operating in Nigeria within the meaning and intendment of Section 15 of the NIMASA Act, CAP N161, Laws of the Federation of Nigeria, 2007.

-A declaration that the Plaintiff is entitled to receive from the 1st and second defendants as part of its statutory funds, three percent of gross freight on all international inbound and outbound cargoes from their ships or shipping companies operating in Nigeria including their agents, subsidiaries, contractors and sub-contractors.

-A declaration that the first and second defendants (including their agents, subsidiaries, contractors and sub-contractors) are companies operating in Nigeria within the meaning and intendment of Section 43 of the Coastal and Inland Shipping Act (Cabotage Act), CAP C51, Laws of the Federation of Nigeria, 2004.

-A declaration that the Plaintiff is entitled to receive from the first and second defendants, their agents, subsidiaries, contractors and sub-contractors, as part of its statutory functions, two percent of the contract sum performed by any of their vessels engaged in coastal trade.

-A declaration that the liability of the first and second defendants to pay the three percent levy under Section 15 of the Nigerian Maritime Administration and Safety Act, (NIMASA Act), CAP N161, Laws of the Federation of Nigeria, 2007 arose and crystallized upon the conditions stipulated under Section 2 of the Nigeria LNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria, 2004.

– An Order compelling the first and second defendants, their agents, subsidiaries, contractors and sub-contractors, to pay to the Plaintiff 3 percent of gross freight on all international inbound and outbound cargoes from any of their ships or shipping companies they are operating in Nigeria from the year 2007 when NIMASA Act, CAP N161, Laws of the Federation of Nigeria, 2007 became effective.

– An Order compelling the 1st and 2nd Defendants, their agents, subsidiaries, contractors and sub-contractors, to pay to the Plaintiff 2 percent of the contract sum performed by any of their vessels engaged in coastal trade from the year 2004 when the Coastal and Inland Shipping Act (Cabotage Act), CAP C51.

Condemnable Resort to Self-Help

NIMASA’s decision to seek reliefs in the court was the most appropriate option given the fact that the dispute emanated from an apparent clash of the NIMASA Act and the NLNG Act, which only the courts can interpret and resolve.

Also given the international shareholding structure of NLNG Limited, NIMASA’s court action also portrayed both the agency and the country as advocates of due process and the rule of law in the eyes of the international community.

But the dispute took a curious twist when the maritime regulator allegedly withdrew the case from the court and resorted to self-help. NIMASA dropped the court action and used the facilities of GWVSL to block access to the Bonny Channel, thereby hindering shipment of LNG cargoes by NLNG, and resulting to loss of huge revenue by the Federal Government.

NIMASA’s blockade, which was seen as a demonstration of impunity in high places, has lent credence to the speculations of many stakeholders, who argue that the maritime regulator’s initial decision to go to court stemmed from its initial lack of capacity to use force to extract the levies from the NLNG and not its belief in the rule of law and due process.

The stakeholders, who spoke to THISDAY on condition of anonymity, alleged that NIMASA went to court when it did not have the apparatus of GWVSL, which is backed by heavily armed officers and personnel of the armed forces and other security agents.

“But when it sealed the contract with Tompolo’s GWVSL, which is backed by heavily armed personnel and officers of the armed forces, NIMASA felt that it can use military might to collect the levies and abandoned the courts,” said one of the stakeholders.

“You should remember that they used the same state apparatus to seal Integrated Oil for several weeks and I am not sure if they secured court orders before taking this action,” he added. The stakeholders also stated that NIMASA’s action was alien in a country that operates the rule of law. According to them, even though companies with foreign interests should not be allowed to hide under the rule of law to evade payments of statutory levies in the country, the court remains the appropriate place to resolve such disagreements and not military might.

In its reaction to the NIMASA/NLNG face-off, the Trade Union Congress of Nigeria (TUC) called on the federal government to prosecute all those circumventing the statutory payment from NLNG to NIMASA.

The President of TUC, Peter Esele and Secretary, Musa Lawal, also called on the federal government to exonerate itself by bringing to book all those involved in the dirty deals, adding that no company or individual is above the law of the land.

It is interesting to note that TUC as a believer in the rule of law, called for the prosecution of offenders in the courts and not military blockade of their businesses.

For a country seeking foreign investments to allow the use of its military to seal businesses with foreign interests portrays such country as non-respecter of local and international arbitration procedures and a wrong destination for investments.

Since NIMASA is a Federal Government’s agency, its decision to abandon the courts and resort to self help might have also been seen as a sign of lack of faith of the Federal Government in the country’s judicial system.

The resort to self help was further manifested with the recent 21-day ultimatum issued by maritime workers to the federal government to prevail on management of the NLNG to pay all statutory levies owed NIMASA.

To demonstrate their capacity to extract the levies without judicial intervention, the workers also threatened to shut down all port operations across the country. But as a country that observes the tenets of democracy and the rule of law, it is not even within the prerogative of President Goodluck Jonathan to direct the NLNG to pay.

The decision to pay or not should be a judicial pronouncement and not an executive order. NIMASA may have developed cold face to pursue court action following revelation that the Niger Delta Development Commission (NDDC) took similar case to the Supreme Court and allegedly lost out.

However, since all the contending parties have been quoting relevant laws to support their uncompromising positions on the matter, the final destinations should be the courts and the federal government should encourage the two parties to follow this path of honour.