Oil Drilling Rig Not a Vessel Under Cabotage Act, Appeal Court Rules

The Court of Appeal in Lagos has clarified the law on whether a
rig is a vessel under the Coastal and Inland Shipping (Cabotage)
Act 2003.

Delivering judgment in an appeal filed by Transocean Support
Services Nigeria Limited against the decision of the Federal High
Court in Lagos, in its case and three other against the Nigerian
Maritime Authority and Safety Agency (NIMASA) and Minister of
Transport, the court in a unanimous decision, held that an oil
drilling rig is not a vessel and not engaged in coastal trading
(cobotage) within the meaning of Sections 2 and 5 of the Cabotage
Act.

Justice Abimbola Obaseki-Adejumo who delivered the lead
judgment, also held that a drilling rig is not one of the vessels
requiring registration pursuant to section 22(5)(m) of the Cabotage
Act and that the listing of drilling rigs in paragraph 9.1.1C of
the Cabotage Guidelines 2007 as one of the “foreign vessels”
eligible for registration and thus liable to pay two per cent
cabotage surcharge was unlawful and invalid.

Before the judgment, there was confusion regarding the
applicability of the Cabotage Act to drilling rigs, especially
jackup rigs and drill ships, and the liability of drilling services
providers to contribute two per cent of the nominal amount of
drilling contracts performed by them into the Cabotage Vessel
Financing Fund pursuant to sections 42 and 43 of the Cabotage
Act.

The confusion was said to have arisen in 2007 when the Minister
of Transportation purported to issue a guideline for the
implementation of the Cabotage Act (Cabotage Guidelines 2007) in
which he listed drilling rigs in paragraph 9.1.1C of the Cabotage
Guidelines 2007 as one of the “foreign vessels” eligible for
registration and thus liable to pay two per cent cabotage
surcharge.

Pursuant to Cabotage Guidelines 2007, NIMASA appointed debt
collection agents whom it directed to issue cabotage surcharge
demands to companies involved in drilling operations in
Nigeria.

Consequent upon this, Transocean Support Services Nigeria
Limited, through their lawyer, Professor Fidelis Oditah (SAN),
filed a suit against NIMASA and Minister of Transport at the
Federal High Court in Lagos.

However, Justice Rita Ofili-Ajumogobia dismissed the proceedings
on the basis that they were not issued within three months of
receipt of the NIMASA debt collector’s demand notices and
consequently were statute-barred pursuant to Section 2 of the
Public Officers Protection Acxt (POPA).

But in a unanimous decision, the Court of Appeal reversed her
decision and, pursuant to section 16 of the Court of Appeal Act,
which gave it power to hear the case as if it were sitting as a
first instance court, accepted Transocean’s invitation to decide
the merits.

Justice Obaseki-Adejumo of the appellate court held that only
vessels engaged in coastal trade are liable to pay into the fund
the two per cent of the contract sum performed by such vessel.

She added that drilling rig, like the one owned and/ or operated
by the appellants cannot represent a vessel within the definition
under the Cabotage Act.

The judge submitted that without any modicum of doubt, by the
definition under the Act, a vessel must be designed, used or
capable of being used solely or partly for marine navigation and
used for the carriage of persons or property on, through or under
water without regard to method or lack of propulsion.

She concluded that unless a drilling rig falls within this
definition and/or is expressly stated to be among the machineries
contained in section 22(5)(a) -(m), same cannot be deemed to be a
vessel eligible for registration under Section 22(1) of the
Cabotage Act and liable to pay a surcharge of two per cent of the
contract sum performed by such vessel engaged in coastal trade.

She equally noted that under the Cabotage Act, a rig is not
listed as one of the vessels that are to be registered and it is
also not involved in the transportation of goods or passengers from
one point in Nigeria to the other.

“I am, therefore, not persuaded by the argument canvassed by the
1st respondent’s counsel that drilling rigs are vessels within the
meaning of section 22(5)(m) of the Cabotage Act. To my mind,
drilling rig cannot therefore be deemed to be a vessel for the
purpose of section 22 of the Cabotage Act and liable to the two per
cent surcharge under Section 43 of the Act.

As I have found that drilling rigs do not fall within the
definition of vessels under the Act, and in particular, section
22(5)(m) of the Cabotage Act, it follows that the attempt by the
Minister of Transport to list Rigs under the head of “Foreign
Vessels” in Paragraph 9.1 of the Cabotage Guidelines, so as to make
them liable to pay two per cent surcharge, is not proper. The
essence of the guideline as a subsidiary legislation is to give
effect to the principal legislation and not to deviate from same;
it cannot expand or curtail the provision of the substantive
statute.”

The court also held that the limitation period contained in the
Public Officers Protection Act did not apply to the making of the
Cabotage Guidelines, with the result that the Guidelines could be
challenged outside the three month time limit for challenging
administrative acts of public officers.