Akabogu & Associates
AKABOGU & ASSOCIATES is a law practice offering full business law services across Nigeria. Our services cut across legal, advisory, due diligence, claims handling, documentation and litigation.Show more
Shipping & Transport
Shipping finance transactions are characterised by peculiar risk factors principally on account of shipping assets' transient operations. The applicable rules and mercantile uses – reflective of this reality themselves – must therefore be adequately factored into financiers' lending procedures and loan recovery strategies, whether they be banks or private investors. This article offers helpful guidance to such lenders.
In a recent ruling concerning a claim for crew wages, the National Industrial Court held that Section 254C(1)(a) of the Constitution clearly vests the court with the exclusive jurisdiction to hear and determine civil causes and matters relating to or connected with labour, employment, trade unions or industrial relations and matters arising from the workplace. The claim in question was for N500 million in compensation for the defendant's failure to observe safety standards and procedures during a fumigation exercise.
The president recently announced that only cargo vessels which have been at sea for more than 14 days can dock in Nigerian ports. The 14 days referred to by the president will start from the last port of call, which means that vessels trans-shipping in Tema or Cotonou before arriving in Nigeria will be subject to delays of at least 12 days before berthing. However, most shipowners have drafted clauses to excuse themselves and their ship from any liability arising from delays caused by COVID-19.
Persons claiming against ships should be careful to comply with the detailed procedural requirements, otherwise valid claims may be compromised by the additional possibility of liability in damages. Ship interests equally need not go into panic mode on the arrest of the ship. A detailed review of the processes filed for compliance or non-compliance with arrest procedures should be the first step, possibly coupled with other extenuating measures.
A caveat registered in the courts serves to prevent a ship's arrest by committing to pay a bond for any sum claimed against the ship which is equal to or less than the amount stated in the caveat. Entering a caveat against release does not automatically entitle the caveator to the security flowing from a ship in respect of which a caveat has been entered. A request for security can be made only when there is a subsisting claim against the ship in respect of which the caveat is entered.
The general Nigerian economic landscape could be seen as challenging, but its robustness and potential make it worthwhile for parties that do their research. As the Nigerian ship charter market is estimated to be worth at least $10 billion, there is a lot of potential for interested parties to benefit.
The president recently assented to the Suppression of Piracy and Other Maritime Offences Bill, successfully concluding almost a decade of advocacy to implement such a law in order to curb and deter sea piracy, armed robbery and other unlawful acts at sea. The new law has ended the controversy around whether the crime of sea piracy is defined in any local legislation and bestowed on the Federal High Court exclusive jurisdiction to determine matters of armed robbery and other unlawful acts at sea.
Wrecks pose a real danger to navigational safety and the marine environment and their expeditious removal, control and management is therefore a key concern. The issue of wreck control in Nigeria has been the subject of an increasingly fierce conflict between the Nigerian Inland Waterways Authority, the Nigerian Maritime Administration and Safety Agency and the Nigerian Ports Authority.
A tripartite arrangement between the Federal Ministry of Finance, the Customs Service and the Nigerian Maritime Administration and Safety Agency (NIMASA) seeks to encourage the expansion of Nigeria's indigenous fleet by creating a special tariff regime for vessel acquisition in the country. According to NIMASA Director General Dakuku Peterside, the high cost of vessel acquisition is gradually driving away many indigenous players in the maritime sector.
The Nigerian Maritime Administration and Safety Agency has announced a five-year strategic plan to stop the issuance of cabotage waivers. This plan appears to be a tacit admission that the waiver regime – which was intended to be a stop-gap measure pending the development of indigenous capacity – is derailing the country's lofty cabotage goals. Nonetheless, the cessation of the issuance of cabotage waivers represents a significant shift in policy.
The Nigerian Maritime Administration and Safety Agency (NIMASA) recently issued a marine notice to further the Cabotage Act's objectives and to ensure strict compliance. It is expected that this notice would, among other things, ensure greater compliance with the cabotage regime and drive wider indigenous participation in offshore marine operations. However, as the NIMASA has not introduced a fine or other punishment for non-compliance, full compliance with the notice cannot be guaranteed.
It is not uncommon for shipowners to incur liability for acts or omissions for which neither they nor their employees are directly responsible. This is particularly common in the compulsory pilotage field. However, even in cases where liability cannot be disputed, shipowners may be entitled to limit their liability or, in some cases, escape it entirely.
In late 2018 the president declined to assent to the National Transport Commission Bill (which the Senate had passed in March 2018). The president cited the need to review certain fiscal provisions set out in the bill, as well as concerns over the duplication of functions which already fell within the statutory mandates of existing agencies. The Senate recently formally reapproved the bill after examining it in view of the president's observations.
Voyaging in West African waters, particularly the Gulf of Guinea, is considered dangerous and raises the question of whether shipowners are entitled to put armed guards on board their vessels to protect them from attacks by arms-bearing third parties. Considering reported attacks of armed robbers at sea, kidnappings for ransom and other criminal occurrences in Nigerian waters, shipowners and operators have explored how to optimise the protection of both ships and cargo.
Shipowners whose ships have caused damage will not want their ship to be arrested, but also will not want to pay damages to the extent of the actual claim. Luckily, shipowners can ensure that their ships are not arrested and at the same time significantly limit the total amount payable. To cap it all off, shipowners do not have to accept liability. If this is not having your cake and eating it, then nothing is.
In a watershed decision, the Supreme Court appears to have overruled itself on the question of what constitutes 'outside jurisdiction' in relation to the Admiralty Court (Federal High Court) for the purpose of determining whether leave of court is required to effect service of an originating process. The decision puts to bed the decade-long unease surrounding the territorial jurisdiction of the Admiralty Court in the wake of MV Arabella.
Following the Federal High Court's recent ruling that claims for crew wages fall outside its jurisdiction, practitioners and other observers are understandably eager for judicial elaboration on the fate of such claims. Although initial reactions appear to be that crew wage claims may no longer be enforceable through the adoption of the in rem procedure, some have argued that the ruling, being merely persuasive, can and should be sidestepped by other Federal High Court judges.
Maritime claims are generally under the Federal High Court's exclusive jurisdiction and enforceable by an admiralty action in rem or in personam. However, in a decision which portends significant implications for Nigeria's maritime jurisprudence, the court recently held that a claim for crew wages fell outside its jurisdiction.
The chief of naval staff has claimed that the recently promulgated Harmonised Standard Operating Procedures on Arrest, Detention and Prosecution of Vessels and Persons in Nigeria's Maritime Environment 2016 (HSOPs) will provide consolidated guidance for the harmonious management of the arrest, detention and prosecution of vessels and suspects, as well as seizure and forfeiture. However, despite the fanfare that accompanied their launch, the HSOPs have no legal potency or operational clarity.
Various questions can arise regarding the service of processes in admiralty proceedings. For example, what happens if a ship (X) is named as the first defendant in a writ of summons, along with a second defendant which is merely referred to as the "owner of X"? Does the action cease to be one in rem? Further, where X is a foreign ship, is leave of court required to effect service on the second defendant? Although a recent Court of Appeal decision is instructive in this regard, it was arguably reached per incuriam.
Maritime claims arise in relation to the ownership, possession, mortgage and general operation of a ship and are primarily enforced by an admiralty action in rem or in personam. Admiralty actions do not last forever; rather, they have prescribed limitation periods, which often vary depending on the type of claim. Thus, if a claim is not brought within the time prescribed by the relevant law or contract, a party with an otherwise valid claim will generally lose its right of action on that claim.
Where a bill of lading holder fails to take delivery within a reasonable time, the carrier may be entitled to land and store the goods at the cost of the bill of lading holder. This common-sense position accords perfectly with the Bill of Lading Act 1856. Although conversion claims based on the creation of unauthorised liens on cargo are maintainable against carriers, cargo holders should remember that this is the case only in specific circumstances.
In a recent Court of Appeal case, the appellant terminal operators challenged the Nigerian Shippers' Council's powers to review local storage charges unilaterally. The judgment gives further judicial impetus to the government's policy intent, particularly with regard to storage operations at the nation's ports. However, it conflicts with an earlier decision by the same court concerning the Nigerian Shippers' Council's role as the economic regulator of the Nigerian ports.
While delay can be expensive for a shipowner which suffers loss where a charterer delays the loading and discharge operation, a charterer should not be made to pay demurrage for such delay where it can be proven that it was not at fault. It is imperative to ensure that, before executing the contract of carriage, both parties are clear on the laytime and clauses regarding where a charterer is relieved of its obligation to pay demurrage.
There appears to be some level of cooperation across the relevant agencies in Nigeria in ensuring that the country's waters are kept safe. However, the lines are blurred with regard to the delineation of these agencies' maritime security functions. As several international instruments to which Nigeria is legally bound call for the preservation of maritime security, it is imperative to understand which agencies should be held accountable for protecting its waters.
The Court of Appeal recently declared the Lagos State House of Assembly competent to make laws relating to intra-inland waterways in the state. The appeal turned on whether the regulation and control of Lagos state intrastate and inland waterways falls under the exclusive legislative list which confers legislative competence on the National Assembly. Contrary to reports, the decision is hardly a win for the Lagos state government.
Although the Convention on the Limitation of Liability for Maritime Claims 1976 has yet to be domesticated in Nigeria, certain laws provide for the limitation of liability in some instances. However, the question remains as to whether the insurer – where the law permits an assured to limit its liability and it makes a claim – must indemnify the assured up to the limit of its liability or to the fullest extent of the policy.
The Ports and Harbours Authority Bill recently passed its third and final reading in the Senate. The bill's objectives will resonate with followers of Nigeria's port reform efforts, as they clearly demonstrate an intention to give legal status to the landlord port management and administration model adopted by the government in 2006. The bill thus addresses some of the legal issues that have resulted from the inadequate statutory provisions that support Nigeria's so-called 'port concessions era'.
A court of appeal sitting in Lagos State recently declared that the collection of the shipping line agency charge (SLAC) by shipping companies and its subsequent levy on importers and consignees was illegal. This judgment clarifies that shipping agency charges are illegal in Nigeria. The Nigerian Shippers' Council is now expected to recover the SLAC collected by the shipping companies, as ordered by the court.
Two recent Supreme Court decisions provide case law on the fact that, as regards carriage of goods by sea claims, concurrent rights to sue in tort as well as under the contract may coexist for a claimant's benefit. However, English cases admit to the concurrent liabilities position certain exceptions that the Supreme Court, which substantially referenced an English Court of Appeal decision in one of its decisions, failed to point out.
When shipwrecks occur, they often pose navigational and environmental hazards and thus their urgent removal is necessary. Nigeria has had its fair share of wrecks, and in response the Nigerian Maritime Safety and Administration Agency recently directed that all abandoned ships should be removed from Nigerian territorial waters.
Certain government agencies in Nigeria are empowered to detain vessels operating within the country's territorial waters. Detention is mostly used to enforce regulatory compliance and secure the payment of statutory dues at the nation's various ports. In order to avoid vessel detention in Nigeria, it is necessary to identify the circumstances in which such a detention can arise.
The National Assembly enacted the Coastal and Inland Shipping (Cabotage) Act in 2003 to enhance indigenous participation in the maritime sector. Despite its commendable provisions targeted at developing Nigerian tonnage, the act has its shortcomings. As such, the legislature recently proposed the Coastal and Inland Shipping (Cabotage Act) (Amendment) Bill, which significantly amends the existing law.
On becoming a contracting state to the Hamburg Rules, any state party to the Hague Rules must notify the Belgian government of its denunciation of the latter. Nigeria failed to fulfil this requirement and, as a result, the invalidity of the Hague Rules in Nigeria has been questioned. Two unreported Federal High Court cases on this matter have recently come to light due to their controversial implications.
In a recent ruling, a Federal High Court judge held that there is no limitation period for claims brought within the admiralty jurisdiction that are enforceable in rem. Taken literally, this decision could have significant practical consequences, as proceedings could effectively be brought at any time. In the case at hand, the proceedings stemmed from events that had occurred 10 years earlier.
Following an executive order confirming it as the economic regulator of Nigeria's ports, the Nigerian Shippers' Council recently issued standard operating procedures (SOPs) that apply to various port users and operators. The SOPs are expected to streamline port activities significantly and ensure improved efficiency and greater value for money. They may also reduce the number of disputes and litigation brought by port users that are unhappy with the services provided by operators.
The draft International Convention on Foreign Judicial Sales of Ships and their Recognition is being developed and Comite Maritime International intends to submit it for consideration as an international maritime convention. While the Nigerian Admiralty Jurisdiction Procedure Rules have laid the groundwork for the convention to some extent, it should solve a number of problems faced by purchasers following a foreign judicial sale.
The Department of Petroleum Resources' bunkering guidelines apply to all vessels engaged in bunker fuel business or trade within any part of Nigeria's territorial or internal waters. They regulate all matters pertaining to bunkering, including the issuance of licences. Any party intending to participate in bunkering operations must obtain a bunkering licence. Failure to do so can incur a penalty of $1 million and criminal prosecution.
Due to their relatively conflicting provisions, the continued co-existence of the Hague Rules and the Hamburg Rules has generated confusion among ship and cargo owners. Although the Hamburg Rules adequately and equitably regulate carriage of goods by sea transactions in Nigeria, steps should be taken to formally denounce the Hague Rules to clarify the subject for those who may still be confused.
The Federal High Court recently convicted a vessel and its crew of charges that included conspiracy to deal, dealing with, attempting to export and storing crude oil without lawful authority or a licence. In convicting the vessel and crew, the court relied on the fact that the defence's ship-to-ship transfer claim was neither proven nor supported by International Maritime Organisation or Lloyds List data.
Claims for delay are not limited to the terms of a charterparty. Another class of claims can be founded on tort, negligence or contract and brought by or against parties not named in a charterparty. Extra-charterparty delay claims are important in a jurisdiction such as Nigeria, where factors that result in delays are frequent and may not be adequately handled by claims founded on a charterparty.
The principle of subrogation – now a universally recognised component in almost every insurance contract – is where an insurer, having indemnified an insured, acquires all the rights and remedies of the insured with respect to the subject matter of the damage. The Marine Insurance Act clearly vests a recognised legal right of subrogation on the insurer. A party need only establish a recognised legal right and the courts will enforce it.
A ship intended for use in the Nigerian cabotage trade must be registered as a bareboat vessel. The Coastal and Inland Shipping Cabotage (Bareboat Registration) Regulations set out guidelines and criteria for the registration of bareboat vessels, including the eligibility requirements, the obligations of a registered vessel, the application of private law provisions and the grounds for refusal or termination.
The Federal High Court recently held that while the Nigerian Navy can arrest vessels suspected of involvement in oil theft or illegal bunkering, it does not have unfettered power to detain vessels beyond the period prescribed by law. The judgment sets a precedent for shipowners and practitioners in similar situations where the navy has acted arbitrarily when detaining ships.
The recent banning of certain oil tankers from trading in Nigeria was a shock for the industry. The vessels have since been re-admitted under the condition that they comply with the law. In the interests of due diligence and risk management, vessel owners and parties with interests in ships operating in Nigeria should be properly acquainted with the relevant rules.
The government recently banned 113 oil tankers from doing business in oil terminals in Nigerian territorial waters. Industry sources have stated that the ban may be connected to the misappropriation of crude oil. This alleged breach has heightened the focus on the legislation regarding Nigeria's territorial waters and the relevant international conventions to which it is a signatory.
The Nigerian Maritime Administration and Safety Agency recently revised the schedule for the phase-out of single-hull tankers operating in Nigeria. From a risk assessment viewpoint, operators of single-hull tankers that wish to take advantage of the extension should ensure that such tankers are limited at all times within Nigerian territory.
A 2010 amendment to the Constitution conferred exclusive jurisdiction in respect of all labour-related matters on the National Industrial Court, to the exclusion of all other courts of coordinate jurisdiction (the state and federal high courts). This has raised pertinent legal issues in relation to admiralty proceedings, which are exclusive to the Federal High Court in Nigeria.
The Nigerian Maritime Administration and Safety Agency recently introduced a raft of regulations to police the marine environment. The regulations are drawn from provisions in various international conventions to which Nigeria is a party, but which had not previously been put into effect. They established a robust regulatory regime for the marine environment, with strong compliance responsibilities for shipowners.
A recent Federal High Court decision has clarified the right of a party to be heard in Nigeria, particularly as in relation to the administration of the Cabotage Act. As a result, persons other than the minister of transport can approach the court where the minister fails to take steps to ensure compliance with the act.
In serving an in rem writ, the practice in Nigeria – and in most other common law jurisdictions – has been that the plaintiff will cause it to be issued against the ship or other res and at least another defendant. However, the traditional view of service of an in rem writ has been altered by a recent Court of Appeal decision.
In a landmark judgment the Federal High Court has affirmed the role of the Nigerian Shippers' Council as the economic regulator of ports in Nigeria, dismissing claims filed by shipping companies and terminal operators. It also held the shipping line agency charge, often levied by shipping companies against importers, to be illegal.
Nigeria's ratification of the Maritime Labour Convention is a welcome development for the country's maritime industry. However, implementation may present some legal and constitutional hurdles, as the convention has not been enacted into domestic law by the National Assembly, which the Constitution requires for any treaty or convention signed by the government to have force of law.
The Federal High Court recently ordered the sale of a vessel under arrest for the purpose of preserving pre-judgment security. The court held that the application of the Admiralty Jurisdiction Procedure Rules does not depend on the filing of a statement of defence, but is rather to preserve the vessel from destruction. The court ordered that the vessel be sold and the proceeds kept in a profit-yielding account pending the case outcome.