Court upholds oil rig as vessel under Cabotate Act, 2003
A Federal High Court sitting in Lagos has upheld the position of the Nigerian Maritime Administration and Safety Agency NIMASA to the effect that oil rigs are classified as vessels under the Coastal and Inland Shipping Act 2003.
Honourable Justice Babs Keuwumi of the Federal High Court, Lagos, in a landmark judgment delivered Friday, June 14, 2019 in a matter instituted by Seadrill Mobile Units Nigeria Limited against the Honourable Minister for Transportation and two others with suit No: FHC/L/CS/607/2016, initiated through an Originating Summons, held that drilling operations fall within the definition of ‘coastal trade’ under the Coastal and Inland Shipping (Cabotage) Act and that oil rigs fall within the definition of vessels under the Act.
The Plaintiff, Seadrill Mobile Units Nigeria Limited, had initiated the suit in reaction to the detention of its oil rig, The West Capella, by the Nigerian Maritime Administration and Safety Agency NIMASA, which had been detained upon the Plaintiff’s failure to register it as a vessel at the Ship Registry for cabotage operations.
Pursuant to the suit, the plaintiff in seeking the release of its vessel from detention had raised two questions for determination as to whether drilling operations fall within the definition of ‘coastal trade’ and ‘Cabotage’ under section two of the Coastal and Inland Shipping Cabotage Act 2003.
It also sought to know whether on a proper interpretation of the Cabotage Act; particularly sections two, five and 22(5); drilling rigs fall within the definition of vessel under the Coastal and Inland Shipping Cabotage Act.
Plaintiff’s counsel had argued that drilling operations were simply limited to oil production and this had no relation to the carriage of goods and passengers within Nigerian waters, which had been defined as coastal trade and Cabotage under s two of the Act.
The Plaintiff further argued that section 22 (5) of the Act expressly included certain vessels that were eligible for Cabotage registration under the Act. It was argued that it was immaterial that the word ‘include’ was used in section 22 (5) and that the express mention of the specific vessels in the section meant the exclusion of an oil rig, which was not mentioned.
In opposition, the first and third defendants’ counsel, Dr. Oluwole Akinyeye of Olisa Agbakoba Legal, argued that the plaintiff’s drilling operations, which involved oil production encompassed the exploration and exploitation of minerals or non-living natural resources in Nigeria and that the nature and functions of The West Capella compulsorily required it to carry persons and goods in relation to its oil drilling operations, which fell within the definition of coastal trade or cabotage under section two of the acts.
Dr. Akinyeye further argued that the nature and functions of The West Capella satisfied the three elements required to be fulfilled under section two of the Act for the purpose of classifying an oil rig as a vessel. It was also argued that The West Capella was a type of oil rig known as a drillship and that this fact ought to be taken into joint consideration with the provisions of the Admiralty Jurisdiction Act, NIMASA Act, and Merchant Shipping Act, which all contained provisions defining an oil rig as a ship.
In deciding the first question for determination in the affirmative, the Honourable Court found that the plaintiff’s drilling operations, which were conducted offshore; fell within the ambit of the definition of costal trade and Cabotage in section two of the Cabotage Act.
The court further found that the pictorial evidence of The West Capella reflected that its drilling operations encompassed the carriage of goods and persons for the purpose of being classified as coastal trade or Cabotage under section two of the Act.
In deciding the second question for determination also in the affirmative, the court considered the provisions of the Admiralty Jurisdiction Act and Interpretation Act and found that an oil rig was defined as a ship. The court also held that the word – ‘include’ as utilised in section 22 (5) of the Cabotage Act was to broaden the scope of the Act’s application to encompass vessels not specifically mentioned in the Act.
The court also held that the community reading of the Admiralty Jurisdiction Act, Interpretation Act and Cabotage Act meant that drilling rigs fell under the definition of vessel under the Act.
Experts believe that the judgment is groundbreaking as it has now settled the age-long controversy regarding whether the oil rigs employed by oil and gas companies in the maritime industry can be regarded as vessels for the purpose of the Cabotage Act.
They also said that the judgment is also far-reaching as NIMASA can now charge and demand statutory levies on the oil rigs for Cabotage activities, which had hitherto been contested by the oil and gas companies. As a corollary, the government stands to derive significant revenue from these levies thereby improving the economic fortunes of Nigeria.
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