The Court of Appeal (CoA) sitting in Lagos delivered judgement on 24 June 2019 in the case of Transocean Support Services Nigeria Limited & 3 Ors. and Nigerian Maritime Administration and Safety Agency (NIMASA) & Minister of Transport to the effect that drilling rigs are not vessels within the meaning of the Coastal and Inland Shipping (Cabotage) Act (“the Act”) and are, therefore, not liable to 2% surcharge on payments under the drilling contracts.
Earlier on 14 June 2019, the Federal High Court (FHC), in the case of Seadrill Mobile Units Nigeria Limited and Minister of Transport & 2 Ors., held that a “drill ship” was a vessel used solely for marine navigation, carriage of workers and operational equipment, and the storage and transportation of oil and gas products.
Section 43(a) of the Cabotage Act (“the Act”) imposes a 2% surcharge of the contract sum performed by any vessel engaged in coastal trade in Nigeria. Also, Section 2 of the Act defines vessels to include “any description of vessel, ship, boat, hovercraft or craft, including air cushion vehicles and dynamically supported craft, designed, used or capable of being used solely or partly for marine navigation and used for the carriage on, through or under water of persons or property with regard to method or lack of propulsion”. Section 22 of the Act further lists the types of vessels covered by the Cabotage Act, but this list does not specifically include drilling rigs. Nonetheless, Subsection 22(5)(m) of the Act contains an omnibus definition of eligible vessels as “any other craft or vessel used for carriage on, through and underwater of persons, property or any substance whatsoever”.
In addition, Section 2 of the Cabotage Act defines “coastal trade” or “cabotage”:
• with respect to “passengers” as:
“the carriage of passengers by vessel from any place in Nigeria situated on a lake or river to the same place, or to any other place in Nigeria, either directly or via a place outside Nigeria to the same place without any call at any port outside Nigeria or to any other place in Nigeria, other than as an in-transit or emergency call, either directly or via a place outside Nigeria”; “the carriage of passengers by vessel from any place in Nigeria to any place above or under Nigerian waters to any place in Nigeria, or from any place above Nigerian waters to the same place or to any other place above or under Nigerian waters where the carriage of passengers is in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources in or under Nigerian waters”.
• with respect to “goods”, as
“the carriage of goods by vessel or any mode of transportation, from one place in Nigeria or above Nigerian waters to any other place in Nigeria or above Nigerian waters, either directly or via a place outside Nigeria and includes the carriage of goods in relation to the exploration, exploitation or transportation of the mineral or non-living natural resources of Nigeria whether in or under Nigerian waters”; “the engaging, by vessel, in any other marine transportation activity of a commercial nature in Nigerian waters and, the carriage of any goods or substances whether or not of commercial value within the waters of Nigeria;”
In April 2007, the Federal Ministry of Transportation (“the Ministry”) issued “Guidelines on Implementation of the Cabotage Act, 2003” (“the Guidelines”) wherein drilling rigs were included as eligible vessels liable to the 2% Cabotage levy. Following the Guidelines, NIMASA issued assessment notices to operators of drilling rigs in Nigeria. Some of the operators challenged the assessments and subsequently sought judicial reliefs.
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