I COMMERCIAL OVERVIEW OF THE SHIPPING INDUSTRY
Nigeria continues to be the pivot of West Africa's shipping activities, owing to its strategic location by the coastline. With an extensive natural maritime endowment base incorporating a coastline of more than 800km, an exclusive economic zone of more than 200 nautical miles,2 the Nigerian 'blue economy'3 is being harnessed, considering the decline in oil and gas revenues, as one of the key drivers of the nation's economic development.4
Nigeria is also blessed with a vast inland waterways resource estimated at nearly 3,000km and comprising more than 50 rivers, both large and small, that can support a vibrant intra-regional trade.5 The country's population inspires large-scale importation of raw materials, luxury goods and other commodities, and large quantities of petroleum products owing to the lack of sufficient refining capacity in Nigeria.6 Crude oil and natural gas continue to be exported in large quantities. Consequently, demand in shipping services has been on the increase and the maritime industry, which plays an important part in the exploitation and distribution of Nigeria's oil and gas, conveniently takes second place as the principal contributor to the nation's economy after petroleum.
Commercial shipping activities largely revolve around six active ports7 and six petroleum exportation terminals.8 The 2006 port reforms brought about a remarkable increase in their cargo volume.9 Consequently, infrastructure and all other paraphernalia suitable for a standard port have been put in place, and continue to be upgraded, to meet the demands brought about by the increase in cargo volume.
Within the first six months of 2018, a total of 2,008 vessels berthed at the various Nigerian ports.10 This represents a consistent but sharp decline compared with the three preceding years, when a total of 5,014 vessels, 4,373 vessels and 4,292 vessels berthed at Nigerian ports in 2015, 2016 and 2017 respectively. The decline in the number of berthed vessels and tonnage registered can be attributed to the increase in the exchange rate of international currencies against the Nigerian naira, the introduction of new importation policies and a reduction in service boat operation because of the decline in international crude oil prices.
The total value of Nigeria's merchandise trade was 6,569.98 billion naira in the second quarter of 2018, which was a -8.89 per cent contraction from the figure recorded in Q1, 2018 (7,211.12 billion naira) and a 14.56 per cent growth from Q2, 2017 (5,734.80 billion naira).11 The total value of exports in 201712 stood at 13,598.2 million naira.
Compared to other oil-producing nations, vessel tonnage is low but in the past three years and pursuant to the implementation of several items of indigenous shipping development legislation, Nigerian-flagged vessels (mostly oil tankers, oil rigs and liftboats, offshore support vessels, floating storage and offloading (FSO) vessels, and floating production storage and offloading (FPSO) vessels) have enjoyed significant growth, from 370 vessels with a total of almost 420,000 metric tons in 2016, with a dip in 2017, at 307 registered vessels with a total of 415,638.03 metric tons13 and an increased pick up in 2018, due to registration of high capacity index vessels like the EGINA FPSO and a crude oil tanker, with approximately 595 vessels and a total of approximately 711,987.95 metric tons.14
II GENERAL OVERVIEW OF THE LEGISLATIVE FRAMEWORK
Although there has been a flurry of maritime legislation in Nigeria, the principal body of substantive shipping laws is contained in the Merchant Shipping Act, 2007 (MSA), the Nigerian Maritime Administration and Safety Agency Act, 2007 (the NIMASA Act), the Coastal and Inland Shipping (Cabotage) Act No. 5, 2003 (the Cabotage Act) and a raft of regulations (a number of which put into force, or are used to apply, international instruments on the construction and safety of ships, navigation, pollution and crew matters) and guidelines published pursuant to the foregoing legislation.
In addition, discrete legislation governs areas such as ports, carriage of goods by sea, wreck and salvage, pollution, the environment and marine resources. This legislation includes the Nigeria Ports Authority Act,15 2004, the Carriage of Goods by Sea Act,16 and the United Nations Convention on Carriage of Goods by Sea (Ratification and Enforcement) Act 2005.
Generally, the Constitution of the Federal Republic of Nigeria 1999 (as amended) (the Nigerian Constitution),17 the Admiralty Jurisdiction Act (AJA),18 and the Admiralty Jurisdiction Procedure Rules 2011 (AJPR) provide the framework for admiralty jurisdiction and court practice.
III FORUM AND JURISDICTION
Pursuant to Section 251(1)(g) of the Constitution and Sections 1 and 2 of the AJA, the Federal High Court has exclusive jurisdiction over shipping and admiralty matters.
Notwithstanding the foregoing, Section 254(c)(1) of the Constitution of the Federal Republic of Nigeria (Third Alteration) Act, 2010 conferred exclusive jurisdiction over all labour-related matters on the National Industrial Court, to the exclusion of all other courts of coordinate jurisdiction (i.e., the High Court of each of the 36 states and the Federal Capital Territory and the Federal High Court). As such, the National Industrial Court has exclusive jurisdiction to deal with all shipping-related labour claims, such as the traditional unpaid wages, which the AJA defines as a maritime lien.
Notably, Sections 20(a) to (h) of the AJA stipulate that the Federal High Court can exercise jurisdiction over admiralty matters, notwithstanding any exclusive jurisdictional clauses contained in any agreement related to such a matter, where the following circumstances exist:
- the place of performance, execution, delivery, act or default is or takes place in Nigeria;
- any of the parties resides or has resided in Nigeria;
- the payment under the agreement (implied or express) is made or is to be made in Nigeria;
- the plaintiff submits to the jurisdiction of the Nigerian court or the rem is within Nigerian jurisdiction;
- the government of a state of the federation is involved and the government or state submits to the jurisdiction of the Court;
- some financial consideration is to be derived from the contract in Nigeria; or
- in the opinion of the Court, the cause, matter or action is one that should be adjudicated upon in Nigeria.
Despite the foregoing, recent interpretations of Section 20 of the AJA suggest that any jurisdictional clause that seeks to oust a Nigerian court's jurisdiction in favour of a foreign court (and not an arbitration clause (Nigerian or foreign)) shall be considered null and void. However, only the jurisdictional aspects of the clause are affected, not the entire agreement. Section 10 of the AJA19 clearly empowers the Federal High Court to recognise and enforce arbitration clauses in admiralty agreements.20
It is worth noting that Section 18 of the AJA mandates that proceedings in a maritime claim or a claim on a maritime lien or other charge to be commenced within any stipulated limitation period provided in the contract in respect of such claim. However, where there is no stipulated limitation period in an agreement or law, such proceedings must be commenced within three years of the cause of action arising.
Meanwhile, the MSA prohibits the commencement of any action for payment by a salvor more than two years after completion of salvage.21 Collision claims can also not be commenced more than two years after accrual of the cause of action.
ii Arbitration and ADR
In general, commercial arbitration in Nigeria is governed by the Arbitration and Conciliation Act (ACA).22 It primarily grants parties the freedom through arbitration agreements to determine the arbitral procedure to govern their dispute resolution. When parties do not agree on the procedure to govern the dispute, the arbitrator will apply the procedural rules set out in the first schedule to the Arbitration Act, which are based on the UNCITRAL Arbitration Rules.23 There are some other very active arbitral institutional bodies in Nigeria, with their own procedures, that entertain commercial disputes, including maritime and shipping disputes. Notable in this regard are the Chartered Institute of Arbitrators UK, Nigeria branch, The Lagos Court of Arbitration (which was established under the Lagos Court of Arbitration Law, No. 17, 2009) and the Lagos Regional Centre for International Arbitration (the formation of which is backed by federal legislation).24
Nigeria does not have any specific maritime arbitration procedure legislation. However, recourse is often made to either the Maritime Arbitrators Association of Nigeria (MAAN), a non-governmental body comprising maritime and commercial law practitioners, master mariners, surveyors, insurance brokers and other maritime practitioners, or to experienced arbitrators, who are committed to providing specialised arbitration services for the settlement of shipping disputes. The MAAN has developed arbitration rules for large-scale (US$15,000 and above) and small-scale (below US$15,000) maritime claims.
There has been a progressive effort during the past 15 years to institutionalise the use of ADR, especially mediation, into the procedure of the judicial process in Nigeria. The first and most advanced of these is the Lagos Multi Door Court (LMDC). If parties fail to resolve their dispute through ADR, then the court would proceed to trial of the action. Matters resolved by mediation at the LMDC are entered as consent judgments of the Lagos State High Court and are enforceable.
iii Enforcement of foreign judgments and arbitral awards
The enforcement of foreign judgments in Nigeria is regulated by the following two statues:
- Reciprocal Enforcement of Foreign Judgments Ordinance;25 and
- Foreign Judgment (Reciprocal Enforcement) Act (FJA).26
Until recently, there was intense intellectual polemics among text writers, commentators and legal practitioners as to which of these two statutes regulates the enforcement of foreign judgments in Nigeria. While the debate continued, there was one common factor to both pieces of legislation – that is, the registration and enforcement of foreign judgments (including maritime judgments) be based on reciprocity.
The FJA provides for a one-year limitation period for the registration and enforcement of foreign judgments, and the REJ has a six-year limitation period.
The REJ, owing to its English origins, lists a number of Commonwealth countries in favour of which reciprocal status was granted for judgments of their superior courts. The FJA, on the other hand, empowers the Minister of Justice to make orders in respect of countries with which the Minister is assured would grant reciprocal enforcement to Nigerian judgments before the provisions of the FJA would be applicable to the judgment of such countries. However, no such order has been made to date by the Minister. As such, the FJA remains inoperative, even though it was enacted well after the REJ. The fact that the FJA did not repeal the REJ further compounds the legal quagmire.
Although there have been several court decisions suggesting that registration and enforcement of judgment should follow the provisions of the FJA, the Supreme Court has been consistent during the past 10 years that the REJ is the applicable law, for the time being, for the registration and enforcement of judgments from the United Kingdom and other named Commonwealth countries (pursuant to Section 5 FJA) until the relevant orders are made by the Minister of Justice pursuant to the FJA. The foregoing was recently echoed in Bronwen Energy Trading Ltd v. Crescent Africa (Ghana) Ltd,27 in which the Supreme Court relied on earlier decisions.28
The number of foreign judgments enforced has not been high, not only as a result of the restricted number of countries that have been recognised by law to reciprocate enforcement of Nigerian judgment, but also because of the conditions contained in the REJ that may prevent a duly obtained judgment in any jurisdiction from being registered and enforced in Nigeria.29
Order 52 Rules 16 and 17 of the Federal High Court (Civil Procedure Rules) 2009 also govern the recognition and enforcement of arbitral awards at the Federal High Court, which has exclusive jurisdiction over admiralty matters.
Nigeria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention), which was included as a schedule to the ACA. An arbitration award may be enforced pursuant to either Section 51 or Section 54 of the ACA. While Section 51 allows recognition and enforcement of an award from any country, Section 54 applies to recognition and enforcement of awards between Nigeria and any other contracting state to the New York Convention, pursuant to conditions stipulated thereunder.
The ACA does not specify a limitation period for the recognition and enforcement of an award. As such the question as to when time begins to run for the purpose of commencing the enforcement of an arbitral award has always been the subject of much debate. The foregoing stems from the conception of enforcement proceedings as an action instituted for the assertion of a right. If it is considered as such, then the six-year limitation period contained in the Limitation Act 1966 and the limitation laws of the different states (and the Federal Capital Territory, Abuja) for the institution of an action in a Nigerian court is therefore applicable.
In Murmansk State Steamship Line v. Kano Oil Millers Limited,30 City Engineering Nigeria Limited v. Federal Housing Authority31 and Tulip (Nig.) Ltd v. Noleggioe Transport Maritime SAS,32 the Supreme Court decided that the period of limitation runs from the date of the accrual of the original cause of action in the arbitral agreement, being the date on which the claimant acquires the right to institute an arbitral proceeding, and not from the date of the arbitral award.
The decision of the Supreme Court in City Engineering v. Federal Housing Authority is most unsatisfactory for the law does not command impossibility. Time cannot start to run before the making of an award. Second, an arbitration agreement constitutes two distinct contracts, namely the contract to submit a dispute to arbitration when one does occur, and second, the contract or agreement to comply with the terms of the award when made. It is therefore expected that the English position,33 which the Supreme Court was urged to adopt in City Engineering, would be followed, namely that the making of an arbitral award gives rise to a new cause of action as soon as the unsuccessful party fails to comply with the terms of the award, and not from the date of accrual of the original cause of action giving rise to the submission.
Notwithstanding the preceding paragraph, an applicant wishing to enforce an arbitral award in Nigeria must also ensure that the arbitration proceedings are swiftly concluded so as not to be caught up by the applicable limitation period. As an alternative, as advised by Elias, Chief Justice of Nigeria (as he then was) in the Murmansk case, it may be prudent for an aggrieved party to institute an action in court following a breach of the contract containing the arbitration agreement. Upon an application by the other party, the matter may be stayed pending the outcome of arbitration.
IV SHIPPING CONTRACTS
Nigeria does not undertake a significant amount of shipbuilding. Most newbuilds are ordered from abroad but a few Nigerian shipyards build or assemble craft (barges, tugboats and riverboats) below 5,000 tonnes for use in inland waterways, cabotage operations and the lucrative support services to the oil and gas industry. The size and sophistication of the products of these shipyards are growing steadily and the Nigerian Maritime Administration and Safety Agency (NIMASA), in line with its statutory responsibility to facilitate the growth of local capacity in the construction of ships and other maritime infrastructure, is taking strategic steps towards shipbuilding, with much expectation hinged on Ajaokuta steel mill in Kogi State and Aluminium Smelter Company in Ikot-Abasi, Akwa Ibom State, coming on stream.34
There is no statutory regime governing shipbuilding, and the rights and obligations of the parties are circumscribed by the terms of the contract and the principles of English common law of contract. The structure of most shipbuilding contracts mirrors the standard provisions as adopted elsewhere – that is, the shipyard undertakes to construct the vessel to specification and to deliver and pass title following completion of sea trials coupled with post-delivery warranties. The purchaser, on the other hand, undertakes to pay for the construction of the vessel in instalments against the completion of specified milestones and to accept delivery and title.
ii Contract of carriage
Ship and cargo owners with an interest in Nigeria may be confronted by a unique question in their quest for due diligence: in the event of damage or loss to cargo, which liability regime applies? The Hague Rules 1924 and the Hamburg Rules 1978 are concurrently in force in Nigeria. The Hague Rules are one of the statutes inherited from the time of British rule and they apply pursuant to the provisions of the Carriage of Goods by Sea Act 2004 (COGSA). Conversely, the Hamburg Rules were domesticated in Nigeria as a National Assembly act (as required by Section 12 of the Constitution) via the UN Convention on the Carriage of Goods by Sea (Ratification and Enforcement) Act 2005.
The COGSA expressly states that the Hague Rules apply in respect of outward carriage of goods from ports in Nigeria to ports outside Nigeria, or other ports within Nigeria. Consequently, the choice of law clauses of most bills of lading in respect of shipments to Nigeria, providing for reliance on the terms of The Hague Rules Convention, have been upheld.
The UN Convention on the Carriage of Goods by Sea (Ratification and Enforcement) Act 2005, which introduced the Hamburg Rules as a schedule, failed to expressly repeal and denounce the Hague Rules, as required by Article 15 of the Hague Rules. It is therefore arguable that the Hague Rules and the Hamburg Rules currently apply in Nigeria.
Notwithstanding the foregoing, it is the author's view that the Hamburg Rules, by virtue of the UN Convention on the Carriage of Goods by Sea (Ratification and Enforcement) Act 2005, applies in Nigeria by force of law to all carriage of goods by sea (inwards and outwards) to the exclusion of any other international convention, including the Hague Rules.
Nigeria is not a party to the Hague-Visby Rules, but it signed the Rotterdam Rules and would need to make same an act of the National Assembly for the Rotterdam Rules to apply in Nigeria once the act comes into force.
iii Cargo claims
Cargo disputes may arise as a result of loss or damage during carriage or in port during discharge. The right to sue with regard to cargo claims was originally contained in the Bill of Lading Act 1855 (the 1855 Act), being a pre-1900 United Kingdom statute of general application in Nigeria. By virtue of the 1855 Act, only the consignor, consignee and endorsee have privity and right to sue, often referred to as locus standi.35
The essential features of the 1855 Act were imported into the Merchant Shipping Act 2004 (MSA 2004), in Section 375. Regrettably, when the MSA 2004 was repealed by the MSA, Section 375 of the MSA 2004 was not preserved. As such, there is now a lacuna regarding applicable legislation detailing the right of suit principle in Nigeria, the cases that provide judicial precedent notwithstanding (see footnote 23). At best, it remains applicable as a common law principle of contract in Nigeria.
There are some notable exceptions to these rules as have been recognised, including the Brandt v. Liverpool36 doctrine, whereby the holder of the bill of lading can maintain an action at common law where the court is able to infer or imply a contract on the bill of lading terms between the holder and the carrier in circumstances where the holder:
- takes delivery of the goods;
- pays freight or demurrage; or
- presents the bill of lading.
The lack of capacity of a notified party to sue on a bill of lading was underscored by the Supreme Court in the case of Pacers Multi-Dynamic Ltd v. MV Dancing Sisters & Anor.37 However, where the bill of lading is endorsed to the person named as the 'notify party', the Supreme Court held in Basinco Motors Limited v. Woermann-Line and Anor38 that the action would be maintainable because property in the goods would have passed to the notify party, whose position changes to that of an endorsee.39
iv Limitation of liability
Under Nigerian law, not all claims against a shipowner are susceptible to
limitation of liability. Nigeria, as a signatory to the 1976 Convention on Limitation of Liability for Maritime Claims (LLMC) (which replaced the 1957 International Convention Relating to the Limitation of Owners of Seagoing Ships) and the 1996 Protocol (the Protocol) thereto,40 domesticated the LLMC and the Protocol in its laws through the provisions of Section 335(1)(f) of the MSA.
The LLMC and its Protocol formed the basis of the Limitation of Liability for Maritime Claims as stated in Sections 351 to 359 of the MSA, which set out the circumstances in which shipowners (including the owners, charterers, managers and operators of a ship), salvors and their insurers may limit their liability for maritime claims, as well as the computation for that limitation.
Sections 352(1)(a) to (g) of the MSA states the types of claims that are subject to limitation, while Sections 353(a) to (e) list the claims that may not be subject to limitation, such as claims for salvage or contribution in general average, oil pollution liability and claims in respect of nuclear damage.
The following underlined provision of Section 356(1) of MSA creates room for discussion as to whether or not there is a lacuna in the determination of the general limits of liability:
The limits of liability for claims other than those mentioned in this Act, arising on any distinct occasion, shall be calculated as follows:
One interpretation of this would be that: 'the maritime claims subject to limitation under Section 352 of MSA would not be subject to the limits stated in Section 356(1). If so, how would the limit of such claims be calculated?' On the other hand, the above provision of the MSA could mean that the general limits of liability for claims, other than claims for which specific limitations has been provided for in the MSA (such as passenger claims under Section 357), shall be calculated as provided.
The above provision of the MSA is clearly a case of inelegant drafting as the words 'other than those mentioned in this Act' create room for ambiguity as to what specific cases the limitation of liability provisions is applicable. The author aligns with the first interpretation. Pending judicial interpretation of the above provision of the MSA, a revision of the MSA is being agitated to clear this ambiguity as well as other salient issues highlighted herein.
The entry into force of the amendment to the limit of liability in the Protocol on 8 June 201541 (Protocol Amendment 2015) presupposes an increase in liability for the relevant maritime claims. This may not be the case in Nigeria as it is arguable that the Protocol Amendment 2015 does not automatically apply in Nigeria, pursuant to Section 335(1)(f) of the MSA, as the Constitution requires every convention to be domesticated via a law of the National Assembly before it can have force of law in Nigeria. The matter is further compounded by the fact that the MSA states expressly, in Sections 356 to 359, the limits provided for in the Protocol.
It is therefore imperative that the MSA be amended to accommodate amendments to the Protocol (such as the Protocol Amendment 2015) and how such amendments would be incorporated into the express thresholds of limitation of liability as set out in the MSA to enable Nigerians to benefit from these developments in line with international best practice.
Order 15 Rule 1(4) of the AJPR provides that a limitation of liability proceedings shall be commenced through the filing of an originating summons at the registry of the Federal High Court. An originating summons is expected to be accompanied by the following processes: (1) an affidavit setting out the facts relied upon; (2) copies of all the exhibits to be relied upon; and (3) a written address.
An action for limitation is commenced as an admiralty action in personam against at least one of the (possible) claimants in a maritime claim (as a defendant), who must be served before the case may be set down for hearing or determination given in default of appearance. After determination of the applicant's entitlement to a limitation of its liability, the court may order advertisement of its determination to allow anyone with a maritime claim against the vessel or such other parties named above to apply to set aside, vary the court's determination or lodge its interest.
i Ship arrest
The AJA and the AJPR govern admiralty matters. A party seeking to arrest a ship in Nigeria must satisfy the court that its claim qualifies as a 'maritime claim' as defined in Section 2 of the AJA. This generally means that it must be a proprietary maritime claim or a general maritime claim.
A proprietary maritime claim42 includes a claim relating to the possession of a ship, title to or ownership of a ship or a share in a ship, mortgage of or a share in a ship, mortgage of a ship's freight or claims between co-owners of a ship relating to the possession, ownership, operation or earning of a ship. A claim for the satisfaction or enforcement of a judgment given by a court (including a court of a foreign country) against a ship or other properties in an admiralty proceeding in rem is also a proprietary maritime claim.
Section 2(3) of the AJA states the claims that fall under a general maritime claim. These include, but are not limited to, claims for damage done or received by a ship (whether by collision or otherwise), claims in respect of goods, materials or services (including stevedoring and lighterage services) supplied or to be supplied to a ship for its operation or maintenance, claims for loss of life, or for personal injury, sustained in consequence of a defect in a ship or in the apparel or equipment of a ship as well as arising out of an act or omission of the owners or characters of a ship.
The AJA stipulates that an action in rem can only be brought if there is a proprietary maritime claim or if, in the case of a general maritime claim, the action can be brought in personam against the proprietor of the vessel in question. Consequently, whenever there is a general maritime claim, an action in rem can only be brought before the court if, at the time of commencing the action, the person against whom an action in personam may have been brought (referred to as the 'relevant person') is the owner of the vessel in question, the owner of a sister vessel or the demise (bareboat) charterer of the vessel in question.43
In addition to the foregoing, an action in rem may be commenced against a ship if there is a maritime lien or other charge on that ship.44
An application for the arrest of a vessel is brought via an ex parte application (if the vessel is within Nigerian territorial waters45 or expected to arrive there within three days, disclosing a strong prima facie case for the arrest order. This application must be supported by an affidavit deposed to by the applicant, its counsel or its agent. The applicant is required to provide the following with the ex parte application:
- an undertaking to indemnify the ship against wrongful arrest; and
- an undertaking to indemnify the Admiralty Marshal in respect of any expenses incurred in effecting the arrest.
The applicant is also required to pay, fortnightly, the Admiralty Marshal's minimum cost of 100,000 naira for maintaining the vessel under arrest.
ii Court orders for sale of a vessel
A court of competent jurisdiction can order a ship under arrest in proceedings within its jurisdiction to be valued and sold on application by an interested party before or after final judgment.46 The application can only be made if the vessel has been under arrest for six months and the owner has failed to provide security for her release and the vessel is depreciating in value. Where a sale is ordered by the court, a valuation of the ship is carried out, after which an advert is published in two national newspapers. The sale is conducted by the Admiralty Marshal within 21 days of the newspaper advertisements appearing. The proceeds of the sale are paid into court and the Admiralty Marshal files an account of sale and vouchers of the account.
The NIMASA, pursuant to the NIMASA Act, the MSA, the Cabotage Act and other related legislation, is empowered, inter alia, to regulate maritime safety, security, marine pollution and maritime labour.
Section 20 of the NIMASA Act empowers the Agency to establish the procedure for the implementation of international maritime conventions of the IMO, the ILO and other conventions on maritime safety and security to which the government of Nigeria is a party, especially by making regulations in respect of any such implemented convention.
Some of the maritime safety conventions that have been implemented and their corresponding regulations (where applicable), pursuant to Section 215 of the MSA, are:
- the International Convention for the Safety of Life at Sea (SOLAS), 1974;
- the 1988 Protocol relating to SOLAS and Annexes I to V thereto;
- the Search and Rescue Convention 1979;
- the International Labour Organisation Convention concerning the Protection Against Accident of Workers Employed in Loading or Unloading Ships (the Dockers Convention); and
- the Convention for the Suppression of Unlawful Acts of Violence Against the Safety of Maritime Navigation 1988.
ii Port state control
The NIMASA is the authority tasked with undertaking port state control (PSC) duties. Nigeria facilitated the development of the Abuja MOU on PSC; 16 states have signed the MOU, 11 of which have deposited an instrument of ratification with the Secretariat of the Abuja MOU. The MOU has been active, recently hosting its third Ministerial Conference and ninth Port State Control Committee Meeting with the aim of developing a unified system of PSC inspection procedure for the region.
Although vessel inspection under PSC is relatively low when compared with vessel traffic, Nigeria is one of the leading nations in Africa, having inspected more than 700 ships in 2014 and detained 63. Also, Nigeria is one of the countries with the highest positive performance indicators in the 2016–2017 Shipping Industry Flag State Performance Table prepared by the International Chamber of Shipping.
Continuous efforts are being made to train PSC monitors, inspectors, surveyors and other key officials. This is germane to Nigeria's quest to have port facilities that are on a par with those in the developed world. The idea of making Nigeria a hub in port operations cannot be removed from an effective PSC in the country and other member states.
iii Registration and classification
The Nigerian Ship Registry (NSR) is domiciled with the NIMASA and, ordinarily, only Nigerian citizens or bodies corporate, or partnerships subject to Nigerian law and having their principal place of business in Nigeria, can register their interests in a vessel under the Nigerian flag. There is no provision for dual registration, as a vessel may only fly the flag of one country. Consequently, there is a requirement for vessels already registered under a foreign flag to deregister their current present port or state registries in order to be registrable in Nigeria. However, the NSR permits provisional registration of a vessel for six months to allow it sail into Nigeria with the Nigerian flag before completing a full registration on arrival.
The NSR is equally responsible for maintaining the Cabotage Register for vessels eligible to participate in the Nigerian cabotage trade. Additionally, the NIMASA has set a five-year period for the cessation of the nation's cabotage waiver regime (which was implemented pursuant to the provisions of the Cabotage Act) that has given, inter alia, an advantage to foreign-flagged vessels, foreign-owned vessels as well as foreign crew to operate in Nigerian cabotage for over 15 years now. The recent move by the NIMASA, which is quite commendable and in consonance with the spirit and letters of the Cabotage Act, which primarily aims to reserve commercial transport of goods and services within Nigerian coastal and inland waters to only vessels built, owned and operated by Nigerians. Preliminary findings reveal that the NIMASA has commenced the termination of the cabotage waiver regime with the stoppage of manning waivers (with the exceptions of captains and chief engineers), while the final two phases of the termination are expected to end in two and five years respectively. The move by the NIMASA to end the cabotage waivers for foreign-owned vessels is welcome news and a relief to the indigenous operators as well as other domestic stakeholders, who have long been greatly concerned that cabotage waivers had become the norm rather than an exception. It is believed that the demise of the waiver regime, if properly effected, would allow cabotage to flourish for Nigerians who would be better positioned to reap the benefits of coastal trade in Nigerian waters.47
As part of the requirements for Nigerian ship registration, an applicant is required to provide a current certificate from an approved international classification society. In this regard, the NIMASA has established collaborative links with the following leading classification societies by signing memoranda of understanding with them and has issued marine notices to this effect: the American Bureau of Shipping, Bureau Veritas, Det Norske Veritas, Lloyd's Register, the International Naval Survey Bureau and the International Register of Shipping.
iv Environmental regulation
The NIMASA's Marine Environment Management Department (MEMD) is statutorily responsible for ensuring a clean marine environment through the implementation of all relevant IMO Conventions. The MEMD draws its statutory powers from Part XXIII Section 335 of the MSA and Sections 22(2) and 23(9)(b) of the NIMASA Act.
The functions of the MEMD are generally derived from the IMO Conventions relating to the protection of the marine environment against pollution and any other related conventions adopted by the IMO from time to time. Broadly, the MEMD implements and enforces compliance to the IMO Conventions for protecting and preserving the marine environment and resources, including MARPOL 73/78, the London Dumping Convention 1972 and its 1996 Protocol 1996, the Ballast Water Management Convention 2004 and the Intervention Convention 1969.
v Collisions, salvage and wrecks
The MSA contains various provisions in respect of collisions, salvage and wrecks. The MSA mandates the observance of the Merchant Shipping (Collision) Rules 2010 (Collision Regulations), which are significantly modelled after the International Regulations for Preventing Collisions at Sea 1972 (the COLREGs) and provide practical guides for ships' conduct, inter alia, in anticipation and prevention of, or in reaction to, a collision. The Collision Regulations further provide for the rights of NIMASA-approved inspectors to inspect ships for the purpose of enforcing the Regulations, as well as for the duty of a ship master (to other ships and occupants of ships with which they collide) to report collisions.
Pursuant to Section 387 of the MSA, the International Convention on Salvage 1989 forms the basis of Nigeria's salvage regime set out in Part XXVII of the MSA. The MSA also provides for the Merchant Shipping (Wrecks and Salvage) Regulations 2010, which essentially set out the procedure for investigating wrecks and salvage.
Whereas the Cabotage Act provides that only vessels that are wholly owned and wholly manned by Nigerian citizens, as well as being built and registered in Nigeria, are entitled to engage in domestic coastal carriage of cargo and passengers within Nigerian waters, Section 8 of the Cabotage Act permits foreign vessels engaged in salvage operations, as determined by the Minister of Transportation to be beyond the capacity of Nigerian owned and operated salvage vessels and companies, to operate in Nigerian water. The foregoing requirement for ministerial determination, however, shall not apply to any foreign vessel engaged in salvage operations for the purpose of rendering assistance to persons, vessels or aircraft in danger or distress in Nigerian waters.
According to the MSA, the responsibility for removal of any ship that becomes a wreck is placed on the shipowner.48 However, this is difficult to implement as most shipowners are usually insolvent at that stage. The MSA further provides for the Receiver of Wrecks to take possession, raise, remove or destroy the whole or any part of the vessel. It is an offence for any person other than the Receiver of Wrecks (or the shipowner) to carry out any of the aforementioned without the written permission of the Receiver of Wrecks. Also, in a manner it thinks fit, the Receiver of Wrecks may sell any part so raised or removed and any property recovered in the exercise of its powers.
Despite the foregoing provisions, the Receiver of Wrecks, owing to the paucity of funds and administrative bottlenecks, has been unable to efficiently remove identified hazardous wrecks when shipowners have failed to do so. This is further compounded by several claims from alleged shipowners when the Receiver of Wrecks seeks to exercise its power of sale to raise the required funds or remove the wrecks after the shipowners have failed to remove them within the time limit set by the Receiver of Wrecks. It is expected that the Receiver of Wrecks and the NIMASA would put in place the framework for a mutually beneficial relationship with recyclers, with whom the Receiver of Wrecks can partner to remove and efficiently dispose of wrecks.
Nigeria is a signatory to the Nairobi International Convention on the Removal of Wrecks 2007 (the Nairobi WRC 2007). However, the Nairobi WRC 2007 does not have the force of law in Nigeria, as it is yet to be ratified and enacted as legislation or a law of the National Assembly, as required by Section 12 of the Constitution.
vi Passengers' rights
The Athens Convention Relating to the Carriage of Passengers and their Luggage by Sea, 1974, and its Protocol of 1990, is applicable in Nigeria pursuant to Section 215 of the MSA. To date no regulations have been made pursuant to the Athens Convention and its Protocol.
Sections 340 and 341 of the MSA provide that passengers may claim for loss of life or injury and nothing shall deprive any person who has claimed against the right of defence or the right to limit liability where it exists; and where the proportion of damages recovered from a ship exceeds the proportion of its fault where two or more ships are involved, the ship from which the excess damages was recovered may recover the excess amount from the owners of the other ships involved to the extent of their faults. There is, however, very minimal organised international carriage of passengers by seagoing vessels into and from Nigeria.
Actions in relation to passenger claims under the MSA must be brought to court within two years of the date on which the loss or injury was caused.
vii Seafarers' rights
Several conventions on seafarers' rights have been implemented pursuant to Section 215, MSA. These include:
- rights with regard to their employment contracts (and obligations of their employers), including wages, leave benefits and discharge from service; and
- rights regarding general welfare, health and accommodation.
Some MSA regulations regarding seafarers' rights pursuant to international conventions have already been implemented in Nigeria. The International Convention on Standards of Training, Certification and Watchkeeping for Seafarers 1978 (the STCW Convention) was domesticated through the rule-making authority of the Minister49 by way of subsidiary legislation in the Merchant Shipping (Medical Examination of Seafarers) Regulations 2001 and the Merchant Shipping (Safe Manning, Hours of Watchkeeping) Regulations 2001.50
Other conventions domesticated by the MSA are the ILO Convention (No. 32 of 1932) on Protection Against Accident of Workers Employed in Loading or Unloading Ships (Dockers Convention Revised 1932) and the Placing of Seamen Convention, 1920.
In June 2013, Nigeria deposited an instrument of ratification for the Maritime Labour Convention 2006 (MLC) at the ILO Secretariat in Geneva. However, Nigeria is yet to domesticate the MLC, which was adopted by the International Labour Conference of the ILO in February 2006.
The AJA provides seafarers and masters with the right (as general maritime claims and maritime liens) to bring an action (including the arrest of a ship) against a shipowner for unpaid wages. However, the Federal High Court stated in a recent decision51 that pursuant to Section 254(c)(1) of the Constitution of the Federal Republic of Nigeria (Third Alteration) 1999, the National Industrial Court is the appropriate court to deal with an action for unpaid crew wages.
Generally, the outlook for the Nigerian economy continues to be positive. Based on available data, the Nigerian economy, after exiting recession in 2017, quickened its pace of growth in 2018, and this upward trajectory is expected to continue in 2019, albeit at a reduced pace due to expected delays following the successful 2019 general elections and the inauguration of the new government.
Further to the Maritime Industry Forecast for 2019–2020 (as recently presented by the NIMASA), the total Nigerian fleet is projected to grow by 10.33 per cent in 2019 and ease to 8.75 per cent in 2020 (that is to say, the size of the oil tanker fleet is projected to decrease by 11.2 per cent in 2019 and recover to a positive growth of 0.11 per cent in 2020; the size of the non-oil tanker fleet size is to estimated to increase by 14.3 per cent in 2019 and 10.2 per cent in 2020; and oil rigs are projected to increase by 6.98 per cent and 6.5 per cent in 2019 and 2020 respectively).
Regrettably, the following bills, most of which were highlighted in last year's chapter and would positively affect the Nigerian maritime industry, are still going through legislative processes at the National Assembly: the Anti-Piracy Bill, the National Transport Commission Bill, the Petroleum Industry Governance Bill, the National Inland Waterways Authority Amendment Bill, the Deep Offshore and Inland Basin Production Sharing Contract Amendment Bill, the Cabotage Act Amendment Bill and the Ports and Harbour Bill. If the foregoing bills are not passed into law before the dissolution of the current National Assembly in June 2019, the bills would lapse and would have to be reintroduced to the next National Assembly for consideration.
The development of new greenfield ports, with a view to reducing congestion at existing ports and meet global shipping trends, continues in Nigeria. Extensive works are ongoing at the Lekki Deep Sea Port, which is now scheduled to be completed in 2021. Other greenfield port projects include: (1) the Ibom Deep Sea Ports, designed as a PPP arrangement between the Federal Ministry of Transportation, Akwa Ibom State and the Nigeria Ports Authority and intended to be a major transhipment port to accommodate Panamax vessels, is due to commence construction in 2019; and (2) the Badagry Deep Sea Port.
In line with the renewed synergy between the NIMASA and the Nigerian Content Development & Monitoring Board (NCDMB), certain categories of vessels have been identified (tugboats, security patrol vessels, crew boats, among others) to be in high demand in the Nigerian offshore industry over the next four years, with a projected spend of approximately US$1.6 billion on marine contracts for the aforesaid vessels. Equally worth noting is that the NCDMB has set in place a financial scheme to aid Nigerians to acquire these vessels. Similarly, a framework for manpower development for critical skills required in the maritime industry has been put in place. All these developments are part of NIMASA's recent drive to cease the granting of cabotage waivers in five years and further promote indigenous participation in the country's maritime industry.
With the Nigerian LNG Limited (NLNG) Train 7 expansion project,52 which will be done locally by most Nigerian companies, a lot of value is expected to be added to the Nigerian offshore industry in 2019 and 2020 (just as the EGINA FPSO was primarily constructed and integrated in Nigeria), taking into consideration the project estimate of US$4.3 billion and the above-mentioned synergy between the NIMASA and the NCDMB for the development of local content in the Nigerian offshore industry.
1 Adedoyin Afun is a partner at Bloomfield Law Practice.
2 By a combined reading of Sections 1 and 2 of the Exclusive Economic Zone Act 1978, Cap E17 Laws of the Federation of Nigeria (LFN) 2004, the sovereign and exclusive rights in the Exclusive Economic Zone, which includes the sovereign and exclusive rights to the exploration and exploitation of the natural resources of the seabed, subsoil and superjacent waters of the area extending from the external limits of the territorial waters of Nigeria up to a distance of 200 nautical miles from the baseline from which the breadth of the territorial waters of Nigeria is measured is vested in the Federal Republic of Nigeria.
3 Andrew Hudson 'Blue Economy: a sustainable ocean economic paradigm' (United Nations Development Programme, 26 November 2018) < https://www.undp.org/content/undp/en/home/blog/2018/blue-
economy-sustainable-ocean-economic-paradigm.html> [accessed 17 April 2019]; The Commonwealth 'Blue Economy' < http://thecommonwealth.org/blue-economy> [accessed 17 April 2019].
4 Wumi Iledare 'Oil and the Future of Nigeria: Perspectives on Challenges and Strategic Actions for Sustainable Economic Growth and Development' (2007) International Association for Energy Economics 21-25; PwC 'Nigeria: Looking beyond oil' (PwC, Lagos Chamber of Commerce and Industry, Lagos, Nigeria, March 2016) 1-32.
5 Eromosele Abiodun (2018), 'Rescuing the Maritime Sector', THISDAYLIVE < https://www.thisdaylive.com/index.php/2018/03/09/rescuing-the-maritime-sector/> [accessed 17 April 2019].
6 A H Isa, S Hamisu, H S Lamin, M Z Ya'u and J S Olayande 'The perspective of Nigeria's projected demand for petroleum products' (2013) 4(7) Journal of Petroleum and Gas Engineering 184–187.
7 Located in Lagos State are Apapa Port and Tin Can Island Port. Located in Rivers State are Port Harcourt Port and Onne Port. Located in Delta State and Cross River State are Warri Port and Calabar Port, respectively. Three other ports are under construction: Badagry, Lekki and Ibom.
8 Nigeria Business Info 'The Nigerian Crude Oil & Gas Industry' < https://web.archive.org/web/20060213013744/http://www.nigeriabusinessinfo.com/nigerian-oil.htm> [accessed 17 April 2019].
9 James Leigland and Gylfi Palsson 'The World Bank 'Port reform in Nigeria' (Grid Lines, World Bank, March 2007) < http://www.infradev.org/Infradev/assets/10/documents/Gridline%20-%20Port%20Reform%20in%20Nigeria.pdf> [accessed 17 April 2019].
10 Source: Nigerian Port Authority – Nigerian Port Statistics for 2007 to June 2018.
11 'Merchandise Trade Declines in Q2 2018: -8.89% Contraction from Q1 2018 Trade Figure'
Q2-2018---8.89Percent-Contraction-from-Q1-2018-Trade-Figure/41705> [Accessed 18 April 2019].
12 'Nigeria's Merchandise Trade Declined Marginally QoQ but Increased YoY for Q4 2017' (2018) < https://www.proshareng.com/news/Nigeria%20Economy/Nigeria%E2%80%99s- Merchandise-Trade-
Declined-M/38717> [Accessed 18 April 2019].
13 Nigeria's Maritime Industry Forecast: 2018–2019 as presented by the Nigerian Maritime Administration and Safety Agency (NIMASA).
14 Nigeria's Maritime Industry Forecast: 2019–2020 as presented by the NIMASA.
15 Cap. N126, LFN 2004.
16 Cap. C2, LFN 2004.
17 Cap. C23, LFN 2004.
18 Cap. A5 LFN 2004.
19 Section 10 of the AJA codifies Nigeria's obligations under Article II(1) of the New York Convention, which provides that Nigeria and the other contracting states shall recognise an agreement in writing under which parties undertake to submit their disputes to arbitration. Article II(3) of the New York Convention provides that: 'The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.'
20 Onward Enterprises Limited v. MV 'Matrix' & 2 Ors (2010) 2 NWLR (Pt. 1179) 530, and The Owners of The MV Lupex v. Nigerian Overseas Chartering and Shipping Limited (2003) FWLR (Pt 270) 1428.
21 This time may, however, be extended by a court if the salvor has been unable to arrest the salvaged vessel.
22 Cap. A18, LFN 2004.
23 Section 15 of the ACA.
24 The Regional Centre for International Commercial Arbitration Act, Cap. R5, LFN 2004.
25 Cap 175, Laws of the Federation of Nigeria and Lagos, 1958 (REJ) (this Ordinance was enacted in 1922 as LN 8, 1922).
26 Originally enacted in 1960. Cited as Chapter C35, Laws of the Federation 2004.
27 (2018) LPELR-43796(CA).
28 See Macaulay v. RZB Austria (2003) ALL NLR 393, Marine & General Assurance Company Plc v. Overseas Union Insurance (2006) 4 NWLR (Pt. 971) 622 and Grosvenor Casinos Ltd v. Halaoui (2009) 10 NWLR (PT 1149) 309.
29 Some of the other conditions include that the original court must have jurisdiction that the judgment was not obtained by fraud, that the judgment is not subject to appeal in another country or that the judgment is not contrary to public policy in Nigeria.
30 (1974) All N.L.R 89.
31 (1997) 9 NWLR (Pt 520) 224.
32 (2011) 4 NWLR (Pt 1237) 254.
33 As stated by Otton J in Agromet Motoimport Ltd v. Maulden Engineering Co. (Beds) Ltd (1985) 2 All ER 436.
34 Anna Okon 'NIMASA to end 16-year cabotage waivers regime' (The Punch, Lagos, Nigeria, 11 April 2019) (online) < https://punchng.com/nimasa-to-end-16-year-cabotage-waivers-regime/> [accessed 19 April 2019].
35 This principle is well illustrated in the cases of Fasasai Adesanya v. Leigh Hoegh and Co (1968) 1 All NLR p. 325 and Nigerbrass Shipping Line Limited v. Aluminium Extrusion Industries (1994) 4 NWLR Pt. 341, 733.
36  1 KB 575.
37 2012) LPELR-7848(SC).
38 (2009) 13 NWLR (Pt 1157) p. 149.
39 L Chidi Ilogu SAN, Foundation of Carriage of Goods by Sea – The Nigerian Perspective (2016) at pp. 199–206.
40 Which came into force on 1 December 1986 and 13 May 2004, respectively.
41 Thirty-six months after it was adopted by the Legal Committee of the IMO, when the Committee met for its 99th session in London.
42 Section 2(2) of the AJA.
43 Section 5(4) of the AJA.
44 Section 5(3) of the AJA.
45 According to the Territorial Waters Act, Cap. T5, LFN 2004, the territorial waters of Nigeria extend to 12 nautical miles off the coast of Nigeria, measured from the low-water mark, or of the seaward limits of inland waters.
46 Order 16, Rule 1 of the AJPR.
47 Anna Okon 'NIMASA to end 16-year cabotage waivers regime' (The Punch, Lagos, Nigeria, 11 April 2019) (online) < https://punchng.com/nimasa-to-end-16-year-cabotage-waivers-regime/> [accessed 19 April 2019].
48 See Sections 360 to 385 and 398 of the MSA.
49 Section 408 of the MSA empowered the Minister to make regulations for the general carrying into effect of the Act.
50 Regulations 3 and 4 place duties on masters of Nigerian ships to ensure, so far as is reasonably practicable, that a seafarer on board a ship does not work more hours than is safe in relation to the safety of the ship and performance of the seafarer's duties. Section 5 places the duty on both masters and seafarers, so far as is reasonably practicable, to ensure that they are properly rested before commencing duty on a ship and that they obtain adequate rest during periods when off-duty.
51 Suit FHC/L/CS/1807/17: Assuranceforeningen Skuld v. MT Clover Pride (Unreported) – Ruling of Idris J delivered on 28 March 2018. The ruling was appealed but same was subsequently withdrawn and the suit discontinued. Pending consideration of this issue by the Court of Appeal, this remains the position of the law in Nigeria.
52 Which aims to increase NLNG's production capacity from 22 metric tons of liquified natural gas per annum to over 30 MTPA by upgrading Trains 1-6 and adding of Train 7 and associated infrastructure.