The maritime industry has been recognized as an integral part of a nation's economic infrastructure and national security. Consequently, many nations including Nigeria have adopted regulations designed to foster a strong domestic maritime transport industry. Such regulations prohibit foreign carriers from carrying cabotage: the hired transport of goods between two points within the same country.
In Nigeria, the Coastal and Inland Shipping (Cabotage) Act No. 5, 2003 regulates coastal trade in Nigeria, and its essence is to restrict the use of foreign-owned vessels in domestic coastal trade, in order to promote the development of indigenous tonnage and to establish a cabotage vessel financing fund system. Thus, under the Cabotage Act 2003, only Nigerian-built vessels wholly owned and manned by Nigerian citizens may engage in coastal trade or cabotage within Nigerian waters. Foreign vessels are not allowed except when rendering assistance to persons, vessels or aircraft in danger or distress. Thus, the preamble of the Cabotage Act expressly states:
Act to restrict the use of Foreign Vessels in Domestic Coastal Trade to promote the development of Indigenous Tonnage and to establish a Cabotage Vessel Financing Fund and for Related Matters.
Although the promulgation of the Cabotage Act 2003 is laudable, the Act is not without some controversies. Recently, Nigerian courts have been called upon to interpret the Cabotage Act and its provisions on the definition of a vessel and whether an oil rig can fall under the definition of a vessel under the Cabotage Act.
Section 2, of the Cabotage Act, defines a vessel 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 without regard to method or lack of propulsion.
Prominent in the courts’ interpretation of whether a drilling rig can be said to be a vessel are two recent decisions of the Federal High Court and the Court of Appeal in SEADRILL MOBILE UNITS NIGERIA LIMITED v. THE HONOURABLE MINISTER FOR TRANSPORTATION & 2 ORS and TRANSOCEAN SUPPORT SERVICES NIGERIA LIMITED & 3 ORS v NIGERIAN MARITIME ADMINISTRATION AND SAFETY AGENCY, respectively.
In the case of SEADRILL MOBILE UNITS NIGERIA LIMITED v THE HONOURABLE MINISTER FOR TRANSPORTATION & 2 ORS (The Seadrill Case), two questions were submitted to the court for determination:
- Whether drilling operations fall within the definitions of ‘coastal trade’ and ‘cabotage’ under Section 2 of the Coastal and Inland Shipping (Cabotage) Act;
- Whether on a proper interpretation of the Cabotage Act – particularly Sections 2, 5 and 22(5) – drilling rigs fall within the definition of ‘vessels’ under the Coastal and Inland Shipping (Cabotage) Act, 2003.
The Court in resolving the 1st question in the case, considered the provision of Section 2(d) of the Cabotage Act and stated that in determining whether an oil-drilling operation falls under coastal trade, proper consideration must be given to the type of drilling operation being considered. The Court, in its decision, held that the type of drilling operation that will fall within the definition of “Coastal trade” or “cabotage” under the Cabotage Act, depends on the circumstance of each case. The court in reaching its decision looked closely at the operations of the rig and stated in its judgment that, by reason of the carriage of workers and other operational equipment by the drilling rig, the offshore drilling operation falls within the definition of coastal trade.
In resolving the 2nd question, the court held that statutes are to be construed to promote the general purpose of the legislature not just by the letters of the law but also by the spirit of the entire enactment. Therefore, the use of the word “includes” in the definition of what a vessel is under the Cabotage Act, implies that more of similar crafts within the category listed can be allowed. Accordingly, the court held that a drilling rig is a vessel.
In the case of TRANSOCEAN SUPPORT SERVICES NIGERIA LIMITED & 3 ORS v. NIGERIAN MARITIME ADMINISTRATION AND SAFETY (the Transocean Case), the Appellants/Plaintiffs appealed the decision of the Federal High Court wherein the lower court dismissed the appellant’s action seeking the interpretation of the Coastal and Inland Shipping (Cabotage) Act, 2003 on the ground that the proceedings were issued outside the 3 months’ notice allowed by the Public Officers Act (POPA).
The Court, in determining the appeal, inter alia, dealt with the issue of “drilling rigs” falling within the definition of a “vessel” under the Cabotage Act and whether the Minister acted ultra vires when he made the Cabotage Guidelines to include drilling rigs among vessels for which payments should be made in respect of the 2% surcharge under the Act. In resolving this, the Court considered Sections 2, 22, 43 of the Cabotage Act.
The Court held that unless a drilling rig falls within the definition stated in Section 2 of the Cabotage Act and/ or is expressly stated to be among the machinery contained in Section 22(5) (a) – (m) of the Act, same cannot be deemed to be a vessel eligible for registration under Section 22 (1) of the Act and not liable to pay a surcharge of 2% contract sum performed by such vessel engaged in coastal trade.
The Court then held in the Transocean’s case that for a drilling rig to be classified as a vessel under the Cabotage Act, it must be shown that such drilling rig is designated, used or capable of being used solely or partly for marine navigation for the carriage of persons or property on, through and under water. Since this was not the case in Transocean’s case, the court held the drilling rig not to be a vessel.
The Court of Appeal further stated that the Minister acted ultra vires when he made the Cabotage Guidelines to include drilling rigs among vessels for which payments should be made in respect of the 2% surcharge under the Act. The Court mentioned that unlike Section 25 of the Admiralty Jurisdiction Act which expressly states that a drilling rig is a vessel, the Cabotage Act, does not list a rig as one of the vessels that are to be registered. The court also noted that a rig is not involved in the transportation of goods or passengers from one point in Nigeria waters to the other, thus cannot be deemed a vessel for the purpose of Section 22 of the Cabotage Act and liable to the 2% surcharge under Section 43 of the Act.
Flowing from the above reasoning, the Court held 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 the 2% surcharge is improper as the essence of a subsidiary legislation is to give effect to the principal legislation and not to deviate from it, same legislation cannot expand or curtail the substantive statute.
At first glance, it may appear that the decisions in the cases of SEADRILL MOBILE UNITS NIGERIA LIMITED v. THE HONOURABLE MINISTER FOR TRANSPORTATION & 2 ORS and TRANSOCEAN SUPPORT SERVICES NIGERIA LIMITED & 3 ORS v. NIGERIAN MARITIME ADMINISTRATION AND SAFETY AGENCY are contradictory; however, a careful analytical reading of the decisions of the courts in these cases shows that they are rather complimentary.
The learned judge in Seadrill’s Case, stated in his ruling that:
In the instant case, “the West Capella” is engaged in the carriage of seadrill workers, other operational equipment like cranes and risers, and on regular basis welcomes choppers on its helipad and these activities take place while “the West Capella” is navigating within or in the waters of Nigeria. The West Capella via the drilling rig attached to its moon pool extracts oil and gas and temporarily stores it before transporting it out to other facilities. The oil and gas extracted and transported by “the West Capella” is a substance carried within the waters of Nigeria.
It appears from the above that the reason for the decision above is premised on the evidence that the rig, WEST CAPELLA was used for transportation whilst navigating within the waters of Nigeria.
Looking at the Transocean case, the Court of Appeal in that case also noted that “A rig is not listed as one of the vessels that are to be registered” however, the court went further to note that the rig was not involved in transportation of goods or passengers from one point in Nigeria to the other, and on that basis held that the oil drilling rig is not a vessel.
From the above, it is clear that part of the reason for the court’s decision in the transocean’s case was on the ground that a rig is not involved in transportation.
In light of the above, the position of law remains that a drilling ship is not a vessel except the drilling ship is being used for the carriage of goods, passengers or other equipment which are ancillary to trade in inland waters. It is however certain that in determining whether a drilling rig is a vessel, recourse will be heard to the usage of the rig and the circumstances of each case.
There is Bill before the National Assembly seeking to include drilling rigs as vessels, and until this is done, there will continue to be uncertainties as to whether a drilling rig is a vessel – a question/ interpretation to be made by the courts based on the circumstances of each case.