The General Manager, External Relations, Kudo Eresia-Eke, said the development followed the decision on October 3, 2017 by the Federal High Court, Lagos that NLNG was not liable to make the said payments to NIMASA, and that all such payments already made by NLNG to NIMASA should be refunded forthwith.
The court, presided over by Justice M. B. Idris, held that NIMASA was wrong in blockading the Bonny Channel for the purpose of enforcing the payments against NLNG.
Eresia-Eke said: “The Federal High Court ruling transcends being simply a legal victory for NLNG. It must be viewed for what it really is: A resounding message from Nigeria to the global investment community. The message is that we can be trusted to keep our sovereign word and that Nigeria remains open for business, partnership and investments.”
NIMASA had alleged that NLNG was liable to pay three percent gross freight levy on its international inbound and outbound cargo, Sea Protection Levy, two percent cabotage surcharge as well as other sundry claims, all of which NLNG disputed.
NLNG, in 2013 filed the case at the Federal High Court against NIMASA, seeking a judicial determination on, among other things, the legality or otherwise of the levies sought to be imposed on NLNG by NIMASA, and the consequent blockade of the Bonny Channel by NIMASA and its agent as a result of the dispute.
NLNG had also sought a Court Order restraining NIMASA from further blockade of the Channel. An Interim Injunction granted in favour of NLNG by the Federal High Court was disobeyed by NIMASA, which again blockaded the Bonny Channel over a three week period while the matter was pending, thereby preventing NLNG vessels and other vessels doing business with the Company from entry and exit through the Channel.
On the day the judgment was given, NIMASA Director-General Dr Dakuku Peterside expressed the agency’s dissatisfaction with the decision of Justice Idris.
A statement by the agency’s spokesman, Isichei Osamgbi, said: “Consequently, Dr Dakuku has stated the management’s intention to appeal the judgment. The agency’s legal team are waiting for the certified true copy of the judgment, which we will study and respond as appropriate.”
The problem predated Peterside. It started in 2013 when the agency requested the NLNG to pay all statutory levies accruable to the agency, including the 3% levy on gross freight on inbound and outbound international cargo, 2% Cabotage levy and Sea Protection levy. NIMASA insisted that the NLNG was not exempted from payments of statutory levies after its tax holiday ended.
“NIMASA has portfolios of statutory revenues that it collects from shipping companies/ship operators, manning agents and seafarers. This the agency pays into the coffers of the government. It is within these funds generated that the agency uses to develop and police the maritime sector. NIMASA does not receive any government allocations,” said the agency.
Six years before the crisis blew open in 2013, the leadership of NIMASA ‘pursued’ the NLNG Limited for levies, which Africa’s premier LNG company saw no legal basis for.
In June 2013, after NIMASA blockaded its vessels from taking liquefied gas to its customers overseas, NLNG ran to the court again.
Before that, the Federal Government set up a mediation committee in May 2013, with the then Attorney-General of the Federation (AGF) and Minister of Justice Adoke Bello as the panel’s legal adviser. An agreement was reached that NLNG should pay the outstanding levies from September 2009.
It paid $20 million in protest and approached the court for a judicial interpretation of the dispute.
On September 19, 2013, the court started a process for the ‘proper interpretation’ the relevant sections of the enabling laws of both parties.
NIMASA did not just keep quiet after NLNG returned to court in a suit in which NIMASA was not joined as a party. The Nation learnt NIMASA was not joined because its Act says it must be given prior notice before being a party in a suit.
The second 2013 blockade by the waterways police led to the NLNG agreeing to pay NIMASA $140 million. It said the payment was in protest. The filings in court make interesting reading for anyone interested in the uses and abuses of power, the dilemmas caused by ambiguous laws and the tactics parties have been compelled to employ to outsmart each other. They also show the need for laws not to be written in ambiguous language.
The NLNG/NIMASA saga began in 2007 when the maritime regulator expected NLNG to start paying levies. By NIMASA’s calculation, NLNG’s tax holiday lapsed in 2007. NLNG saw no sense in NIMASA’s claim. As far as it is concerned, the Act setting it up exempts it from NIMASA’s levies. NIMASA says it has always acted in line with its enabling law.
Section 15(a) of the NIMASA Act 2007 stipulates: “The agency shall be funded by monies accruing to the agency from the following sources: 3 per cent of gross freight on all international inbound and outbound cargo from ships or shipping companies operating in Nigeria to be collected and paid over to the agency to meet its operational cost.”
Section 2(2) of the Act states that exemptions are only granted to “war ships and military patrol ships”.
NIMASA says NLNG vessels do not fall within those exempted from the levies and that the tax holiday granted it was time-bound.
The NLNG Act 2004 predates the NIMASA Act 2007. Section 7(7) of the NLNG Act 2004 states: “No export duties, taxes, or other duties, levies, charges, or imposts of a similar nature shall be payable or imposed on the exports of liquefied natural gas or other hydrocarbons produced by the company.”
To add to the confusion, paragraph 3, Schedule 2 of the NLNG Act states: “Neither the company nor its stakeholders shall in any way be subject to new laws, regulations, taxes, duties, imposts or charges of whatever nature which are not applicable generally to companies incorporated in Nigeria.”
Yet, according to NIMASA Act 2007, it has right to collect levies from ships and small ships “registered in Nigeria and also to ships, small ships and crafts flying a foreign flag in the exclusive economic zone, territorial and inland seas, inland waterways and in the ports of the Federal Republic of Nigeria”.
It also collects levies from shipping companies/ship operators, manning agents and seafarers on the government’s behalf. It is with these funds generated that the agency develops and polices the maritime sector. NIMASA does not receive any government allocations, said a source.
The incentives granted NLNG, said NIMASA, are not meant to be in perpetuity. The agency points at Section 2 of the NLNG Act which limits the tax holiday of the company to 10 years or when the cumulative average sales price of the liquefied natural gas reaches $3 in million metric British Thermal Units (MMBTU).
NIMASA said its market intelligence shows that as at January 2004, which was the fifth anniversary of the production of the NLNG, the milestone for the expiration of the exemption period had been surpassed by 200 per cent.
By July 12, 2013 when the NLNG agreed to pay to NIMASA, the company said it has lost over N76 billion ($475 million).
In a statement by its General Manager, External Relations Kudo Eresia-Eke, the then NLNG Managing Director, Mr. Babs Omotowa, said: “We feel we have no other option than to now make these payments under protest. In doing this, we have taken into account the overriding national interest; in particular to stem the huge financial and reputation loss the country has suffered as a reliable LNG supplier, a destination for foreign investment and a nation of the rule of law.
“NLNG still strongly believes that it has a very strong case to be exempted from the NIMASA levies under the terms of the NLNG Act and will continue with its substantive case in court to obtain a judicial determination of whether or not such levies are due to be paid. It is for this reason that the payments that NLNG is making will be made on an ‘under protest’ basis.
“Our position has nothing to do with how much NLNG is being charged by a relevant agency but with the legality or otherwise of such a charge or levy, in order for us to ensure that all our payments are made within the ambit of what is lawful.
“As a law abiding company, NLNG has always paid its taxes, including those due after its tax holidays since 2009. It therefore has no issues with legally required tax payments but with levies, from which it is clearly exempt by virtue of the NLNG Act.”
NIMASA accused NLNG of twisting the truth. It said contrary to NLNG’s claim, it did not flout any court order as it was not a party to the court case that led to the 2013 exparte injunction by the Federal High Court, sitting in Lagos.
It said it was unfair of the NLNG to claim being a Federal Government agency, because of the 49 per cent shareholding. NLNG, said NIMASA, is a limited liability company incorporated under the Nigerian laws with majority shareholding by foreign entities and should pay all levies set out by the law.
A truce was brokered by NLNG’s counsel Olawale Akoni (SAN) through letters dated July 5 and July 12, 2013.
The July 12, 2013 letter said: “Subject to NLNG continuing to make payment for all applicable NIMASA levies (three per cent NIMASA levies and Sea Protection levy), NIMASA undertakes not to detain NLNG-owned or chartered vessels.
“NLNG undertakes to pay outstanding levies attributable to the Freight on Board (FoB) and Cabotage vessels if they fail to make payment within three months of the date of this letter.
“Going forward, NIMASA is at liberty to collect these levies directly from the FOB and Cabotage vessels without further recourse to NLNG.”
According to the letter, signed by Omotowa, the NLNG had already made payment of $20million to NIMASA for the three per cent NIMASA levy.
Said the letter: “This sum will be deducted from the amount stated as due in your (NIMASA) letter. As agreed between NIMASA and NLNG, an oral application shall be made to the court by our lawyers which shall not be opposed by NIMASA lawyers and other lawyers in the ongoing suit to allow for the above payments to be made.”
Mike Igbokwe (SAN), who was NIMASA’s lawyer, told the court about the agreement in July 2013, asking that the letters be adopted by the court as consent order.
Igbokwe said: “My Lord, there have been some positive developments in respect of this suit and the applicants which had led to exchange of correspondence and telephone discussions between the plaintiff (NLNG), the first defendant (Attorney-General) and NIMASA and which were conveyed to the second defendant (Global West) counsel.
“The discussions involved counsel for all parties. I have before me a letter dated 12th July 2013, written to NIMASA by the plaintiff containing the agreement that had been reached between the plaintiff and NIMASA which the Attorney-General and Global West had already been informed about. “We have agreed that the contents of this letter which NIMASA and the plaintiff intend to start implementing today should form the basis of a consent order to be made by the Honourable Court.
“On the basis of the letter, we urge the court to make a consent order. On behalf of the plaintiff, I confirm that the parties have had discussions and there have been exchange of correspondence.”
Justice Idris Mohammed said: “The letters dated July 5, 2013 and July 12, 2013 are hereby made the consent order of this court.”
Now, NLNG has won in court and wants all the money it has paid returned to it. By its calculation, $315m has so far been paid. Though it is not clear if notice of appeal is tantamount to stay of execution, NIMASA certainly will not just give in. With its decision to challenge Justice Idris’ judgment, the end of the matter is not here. Chances that the Supreme Court will end it all are very high. That may take some more years.