On 29 March 2019, the Court of Appeal (COA) set aside the decision of the Federal High Court (FHC) in the case between Nigerian Maritime Administration and Safety Agency (NIMASA) vs Nigerian Liquefied Natural Gas (NLNG) Limited and ordered a retrial of the case. The FHC had previously held that NLNG was not liable to pay taxes and levies to NIMASA based on the exemption provisions contained in the NLNG Act. However, the COA set aside the FHC's decision on the basis that NIMASA was not given fair hearing by the FHC.
NLNG is a joint venture gas production company owned by the Nigerian National Petroleum Corporation and a number of International Oil Companies (IOCs). The company is governed by the NLNG (Fiscal Incentives, Guarantees and Assurances) Act, which provides certain guarantees and assurances by the Federal Government to the participating entities. The Act grants NLNG Limited incentives as well as exemptions from certain taxes and levies.
On the other hand, NIMASA is an agency of the Federal Government responsible for regulations related to Nigerian shipping, maritime labor and coastal waters. The agency is governed by the NIMASA Act, which empowers the agency to regulate and impose levies and charges on operations in the maritime sector.
In 2013, the NLNG instituted an action against NIMASA at the FHC challenging the powers of NIMASA to impose Gross Freight Charges, Sea Protection Levy and Cabotage Surcharge on it. The FHC subsequently ruled that NLNG was not liable to pay the stipulated levies to NIMASA based on the provisions of the NLNG Act, which exempts NLNG from payment of the stipulated levies.
Dissatisfied with the decision of the FHC, NIMASA appealed to the COA on the grounds that it was not granted fair hearing at the FHC amongst other grounds. The COA ruled in favour of NIMASA holding that the failure of the FHC to consider NIMASA's counter affidavit, additional counter affidavit and written address constituted a clear breach of NIMASA's fundamental right to fair hearing and as such, the whole trial conducted by the FHC amounted to a nullity.
Consequently, the COA held that it could not adjudicate on the merits of the case in the absence of valid proceedings at the FHC. Accordingly, the COA set aside the Judgment of the FHC and ordered a retrial of the case at the FHC.
This Judgment implies that the decision of the FHC, which exempted NLNG from the payment of the stipulated charges, is no longer applicable and the FHC would have to adjudicate on the case afresh. The decision of the COA in this case has not done much in settling the underlying issue as to whether NLNG is liable to pay the stipulated levies to NIMASA.
The COA's decision seems to have put NLNG's exemption from charges by NIMASA in abeyance. Thus, the questions continue to linger regarding the status of transactions concluded by NLNG based on the initial FHC decision and the potential exposure for NLNG. In the same vein, the position of the law regarding ongoing transactions will remain uncertain until the matter is re-adjudicated by the FHC.
Notwithstanding the foregoing, it is expected that the Courts would give specific interpretations to specific provisions of the law such as government guarantees and assurances to taxpayers. This would go a long way in providing tax certainty and boosting investors' confidence in Nigeria. While we await the FHC to give an accelerated hearing and judicious pronouncement on the issues raised by the parties, professional advice and guidance is required on the best approach to deal with issues arising from the case.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.