In this Issue:

Case Review

 

Are “Foreign” Maritime Arbitration Clauses Valid in Nigeria?

The M.V. Parnomos Bay

The Nigerian Court of Appeal has decided in The M.V. Panormos Bay vs. Olam (Nigeria) Plc (2004) 5 NWLR (part 865) 1, that section 20 of the Admiralty Jurisdiction Act No. 59 of 1991 effectively nullifies “foreign” arbitration clauses. Galadima JCA said, at page 13 of the report: “… section 20 of the Admiralty Jurisdiction Act has altered the hitherto existing position in admiralty matters thereby modifying sections 2 and 4 of the Arbitration and Conciliation Act, and limiting enforceable arbitration agreements to those having Nigeria as their forum”.

The Court of Appeal’s decision raises concerns as to the present status, in Nigeria, of arbitration agreements entered into in the context of maritime transactions. Are such agreements valid? If they are, what degree of certainty is there that they will be enforced in individual cases?

Section 20 of the Admiralty Jurisdiction Act No. 59 of 1991 renders “null and void” any agreement which seeks to oust the jurisdiction of the Federal High Court in respect of any admiralty matter where any of eight specified circumstances exist, such as: (a) where the place of performance, execution, delivery, act or default (in respect of the underlying maritime transaction) is or takes place in Nigeria, (b) where any of the parties resides in Nigeria or (c) where payment under the agreement is to be made in Nigeria, etc.

There are at least three types of “agreements” that have been thought to fall within the scope of, and are therefore nullified by section 20 of the Admiralty Jurisdiction Act. These are: (a) “foreign jurisdiction clauses” (i.e. clauses requiring disputes to be resolved by the courts of another country); (b) “foreign” arbitration clauses (i.e. clauses requiring disputes to be resolved by an arbitral tribunal having its seat in another country) and (c) any kind of arbitration clause (which will include “domestic” arbitration clauses, i.e. those requiring disputes to be resolved by an arbitral tribunal having its seat in Nigeria).

The difficulty presented by the wording of section 20 arises from its failure to define what types of agreements involve an “ouster of the Court’s jurisdiction”. In the Owners of the M.V. Lupex vs. Nigerian Overseas Chartering and Shipping Limited, (1993 – 1995) NSC 182, the Court of Appeal had previously taken the position that an arbitration clause is not an “ouster” within the meaning of section 20, and had rejected an argument that the section nullifies both “domestic” and “foreign” arbitration clauses. Uwaifo JCA (as he then was) said (at page 200): “arbitration agreements, as they often do, which merely make a resort to arbitration as a first choice to settle differences arising from an agreement, do not seek to oust the jurisdiction of the courts”.

The Court of Appeal’s earlier decision in the M.V. Lupex was not cited to it in The M.V. Panormos Bay, and although the M.V. Lupex itself was finally decided at the Supreme Court (reported in (2003) 15 NWLR (part 844) 469), the Supreme Court did not make any pronouncement on the effect of section 20 of the Admiralty Jurisdiction Act. It appears therefore that the law on this issue (i.e. whether section 20 nullifies foreign arbitration clauses) remains unclear.

If it is assumed that in spite of The M.V. Panormos Bay, maritime arbitration agreements are valid, a further question has arisen from the decisions in both the M.V. Panormos Bay and the M.V. Lupex as to the extent of their enforceability.

The usual method that courts employ to enforce arbitration agreements is to stay proceedings that are brought before them in violation of such agreements. The confusion in this area arises from two separate provisions in the Arbitration and Conciliation Act (Chapter 19, Laws of the Federation 1990) which appear to deal with the same subject (stay of judicial proceedings brought in violation of an arbitration agreement) but in different and apparently contradictory terms. On the one hand, section 4 of that Act provides that the court “shall” stay proceedings brought in violation of an arbitration agreement. On the other hand, section 5 (2) provides that the court “may” stay proceedings brought in apparently the same circumstances. Since it is recognised that the words “shall” and “may” are generally employed in statutory contexts to draw a distinction between mandatory and discretionary powers respectively, it appears contradictory that the Act obliges the courts to stay judicial proceedings that violate an arbitration agreement, and yet at the same time gives them discretion in the matter.

The drafters of the Arbitration and Conciliation Act Cap. 19 had included the two provisions (sections 4 and 5) in the Act without clarifying (as the U.K. parliament had done under section 1 of the English Arbitration Act of 1975) that while one provision (section 4) is intended to apply to “international” arbitration agreements, the other (section 5) is intended for “domestic” agreements. The result of this is that the courts have applied the discretionary standard in the context of international/foreign arbitrations, thus reducing the certainty that international arbitration agreements will be enforced in Nigeria. To demonstrate the point, in the M.V. Lupex case the application of the discretionary standard by the Court of Appeal to an international arbitration agreement resulted in its ultimate decision to refuse a stay, while on appeal in the same case, the Supreme Court, applying the same discretionary standard, held that the case qualified for a stay.

Therefore, the situation that presently prevails in relation to the enforceability of international maritime arbitration agreements (or perhaps of any type of maritime arbitration agreement, whether “domestic” or “international”) is one of uncertainty. The uncertainty arises from the fact that such agreements may either be “null and void” under section 20 of the Admiralty Jurisdiction Act, or, with regard to international arbitration agreements, if it is presumed that they are valid notwithstanding section 20 of the Admiralty Jurisdiction Act, their enforcement may nevertheless depend upon (often) subjective considerations arising from the exercise of judicial discretion.

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News

Cabotage Guidelines – Requirements for the Registration of Joint Venture Owned Vessels

The National Maritime Authority recently released the Guidelines for the Operation of Vessels under the Cabotage Regime. One of the options open to foreigners who desire to participate in the new cabotage regime is the formation of joint ventures with Nigerian companies. The new Guidelines for the Operation of Vessels under the Cabotage Regime outlines, among other things, the requirements for the registration of joint venture owned vessels.

Applicants who desire to register joint venture owned vessels are required to collect and complete the appropriate cabotage application form from the office of the Registrar of Ships. The form must be submitted together with the applicant company’s incorporation documents such as the Certificate of Incorporation, the Memorandum and Articles of Association, Certified True Copies of Form CAC3 and CAC2 and the Current Tax Clearance Certificate.

In addition to the above, applicants are required to submit the following documents in respect of the vessel:

(i) A copy of the Certificate of Registry
(ii) A copy of the Federal Ministry of Transport Certificate of Waiver
(iii) A completed Declaration of Ownership Certificate
(iv) A completed Crew Declaration Form
(v) The following statutory certificates:

• Certificate of Tonnage Measurement
• Passenger Ship Safety Certificate
• Construction Certificate
• Ship Safety Equipment Certificate
• Current Dry-docking Certificate
• International Safety Management Certificate
• Boat Licence (where applicable)
• Loadline Certificate
• Survey Certificate
• Safety Radio Certificate
• Classification Certificate
• Copy of current Certificate of Vessel Insurance
• Survey Certificate (non-convention vessels)

(vi) A Condition Survey Report
(vii) A copy of a completed Cabotage Affidavit Form
(viii) Evidence of payment of the approved registration fees

Upon satisfactory assessment of the application, approval will be conveyed to the applicant by the issuance of the Certificate of Special Register for Vessels and Ship Owning Companies Engaged in Cabotage. The certificate must be carried on board the vessel at all times. It must also be endorsed yearly and renewed every five years by the Registrar of Ships.

The guidelines further provide that all vessels registered in the Special Register for Vessels and Ship Owning Companies engaged in cabotage that are above fifteen (15) years old will continue to be eligible for participation in the cabotage trade for a period of five (5) years provided that they possess the following documents:

(a) The Certificate of ship registry
(b) A Certificate of Seaworthiness from a recognised classification society.

The following additional documents are required to be submitted with respect to the yearly endorsement of the Cabotage Ship Registration Certificate:

(a) Evidence of payment of 2% surcharge (where applicable)
(b) Joint Maritime Labour Industrial Council (JOMALIC) Certificate and declaration of compliance with Seafarers Condition of Employment

There are sanctions and penalties for making false declarations in respect of applications and documentation submitted for registration under the Cabotage regime.

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Conference Reports

The Nigerian American Chamber of Commerce [NACC] held a one day seminar on shipping on Thursday the 25th of March, 2004 at the Golden Gate Restaurant, Ikoyi, Lagos. The seminar was primarily convened to enlighten participants and stakeholders in the shipping industry on the new policy of the Government on destination inspection and also to provide a basic understanding of the Cabotage Law and the impact it will have on the Nigerian economy.

Alhaji (Dr.) W.A. Kareem, B.Sc. MILR, Ph.D discussed the subject ‘Destination Inspection of Imports in Nigeria: Which Way Forward?’ He examined the new destination inspection regime in Nigeria with reference to the roles of the Nigeria Ports Authority, Nigeria Customs Service, COTECNA, importers, government and the public at large.

He added that in order to cope with the volume and influx of ships and cargoes attendant to the introduction of Destination Inspection in Nigeria, the Nigerian Ports Authority has to ensure that it provides necessary infrastructure needed for its implementation. He said there was need for the provision of: adequate berthing facilities; sufficient warehouse and staking areas for cargo storage; fast cargo documentation release and delivery; adequate supply of plant and equipment for cargo discharge, examination and delivery; pilot cutters and big boats to facilitate easy berthing and sailing of ships 24 hours of the day; computerised billing and releasing process and adequate human and cargo security.

According to Alhaji Kareem, the Nigerian Ports Authority has been proactive and has been able to rehabilitate existing port facilities to accommodate more general cargo and containers; establish deck terminals at various locations in Lagos; procure modern cargo handling plants and equipment; reposition and strengthen the marketing department; enter into joint venture warehousing operations with private companies; ensure the free flow of human and vehicular movement within the port and sensitise importers and other port users towards the successful implementation of the scheme.

The Chairman of the occasion was Mr. Moses Ihonde, a past president of the Chamber. Also in attendance at the seminar were: the current president of the NACC, Chief Sola Dada, the newly appointed Secretary to the NACC, Mr. Adeyeye, and Mrs. Ify Akerele, the Director General of the Nigerian Chamber of Shipping.

Preparations for the implementation of the ISPS Code
As July 1, 2004, the international deadline for the implementation of the International Ship and Port Security (ISPS) Code draws closer efforts towards compliance with the Code have also increased.

As part of its efforts, the National Assembly recently asked the Federal Ministry of Transportation to forward to it a draft bill on the ISPS Code before the end of May for accelerated passage.

Speaking through the Deputy leader of the Senate at a one-day colloquium on Maritime legislation and Maritime policy development held by the Senate Committee on Maritime transport, the Senate president Adolphus Wabara said it was imperative for Nigeria to comply with all the requirements of the Code in the interest of the national economy. The Senate attributed the non-domestication of many international maritime conventions to the protracted military rule in Nigeria.

The minister of transport Dr. Abiye Sekibo admitted that Nigeria was far behind in the domestication of international maritime treaties and conventions and said that the draft bill on the ISPS Code was ready. The minister of transport also added that if Nigeria’s maritime sector is better developed, it is capable of generating revenue to national coffers more than the energy sector. He referred to countries like Singapore, which have no crude oil, but have survived on the maritime sector.

At the international level, the International Maritime Organisation is currently in the process of commissioning the production of a training package, which will incorporate relevant elements of the SOLAS amendments, the ISPS Code, the IMO model course for Port Facility Security Officers (No. 3.21) and the ILO/IMO Code of Practice on Security in Ports, which is set to be approved by both organisations during the year. The training package may also include a CD-ROM containing video clips, written materials and interactive web based links.

In addition, the IMO is developing a related “Train-the-Trainer” programme which is aimed at assisting governments to strengthen regulatory implementation by enlarging the pool of trained instructors capable of delivering high quality maritime security training at the national and regional level by using IMO’s updated training package and its three model courses for security officers.

The programme is also aimed at identifying potential instructors from member states and the industry who, following initial training through IMO, can return to their individual countries and regions and train other instructors.

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