NIMASA’s tax dispute with NLNG: Court directs further hearing

The Court of Appeal, Lagos Division, on Friday, set aside the judgment of the Federal High Court over the alleged exemption of the Nigerian Liquefied Natural Gas Limited (NLNG) from tax and other levies payable to the Nigerian Maritime Administration and Safety Agency (NIMASA).

In a judgment delivered by Justice Garuba Lawal, the court directed that the case over the applicability of NIMASA levies to NLNG be returned to the Federal High Court for rehearing. The court said some of the counterclaims of NIMASA were not taken into consideration by the high court in arriving at its decision.

The court, therefore, set aside the judgment of the lower court on the issue of fair hearing. It referred the matter back to the high court to allow NIMASA to state its case.

NIMASA’s Allegations

The NIMASA Act, Cabotage Act, Marine Environment (Sea Protection Levy) Regulations, and other laws of the federation cover all operators within the Nigerian waterways, including the NLNG. Consequently, NIMASA said the NLNG should pay three per cent of the gross freight on all international outbound and inbound cargos carried by ships it chartered for the transport of natural gas cargoes.

The spokesperson of NIMASA, Isichei Osamgbi, said in a statement that the NIMASA Act 2007 says the regulation also affects NLNG’s wholly-owned subsidiaries. In addition, Mr Osamgbi said the NLNG was expected to pay another $283 million surcharge on cabotage trade undertaken by its vessels within 200 nautical miles of the baselines and Nigerian coastal and inland waters as contained in the Coastal and Inland Shipping (Cabotage) Act 2003. Mr Osamgbi said following NLNG’s refusal to honour demand notices over the outstanding taxes and levies, NIMASA commenced an action against the company.

In the legal process filed in court, NIMASA sought an interpretation of relevant provisions of the Nigerian LNG (Fiscal Incentives, Guarantees and Assurances) Act, CAP N87, Laws of the Federation of Nigeria 1990, and the NIMASA Act of 2007. The federal government, through the office of the National Security Adviser (NSA), intervened leading to an agreement.

Under the terms of the agreement, Mr Osamgbi said, the NLNG undertook to pay up all outstanding levies and taxes totalling about $20 million as well as comply with the requirements of the NIMASA Act 2007, and the Cabotage Act. Consequently, Mr Osamgbi said in January 2013, a blockade put on NLNG vessels was lifted, while NIMASA withdrew the case to allow for an amicable settlement of the dispute out of court.

But, in May 2013, he said NIMASA in a bid to enforce compliance to its regulations, again arrested and detained NLNG vessels for non-compliance. On June 18, 2013, Mr Osamgbi said the NLNG served NIMASA the pre-action notice from its counsel, giving 30 days’ notice of its intention to commence legal action in accordance with Sections 53(2) of the NIMASA Act.

NLNG challenges NIMASA in court

The NLNG said in a statement by its Manager, Corporate Communication & Public Affairs, Andy Odeh, on Saturday that its application before the Federal High Court, Lagos against the Attorney General of the Federation and Global West sought a judicial interpretation of certain issues in the case.

They include the legality or otherwise of certain levies NIMASA sought to impose on its operations despite being an agency of the federal government. The NLNG said it also wanted a clarification on the consequent blockade of its vessels by NIMASA and Global West as a result of the dispute.

The notice had resulted in another blockade on June 21, 2013, during which time various issues were canvassed in court by the parties. Meanwhile, following a truce by the parties, the NLNG was said to have agreed to pay all outstanding taxies and levies, including free on board (FOB) cargoes. On its part, NIMASA agreed to lift the detention orders on NLNG vessels for as long as due payments are promptly effected.

NIMASA also agreed to ensure NLNG vessels were not detained, while NLNG will ensure all outstanding FOB payments were made within four months from the date of the agreement failing which NLNG will assume responsibility for the payments. On July 6, 2013, following NLNG’s payment of its outstanding debt, NIMASA lifted the blockade on Saturday, July 7, 2013.

Hearing in the substantive case continued at the Federal High Court until October 2017 when judgment was delivered in favour of the NLNG as well as all the reliefs sought in the case. NIMASA expressed dissatisfaction with the judgment and filed an appeal through their counsel, Lateef Fagbemi and Mike Igbokwe. By the latest decision of the Court of Appeal, the case will be heard afresh by another judge of the Federal High Court.  Premium Times