Cabotage in Nigeria and the Waiver Clauses:
A Critical Appraisal of Control Options

By

Andrew Obinna Onyearu

Principal, ANDREWS SOLICITORS, London & Senior Partner, CHANCERY CHAMBERS, Abuja

THE BACKGROUND

In the Maritime Media, the development of Cabotage in the form of the Cabotage Bill recently enacted by the House of Representatives has continued to make, understandably, waves of attention that its potential consequences rightly deserve.  For completeness, Cabotage law refers to the sets of rules and regulations that govern coastal shipping in any country.  Essentially, it refers to the practice of encouraging a country’s coastal trade by confining it to National Shipping with national crew, as a matter of strategy.  Usually, under Cabotage law where it is enforced, the transportation of goods between two local ports by foreign ships is allowed only if suitable domestic ships are not available and special licences are issued to such ships.  This may represent a reverse definition of Cabotage, which, for the purpose of the bill defines Cabotage as

“the carriage of goods by vessels from one place in Nigeria or above Nigerian waters to any other place in Nigeria or above Nigerian waters, either directly or by way of a place outside Nigeria and includes the carriage of goods in relation to the exploration, exploitation or transportation of mineral or non-leading natural resources whether in or under Nigerian waters”.

Major Maritime nations all over the world have, for some considerable time resorted to devising laws and regulations to promote and protect their own domestic merchant marine.  It is, in the industry, common knowledge that a strong Maritime Industry represents a nation’s foundation for both economic and even military security.  This common approach is recognised all over the world as being that which is predicated on the promotion and protection of the Maritime Industry by prohibiting foreign vessels from participating in domestic, costal or (“Cabotage”) Shipping.  The vast majority of nations with seafaring pedigree have Cabotage laws in place that require ships engaged in such coastal transport either to be acquired, maintained or domestically built but also to be owned and operated from within the country.

It is useful to touch upon, briefly, the reason why the enactment of comprehensive cabotage legislation is not only necessary but also crucial for the development of Nigeria’s commerce.  This position was aptly summarised by Commodore Joe Abulu (retired), Executive Director Rank Shipping Nigeria Limited when, in assessing the benefits of operating such a regime as

“…the development of a seafaring culture amongst the Nigerian people; increasing employment opportunities; decongestion of the land haulage system which would consequently produce a saving both on road usage and maintenance; the increase in domestic trade and commence and in so doing, curtailing capital flight; the development of local ship building and ship ownership with its down stream consequential effect on other industries and the increased owners of sea vessels leaving to get a participation in international shipping…” amongst other things. 

Dr Okey Udeh, Chairman, House of Representative Committee on Transport rightly believed that the enactment of Cabotage Law in Nigeria would provide the foundation for accelerated growth of the domestic maritime industry in that it would stimulate and contribute significantly to the Nigerian economy.  His view was that it would help to develop domestic maritime fleet; create employment opportunities for over 30,000 trained but unemployed seafarers; boost training requirements of the Maritime Academy; increase the currently optional exploitation of the under utilised facilities at Niger Dock; encourage the development of required infrastructure and technical know how in the land waterways and transport and haulage systems.  It is not, therefore, difficult to see the kind of significant influence that an effective Cabotage Policy would have in the development of Nigeria’s economy.  Many are even beginning to look beyond its initial implementation and there are several who believe not only is it apt for the Cabotage Policy to be implemented in this manner but that it should be targeted at achieving involvement of the indigenous firms in crude oil transportation which has, given its substantial demand on capital resources, been, to date, handled exclusively by foreign firms.  The prudent view would be to consider and accept that it would be sometime before the Cabotage policy provides the kind of foundation and leverage that is required for indigenous operators to become involved in crude oil transportation although this aspiration, clearly given the required level of application and commitment, is not a completely unattainable ambition.

THE PROBLEM

This article principally focuses on the anxiety that appears to have been expressed about some of the provisions of the bill in relation to control.  This refers, in particular, to the inclusion of waiver clauses, which have appeared to generate some of the highest levels of controversy.  Those clauses which appear at sections 12,13 and 14 which vest the Federal Minister of Transport with the authority, upon receipt of an application, to grant a waiver of the requirement for vessels involved in coastal trade regulated under the Act to be wholly owned by Nigerians Citizens where he is satisfied that a number of named conditions precedent exist.  These include that no Nigerian vessel is suitable or available to provide a service or perform the activity described in which the application is made.  The clauses, in summary, further provide that such foreign owned vessel should be eligible to be registered in Nigeria and is registered in the Nigerian Registry; the owning company of the foreign vessel has a corresponding or representative office in Nigeria; such company has a substantial number of qualified Nigerian seamen including officers and crew who are employed on board the vessel; all applicable duties, levies and tithes imposed by the relevant authorities applicable to foreign vessels with respect to such vessels participation in coastal trade have been paid in full; such foreign vessels possesses all certificates and documents in compliance with international and regional maritime conventions whether or not Nigeria is a party to those conventions and, additionally, that such certificates and documents are current as well as valid; such foreign vessels meet all safety and pollution requirements imposed by both Nigerian and international Law/Convention in force and, finally, the Minister, in issuing such a licence, must specify the period of time for which the Licence is valid, such period not to exceed one year.  Where the minister exercises or considers an application to a shipping company as to that is co-owned by a joint venture arrangement between Nigerian citizens and non-Nigerian citizens, the equity participation or holding of the Nigerian joint venture partner in either the vessel and/or shipping company shall not be less than 30%.

Olisa Agbakoba, SAN analyses the components of the waiver clause as being two fold.  It considers that there are of a discretionary and/or compulsory nature.  As he explains:

“…..if there are construed discretionary, they are vulnerable to abuse in the absence of strict conditions; if compulsory, as indeed they are, they impose a duty on the minister where appropriate conditions exist”

It is the grave concern that may arise from the unhindered exercise of discretion by the minister that has brought the well-intentioned theme of the bill into critical scrutiny.  The anxiety is not completely misplaced, if viewed against the past failure of various parts of the nation’s shipping policy.  Take, for instance, the Cargo Sharing policy introduced by the National Maritime Authority.  This policy was directly aimed at encouraging the indigenous shipping firms.  The unrestrained abuse led to its suspension three years ago.  The policy, which involved allocation of Nigerian cargo for transportation, was so wrongly abused that even its regulatory or controlling process was itself the subject of acute mal-administration.  Shipping companies were accused of selling their allocation to multi national firms thereby acting as commercial screens or fronts.  The policing of the work from within government posed even greater problems as those responsible for monitoring the process itself actively exacerbated the ingenious efforts designed to defeat the policy itself.  The combined effect of this dual attack on its workability led to its inevitable demise.  The same fate befell the Ship Acquisition and Ship Building Fund (SASBF).  To date, huge sums of money that were advanced for the purpose that the fund was, set up remains both outstanding, even irrecoverable.  The same anxiety appears now to be expressed with its successor, the Fleet Expansion and Maritime Infrastructure Development Scheme (FEMIDS).  It is not, therefore, without some justification that stakeholders are, genuinely concerned.

However, dwelling on the anxieties raised by that situation together with the concerns expressed in relation to the exercise of ministerial authority (or discretion) represents, in my view, both a deficient and indeed an unfair manner of appraising its benefits.  What are, one would ask, the control options that exist?

THE CONTROL OPTIONS

First, one needs to look at the provisions of the Act itself.  In my view, the provisions of the act are both clear in content in relation to circumstances that the minister can be entitled to exercise his power under the waiver clauses.  The conditions imposed are, clearly conjunctive.  In other words, there must be read one in addition to the other.  Unsatisfactory compliance with one of the several conditions listed would clearly constitute a ground for challenge.  In other words, for the minister to exercise those powers, he must ensure that the applicant has satisfied ALL (not some) of the conditions despite the onerous nature of each condition whether taken singly or collectively. 

Second, the provisions of the Act are mandatory or obligatory.  There is no discretion to dispense with any of the conditions.  This situation lends itself less to abuse and makes it more difficult to introduce the kind of flexibility that will support or sustain abuse.  I also believe that it is also commonly recognised that the exercise of executive function is and remains amenable to judicial supervision.  The exercise of the minister’s powers can be challenged by way of judicial review.  This right remains both guaranteed and enshrined in Section 6 of the 1999 Constitution and such a challenge can be assumed by anyone with sufficient interest in the outcome (see Adesanya V President of the Federal Republic of Nigeria 1981 [12 NSCC 145].  Judicial Review remains the process by which orders can be obtained to quash wrongful official decisions of public authorities including, in these circumstances, the exercise of authority by a federal minister.  It is imperative that we build and retain confidence in the judicial system to effectively police this extremely useful piece of legislation.  Although there has been suggestion that a separate body is brought into being in order to exercise the kind of control that the Court can, in these circumstances, in my view, it is unnecessary.  There is no more suitable body that the Courts of Law of the country to receive into it and adjudicator upon issues arising from the exercise of these powers.  To constitute a separate body for the purpose of monitoring the exercise of the active authority in relation to the clauses would be superfluous and would inherently create additional and undesired red tape without necessarily solving the actual problem itself.

As has been observed by numerous commentators on the subject, the waiver clauses are inevitable.  Abulu describes its existence as being “…impelled by extant practical constraints of capacity shortfall..”  Lucas Ajanaku of the “The News” describes the clauses as “children of circumstances”.  These types of clauses are not novel and are used even by experienced seafaring nations. The essence of their inclusion has taken into account the fact that infrastructurally, the resources that indigenous operators currently have remain seriously inadequate.  Sadly, no confidence can be drawn from any empty assurances particularly from indigenous operators that there will be limited attempt to circumvent the law.  The attractions of the substantial financial reward in short circuiting the operation of the law will ensure, regrettably, that there will be a surfeit of inventive and imaginative attempts made to avoid compliance with provisions of the law.  The scrutiny and emphasis, in my view, could be more sensibly channelled towards better effective enforcement of the terms of the law.  The National Maritime Authority and the regulatory bodies, it is suggested,  must be fully resourced; competent staff properly trained and comprehensive as well as transparent monitoring systems put in place to achieve compliance with the laws by indigenous operators.  The screening of these operators must be thorough and comprehensive.  Due diligence exercises must be conducted looking at the operators as they exist.  It is only by doing so that the latent opportunity that is intended by the law to develop Nigerian Shipping policy can be actualised.  The other clauses, as they currently exist, are in themselves, comprehensively drafted so as to ensure that the existence of abuse or excesses will arise elsewhere and not specifically as a consequence of the exercise of ministerial discretion in the grant or refusal of such waiver applications.

Finally, there have been suggestions that a period of say six to ten years would be appropriate to allow the necessary transition to take place after which the waiver clauses should be repealed.  Again, as a matter of logic this will not appear to solve the integral problems that will exist particularly as it relates to the existence of the practical problems which affect the nation’s current capacity to serve its needs.  The period suggested appears ambitious and on current evidence unattainable although this view should present no bar to seeking to achieve it.

In conclusion, it is my belief that the anxieties that are being expressed, although genuinely founded, appear to place significant emphasis on potential abuse of ministerial authority. This ranks quite low in the order of factors that may militate against the effective working of the law.  This paper has not touched upon any particular area other than waiver clauses.  In critically appraising control options, I believe that to minimise abuse, internal enforcement and control from within the regulatory body in relation to the mechanics of the operation of the law itself is paramount.

It is pertinent to recognise that the excitement of these developments in the Maritime industry have been driven by the initiative and guidance of the proactive vision of the Minister of Transport, Chief Ojo Maduekwe; the incisive, analytical commitment of the National Maritime Authority Director General, Ferdinand Agu and an ambitious, resourceful legislature led by Dr Okay Udeh.  These huge steps taken must be actively supported and encouraged by all who have any role at all to play in the maritime industry.

© 2003