July 9, 2018
On 24 May 2018, the Federal High Court (FHC) upheld the powers of NOSDRA to impose sanctions without recourse to the court, in the case between Shell Nigeria Exploration and Production Company Limited (Shell) and National Oil Spill Detection and Response Agency (NOSDRA). The FHC reached this decision on the grounds that the powers of NOSDRA to impose sanctions does not conflict with the powers of the court to adjudicate on the matter under the 1999 Constitution.
Upon detection of a crude oil spill in Shell’s Bonga FPSO facility, NOSDRA levied a sum of over USD3 billion on Shell as compensation and punitive damages for oil spillage, pursuant to its powers under the Oil Spill Recovery, Clean-Up, Remediation and Damage Assessment Regulations (OSDAR). Dissatisfied with this assessment, Shell instituted an action against NOSDRA before the FHC. The main issue before the FHC was whether NOSDRA had the powers to sanction Shell without recourse to the court.
Shell argued that it was not granted fair hearing by NOSDRA prior to the imposition of the sanction. Amongst other reliefs, Shell sought a declaration that the jurisdiction to determine liability, assess, impose and direct the payment of any sum as penalty, levy, damages and/or compensation in respect or in connection with an incidence of oil spillage is vested exclusively in the FHC by virtue of the 1999 Constitution.
However, the FHC held that NOSDRA had acted in line with its powers under the NOSDRA Act and the OSDAR and that it did not violate the 1999 Constitution in the exercise of its powers. In reaching this decision, the FHC did not make any distinction between penalty, levy, damages or compensation but treated them as sanctions. Furthermore, the FHC held that NOSDRA had not infringed on Shell’s right to fair hearing as Shell had the opportunity of recourse to the court when it was served with its notification of sanction. Thus, the FHC ruled in NOSDRA’s favour dismissing the suit.
It would appear that the FHC did not have regard to the Court of Appeal’s (COA) Judgment, which was delivered in March 2018 on a similar case, before reaching its decision. In that case (between NOSDRA vs Mobil Producing Nigeria Unlimited), the COA held that NOSDRA, being an administrative agency, lacks the power to impose fines and penalties without proper adjudication by a court of law. The COA reached this decision on the grounds that penalties and/or fines are imposed as punishment for an offence or violation and only a court has the competence to establish that an offence has been committed.
Although this decision of the COA is still in contention, it remains the position of the law on the matter, except overruled. Had the FHC considered the COA’s judgment, it would presumably have reached a different decision as the doctrine of Stare Decisis requires the FHC to adhere to the decision of a superior court (such as the COA) on similar matters.