Implications of the Nosdra vs Mobil Producing Nigeria court ruling on businesses

Udom Inoyo, Executive Vice-Chairman, Mobil Producing Nigeria Unlimited

Summary

On 22 March 2018, the Court of Appeal, in a case between the National Oil Spill Detection and Response Agency (NOSDRA) and Mobil Producing Nigeria Unlimited (ExxonMobil) held that NOSDRA, being an administrative agency, lacks the power to impose fines and penalties without proper adjudication by a court of law.

The Court 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.

Details

Following an incidence of oil spillage in ExxonMobil’s Qua Iboe facility, NOSDRA levied a penalty of N10million against ExxonMobil for an alleged contravention of the NOSDRA Act. 

NOSDRA instituted an action before the Federal High Court (FHC) to claim the penalty charges.

The FHC held that the imposition of penalties on ExxonMobil by NOSDRA was ultra vires its powers. NOSDRA then appealed to the Court of Appeal.

ExxonMobil argued that there was no justification for the penalty levied by NOSDRA because there was a clean-up exercise following the spillage which was done in line with the NOSDRA Act and rated satisfactory by NOSDRA.

ExxonMobil also contended that NOSDRA, being an administrative agency, has no inherent powers in itself or from the provisions of the NOSDRA Act to impose fines and/or penalties because such powers are vested in the Courts.

Thus, the main issue before the Court of Appeal was whether the Learned Judge of FHC was right in holding that NOSDRA lacked the powers to impose the stated penalties considering the provisions of Section 6(2) and (3) of the NOSDRA Act that grant it the powers to impose penalties.

The Court of Appeal ruled in favour of ExxonMobil that the imposition of penalties by NOSDRA was ultra vires its powers, especially because no platform was established to observe the principles of natural justice.

The Court further held that penalties or fines are imposed as punishment for an offence or violation of the law and the power as well as competence to establish that an offence has been committed belongs to the courts.

Implication

This judgment has a far-reaching effect as it impacts the powers of various governmental agencies to impose fines without recourse to a court of competent jurisdiction.

It could be interpreted to mean that fines and penalties imposed by the Federal Inland Revenue Service, States Internal Revenue Service and other statutory agencies without prior recourse to the courts are invalid.

Recourse to the courts as a precondition for imposition of fines may prevent arbitrary imposition of fines and penalties by administrative agencies. Nevertheless, given the slow judicial process, it may also introduce significant delays to enforcement of laws.