… companies not liable under current cabotage act; future amendments would apply prospectively — Uba, Partner at Dentons CAAS-Law

Oredola Adeola

The Supreme Court of Nigeria has delivered a ruling that drilling rigs and drilling operations are not subject to the Coastal and Inland Shipping (Cabotage) Act, upholding the decision of the Federal High Court in Noble Drilling Nigeria Ltd. v. Nigerian Maritime Administration and Safety Agency (NIMASA).

Chisa Uba, Partner at Dentons CAAS-Law and lead counsel to Noble Drilling Nigeria Ltd., led the legal team, confirmed that the judgment was delivered over the weekend.

Advisors Reports gathered that the Apex court’s ruling brings to a close a long-running legal dispute that began in 2008, finally settling the question of whether the Cabotage Act applies to drilling rigs and drilling-related activities within Nigeria’s oil and gas sector.

In its decision, the Supreme Court affirmed that under the current provisions of the Cabotage Act—particularly Section 2(a), (b) and (c)—drilling rigs do not qualify as vessels engaged in coastal or inland shipping.

The court held that the Act applies strictly to the carriage of goods or passengers from one place to another, an activity which drilling rigs and drilling operations do not perform.

The case was instituted at the Federal High Court in 2008 by Noble Drilling Nigeria Ltd. following a dispute with NIMASA over the regulator’s position that drilling rigs fell within the scope of the Cabotage Act.

The Federal High Court ruled in favour of Noble Drilling, prompting NIMASA to appeal the decision.

In December 2013, the Court of Appeal, led by Hon. Justice Eugenia Iyizoba (rtd.), upheld the judgment of the Federal High Court, a decision that has now been conclusively affirmed by the Supreme Court.

Chisa Uba, Partner at Dentons CAAS-Law and lead counsel to Noble Drilling Nigeria Ltd., led the legal team that successfully countered and defeated NIMASA’s arguments before the apex court.

She described the ruling as a landmark judgment that provides long-needed jurisprudential clarity for Nigeria’s oil and gas maritime sector.

According to Uba, the judgment confirms that drilling and exploration companies are not obligated under the current Cabotage Act to incur liabilities associated with cabotage compliance, and that such liabilities cannot be imposed retrospectively.

She further clarified that if the Act is amended in the future to expressly include drilling rigs and drilling operations, any obligations or liabilities would only take effect from the date the amended legislation comes into force.

Uba also stressed that the ruling applies strictly to drilling rigs and drilling operations and does not extend to Floating Storage and Production Offloading (FPSO) vessels or other categories of vessels.

Legal and industry stakeholders have welcomed the judgment, noting that it provides certainty and stability for operators in the offshore oil and gas space, particularly as proposed amendments to the Cabotage Act are currently before the National Assembly.

The proposed changes seek to classify drilling rigs as vessels and bring their operations under the cabotage regime.

Experts further observed that the Supreme Court’s position aligns with international best practices, pointing to countries such as Angola and Brazil, which exempt pure drilling operations from cabotage laws to attract investment, while focusing local content requirements on transportation and logistics activities.

The judgment is expected to have far-reaching implications for Nigeria’s upstream petroleum sector, reducing regulatory uncertainty and strengthening the country’s attractiveness as a destination for offshore oil and gas investment.

Advisors Reports’ further check revealed that the Coastal and Inland Shipping (Cabotage) Act 2003 was enacted to promote Nigerian-owned vessels in coastal trade while restricting foreign participation.

A Cabotage Act amendment bill is currently before the National Assembly, seeking to expand the law to include drilling rigs, FPSOs, and similar offshore units, and to broaden the definition of coastal trade to cover drilling operations and related offshore activities.