Status of progressive storage charges

 

This update provides a review of progressive storage charges in Nigeria by examining the recent Court of Appeal decision in Apapa Bulk Terminal Limited v Nigerian Shippers’ Council.

Facts

In a February 20 2014 letter, the minister of transport conveyed the president’s appointment of the first respondent (the Nigerian Shippers’ Council) as the economic regulator of the Nigerian ports. Pursuant to its appointment, the first respondent issued Notice NSC/LN-TO/2004/001 on October 28 2014 in order to check:

the excessive loss of revenue from the maritime sector caused by the arbitrary increase in progressive storage charges; and the reduction of the free storage period to three days.

The notice compelled the appellant terminal operators to revert to the approved progressive storage charges and the global best practice of a seven-day free storage period in line with the minister of transport’s May 15 2009 directive.

Aggrieved by the notice, the terminal operators, via a November 10 2014 originating summons, instituted an action in the Lagos Federal High Court challenging the validity of the notice and the first respondent’s powers to review local storage charges unilaterally. In response to the appellants’ originating summons, the first respondent filed a counter-affidavit. The second respondent (the Registered Trustees of Shippers’ Association Lagos State), which was later joined in the suit, filed a counterclaim.

In its December 17 2014 judgment, the trial court dismissed the appellants’ summons in its entirety and upheld the notice, directing the appellants to account for all of the progressive storage charges that they had illegally collected on containerised cargo since May 2009 and refund the same amount to the Cargo Defence Fund of the Nigerian Shippers’ Council. Dissatisfied, the terminal operators appealed to the Court of Appeal.

Arguments

In seeking declaratory and injunctive reliefs before the Court of Appeal, the appellants contended that the power conferred on the first respondent as the economic regulator of the Nigerian ports conflicted with the Nigerian Ports Authority (NPA) Act and the various concession agreements which recognised the NPA as the economic regulator and not the first respondent. They argued that:

• there was no legal basis for the first respondent’s appointment through executive fiat to duplicate the functions of the NPA as the economic regulator; and
• through its notice, the first respondent had usurped the NPA’s powers, in breach of the concession agreements between the terminal operators and the government acting through the NPA.

The appellants further contended that the various concession agreements (Exhibits FA5 to FA5K) were in issue and that the first respondent, being a government agent, was bound by the express terms of the agreement. They further argued that in issuing the notice, the first respondent had acted at variance with the Nigerian Shippers’ Council Act and the Nigerian Shipper’s Council (Local Shipping Charges on Imports and Exports) Regulations 1997.

The first respondent argued that the appellants had set up a new case on appeal, as the validity of its appointment as economic regulator of the Nigerian ports was not the subject of the appellants’ case before the lower court; rather, the subject of the earlier case had been the breach of the concession agreements. The first respondent contended that its power to function as economic regulator was not traceable to the 1997 regulations, but derivable from its appointment as such by the president.

It further contended that it was not a party to the various concession agreements and that they therefore could not be enforced against it. In addition, it argued that the notice had not been a review, modification or increase in charges or an introduction of new charges (requiring proper consultation with all relevant parties), but rather a directive urging the appellants to revert to the already approved rates. It further argued that the questions put forward for determination showed that the concession agreements had never been in issue.

The second respondent argued, among other things, that the appellants’ action had touched on its interest and that the lower court had been right to entertain its counterclaim, which sought an account of all progressive storage charges collected by the appellants over and above the approved rates since May 2009.

Decision

In its January 15 2018 decision, the Court of Appeal dismissed the appellants’ appeal and affirmed the lower court’s decision.

The Court of Appeal found that the president’s appointment of the first respondent as the economic regulator of the Nigerian ports was in line with Section 5(1)(b) of the Constitution. The court also held that there was no statutory provision or agreement appointing the NPA as the economic regulator of the ports in order to curb arbitrary charges and, as such, there was no case for any duplication of functions. The court also held that the appellants had failed to establish how the appointment of the first respondent as economic regulator conflicted with the NPA Act and the Nigerian Shipper’s Council (Local Shipping Charges on Imports and Exports) Regulations.

As regards the notice, the court found that it had not modified, reviewed, increased or introduced new charges, but merely urged the appellants to revert to the approved rates contained in the minister of transport’s May 15 2009 letter.

 Therefore, the notice was not subject to the statutory requirement of prior negotiation and agreement with the appellants within the context of Section 3(f) of the Nigerian Shippers’ Council Act and Regulations 1 and 2(1) of the 1997 regulations. It also found that the notice had not been issued pursuant to the first respondent’s powers under the Nigerian Shipper’s Council Act and the regulations, but rather to its appointment as economic regulator.

On the concession agreements, the court found that the first respondent was not a party to the concession agreements between the appellants and the Nigerian Ports Authority/Bureau of Public Enterprises. As such, the agreements could not be enforced against it.

 It also held that as the declaratory and injunctive reliefs had been sought against the first respondent on the basis of these agreements, the reliefs could not be granted, as no right had been established against the first respondent. The court also held that the appellants had failed to show not only that the various concession agreements were in issue, but also that the agreements were connected to or affected by the notice.

In upholding the second respondent’s counterclaim, the court held that a defendant can file a counterclaim in an originating summons. It cited Order 10, Rule 3(1) and Order 13, Rule 36(2) of the Federal High Court Civil Procedure Rules 2009 and held that the defendant in any action can counterclaim rather than bring a separate action. It further held that the appellants’ action before the lower court had touched on the second respondent’s interest and that the trial court had been right to find in the second respondent’s favour (ie, that there was merit in the counterclaim).

On the whole, the court found no merit in the appeal and dismissed it, stating that the questions put forward for determination by the appellants were hypothetical.

Comment

The Court of Appeal’s judgment gives further judicial impetus to the government’s policy intent, particularly with regard to storage operations at the nation’s ports. Notably, in an earlier decision involving shipping agencies, the court had declared shipping line agency charges illegal, even though in that case it was held that the NPA was the port regulator. (1)

There are now two conflicting Court of Appeal decisions on the Nigerian Shippers’ Council’s role as the economic regulator of the Nigerian ports. It is hoped that the Supreme Court will clarify the position sooner rather than later.

For further information on this topic please contact Enare Erim at Akabogu & Associates by telephone (+234 1460 55550) or email (enare@akabogulaw.com). The Akabogu & Associates website can be accessed at www.akabogulaw.com.

Endnotes

(1) Alraine Shipping Agencies v Nigerian Shippers’ Council.

The materials contained on this website are for general information purposes only and are subject to the disclaimer. ILO is a premium online legal update service for major companies and law rms worldwide. In-house corporate counsel and other users of legal services, as well as law rm partners, qualify for a free subscription.