Great Elephant Corporation v Trafigura Beheer BV & Ors [2012] EWHC 1745 (Comm)

Case No 2010 FOLIO 60

[2012] EWHC 1745 (Comm)

IN THE HIGH COURT OF JUSTICE

QUEEN'S BENCH DIVISION

COMMERCIAL COURT

Venue Royal Courts of Justice, Strand, London, WC2A 2LL

Date 27/06/2012

Before

MR. JUSTICE TEARE

Between

GREAT ELEPHANT CORPORATIONClaimant

TRAFIGURA BEHEER BVDefendant

VITOL S.A.Third Party

Chirag Karia QC (instructed by Andrew Jackson) for Claimant

Robert Bright QC and Richard Waller QC (instructed by Reed Smith) for Defendant

Charles Kimmins QC and Socrates Papadopoulos (instructed by Ince and Co.) for Third and Fourth Parties

Simon Rainey QC (instructed by Herbert Smith) for Fifth Party

Hearing Hearing dates: 27-28 March and 2-3 April 2012

Judgment

Mr. Justice Teare :

[1]The oil tanker CRUDESKY loaded a cargo of crude oil at the AKPO FSPO Terminal, part of a deepwater oil and gas field off Port Harcourt, Nigeria, between 31 August and 1 September 2009. The vessel was not permitted to leave Nigeria by the local authorities until mid-October 2009 and only then on payment of a “fine” of US$12m. The detention of the vessel has given rise to a claim by the disponent owner of the vessel, Great Elephant Corporation (“the shipowners”), against the charterers, Trafigura Beheer BV (“Trafigura”), for demurrage and other sums. Trafigura had bought the cargo from Vitol SA and seeks to pass on its liability, if any, to Vitol SA. Vitol SA in turn seeks to pass on its liability, if any, to Vitol Asia Pte Limited from whom it bought the cargo. Finally, Vitol Asia Pte Limited seeks to pass on its liability, if any, to China Offshore Oil (Singapore) International Pte Limited (“COOSI”), who sold the cargo to Vitol Asia Pte Limited. Since there is no dispute between the Vitol companies who must have bought and sold on back to back terms I shall refer to both companies as “Vitol”. COOSI bought the cargo from another company but has made no claim against that company in these proceedings.

[2]This dispute about liability for delay to CRUDESKY in departing Nigeria has generated over 300 pages of written submissions with reference to over 100 authorities. However, much depends upon the facts and so, before setting out the terms of the charterparty and the several sale contracts (which were not back to back), it is necessary to make findings as to what, on the balance of probabilities, happened in Nigeria, what procedures governed the loading of crude oil in Nigeria, whether any offences contrary to the local law were committed and what lawful authority, if any, the local authorities had to detain the vessel and her cargo.

[3]The court heard oral evidence from three experts in Nigerian law. A fourth gave evidence in writing but was not called. For two reasons the expert evidence, whilst in some respects helpful, was not ultimately of great assistance. First, in the absence of evidence that the principles of statutory construction were any different in Nigerian law than in English law the court has inevitably found itself construing the Nigerian legislation. For the same reason many of counsel’s submissions were not based upon the expert evidence but were indeed their own submissions. Second, much of the “expert” evidence was comingled with issues of fact and the facts assumed by the experts were not necessarily the facts as found by the court. Of the expert witnesses who gave oral evidence I found Mr. Ilogu the most reliable, though I was not able to accept all that he said. He was a careful witness who recognised the limits of his expertise as a lawyer and that much depended upon the facts. When faced with points against his opinion he fairly recognised them. Mr. Oditah QC is no doubt very familiar with Nigerian law and with practices in Nigeria but in cross-examination he was reluctant to confront obvious difficulties in his construction of Nigerian legislation and as a result I found myself reluctant to place reliance on his evidence. Mr. Fagbohunlu was knowledgeable and often helpful but also showed, at times, a reluctance to recognise difficulties in the construction of the legislation.

Events in Nigeria

[4]The AKPO FPSO terminal is located 106 miles south south west of Port Harcourt in the Niger delta. It is operated by Total Upstream Nigeria limited (“Total”). The FPSO is a vessel with a capacity of 350,000 metric tonnes summer deadweight and is moored to a single point mooring. Tankers loading cargo at the terminal are moored bow to bow with the FPSO and the cargo is transferred via a hoseline assembly. The AKPO terminal had only come into service in April 2009. In an email from Total dated 28 August 2009 reference was made to “operational challenges associated with the start up of the AKPO field.” There was concern as to the reliability of the calibration of the equipment which monitored the quantity of oil pumped on board a vessel at the terminal. There was also concern that unless appropriate steps were taken to enable the quantity loaded to be verified by the presence of an official from the Nigerian Department of Petroleum Resources (the “DPR”) at the port of discharge the AKPO terminal might be shut down. This concern no doubt reflected the fact that the Nigerian authorities viewed theft of crude oil (a resource which belonged to the Nigerian people pursuant to section 1 of the Nigerian Petroleum Act 1969) very seriously.

[5]CRUDESKY was nominated as the lifting vessel on 28 August 2009. It appears that another vessel had earlier been nominated as the lifting vessel. The vessel arrived at the AKPO terminal at 0300 on 29 August 2009. The DPR representative on board the FPSO (Mr. Tuboalabo) left the FPSO without informing Total and without the approval of the DPR in Port Harcourt. The vessel tendered Notice of Readiness at 0001 on 30 August 2009. A pilot and surveyors boarded her at 1700 on that day. The vessel was berthed at 0912 on 31 August 2009 and an agent and “the authorities” boarded her at 1020. The independent surveyors monitoring the operations reported that “inward clearances were granted at 1145 on 31 August 2009”. However, such inward clearances cannot have been signed by the DPR representative on board the FPSO because he had left on 29 August 2009. Also on the morning of 31 August clearance from the Crude Oil Management Department (COMD) was received. At 1300 the hose connection was established.

[6]By this time the Total lifting supervisor, Mr. Bankole, had arrived on the FPSO with the lifting crew. Between noon and 3 pm he telephoned the DPR in Port Harcourt to enquire when the DPR representative would arrive. He was informed that the DPR representative, Mr. Idoniboye, would not arrive until 1 September 2009. Mr. Bankole discussed with Mr. Pepple, the Head of Operations at DPR Port Harcourt, the possibility of obtaining the DPR’s agreement to commence loading whilst the DPR representative was not on board the FPSO. Mr. Bankole mentioned that this would “imply severing the padlock currently installed on the export valve” but that Total would replace the padlock with a new one once the lifting operations had been completed. Mr. Bankole understood from his conversation that Mr. Pepple had given him verbal authorisation to sever the padlock and commence the loading operation.

[7]Mr. Bankole assumed that the DPR in Lagos (where the headquarters of the DPR was) had given authorisation to load and that such clearance was “on its way”. That Mr. Bankole made such an assumption is an indication that, although inward clearance had been granted before noon on 31 August 2009 (but not signed by a local DPR representative), some further authorisation to load was required from the DPR in Lagos.

[8]In the course of the conversation between Mr. Bankole and Mr. Pepple the latter asked if it was safe to start loading in the absence of the DPR representative on board the FPSO. Mr. Bankole said it would be safe because exactly the same procedures would be followed and that the independent inspectors and surveyors were on board.

[9]Accordingly, on instructions from Mr. Bankole the padlock was cut and loading commenced at 1612 on 31 August 2009.

[10]Total’s report, from which much of the above narrative is taken, states by way of summary that Mr. Bankole “misunderstood the verbal authorisation” which had been granted to him by Mr. Pepple. It was suggested by Mr. Robert Bright QC, counsel for Trafigura, that no authorisation had been given by Mr. Pepple but that Mr. Bankole had misunderstood Mr. Pepple to have given authorisation. If that had been the position I would have expected Total to have said that Mr. Bankole misunderstood Mr. Pepple to have given him authorisation. Instead, Total referred in terms to the “verbal authorisation which is granted to him by the DPR representative in Port Harcourt.” It seems to me, in circumstances where Mr. Bankole had asked for authorisation to start loading in the absence of the DPR representative, had pointed out that that would require the padlock on the valve to be cut, had said that Total would replace the lock and had discussed the safety of the loading operation in the absence of the DPR representative and where, following the conversation, Mr. Bankole authorised the cutting of the lock, that it is more likely than not authorisation was given by Mr. Pepple. I prefer Total’s detailed “list of known facts” to its “root causes summary”. The reference to a “misunderstanding” was probably intended to refer to an erroneous assumption by Mr. Bankole that verbal authorisation by Mr. Pepple of DPR Harcourt was sufficient. Events proved that it was not.

[11]On 1 September 2009 between 0900 and 1200 “NNPC clearance was sent to the DPR”. The NNPC is the Nigerian National Petroleum Corporation but it is unclear what that clearance was. At 1215 the DPR representative, Mr. Idoniboye, arrived on board the FPSO. He observed the loading process and did not require it to stop. At about the same time, or a little later, Total’s commercial department in Lagos asked the DPR for clearance. Between 1500 and 1800 the DPR in Lagos issued that clearance. It seems that this must have been sent to Mr. Idoniboye because he tried to print it out on board the FPSO but was unable to do so because of a computer glitch. Loading was completed at 2100 on 1 September 2009. Hoses were disconnected at 2154.

[12]At about the same time Mr. Idoniboye received notification that the DPR in Lagos had refused clearance. As a result the necessary cargo documents were not completed. The inspectors’ report said that the documents were not placed on board which caused Mr. Rainey to submit that they had been completed but had not been placed on board. However, other correspondence to which Mr. Rainey drew my attention indicated that the documents were not signed by the DPR representative until 16 October 2009. Thus the Statement of Facts signed by the master of the vessel, Trafigura’s agents and the terminal representative stated that from 2154 on 1 September 2009 the vessel was “awaiting cargo documents.” Nevertheless, the calculations of the quantity loaded on board as a result of metre readings were completed at 2300 on 1 September 2009.

[13]Mr. Richard Waller QC, as he became during the trial, submitted that DPR Lagos revoked the clearance it had given earlier on 1 September 2009 because it had learnt that loading had commenced before clearance had been given. There is no contemporary evidence as to why DPR Lagos revoked the clearance it had earlier given. It is possible that Mr. Waller’s submission is correct. It is also possible that DPR Lagos revoked the clearance it had given on learning that loading had commenced without a DPR representative being present and that Total had broken the lock on the export valve to enable loading to commence. In the absence of any contemporary evidence from DPR Lagos explaining the revocation the only finding I can make is that it more likely than not that DPR Lagos revoked the clearance it had earlier given upon learning something of the irregular circumstances in which the loading of CRUDESKY had taken place.

[14]CRUDESKY was unmoored from the FPSO at 2218 on 1 September 2009 and commenced to drift at 0100 on 1 September 2009. She did not depart Nigeria because she had not received the cargo documents evidencing the quantity loaded. Departure in those circumstances would have been an offence contrary to the Crude Oil (Transportation and Shipment) Regulations 1984.

[15]On 7 September 2009 DPR Lagos wrote to Total in the following terms:

“The Department of Petroleum Resources has observed that Total Upstream Nigeria limited commenced loading of the above named vessel (MT CRUDESKY) at the AKPO FPSO terminal on 31 August 2009 without the clearance of the Department as provided for in Section 3.1.1 of the Procedure Guide for Terminal Operations and other relevant provision as contained in the Procedure Guide for the Determination of the Quantity and Quality of Crude Oil and Petroleum Products at Custody Transfer Points. It was further observed that the export line valve lock (of which the key is statutorily in the custody of DPR) was broken. Indeed Total commenced loading of the vessel 24 hours and 37 minutes ahead of the necessary clearance in utter violation of all known statutory procedures. In view of your action stated in the foregoing which is viewed by the Federal Government as an Economic Crime, you are required to explain within 24 hours why appropriate sanctions should not be imposed on Total in accordance with the statutory provisions.”

[16]On the same day DPR Lagos advised the Chief of Naval Staff by letter that as a result of violations of the Regulations and Guidelines “the DPR has put on hold the issuance to the vessel of the necessary shipping documents, pending the resolution of the matter by the Federal Government. The department therefore requests your assistance in ensuring that the vessel is closely monitored restricted and prevented from sailing away.”

[17]At 1824 on 9 September 2009 8 naval personnel boarded the vessel. The vessel proceeded to the Bonny offshore terminal where she dropped anchor at 1000 on 10 September 2009. The naval personnel remained on board the vessel.

[18]On 9 October 2009 the Ministry of Petroleum Resources wrote to Total advising it that the Minister had “approved the following measures” as a consequence of the vessel being loaded “without compliance with the statutory requirements for loading operations”. Those measures consisted of(i) the payment by Total of a fine in the sum of US$12m. to a US$ account at Citibank, New York, the beneficiary being described as Diamond Bank PLC, and

(ii) the severe disciplining of Total’s personnel on board the AKPO terminal “who perpetrated the dastardly act”. On the same day the DPR informed the Navy that a “resolution” had been reached between Total and the DPR and that the vessel “which is under your custody, be allowed to sail away with the cargo. All the necessary papers required for the vessel sail-away shall be released by the Department as soon as the vessel is released by the Nigerian Navy.”

[19]It appears that Total paid the fine, for on 13 October 2009 at 2100 the vessel was “released” and prepared to sail back to the AKPO terminal. She sailed at 2300 arriving at 0300 on 14 October 2009. The vessel waited for the cargo documents. The documents were completed over the night of 15/16 October and were signed by the DPR. They were sent to the vessel by “surfer”. They arrived on board at 0954 on 16 October 2009 and the vessel sailed at 1300 on the same day for the port of discharge.

The procedure governing the loading of crude oil in Nigeria

[20]It is common ground that there were at least two Procedure Guides, issued by the Nigerian authorities, which applied to the AKPO terminal. The first of these was the Terminal Operations Guide. It appears to have been issued by the NNPC. Paragraph 1 states:

“This manual is intended to guide the Operators at a crude oil terminal of the procedures to follow towards efficient crude oil stock management in the areas of accounting for crude oil receipts, crude oil held in stock and crude oil delivered to local refineries and for exports. The manual contains detailed procedures for stock taking and custody transfer operations.”

[21]There was also in evidence a smaller Procedure Guide for Terminal Operations. Its relationship with the main guide is unclear. One expert on Nigerian law described it as a condensed version of the main guide.

[22]Section 3 of the Terminal Operations Guide is headed Custody Transfers and provides as follows:

“The following procedure shall apply in all cases of custody transfer: ……… (iii) In the case of lifting by sea, ensure that the inward clearance certificate has been used by the Department of Customs and Excise. ……… 3.1 Tanker Information The following information shall be made available at the time and the places indicated thereon: 3.1.1 Advance Tanker Programme The tanker is nominated by the consignee and approved by COMD [Crude Oil Management Department] after ascertaining that the following conditions are satisfied: The following information shall be made available at the time and the places indicated thereon: (i) The vessel is seaworthy. (ii) The vessel had not made trips to prohibited ports. (iii) The cargo to be lifted is not less than 90% of the tankers summer deadweight ton (Sdwt). (iv) COMD shall submit the monthly tanker programme during the first week of every month, to the Petroleum Inspectorate, Task Force and Terminal Operator. (See Appendix VII). Any amendment to the programme shall be promptly communicated to the aforementioned offices in (iv) not later than three days before the Expected Date of Arrival of such tankers in Nigerian waters. ………….. 3.2.0 Loading Operations Having nominated the tanks for the loading, the parties concerned shall perform the following: (i) Tank fiscalisation exercise is carried out as outlined in 2.3. (ii) The nominated vessel gives Notice of readiness (NOR) to the Terminal Operator who in turn advises the Petroleum Inspectorate, Task Force, COMD and Customs. (iii) Customs, Task Force and Immigration board the vessel for necessary inspection and thereafter issue the Inwards Clearance Certificate, (See Appendix VIII). (iv) When the Inward Clearance Certificate has been received, loading will then commence from fiscalised, nominated tank(s) after the Petroleum Inspectorate shall have unlocked the loading valve. (v) On completion of loading, the tanks used for loading are defiscalised after which the quantity of crude oil loaded into the tanker is determined. (vi) The Petroelum Inspectorate then prepares the certificate of Quantity and Quality. The Certificate of Quantity must be signed by the Terminal Operator and consignor of the cargo. (vii) The following documents are then prepared as indicated: (a) Bill of lading…….. (b) Tanker time sheet ……. (c) Tanker ullage report ……. (d) Cargo manifest (e) Tanker sailing advice (f) Certificate of origin.”

The following information shall be made available at the time and the places indicated thereon:

[23]There was no Appendix VIII (as referred to in section 3.2(iii)) but in between Appendix VII and Appendix IX was Appendix G2 which was a pro forma “Inward/Outward Tanker Clearance Certificate.” It provided for the document to be signed by Customs, the Petroleum Inspectorate and the Task Force and to certify that the named tanker was “cleared to load”. It was common ground that the reference in the Terminal Guide to Appendix VIII was to be regarded as a reference to Appendix G2.

[24]It was also common ground that when the Terminal Guide was issued the Petroleum Inspectorate was part of the NNPC. At a later date the DPR took over some or all of the functions of the Petroleum Inspectorate. Thus references in the Terminal Guide to the Petroleum Inspectorate were to be regarded as references to the DPR.

[25]The other guide was the Procedure Guide for the Determination of the Quantity and Quality of Crude Oil and Petroleum Products at Custody Transfer Points. It was issued by the DPR in Lagos and so was thought to post date the Terminal Guide. It contained guides for several matters including the static measurement of crude oil volumes by gauging, crude oil quality determination and the computation of crude oil quantity. The guide provided:

“Section 1 Purpose This guide is issued pursuant to the provisions of section 7 (1) (a) of the Petroleum Act of 1969 and Regulation 51 of the petroleum (Drilling and Production) Regulations 1969. It describes the method to be used and the standards to be complied with in carrying out the quantity and quality measurements of liquid petroleum at designated custody transfer points, the approved devices and equipment, approved calibration Methods and frequency and all other pertinent matters. 1.2 Application This procedure guide applies to measurement of quantities and qualities of crude oil and petroleum products, at all approved custody transfer points falling under the following categories: All export terminals Special purpose vessel storage (SPV’s) Third Party Injection and Supply Points. Loading Jetties Refinery Tank Farms. 1.3 General Provisions 1.3.1 The primary measurement method for determining the fiscal quantities of crude oil at all onshore terminals and tank farms shall be by manual tank gauging which in this procedure guide is called static measurement. In addition to this, all such terminals shall be equipped with functional meters to be installed and maintained in accordance with the relevant section of this guide as issued by the Department of Petroleum Resources. 1.3.2 The meters so installed shall serve as the secondary measurement device and shall be operated in accordance with the procedure guide on dynamic measurement method. 1.3.3 In all other custody transfer points, the primary measurement device shall be with the use of meters with tank gauging as back up wherever possible and as specified by the Department of Petroleum Resources. All such points shall, therefore, be equipped with meters of the positive displacement or turbine types and shall be selected, installed, operated and maintained in accordance with the procedure guide on dynamic measurement method. All custody transfer points from which export of crude oil takes place shall have installed, a fiscalisation switch with lock on the main loading line to be located down stream the pumps. The switch shall be the control point for the main loading valve serving as the main gate of all crude leaving the terminal. The design and installation of the switch shall be approved and supervised by the Department of Petroleum Resources. After the installation of the switch has been found satisfactory to the Director, all the keys to the lock shall be kept in the custody of the Department of Petroleum Resources Official-In-Charge of operations at the point. Section 5.0 Crude Oil Export Documentation Process 5.1 Tanker Movement Information The following information on tankers nominated to lift crude oil cargoes at the export terminals, shall be supplied by all operators to the Department of Petroleum Resources office at the Headquarters and the respective Divisional and Terminal offices within the deadlines stipulated hereunder. 5.1.1 Advance Tanker Programme: This shall contain the schedule of tankers expected to call at the terminal in a particular month giving such information as the name and expected time of arrival (ETA), parcel size and the consignor. It shall be furnished within the first week of the month in question and any amendments to the programme shall be promptly notified to the respective Department of Petroleum Resources offices not later than 72 hours before the arrival of the tanker. 5.1.2 Tanker manifest: On arrival of a tanker at the berth, the following information shall be supplied to the Department of Petroleum resources terminal office: (a) Name of the tanker and its country of registration. (b) Owner of tanker. (c) Summer dead weight of tanker. (d) Last port of call. (e) Quantity and type of crude to be lifted. (f) Destination of tanker after loading. 5.1.3 Tanker Loading Schedule On berthing the tanker preparatory to loading, a schedule shall be prepared for the loading operations and should contain the following information for the purpose of granting loading clearance: (a) Name of berth in use. (b) Estimated time of commencement of loading. (c) Quantity and type of cargo on board on arrival. (d) Tonnage of crude to be loaded. (e) Designated tanks to be used for loading and their BS&Ws. (f) Pumping rate and estimated duration of loading. (e) Consignee and Consignor of the crude cargo. 5.2 Official Export Documents 5.2.1 Gauge Ticket This is a document issued by the Department of Petroleum Resources in which record is made of the tank gauge readings, sample analysis results as obtained before and after loading from the tank (i.e. during opening and closing gauges). It should be completed in quadruplicate and signed by both officials of the Department of Petroleum Resources and the Company’s terminal operations supervisor on duty and the material time or any other higher official of the company so designated for the purpose. The original and triplicate copies are handed over to the company while the duplicate copy is forwarded to the Petroleum Resources Office-In-Charge of the area along with the corresponding copy of the calculated net volume ticket. 5.2.2 Calculated Net Volume Ticket It serves as a mini-certificate of quantity and quality of the cargo. Information to be logged in the document are as follows: (a) Tank Number. (b) SG/API of the crude in the tank before and after loading. (c) The percentage base sediments and water. (d) The gross and net quantities of the crude in barrels and long tons. (e) Metered quantity in barrels. The ticket is completed in duplicate by the Petroleum Resources official on duty after all parties have agreed on the fiscalised quantity of the cargo. The original copy of the ticket should be sent along with the other export returns to the Petroleum Resources Divisional office under which the terminal falls. 5.2.3 Certificate of Quantity This is a document solely prepared and issued in quadruplicate by the Department Petroleum Resources office at the terminal to reflect the official quantity and quality of the cargo. After preparation by the Department of Petroleum Resources office (Petroleum Inspector) on duty, it shall be signed by the official of the Department of Petroleum Resources in charge of the terminal, a very Senior Official of the terminal operator and the representative of the consignor of the cargo. The information contained in this document shall be identical in all respects with the records entered into the bill of lading in respect of that shipment. A certificate of quantity shall be issued for each parcel lifted and for the total cargo lifted by the tanker in the case of joint lifting by two or more consignors.”

Purpose This procedure guide applies to measurement of quantities and qualities of crude oil and petroleum products, at all approved custody transfer points falling under the following categories: Special purpose vessel storage (SPV’s) Loading Jetties All such points shall, therefore, be equipped with meters of the positive displacement or turbine types and shall be selected, installed, operated and maintained in accordance with the procedure guide on dynamic measurement method. Section 5.0 Crude Oil Export Documentation Process It shall be furnished within the first week of the month in question and any amendments to the programme shall be promptly notified to the respective Department of Petroleum Resources offices not later than 72 hours before the arrival of the tanker. (a) Name of the tanker and its country of registration. (b) Owner of tanker. (c) Summer dead weight of tanker. (d) Last port of call. (e) Quantity and type of crude to be lifted. (f) Destination of tanker after loading. On berthing the tanker preparatory to loading, a schedule shall be prepared for the loading operations and should contain the following information for the purpose of granting loading clearance: (a) Name of berth in use. (b) Estimated time of commencement of loading. (c) Quantity and type of cargo on board on arrival. (d) Tonnage of crude to be loaded. (e) Designated tanks to be used for loading and their BS&Ws. (f) Pumping rate and estimated duration of loading. (e) Consignee and Consignor of the crude cargo. This is a document issued by the Department of Petroleum Resources in which record is made of the tank gauge readings, sample analysis results as obtained before and after loading from the tank (i.e. during opening and closing gauges). It should be completed in quadruplicate and signed by both officials of the Department of Petroleum Resources and the Company’s terminal operations supervisor on duty and the material time or any other higher official of the company so designated for the purpose. The original and triplicate copies are handed over to the company while the duplicate copy is forwarded to the Petroleum Resources Office-In-Charge of the area along with the corresponding copy of the calculated net volume ticket. It serves as a mini-certificate of quantity and quality of the cargo. Information to be logged in the document are as follows: (a) Tank Number. (b) SG/API of the crude in the tank before and after loading. (c) The percentage base sediments and water. (d) The gross and net quantities of the crude in barrels and long tons. (e) Metered quantity in barrels. The ticket is completed in duplicate by the Petroleum Resources official on duty after all parties have agreed on the fiscalised quantity of the cargo. The original copy of the ticket should be sent along with the other export returns to the Petroleum Resources Divisional office under which the terminal falls. This is a document solely prepared and issued in quadruplicate by the Department Petroleum Resources office at the terminal to reflect the official quantity and quality of the cargo. After preparation by the Department of Petroleum Resources office (Petroleum Inspector) on duty, it shall be signed by the official of the Department of Petroleum Resources in charge of the terminal, a very Senior Official of the terminal operator and the representative of the consignor of the cargo. The information contained in this document shall be identical in all respects with the records entered into the bill of lading in respect of that shipment. A certificate of quantity shall be issued for each parcel lifted and for the total cargo lifted by the tanker in the case of joint lifting by two or more consignors.”

Crude Oil Export Documentation Process

[26]It is apparent that there is some overlap between the provisions of Section 5 of the Quality and Quantity Guide and Section 3 of the Terminal Guide. Section 5.1.3 of the former refers to the “loading clearance.” However, no form was provided for such clearance. Mr. Simon Rainey QC, counsel for COOSI, submitted that it must be a reference to the Inwards Clearance Certificate mentioned in the Terminal Guide, of which Appendix G2 was a pro forma copy. There is much to be said for this submission. First, although the Quality and Quantity Guide refers to loading clearance whilst the Terminal Guide refers to inwards clearance the pro forma inwards clearance contains a statement that the tanker in question is cleared to load. Second, the Quality and Quantity Guide provides that the loading clearance is to be given after berthing and the Terminal Guide appears to provide that the inwards clearance is also to be given after berthing, because it contemplates that after the inwards clearance is given “loading will then commence.” Mr. Rainey also submitted that the clearance procedure involving DPR Lagos was some form of additional and undocumented procedure not provided for in the Procedure Guides because the inwards clearance required by the Terminal Guide was provided on 31 August 2009.

[27]Neither Guide makes clear whether the inwards clearance certificate or the loading clearance was to be issued by the local DPR or by the DPR in Lagos. It is however to be noted that section 5 of the Quantity and Quality Guide requires the information in that section to be supplied to the DPR at “headquarters” (which was Lagos) and at the respective divisional and terminal offices. Further, it seems clear from the Total report that there was a clearance procedure involving DPR Lagos. First, Total in Lagos asked DPR Lagos for clearance. They would not have done so had there not been a practice requiring such clearance. Second, DPR Lagos in fact gave such clearance and sent it on to the local representative on board the FPSO who would have printed it out had his computer not had a glitch.

[28]In these circumstances, whilst the matter cannot be described as free from doubt, I am not persuaded that that the inwards clearance certificate and the loading clearance were one and the same in 2009 or that the clearance procedure involving the DPR in Lagos was an additional and undocumented procedure not provided for in the Guides. I consider, on the balance of probabilities, that the requirement in Appendix G2 of the Terminal Procedure Guide for the DPR to sign the inwards clearance certificate had become, in practice, a requirement for the DPR in Lagos to grant such clearance (the loading clearance referred to in the Quantity and Quality Guide) and for the head office to inform the local DPR representative that such clearance had been given. The inwards clearance certificate reported as having been granted at 1145 on 31 August 2009 was probably granted by Customs. It cannot have been signed by the DPR representative who had left the FPSO on 29 August 2009. The loading clearance from the DPR was to come from the DPR in Lagos who would transmit it to the DPR representative on board the FPSO. It is true that Mr. Pepple appears to have acted without regard to this requirement but I am not persuaded that his conduct is only explicable on the basis that there was no such requirement. There may have been other reasons why, in circumstances where the DPR representative had unexpectedly left the FPSA, Mr. Pepple permitted Total to commence loading. As a result of Mr. Pepple’s permission loading commenced on 31 August 2009 before clearance from DPR Lagos had been given. The DPR in Lagos gave its loading clearance between 1500 and 1800 on 1 September 2009 (hence the complaint in the DPR’s letter dated 7 September 2009 that loading had commenced 24 hours and 37 minutes ahead of the necessary clearance) but such permission was revoked between 2100 and 2400 on that day.

[29]There was a dispute between the Nigerian experts as to whether the Procedure Guides had the force of law as delegated legislation. By the end of the hearing it was not obvious that the precise status of the Guides mattered in circumstances where neither Guide made non-compliance a criminal offence. I shall therefore express my conclusion and reasons on this question in short form.

[30]The Terminal Operations Guide does not state on its face that it has been issued as delegated legislation. It purports to be an “operating manual….to guide operators at a crude oil terminal of the procedures to follow”. By contrast the Quantity and Quality Guide states that it has been issued pursuant to the provisions of section 7(1)(a) of the Petroleum Act 1969 and Regulation 51 of the Petroleum (Drilling and Production) Regulations 1969. It is common ground that both these references are in error. The first reference should be to section 9 of the Petroleum Act and the second should be a reference to Regulation 52.

[31]Section 9 of the Petroleum Act confers power on the Minister of Petroleum Resources to make regulations, inter alia, “regulating the loading …of petroleum”. Section 12 empowers the Minister to delegate his powers save for his power to make regulations. However, the Nigerian National Petroleum Corporation Act of 1977 (which set up the NNPC) provided by section 10 that any “regulatory function” conferred on the Minister shall be deemed to have been conferred upon and may be discharged by the chief executive of the Petroleum Inspectorate, which later became the DPR. Although there was a debate about this it seems clear to me, notwithstanding Mr. Ilogu’s opinion and Mr. Rainey’s submission, that the effect of this provision is that the power to make regulations under the Petroleum Act 1969 is a “regulatory function” within the meaning of section 10 of the NNPC Act so that the DPR was empowered to exercise the Minister’s powers under section 9 of the Petroleum Act 1969.

[32]In circumstances where the Quantity and Quality Guide states on its face that it has been issued pursuant to section 7 (which it is agreed must mean section 9) I consider that it probably was a “regulation” which the DPR had statutory power to make, notwithstanding that other examples of regulations made by the DPR proved elusive. It is unclear whether the Terminal Procedures Guide was also such a regulation because it did not purport to be. The absence of a reference to a power to make regulations makes it more likely than not that it was not intended to be a “regulation” pursuant to section 9 of the Petroleum Act but was merely a manual, as it was stated to be.

Were any offences contrary to Nigerian law committed ?

[33]The letter from the DPR dated 7 September 2009 stated that the actions of Total were viewed by the Government as an Economic Crime. This appears to be a reference to the Economic and Financial Crimes Commission (Establishment) Act of 2004. Also on 7 September the DPR advised the Navy in general terms of “violations of the Regulations” and said that the loading process was an Economic Crime. Many pieces of Nigerian legislation and delegated legislation were referred to in the reports of Mr. Oditah QC and of Mr. Fagbohunlu but the only legislation upon which detailed submissions were addressed in support of the case that there had been a breach of Nigerian Law was the Crude Oil (Transportation and Shipment) Regulations 1984 made pursuant to section 9 of the Petroleum Act 1969. Mr. Bright suggested that the cutting of the padlock arguably amounted to tampering with an oil line in contravention of s.1(7) of the Miscellaneous Offences Act. However, he did not develop that point. The offence required the tampering to be wilful or malicious and in circumstances where Total had sought and obtained permission from the DPR to cut the padlock there must be serious doubt as to whether an offence had been committed. Mr. OditahQC and Mr. Fagbohunlu said that any breach of the Guides was an offence contrary to section 7(1) of the Terminal Dues Act. But I agree with Mr. Ilogu that the reference in that section to operating the terminal in accordance with “such conditions as may be prescribed” related, on the true construction of s.7, to conditions prescribed for the payment of dues.

[34]Mr. Bright submitted that regulation 3 created an offence which, he said, had been committed by Total, and possibly the shipowners, when CRUDESKY was loaded at the AKPO terminal. The Crude Oil Regulations provided as follows:

“1. Ship, etc., not to carry part cargo or dead freight As from the commencement of these Regulations, no ship, tanker or vehicle in which crude oil is carried shall take part cargo or carry dead freight except- (a) within the limits of operational practice: or (b) when loading the full complement from two or more terminals within Nigeria: or (c) with the prior written approval of the Minister or any other person so designated by the Minister in writing to grant such approval. 2. No topping to be made No topping shall be made, demanded or received for or by any ship, tanker, or vehicle in which crude oil is carried within or outside any loading port or terminal in Nigeria. 3. Verification and certificate of crude oil, etc. All declarations regarding the capacity of any ship, tanker or vehicle in which crude oil is carried shall be verified and certified by the appropriate Government authority or agency at the port of loading and no crude oil shall be loaded into any ship, tanker or vehicle other than that designated solely for that purpose. 4. Prohibition of loading crude oil into ballast tank, etc. No loading shall be made into a ballast tank or any other tank, container or receptacle of a ship or tanker other than those designated, dedicated and designed for the storage and transportation of crude oil. 5. False declaration Any false declaration regarding the capacity of any ship, tanker or vehicle in which crude oil is carried or in respect of the quality or quantity of oil loaded or the alteration of any document relating to quality, quantity or capacity of any ship, tanker, vehicle or cargo of crude oil shall be regarded as non compliance within the provisions of these Regulations. 6. Ship not to depart without full documentation No ship, tanker or vehicle in which crude oil is carried shall depart from Nigeria for any reason whatsoever without full documentation in the prescribed manner having been concluded by the appropriate authorities and without specific authorisation by designated officers of the Nigerian Customs Service and any other Government agency having authority in that regard. 7. No loading, etc., of crude oil in unauthorised location No loading, unloading or trans-shipment of crude oil shall be carried out within Nigeria at any location other than those approved by the Minister for that purpose. 8. Measures to be taken pending trial In any case where a breach of these Regulations is committed by any person or body (corporate or unincorporate) the Minister or any person authorised by him, or under any law, shall, pending the trial of such person or body, do any one or more of the following things, that is to say- (a) cause the arrest or seizure of any cargo, ship or vehicle in which crude oil is carried; (b) arrest or cause to be arrested all persons involved and hand them over to a law enforcement agent to be dealt with in accordance with the law; (c) withdraw or cancel any licence granted by him to any such person or body or direct such action to be taken by an appropriate Government agency; (d) enter or direct the entry into any premises where any breach of the Regulations has occurred and take possession of any document, instrument or material used in connection therewith; (e) cause an inquiry to be conducted into the affairs of any person or body (corporate or unincorporate) connected with the breach of any of these Regulations; (f) order the closure of any premises where such breach occurs; (g) generally take such other action as the Minister may consider necessary for the purpose of preventing any further breach of these Regulations. 9. Penalty for non-compliance Any person or body (corporate or unincorporate) who fails to comply with any of the provisions of these Regulations shall be guilty of an offence and on conviction shall be liable to a fine of ₦100 or a term of imprisonment of six months. 10. Interpretation In these Regulations, unless the context otherwise requires- “appropriate authority” means the Nigerian National Petroleum Corporation, the Nigerian Ports Authority, the Immigration Service, the Nigerian Customs Service, or any other government agency having authority for clearance of ships before departure from the Nigerian waters; “topping” means any further loading of crude oil in any available space on the ship, tanker or vessel after loading the nominated quantity of crude oil at any designated terminal.”

In these Regulations, unless the context otherwise requires-

[35]These regulations appear to regulate the manner in which crude oil may be shipped on board vessels. Thus part loading was forbidden save in certain circumstances (regulation 1). Topping, that is, topping up the quantity loaded by the loading of a further quantity, was forbidden (regulation 2). Loading of crude oil into any tanks other than those designated for the carriage of oil was forbidden (regulation 4). Leaving Nigeria without “full documentation” was forbidden (regulation 6). Loading at an unauthorised location was forbidden (regulation 7). That is the legislative context in which regulation 3 must be construed.

[36]The first part of regulation 3 concerns declarations regarding the capacity of any vessel in which crude oil was carried. Such declarations “shall be verified and certified by the appropriate Government authority or agency at the port of loading”. It is not clear whether that part of the regulation imposes an obligation upon the appropriate Government authority or agency to verify and certify the capacity of the vessel or whether it imposes an obligation upon the owner or charterer of the vessel (or shipper of the cargo or the terminal itself) to ensure that a declaration regarding the capacity of the vessel is verified and certified by the appropriate Government authority or agency. Whilst the language suggests the former meaning, the legislative context (a regulation which forbids actions which might otherwise be carried out by owner, charterer, shipper or terminal) suggests the latter. Regulation 5 also envisages that someone such as an owner, charterer, shipper or terminal will make a declaration as to the capacity of the vessel. I therefore consider that regulation 3 provides that such person (the precise identity of whom is unclear) must get the declaration verified and certified by the appropriate Government authority. Any false declaration as to capacity will be regarded as non-compliance with the regulations and will expose the maker of the declaration to the measures and penalties provided by regulations 8 and 9. However, the problem which arose with regard to CRUDESKY did not appear to concern a declaration as to the capacity of that vessel.

[37]The second part of regulation 3 provides that no crude oil shall be loaded into any vessel other than one designated solely for that purpose. That would appear to be a prohibition on loading crude oil on any vessel other than one designated solely for the carriage of crude oil. So read it sits happily with regulation 4 which contains a prohibition on loading crude oil into any tanks on a vessel other than those designated for the carriage of crude oil. There is no suggestion that CRUDESKY was not designated solely for the carriage of crude oil.

[38]My reading of regulation 3 would therefore suggest that the events in Nigeria did not give rise to an offence under the Crude Oil (Transportation and Shipment) Regulations 1984. Mr. Bright submitted that they did, for these reasons. The true construction of the Regulations may be informed by practice, as the experts on Nigerian law accepted. The Terminal Operations Guide and the Quality and Quantity Guides were good evidence of practice. Section 3.1.1 of the Terminals Guide provides for a tanker to be nominated by the consignee, for the nomination to be approved by the COMD after certain conditions are satisfied (one of which is that the cargo to be lifted is not less than 90% of the tanker’s summer deadweight) and for the nomination to be submitted by COMD to the DPR.

[39]Mr. Bright submitted that the verification and certification of the vessel’s capacity was part of the procedure set out in section 3.1.1 of the Terminal Operations Guide. He said that the reference in the second part of Regulation 3 to a vessel being “designated” for the loading of crude oil was to be understood in the sense of the vessel whose capacity had been verified and certified by the appropriate Government authority pursuant to the first half of that Regulation. An offence was committed contrary to Regulation 3 when cargo was loaded into a ship whose capacity had not been verified and certified. The offence was committed by the terminal and possibly also the vessel.

[40]This was an elaborate submission. Mr. Fagbohunlu said that there was a contravention of regulation 3 where the failure to obtain loading clearance from the DPR “included a failure to obtain verification and certification of the capacity of the vessel” but did not develop the point in the manner that Mr. Bright did.

[41]The scheme set out in the Terminal Operations Guide contemplates several steps. First, section 3.1.1 of the Terminal Operations Guide provides for a nomination by the consignee approved by the COMD and for the COMD to submit it to the DPR. But it does so in the context of the “Advance Tanker Programme”. These nominations would appear to be made sometime before the arrival of the vessel at the terminal. That which the COMD submits to the DPR is described as the monthly tanker programme and is submitted during the first week of every month. I accept however that, although the nomination is not required expressly to state the capacity of the vessel, it seems likely that it will do so because the cargo to be lifted must be not less than 90% of the vessel’s summer deadweight. Second, within 24 hours of the vessel’s arrival the terminal operator must submit to the DPR a “tanker manifest” pursuant to section 3.1.2. Third, the terminal operator must furnish to, inter alios, the DPR at the terminal a “tanker loading schedule” before the tanker berths to receive the cargo. Neither the tanker manifest nor the tanker loading schedule expressly require a declaration as to the capacity of the ship. Fourth, the nominated vessel gives Notice of Readiness to the terminal operator who in turn advises the DPR. Fifth, the “Inward Clearance Certificate” is then issued. Section 3.2 states that it is issued, after “necessary inspections”, by Customs, Task Force and Immigration. Sixth, when the Inward Clearance Certificate has been received loading will then commence after the DPR has unlocked the loading valve.

[42]The Quantity and Quality Guide contains in section 5 a similar set of steps. This guide contemplates that the various documents containing information as to the nominated tankers shall be supplied to the DPR offices both at headquarters (Lagos) and at the respective divisional and terminal offices (the local terminal office). The guide also requires the tanker manifest to include the summer deadweight of the vessel. The loading schedule is stated to be required “for the purpose of granting loading clearance”. That, for the reasons I have already given, contemplates clearance by the DPR in Lagos.

[43]In the present case there is no evidence that anything untoward happened with regard to steps 1-4. There is evidence that the inward clearance certificate was issued at 1145 on 31 August 2009 but the document in question was not in evidence. It cannot have been signed by the DPR representative at the terminal because he had left on 29 August 2009. It is likely to have been granted by Customs.

[44]Neither Guide contains a provision for the verification and certification by any authority of the capacity of the vessel.

[45]It was said by the DPR in its letter dated 7 September 2009 that Total had commenced loading “without the clearance of the Department as provided for in section 3.1.1 of the Procedure Guide for Terminal Operations and other relevant provision as contained in” the Quantity and Quality Guide. There is no evidence that section 3.1.1 of the Tanker Operations Guide (which deals with Advance Tanker programme) was not complied but there is evidence that loading commenced without clearance having been given by the DPR in Lagos. That is the essence of the allegation in the DPR’s letter. However, loading without the clearance of the DPR does not appear to have been a criminal offence contrary to regulation 3. It does not forbid the commencement of loading without the clearance of the DPR in Lagos. I am unable to accept Mr. Bright’s submission that loading in such circumstances was an offence contrary to regulation 3. There is no evidence that the capacity of CRUDESKY was not verified and certified in accordance with that regulation. The fact that the DPR Lagos gave its clearance between 1500 and 1800 on 1 September (after loading had commenced) suggests, if anything, that that such verification and certification had been carried out. For these reasons I am unable to accept Mr. Bright’s submission that a criminal offence was committed when loading commenced on 31 August 2009 without clearance to load from the DPR in Lagos.

Was there a breach of the Procedure Guides ?

[46]It was submitted that, whether or not a criminal offence was committed, there was a failure to comply with the Procedure Guides.

[47](a) Commencing to load without clearance by the DPR: Whilst clearance was given by an authority, probably the Customs, at 1145 on 31 August 2009 that clearance cannot have been signed by the local representative of the DPR and was not, in any event, granted by the DPR Lagos. Loading commenced before the DPR Lagos granted loading clearance only to revoke it a little later. This was, for the reasons I have given a breach of the Terminal Operations and Quantity and Quality Guides.

[48]It is however difficult to describe Total’s conduct as culpable (let alone a “dastardly act”) in circumstances where Total requested and obtained permission to load from Mr. Pepple of the DPR Port Harcourt. Mr. Bankole probably thought that if Mr. Pepple was able to give permission to load the DPR Lagos must have given clearance.

[49](b) Cutting the padlock: The Terminal Operations Guide provides that the DPR shall unlock the loading valve. This did not happen. Total cut the lock. There was therefore a further failure to comply with the Terminal Guide. Again, it is difficult to describe Total’s conduct as culpable in circumstances where Mr. Bankole had sought and obtained permission from Mr. Pepple to cut the padlock. (c) Loading in the absence of the DPR representative: There is no express requirement in the Guides that loading must take place in the presence of the DPR. It is also to be observed that the DPR in its letter dated 7 September 2009 did not allege that in breach of the Guides loading took place in the absence of a DPR representative. It was nevertheless submitted that the Guides required the presence of a DPR representative. Reliance was placed on paragraph 2.3 of the Terminal Operations Guide. However, this appears to relate to fiscalization of the shore tanks. Reliance was also placed on the provision in paragraph 5.2.1 of the Quantity and Quality Guide that the gauge ticket should be issued by the DPR on the basis of the results obtained before and after loading. There does not appear to be any dispute that this relates to the vessel’s tanks. The provision contemplates, it seems to me, that the DPR representative will be present during loading. The certificate of quantity is to be prepared and issued solely by the DPR and, although the DPR representative could issue such documents based upon readings by appointed inspectors, it is more likely, it seems to me, that it was envisaged that he should be present during loading to confirm the reading himself. In their report Total appear to accept that the representative of the DPR ought to have been present during loading. That was why they sought permission to load in the absence of the DPR representative. For these reasons, although the matter is not entirely clear, I consider that the Guides envisaged the presence of the DPR representative during loading. That requirement was breached because loading commenced at 1612 on 31 August 2009 and the DPR inspector did not attend until 1215 on 1 September 2009. But, as with the other breaches, it is difficult to describe Total’s conduct as culpable in circumstances where Mr. Bankole had sought and obtained permission from Mr. Pepple to commence loading.

Was the action of the Nigerian authorities unlawful ?

[51]The action of the Nigerian authorities consisted of(i) revoking the clearance to load which it had given earlier on 1 September 2009,

(ii) refusing to issue the cargo documents,

(iii) instructing the Navy to ensure that the vessel did not leave Nigeria and

(iv) requiring payment of a fine of US$12m.

[52]There was no evidence that the DPR, in circumstances where it had learnt of the irregular circumstances in which the loading had commenced, was not entitled to revoke the clearance it had earlier given or to refuse to issue the loading documents. On the contrary Mr. Illogu very fairly accepted that the DPR had power to refuse to issue the cargo documents.

[53]On 7 September 2009 the Navy was instructed by the DPR to ensure that the vessel did not sail away from Nigeria. The experts on Nigerian law were agreed that at common law a citizen has a right to arrest any person or property if there is a reasonable suspicion of the commission of a crime and that the DPR as a regulator may exercise a similar right. There was therefore debate as to whether the DPR in Lagos could reasonably have suspected that a crime had been committed and whether the DPR could effect an arrest by use of the Navy instead of informing the marine police. However, the DPR’s instruction on 7 September 2009 can be explained more simply. There is no dispute that it would have been an offence, contrary to regulation 6 of the Crude Oil Regulations, for the vessel to have left Nigeria before the cargo documents had been issued (though I accept that there was no evidence that the vessel intended to sail away in breach of regulation 6). The DPR informed the Navy in its letter of 7 September 2009 that the DPR had put on hold the issue of the shipping documents and requested the assistance of the Navy in ensuring that the vessel was prevented from sailing away.

[54]Mr. Ilogu said that there was no power to “arrest” the vessel. However, there was no documentary evidence of any formal arrest and the DPR did not purport to “arrest” the vessel on 7 September 2009. The heading of the DPR’s letter to the Navy was entitled “Surveillance and Restriction of Movement of Vessel MT CRUDESKY at AKPO FPSO Terminal”. There was no letter to the CRUDESKY informing it that it was being arrested. In practical effect there may be little difference between a restriction on the movement of a vessel and the arrest of a vessel (hence the vessel’s statement of facts referred to the vessel being “released” on 13 October 2009) but if a formal “arrest” had been intended I would have expected that term to be used and for the vessel itself to receive formal notification of an “arrest”.

[55]There was no evidence that it was not within the power of the DPR to request the Navy to ensure that the vessel did not leave Nigeria in breach of Regulation 6 of the Crude Oil Regulations. It is probable that it did and I accordingly find that the DPR had such power.

[56]The conduct of the Nigerian authorities in exacting a fine of US$12m. before permitting the vessel to sail away from Nigeria is, however, difficult to explain by reference to any lawful power to exact such a fine. A fine is normally ordered by a court of law after a person has been found guilty of a crime. Thus regulation 9 of the Crude Oil regulations provides for a fine of N100 or six months imprisonment for any person found guilty of an offence contrary to those regulations. Neither Total nor CRUDESKY was found guilty of any offence by a court of law. There is no evidence that any offence was committed contrary to regulation 3 (or any other regulation) of the Crude Oil Regulations and in so far as “stealing” was suspected (referred to by Mr. Fagbohunlu in his account of his meeting with the Director of the DPR on 25 October 2009) questioning of Mr. Pepple by the DPR in Lagos would have revealed that Total had no dishonest intention and had sought and obtained approval of their actions from Mr. Pepple, the Head of Operations of DPR at Port Harcourt.

[57]Mr. Rainey submitted that the fine was an indefensible and wholly arbitrary act for which no legal power existed and that it sheds light on the DPR’s “cavalier and careless attitude to its legal powers”. The Minister is not party to these proceedings and so I have not received any evidence from him to explain his actions. However, Mr. Bright sought to explain the fine. He said that the Minister had power to suspend Total’s operations at the AKPO terminal pursuant to section 8(1)(h) of the Petroleum Act. This would have been a much worse punishment than the levying of a US$12m. fine. A commercial deal was therefore done by Total and the Minister by which Total agreed to pay US$12m.

[58]It is indeed likely that Total agreed to pay the “fine” in order to ensure that they could continue their operations in Nigeria. In Total’s letter to the DPR dated 8 September 2009 Total appealed “for the most benevolent decision possible from the government authorities on this issue in order to allow the Terminal to resume its normal operation.” But Mr. Bright’s explanation does not reveal any statutory or other lawful power to exact a fine of $12m. There is none in section 8 of the Petroleum Act. Mr. Ilogu’s opinion was that the imposition of the “fine” was an abuse or arbitrary exercise of power. In circumstances where no power to exact such a fine can be identified I am compelled to accept that evidence. I therefore find that the “fine” was an abuse or arbitrary exercise of the Minister’s power. As I have already said I have not had the benefit of any evidence from the Minister and have reached my decision on the basis of the evidence which has been adduced by the parties to this action.

[59]However, it does not follow that the DPR’s actions in withholding the issue of cargo documents on 1 September 2009 was arbitrary and unlawful. An unusual and irregular act had taken place, albeit with the consent of Mr. Pepple. The padlock to the export valve had been broken and loading had commenced before the DPR in Lagos had granted clearance. Cargo documents were withheld by the DPR (as it had power to do) and as a result, pursuant to regulation 6 of the Crude Oil Regulations, the vessel could not leave Nigeria. Once the matter had been investigated with Mr. Pepple one might have expected that the DPR would have issued the cargo documents and permitted the vessel to leave within a matter of days, probably by 7 September 2009. But that did not happen, probably because the DPR had to await “the resolution of the matter by the Federal Government”, as stated by the DPR in its letter dated 7 September 2009. The DPR was only permitted to issue the cargo documents on 16 October 2009 after the fine had been paid. Only then was CRUDESKY able lawfully to depart Nigeria.

The Owners’ claim against Trafigura under the charterparty

[60]The charterparty contained the following clause:

“If vessel delayed for more than three (3) hours after hoses disconnected for charterers purposes or waiting cargo documentation, then full time to count.”

Demurrage

[61]Mr. Chirag Karia QC, as he also became during the trial, submitted that pursuant to that clause laytime recommenced at 0054 on 2 September 2009 because the vessel was delayed “waiting cargo documentation.” Accordingly laytime expired at 0919 on 3 September 2009 after which the vessel was on demurrage.

[62]It follows from my account of the facts that the vessel was indeed delayed from 2154 on 1 September 209 “waiting cargo documentation”. The DPR refused to issue the cargo documents until 16 October 2009. As a result the vessel was, both practically and by law, prevented from leaving the terminal.

[63]It follows that the vessel was on demurrage from 0919 on 3 September until 0954 on 16 October 2009 when the cargo documents were placed on board the vessel. It is true that as from 7 September 2009 it is more likely than not that the DPR was awaiting the resolution of the matter between the Minister and Total but so far as the vessel was concerned she was “awaiting cargo documentation” just as she was from 1-7 September 2009. I do not consider that a change in the underlying reason for the delay in the provision of cargo documents affects the application of the clause in the charterparty concerning delay after the disconnection of hoses. Laytime expired at 0919 on 3 September 2009 after which the vessel was on demurrage.

[64]There remains an issue as to whether demurrage accrued at the full rate or at half rate pursuant to clause 21 of the BEEPEEVOY 3 form on the grounds that the delay arose from “arrest or restraint of princes”. Clause 21 provided:

“Any delay(s) arising from ……..arrest or restraint of princes…shall, provided always that the cause of the delay(s) was not within the reasonable control of Charterers……….count as one half laytime or, if the Vessel is on demurrage, at one half of the demurrage rate.”

[65]On the facts as I have found them there is no question of the delay from 1-7 September 2009 having been caused by an “arrest or restraint of princes”. However, as from 7 September 2009 the underlying reason for the delay was an abuse or arbitrary exercise of power by the Minister.

[66]The first question is whether the delay after 7 September 2009 “arose from” an arrest or restraint of princes. I consider that it did. If the Minister had not improperly demanded payment of a “fine” it is more likely than not the DPR would have issued the cargo documentation by 7 September 2009 thereby enabling the vessel to depart. By that time it is likely that the DPR had learnt that Mr. Pepple had authorised the loading. The second question is whether the cause of the delay was within the reasonable control of Trafigura. Trafigura carried out its obligation to load through Total. If the cause of the delay was within the reasonable control of Total, it was, as between the Owners and Trafigura, within the reasonable control of Trafigura. However, I do not consider that the delay after 7 September was within the reasonable control of Total. It is true that Total had loaded in breach of the Procedure Guides. But Total had sought and obtained permission to load from Mr. Pepple. By 7 September it is likely that the DPR had learnt from Mr. Pepple that he had authorised the loading of the cargo. The delay after 7 September when the Minister improperly demanded payment of a “fine” was not within the reasonable control of Total. After this judgment was handed down in draft Mr. Karia said that this point had not been taken by Mr. Bright. However, the point was taken orally by Mr. Rainey for COOSI (as my notebook records) and Mr. Kimmins and Mr. Bright formally passed up the line points taken by Mr. Rainey. I have however considered Mr. Karia’s submission in response. I am not persuaded by it. I have not equated “culpable” with “reasonable control”. The delay after 7 September 2009 was caused by the improper actions of the Minister over whom Total had no control. Even if it could be said that the decision of Total to load without consent from the DPR in Lagos was within its reasonable control (which in my judgment it cannot, see paragraph 115 below) the delay from 7 September 2009 was not caused by that decision but by the improper actions of the Minister.

[67]Mr. Karia challenged Trafigura’s reliance on clause 21 in a number of ways with reference to several authorities. He submitted that loading of the cargo was Trafigura’s responsibility (which it was) and that loading was to be at the risk and peril of Trafigura (which it was, pursuant to clause 15 of the BeepeeVoy 3 charterparty). He said that in those circumstances Trafigura could not take advantage of clause 21 of the charterparty. However, clauses 15 and 21 must be read together. In circumstances where the vessel is on demurrage effect is given to the fact that loading is Trafigura’s responsibility and that it is at the risk and peril of Trafigura. Effect is given to clause 21 by providing that, if the conditions set out in that clause apply, demurrage will be at half-rate.

[68]Mr. Karia also submitted that Trafigura is not entitled to benefit from its own breach and is not entitled to rely upon a force majeure event which has been caused or contributed by its own breach. However, I do not consider that Trafigura is seeking to benefit from its own breach. It is true that but for the breach of the Procedure Guides the Minister would not have had the opportunity to demand payment of a “fine” but that does not, in my judgment, mean that Trafigura is seeking to benefit from its own breach. Nor do I consider that the detention of the vessel after 7 September was caused or contributed to by Trafigura. It was caused by the improper actions of the Minister. By 7 September it is likely that the DPR had learnt that Total’s conduct (and hence Trafigura’s conduct as between the Owners and Trafigura) was not culpable and, but for the improper actions of the Minister, would have issued the cargo documents.

[69]Mr. Karia further submitted that in any event the forcible detention of the vessel ceased on 13 October 2009 and that the full rate should apply between 13 and 16 October 2009. However, whilst the vessel was “released” at 2100 on 13 October 2009 the delay thereafter arose, in my judgment, from the forcible detention. Had there been no forcible detention on 7 September the vessel would, on the balance of probabilities, have been free to depart on about that date.

[70]Mr. Karia submitted in his reply that Mr. Bright, in the course of his submissions, had said that he did not rely upon clause 21 but would pass on to the Owners any reliance on that clause by Mr. Kimmins (for Vitol) or Mr. Rainey (for COOSI). Since they did not advance an argument on that clause Mr. Karia said that Mr. Bright’s previous reliance on that clause had been “eliminated”. I am unable to accept that submission. Mr. Bright made clear that he was not advancing a factual case that there had been an event within clause 21 but that if the factual case accepted by the court (following submissions by Mr. Kimmins or Mr. Rainey) involved such an event then he would rely on it.

[71]There is (or may be, I was not entirely sure) a short point to be decided as to the quantification of demurrage, namely, whether address commission of 2.5% should be deducted. It should be deducted because it was expressly agreed that such commission should be deducted from freight and demurrage.

[72]For these reasons, and on the basis of the facts which I have found, the Owners’ claim for demurrage succeeds, but only at half-rate for the period from 7 September 2009.

[73]Since the claim in demurrage has succeeded there is no need to consider the alternative claim for damages for detention.

Additional war risk premium

[74]The BP War Risk Insurance Clause agreed between Owners and Charterers is in the following terms:

“War risk insurance additional premiums, crew war bonus and insurance and additional expenses directly incurred as a result of the vessel entering and or transitting an excluded area shall be for charterers’ account…..”

[75]It is admitted that Nigeria is an excluded area for the purposes of the War Risk premium. It therefore follows that additional premiums incurred as a result of the vessel “entering and/or transitting” Nigerian waters is for Trafigura’s account. The vessel entered Nigerian waters shortly before 0300 on 29 August 2009. She remained in Nigerian waters, transitting those between Akpo and Bonny, until 16 October 2009.

[76]Mr. Bright submitted that the additional premium which the Owners seek to recover is the result of the vessel not being allowed to leave Nigerian waters as opposed to entering or transitting Nigerian waters. I am unable to accept that submission. It seems to me that the clause is intended to cover the whole time spent by the vessel in an excluded area after it has entered that area.

[77]Mr. Bright also relied upon clause 46 of the BEEPEEVOY3 form which provided that Trafigura were not responsible for loss or damage or delay rising or resulting from arrest or restraint of princes. However, clause 46 was prefaced “unless otherwise in this Charter expressly provided”. It is common ground that the parties had expressly agreed a specific provision dealing with war risk additional premium. I have therefore concluded that clause 46 does not apply in that context.

[78]For these reasons the Owners’ claim for additional war risk insurance succeeds.

Fresh water production and bunker consumption

[79]There are two further claims of the Owners against Trafigura which remain in dispute. One is for the costs incurred in producing fresh water during the delay at the FPSO and at Bonny in the sum of US$16,297.64. The other is for the bunkers incurred in shifting and keeping the vessel at anchor at the FPSO and at Bonny in the sum of US$132,212.60.

[80]The documents in support of the first claim indicate that it relates to the cost of producing fresh water from 22 September until 7 October 2009. The documents in support of the second claim indicate that it relates to the bunker consumption between 10 September and 13 October 2009. The basis of both claims is that the costs were incurred by reason of a breach of contract by Trafigura and are not encompassed within the payment of demurrage because they represent loss over and above the mere detention of the vessel.

[81]The alleged breach of contract is a breach of an implied term of the charterparty that the charterers would not load any cargo in breach of the municipal law which is of direct relevance to the carriage of the cargo; see Bunge SA v Adm Do Brasil Ltda [2009] 2 Lloyd’s Rep. 175 at paragraphs 27-31. As I understood Mr. Bright’s response it was that he put the owners to proof of the existence of the alleged implied term but advanced no argument as to why the alleged term should not be implied. However, he submitted that if there was such an implied term and it was breached then Trafigura were not liable because of clause 46 of the charterparty which provided:

“Charterers shall not, unless otherwise in this Charter expressly provided, be responsible for any loss or damage or delay or failure in performance hereunder arising or resulting from …arrest or restraint of princes…. ”

[82]In my judgment, there was an implied term of the charterparty that the charterers would not load any cargo in breach of the municipal law for the reasons given by Tomlinson J in Bunge SA v Adm Do Brasil Ltda [2009] 2 Lloyd’s Rep. 175 at paragraphs 27-31. Although the loading of the cargo did not involve the commission of an offence contrary to the Nigerian criminal law (see paragraphs 33-45 above), there was a breach of Nigerian law in that commencing to load without permission from the DPR in Lagos and in the absence of a DPR representative was contrary to the Quantity and Quality Guide which had the force of law; see paragraphs 28-32 and 47 and 50 above. There was therefore a breach of the implied term.

[83]However, the improper actions of the Minister after 7 September 2009 were a restraint of princes. That restraint caused the loss or damage which the Owners suffered in the form of the costs of producing fresh water and consumption of bunkers after that date. For this reason the claims for that loss and damage must fail pursuant to clause 46 of the charterparty.

Trafigura’s claims against Vitol

[84]Trafigura seeks to pass on to Vitol the liability it has incurred under the charterparty to the Owners in respect of demurrage and additional war risk insurance. In addition Trafigura seeks damages in respect of the additional cost of chartering another vessel to lift a second parcel that it had intended would be lifted by CRUDESKY. The quantum of that claim has been agreed in the sum of US$125,000 subject to liability being established.

Article 18 of the NNPC Conditions

[85]Trafigura’s claim is put on several bases, the first of which was Article 18 of the NNPC Conditions which formed part of the fob sale contract between Trafigura and Vitoil. Article 18 provided as follows:

“Each party hereby agrees to comply and to procure its personnel, directors, agents, contractors, representatives and permitted assigns to comply with all laws, rules, regulations, valid directives and policies and bye laws applicable and necessary for the performance by each party of its obligations under this Contract.”

[86]Since it was Vitol’s obligation as FOB buyer to ship the goods on board Article 18 required Vitol to comply with the applicable laws, regulations, directives and policies. I have found that Total (and hence Vitol, because Vitol could only perform its obligations though the actual shipper, Total) failed to comply with the Procedure Guides in three respects. They loaded without clearance from DPR Lagos, they cut the lock and they loaded in the absence of the DPR representative. The Procedure Guides were, in my judgment, valid directives or policies. Vitol therefore acted in breach of Article 18.

[87]That breach caused the delay to the vessel from 1-7 September 2009. Thereafter the delay was caused by the improper actions of the Minister. Mr. Bright submitted that even if the Minister exceeded his powers Vitol’s breaches remained an effective cause of Trafigura’s loss. I am unable to accept that submission. Had the Minister not sought to impose a “fine” which he had no power to impose it is more likely than not that by 7 September 2009 the DPR in Lagos, having learnt that Total had loaded with permission from Mr. Pepple, would have issued the cargo documents. Although Vitol’s breach provided the opportunity for the Minister’s intervention I do not regard it as an effective cause of the delay caused by that intervention.

The terms implied by section 12 of the Sale of Goods Act 1979

[88]Trafigura also relied upon Article 30 of the NNPC conditions but it is convenient to deal, next, with Trafigura’s reliance upon the terms implied by section 12 of the Sale of Goods Act, namely, that the seller warrants that he has the right to sell the goods at the time when property is to pass (s.12(1)), that the goods are free and will remain free from any charge or encumbrance (s.12(2(a)) and that the buyer will enjoy quiet possession (s.12(2)(b)).

The entire agreement clause

[89]The contract between Trafigura and Vitol contained an entire agreement in these terms:

“The contract contains the entire agreement between the parties and supersedes all previous negotiations, representations, agreements or commitments with regard to its subject-matter………… Each party further acknowledges that it will only be entitled to remedies in respect of breach of the express terms of the contract and will not be liable in tort or under any collateral contract or warranty in respect of any representations, warranties, statements or undertakings which may have been made prior to the contract being entered into.”

[90]It was submitted that this clause was effective to exclude the terms implied by section 12 of the Sale of Goods Act 1979. The first sentence relied upon does not have that effect. Rather, it merely provides that the agreement between the parties is to be found in the contract and not in any previous discussions or agreements. The second sentence restricts the parties’ remedies to those in respect of a breach of the “express” terms of the contract as opposed to breach of a collateral contract. I do not consider that that is apt to exclude terms implied by section 12 of the Sale of Goods Act 1979. First, implied terms “spell out in express words what the instrument, read against the relevant background, would reasonably be understood to mean”; see A-G of Belize v Belize Telecoms

[2009] 1 WLR 1988

at paragraph 21 per Lord Hoffmann. Thus implied terms spell out the terms which the parties have agreed. They are not part of any collateral contract or warranty with which “express terms of the contract” are compared in the clause. Second, where the parties wished to exclude the terms implied by other sections of the Sale of Goods Act 1979 they did so using clear language. Thus they agreed that:

“All other conditions, warranties, or other terms whether express, implied or which would otherwise be imposed by statute with respect to quality, satisfactory quality, suitability or fitness for any purpose whatsoever of the product are hereby excluded. ”

[91]For these reasons Trafigura was entitled, in my judgment, to rely upon the terms implied by section 12 of the Sale of Goods Act 1979.

Section 12(1); the “right to sell”

[92]Mr. Rainey (whose submissions in this regard were adopted by Mr. Kimmins as against Mr. Bright) submitted that COOSI passed title to the oil to Vitol (and Vitol passed title to Trafigura) when it was shipped on board the vessel. He accepted, on the authority of Niblett Ltd. v Confectioners’ Materials Co. Ltd.

[1921] 3 KB 387

and Microbeads AG v Vinehurst Road Markings Ltd.

[1975] 1 WLR 218

, that where a third party has a right to prevent a sale the seller has no “right to sell”. But he submitted that neither the DPR nor the Minister had any right to prevent the sale. DPR’s right, if any, was not to prevent the sale but to detain the vessel, which right it exercised after title to the oil had passed on shipment. By contrast Mr. Bright submitted that the DPR and/or the Minister had the statutory right to seize the oil and/or to prevent the oil leaving Nigeria pending an investigation into Total’s violations of the loading rules and regulations and accordingly COOSI and Vitol had no right to sell the oil.

[93]The two cases which govern the interpretation of section 12(1) of the Sale of Goods Act 1979 concern third parties with trade mark or patent rights in respect of goods which are the subject of sale. In Niblett Ltd. v Confectioners’ Materials Co. Ltd. the seller had agreed to sell a quantity of condensed milk; payment was to be made cash against documents. The buyers received the documents and paid the price. The goods arrived bearing a name which was an infringement of a trade mark of certain manufacturers of condensed milk at whose instance the Commissioners of Customs and Excise detained the goods. The buyers were obliged to remove the name in order to get possession of the goods and could only sell them at a loss. In the Court of Appeal Scrutton LJ said that several difficult questions had been argued and that if it had been necessary to decide them all he would have required further time to consider them. He was, however, able to agree with the other two members of the court with regard to section 12(1) of the Sale of Goods Act 1893. The reasoning of the court on this issue is perhaps most fully expressed by Atkin LJ at 401-403. The “right to sell” does not mean simply the ability to pass property in the goods. It is to be understood in a wider sense. Where a third party with a title superior to that of the seller is able to obtain an injunction restraining the sale of the goods, so that the possession of the buyer is disturbed, the seller has no “right to sell the goods”; see also Scrutton LJ at p.398 and Bankes LJ at pp.394-5.

[94]In Microbeads AG v Vinehurst Road Markings Ltd. an English company bought machines from a Swiss company. When sued for the price the English company alleged that there had been a breach of section 12(1) of the Sale of Goods Act 1893 because the machines infringed a patent. That defence failed because the machines had been sold and delivered between January and April 1970 and it was only after November 1970 that the holder of the patent became entitled to institute proceedings for infringement of the patent. Thus there was no breach of section 12(1). In the course of his judgment Lord Denning observed at p.222:

“The words “right to sell the goods” mean not only a right to pass the property in the machines to the buyer, but also a right to confer on the buyer the undisturbed possession of the goods; see Niblett Ltd. v Confectioners’ Materials Co.Ltd. [1921] 3 KB 387, 42 by Atkin LJ. ”

[95]Roskill LJ said: at p.225 “As this court said in Niblett’s case

[1921] 3 KB 387

, subsection (1) covers, inter alia, the position where some third party is entitled as of right to stop the same, so that the intending seller cannot transfer a good title to his intending buyer.”

[96]In the present case the DPR had no power to prevent the sale of the oil in the sense of preventing property in the oil passing to Vitol and did not purport to do so. It had no title superior to that of Vitol who were selling the oil. Instead, the DPR was entitled to and did exercise a power to refuse to issue the cargo documents. This power was exercised after the property in the oil had passed on shipment. The effect of refusing to issue the cargo documents was to prevent the vessel from sailing, both commercially and legally. The DPR also had power to request the assistance of the Navy in ensuring that the vessel did not sail away. The DPR had no rights over the oil.

[97]The true extent of the construction of section 12(1) established by Niblett’s case and recognised in Microbeads is a matter of some debate. Mr. Bright referred me to Benjamin on Sale 8th ed. paragraph 4-004 which said that the ratio decidendi of Niblett may be limited to situations where the property is encumbered by a right vested in a third party such as a patent “or a right of prohibition or seizure which affects the goods in the hands of the buyer”. It may well be that the ratio decidendi of Niblett extends to a “right of prohibition or seizure” but such right must be one which in the required sense stops or prevents the sale. Here, the DPR had no right to prohibit the sale of the goods or to seize the goods. The most that can be said is that the DPR’s right to prevent the departure of the vessel (by refusing to issue the cargo documents and/or by giving appropriate instructions to the Navy) was in practice a right to prevent the departure from Nigeria of the oil on board the vessel. The question is whether such a right brings the case within the principles established by Niblett Ltd. v Confectioners’ Materials Co. Ltd. and Microbeads AG v Vinehurst Road Markings Ltd.

[98]In the present case the DPR had a right to prevent the departure of the vessel (by refusing to issue the cargo documents and giving appropriate instructions to the Navy) the practical effect of which was to prevent the departure of the oil on board the vessel from Nigeria. That right was exercised after property in the oil passed to the buyers (on shipment) but the right arose from the irregularities in loading, in particular, loading without the approval of the DPR in Lagos. Since the irregularities existed at the commencement of loading the DPR’s right existed at the time that property in the oil passed to the buyer (that is, as it was shipped on board) notwithstanding that such right was only exercised after property passed. The effect of the DPR’s right, though directed at the vessel, was to disturb the buyer’s possession of the oil.

[99]The reference by both Atkin LJ in Niblett’s case and Lord Denning in Microbeads to a right which disturbs the possession of the buyer might suggest that the DPR’s right is sufficient to prevent Vitol from having “the right to sell” in the sense in which that right is used in section 12(1). However, I do not consider that such suggestion is correct. As Roskill LJ said in Microbeads at p.225 section 12(1) is concerned with defects in title and not with the case where a good title is passed to the buyer but for some reason the buyer’s right to quiet possession is subsequently interfered with. The latter case is the subject of section 12(2)(b) which provides for an implied term that the buyer will enjoy quiet possession of the goods. In Niblett’s case the third party trade mark holder had a superior title in the sense that the seller could have been restrained by injunction from selling the goods; see the judgment of Atkin LJ at p.401 and Scrutton LJ at p. 398. In the present case it cannot be suggested that the DPR had a superior title to Vitol in the sense that Vitol could have been restrained from selling the oil to Trafigura. I do not consider that a third party right which merely interferes with the possession of the buyer is sufficient to prevent the seller from having the “right to sell”. It may be that the DPR could have obtained an injunction restraining the vessel and cargo from leaving Nigeria but that would not, in my judgment, mean that Vitol had no right to sell the cargo in breach of section 12(1) of the Sale of Goods Act 1979.

Section 12(2)(a); no charges or encumbrances

(a) ; no charges or encumbrances

[100]Essentially for the same reason there was no breach of section 12(2)(a) of the Sale of Goods Act 1979. The DPR had no charge or encumbrance over the oil.

Section 12(2)(b): quiet possession

(b) : quiet possession

[101]Section 12(2)(b) implies a term that the buyer will enjoy quiet possession of the goods. Microbeads appears to be a binding authority to the effect that the implied term is breached even though there is no interference with possession at the time property passes but the interference occurs later; see The Playa Larga [1983] 2 Lloyd’s Rep. 171 at p.179-180. However, the scope of the implied term is not considered to be entirely clear; see Benjamin’s Sale of Goods 8th.ed paragraph 4-026.

[102]In the present case Trafigura did not enjoy quiet possession of the oil once the DPR had refused to issue the cargo documents and so prevented the vessel and oil from leaving Nigeria, both commercially and legally. Mr. Rainey did not suggest otherwise. Indeed, he described the present case as a “classic case of interference with Trafigura’s possession”. Although this interference with Trafigura’s possession of the oil occurred after property had passed to Trafigura it arose out of circumstances existing as at the time when property passed. Loading had commenced in breach of the Procedure Guides.

[103]Following the decision in Microbeads I hold that Vitol breached the implied term of quiet enjoyment as against Trafigura.

[104]The breach of that implied term caused the delay from 1-7 September 2009. It is true that Trafigura’s quiet possession was also disturbed from 7 September until 16 October 2009 but the underlying reason for the vessel’s inability to leave Nigeria and hence for the interference with the buyer’s right to possession after 7 September 2009 was the unlawful demand by the Minister for payment by Total of a “fine”. It would be odd if the scope of the implied term in section 12(2)(b) extended to interference with possession resulting from an unlawful demand. Nobody suggested that it did. Mr. Bright made a more limited submission that a foreseeable unjustified act which arose out of pre-sale events was within the protection afforded by section 12(2)(b). However, even if that submission were correct I do not consider that the delay from 7 September to 16 October 2009 was foreseeable. The improper actions of the Minister were not foreseeable; see paragraph 123 below. It is commented in Benjamin’s Sale of Goods at para. 4-026 that “it can scarcely be intended to impose upon a seller the obligation of guaranteeing the buyer’s possession against every disturbance that may occur.”

[105]In the result therefore there was a breach of section 12(2)(b) with regard to the interference with the buyer’s possession until 7 September 2009 but not thereafter.

Article 30 of the NNPC Conditions

[106]I can now return to Article 30 of the NNPC conditions which provides:

“Seller represents and warrants to Buyer, that as of the Effective Date: ……. (ii) Seller has power, authority, and legal title to the crude oil to be delivered and has taken all necessary action to sign and deliver this Contract and perform its obligations under this Contract.”

[107]Trafigura relies on both parts of this clause. It alleges, first, that Vitol did not have power, authority and legal title to the oil and, second, that Vitol had not taken all necessary action to perform its obligations under the contract.

[108]I am unable to accept the first argument because Vitol had power, authority and legal title to the oil. No other person had a superior title. The DPR’s power to prevent the vessel and oil from leaving Nigeria did not mean that Vitol lacked power, authority and legal title to the oil.

[109]The second argument in essence depends upon whether Vitol, acting through Total as it must, took all necessary action to perform its obligations under the contract. Since I have held that Vitol was in breach of its obligations pursuant to Article 18 of the NNPC Conditions and in breach of section 12(2)(b) of the Sale of Goods Act 1979 it follows that Vitol had not taken the necessary action to perform its obligations under the contract. There was a potential obstacle to this conclusion in that this further warranty was given “as of the effective date” of the contract, which was, according to the definitions in the NNPC conditions, the date of signature, namely 10 August 2009, long before any breach occurred. However, Mr. Bright submitted that the effect of Article 30.3 was to make the warranty a continuing warranty. The relevant words in Article 30.3 are that the warranty “shall be true and accurate in all material respects when made and shall remain actionable for the duration of this contract.” Whilst the words “shall remain actionable” are not the clearest way of stating that a warranty is a continuing warranty it is difficult to suggest an alternative meaning for those words and none was suggested. I therefore accept Mr. Bright’s submission. What was suggested by Mr. Kimmins was that due diligence was the limit of Vitol’s obligation. I do not accept that submission. The words of Article 30 are “all necessary action to ……perform its obligations”, not all reasonable action to perform its obligations (emphasis added). I therefore accept that Vitol also acted in breach of Article 30 of the NNPC Conditions. However, this adds nothing to the breaches of Article 18 and of the implied term concerning quite possession

Further implied terms and fob sales

[110]Mr. Bright, for Trafigura, also relied upon breach of implied terms(a) to ensure that the cargo was loaded properly and carefully and

(b) to procure shipping documents forthwith or within a reasonable time. Assuming that such terms were implied into the contract between Trafigura and Vitol I do not consider that Trafigura can be in any better position than Trafigura is in by reason of Articles 18 and 30 of the NNPC conditions or by reason of the terms implied by section 12 of the Sale of Goods Act 1979. Mr. Bright also relied upon general propositions concerning the nature of an fob sale. Again, I do not consider that such propositions can put Trafigura in any better position than Trafigura is in by reason of Articles 18 and 30 of the NNPC conditions or by reason of the terms implied by section 12 of the Sale of Goods Act 1979. I shall therefore not extend this already lengthy judgment by considering these matters any further. Force majeure

[111]Article 21 of the NNPC conditions provides as follows:

“21. Neither the Seller nor the Buyer shall be held liable for failure or delay in performance of its obligations under this Contract, if such performance is delayed or hindered by the occurrence of an unforeseeable act or event which is beyond the reasonable control of either party (“force majeure”). No party shall be entitled to claim any costs, expenses or compensation arising from the effect of force majeure.” 21.1 The Act or event constituting Force Majeure shall include but not limited to: … ii. Act of Government intervention, directive, or policy (whether war Federal or State Government)…”

[112]In The Kriti Rex [1996] 2 Lloyd’s Rep.171 at p.196 Moore-Bick J. said in relation to the construction of force majeure clauses:

“In general I think it fair to approach such clauses with the presumption that the expression force majeure is likely to be restricted to supervening events which arise without the fault of either party and for which neither of them has undertaken responsibility. However, as Mr. Justice McCardie pointed out, the questions is one of construction and in each case close attention should be given to the language of the clause itself whilst paying due regard to the nature and terms of the contract as a whole.”

[113]Article 21 expressly contemplates that a party may have failed to perform its obligations and yet will not be liable for such failure in the event of a force majeure event which is defined as an unforeseeable act or event which is beyond the reasonable control of either party. Thus on the true construction of this particular clause, in the context of the contract as a whole, failure or delay in performance by Vitol of its obligations under the contract is not sufficient to prevent Vitol from being able to rely upon the clause. The clause recognises that a party might have failed to perform its obligations and yet provides that there shall be no liability if performance of an obligation is delayed or hindered by an unforeseeable act or event which is beyond the reasonable control of either party. But since, as between Vitol and Trafigura, Vitol was responsible for the loading of the cargo and delegated the performance of its duty to others, ultimately to Total, Vitol cannot say that failures in loading were beyond its reasonable control merely because Total was beyond its practical control. What must be shown is that Total’s failures were caused by an unforeseeable act or event which was beyond the reasonable control of Total; see also the Apostolis (No.2) [2000] 2 Lloyd’s Rep.337 at p.349and the Vine [2011] 1 Lloyd’s Rep. 301 at paragraph 64.

[114]Vitol had an obligation under Article 18 to comply with valid directives and policies. It did not comply with that obligation for the reasons which I have already given. Vitol also had an implied obligation to provide Trafigura with quiet possession of the oil. It failed to do so. Those breaches caused the delay from 1-7 September 2009. Were those breaches caused by an unforeseeable act or an event which was beyond the reasonable control of Vitol?

Reasonable control

[115]I have already said that Total’s failure to comply with the Procedure Guides was not culpable. Essentially for the same reasons I have reached the conclusion that Total’s, and hence Vitol’s, failure to comply with the Procedure Guides was beyond Total’s, and hence Vitol’s, reasonable control. In the absence of the local DPR representative Mr. Bankole spoke to the DPR in Port Harcourt and received permission to load from Mr. Pepple, the Head of Operations at DPR Port Harcourt on 31 August 2009. Loading commenced. The next day a DPR representative arrived on board the FPSO and did not require the loading to stop. On the same day Total in Lagos sought clearance from the DPR in Lagos. That was granted and loading was completed at 2100 on 1 September 2009. It was only at about that time that the DPR in Lagos revoked their clearance. In circumstances where the local DPR representative had unexpectedly left the FPSO the only other option available to Total was to await the arrival of a replacement DPR representative on the FPSO. That was within Total’s control but in circumstances where Total had obtained permission to load from Mr. Pepple, the Head of Operations of the DPR in Port Harcourt, it was unreasonable to expect Total to have awaited the arrival of a local representative on board the FPSO. I have therefore concluded that the breaches of contract by Vitol were beyond the reasonable control of Vitol. It was suggested by Mr. Bright after my judgment was handed down in draft that this approach to the question had not been argued and therefore he had not had an opportunity of dealing with it. However, as my notebook records, Mr. Rainey made a submission to this effect in his oral submissions and Mr. Kimmins formally passed Mr. Rainey’s submissions up the line. I have noted the additional submissions now made by Mr. Bright but am not persuaded that I should reach a contrary conclusion. As I said in paragraph 115 the clause in question contained the words “beyond the reasonable control” of Total not merely “beyond the control” of Total. The adjective governs control. What is reasonable must depend upon all the circumstances of the case. I did not seek to equate reasonable with culpable or blameworthy but the factual circumstances which determine whether Total’s conduct was culpable must also be considered in determining whether Total’s breaches of the Procedure Guides (and hence Vitol’s breaches of contract) and the delay resulting from them were beyond their reasonable control. As I stated in paragraph 115 it was within Total’s control whether to commence loading or to await the arrival of a replacement DPR representative on the FPSO but in circumstances where Mr. Pepple had given permission to load I do not consider that it can be said that Total’s breaches of the Procedure Guides (and hence Vitol’s breaches of contract) and the delay resulting from them can be said to be within Total’s (and hence Vitol’s) reasonable control. In the wake of the unexpected departure of the DPR representative from the FPSO Total took reasonable steps to obtain the consent of the DPR to load by seeking and obtaining permission to do so from Mr. Pepple. I do not accept that the permission given by Mr. Pepple was “informal” or that Mr. Bankole acted unreasonably in seeking it or in making the assumptions which he did and to which I referred in paragraphs 7 and 10 above. I do not accept that the facts of the case are comparable to those of Mamidoil-Jetoil v Okta (No.2) [2003] 2 Lloyd’s Rep.635.

Foreseeability

[116]The event causing the failure or delay in performance must also have been unforeseeable. In circumstances where Mr. Pepple, following the unexpected departure of the local DPR representative from the FPSO, had given permission to load the cargo and to break the padlock I do not consider that it was foreseeable that the DPR would refuse to issue cargo documents and so prevent the departure of the vessel and its cargo. It was also suggested by Mr. Bright after my judgment had been handed down in draft that this point was not open to Vitol and was not supported by Vitol’s expert. But it is a point which flows from the facts as I found them in circumstances where, as recognised by Mr. Rainey, those facts may be “some combination or permutation” of the two extreme cases put forward at trial. It was further suggested that my finding is inconsistent with my finding in paragraph 59. I do not accept that. Paragraph 59 was concerned with whether the actions of the DPR between 1 and 7 September 2009 were unlawful. I held that they were lawful. However, paragraph 11 6 is concerned with whether they were foreseeable. In the light of Mr. Pepple’s permission to load given apparently on behalf of the DPR I considered that the DPR’s actions, though lawful, were not foreseeable.

[117]In reaching these conclusions I have not overlooked Mr. Bright’s reliance on the expressions of opinion by Vitol’s own expert as to it being “obvious” that the DPR would intervene. But the question whether something is unforeseeable must depend on the facts and those include Total’s dealings with Mr. Pepple. It did not appear that Mr. Oditah QC was focussing on Total’s dealings with Mr. Pepple when he expressed the opinions relied upon by Mr. Bright.

[118]Article 21.2 of the NPCC conditions provided that the party claiming to be affected by a force majeure shall “immediately on the occurrence of force majeure …..promptly notify the other party in writing stating the details of the event or act constituting force majeure and stating also the measure being adopted by it to minimise or to remedy the consequences of the force majeure on the performance of this contract.”

[119]Mr. Bright submitted that the notice of force majeure given on 2 October 2009 by Vitol to Trafigura was neither immediate nor prompt and therefore Vitol is unable to rely upon the force majeure clause.

[120]Article 21.2 does not state that compliance with the notice obligation was a condition precedent to reliance upon the force majeure clause. Mr. Bright submitted that it was to be implied that compliance was a condition precedent, relying upon Mamidoil-Jetoil v Okta [2003] 1 Lloyd’s Rep. 1 at paragraphs 133-134. Mr. Kimmins submitted that there was no such implied term, relying upon Azur Gas [2006] 1 Lloyd’s Rep. 163 at paragraphs 38-39. Both of those cases referred to the guidance of Lord Wilberforce in Bremer Handelsgesellschaft v Vandon Avenne-Izegem PVBA [1978] 2 Lloyd’s Rep. 109 at p. 113

[121]Following that guidance the following seem to be important points to bear in mind when construing the notice provision in this case: i) The clause is not framed as a condition precedent. ii) The requirement is not for notice within a clear and specified number of days but notice which is immediate and prompt. What is immediate and prompt will depend upon factual context. Here, the notice requires not only the “details” of the event but also the “measures” being adopted to minimise the consequences of the event. Both of these requirements suggest that some delay in giving notice must be permitted. Thus identifying when a notice is not immediate or prompt may be difficult. This is not the context in which the parties are likely to have intended that failure to provide immediate or prompt notice would debar a party from relying upon a force majeure event. iii) Where a specific sanction is intended the parties tend to say so expressly. Thus clause 6.7 of the NPCC conditions provided that failure to give notice of a demurrage claim within a defined period would result in the claim being waived.

[122]I have concluded that the notice provision is not to be construed as a condition precedent to reliance upon the force majeure clause but as an innominate terms sounding in damages only. No damages were claimed in this regard.

[123]I have therefore concluded that Vitol can rely on the force majeure clause and accordingly is not liable to Trafigura. It is unnecessary to consider whether Vitol can rely on the force majeure clause in respect of the period after 7 September 2009 because I have not found Vitol to have been in breach in respect of that period. But if it were necessary to do so I would have held that the improper action of the Minister in seeking payment of a “fine” was also an unforeseeable event beyond the reasonable control of Vitol.

[124]For these reasons Trafigura’s claims against Vitol fail.

Vitol’s claim against COOSI

[125]In the light of my conclusion that Vitol has no liability to Trafigura it must follow that COOSI has no liability to Vitol. It is therefore strictly unnecessary to consider the claim against COOSI any further. However, in case my views are required I shall set them out shortly.

Incoterms

[126]There is no dispute that the contract between COOSI and Vitol incorporated the definition of FOB in the Incoterms. I do not accept that there was any greater incorporation of Incoterms into the contract. Thus COOSI as seller was obliged, pursuant to the definition of FOB, to “clear the goods for export” which obligation, it was common ground, was defined by clause A2 as follows:

“The seller must obtain at his own risk and expense any export licence or other official authorisation and carry out, where applicable, all customs formalities necessary for the export of the goods.”

[127]Mr. Rainey submitted that this obligation did not extend to the need to obtain loading clearance by the DPR and that in any event any such obligation was one of due diligence only.

[128]The need for loading clearance under section 5.1.3 of the Quantity and Quality Procedure Guide related to export because section 5 was entitled Crude Oil Export Documentation Process (emphasis added). Thus, although Customs had itself granted clearance at 1145 on 31 August 2009, there remained a further export requirement, namely, loading clearance by the DPR in Lagos; see my findings in this regard at paragraph 28 of this judgment. In any event loading clearance was an “official” authorisation.

[129]Clause A2 provides that the seller “must obtain” such authorisation. That appears to me to be an absolute duty, not merely one of best endeavours. The words “must obtain” distinguish the clause from that considered in Pagnan v Tradax [1987] 2 Lloyd’s Rep. 342 at p.348.

[130]For these reasons, and having regard to my findings of fact, COOSI was in breach of its obligations to Vitol under the Incoterms.

Article VII.5 of the Total Conditions

[131]This article provides:

“Subject to Buyer complying with the provisions of sub-section VII.2 above, Seller, having regard to the regulations, procedures and requirements referred to in sub-section VI.5 above and the time when Buyer complied with the provisions of sub-sections VII.1 and VII.2 above, shall commence loading as soon as reasonably practicable.”

[132]This article obliges the seller to commence loading as soon as reasonably practicable. I am not persuaded that the words “having regard to the regulations, procedures and requirements referred to in sub-section VI.5 above” impose further obligations upon the seller. Section VI.5 refers to obligations of the buyer and the vessel nominated by him.

Terms implied by the Sale of Goods Act 1979

[133]The first question is whether the implication of the terms in the Sale of Goods Act 1979 is excluded by the entire agreement clause in section XIX.6 of the Total Conditions which provided:

“The Special Terms and Conditions and the General Terms and Conditions together form the entire agreement between the parties, and no additional terms, conditions, representations or warranties shall be incorporated in the Agreement in the absence of express written consent of each party.”

[134]This clause prevents the incorporation of terms, not the process by which terms are implied in a contract. When the parties wished to exclude the implication of terms in the Sale of Goods Act 1979 they did so expressly; see Section III of the Total Conditions.

[135]Thus the terms in section 12 of the Sale of Goods Act 1979 were implied terms of the contract between COOSI and Vitol.

[136]However, for the reasons which I have already given in the context of the claim by Trafigura against Vitol there was no breach of the term implied by section 12(1) or section 12(2)(a). Subject to one further point made by Mr. Rainey there was a breach of the term implied by section 12(2)(b) – the warranty of quiet enjoyment.

[137]The further point made by Mr. Rainey was that because Vitol immediately passed on possession to Trafigura it could not be said by Vitol, as against COOSI, that Vitol’s possession had been disturbed. I disagree. As between COOSI and Vitol the possession of oil by Trafigura, who bought the oil from Vitol, must be regarded as Vitol’s possession of the oil. Otherwise, as Mr. Kimmins argued, an intermediate seller in a string contract would have no protection when there was an interference with a sub-buyer’s possession, a result for which there would be no justification.

Additional implied terms

[138]Vitol argues that the further terms sought to be implied by Trafigura in the contract between Trafigura and Vitol should also be implied in the contract between Vitol and COOSI. Mr. Kimmins also relied upon general propositions concerning the nature of an FOB sale. I do not consider that Vitol can be in any better position than it is in by reason of the Incoterms and implied terms to which I have just referred. I shall therefore not consider these arguments any further.

Force majeure

[139]COOSI relies upon Article XII which provides as follows:

Force majeure

“Neither party shall be deemed in breach of the Agreement as a result of, or be liable to the other for, any failure, omission or delay in its performance in whole or in part of any of the terms or conditions of the Agreement………if such failure, omission or delay arises or results from any cause reasonably beyond…..the control of that party…..”

[140]Although this force majeure clause is not expressed in identical terms to that in the contract between Trafigura and Vitol it also expressly contemplates that a party may have failed in its performance of the agreement and yet provides that such party shall not be liable to the other for such failure if the failure arises from “any cause reasonably beyond …the control of that party.” In circumstances where COOSI delegated the loading of the cargo, ultimately to Total, COOSI is responsible for the manner in which Total performed that obligation. Mr. Rainey submitted that COOSI could rely upon the clause if the failure was beyond its own actual control but I reject that submission. In my judgment, as was the position as between Trafigura and Vitol, so between Vitol and COOSI, it must be shown that the failure in performance was beyond Total’s reasonable control.

[141]For the reasons which I have given in the context of Trafigura’s claim against Vitol I consider that Total’s, and hence COOSI’s, failure to comply with the Procedure Guides arose from a cause reasonably beyond their control.

[142]Section XII.4 provides that “prompt” notice of a force majeure event shall be given “and, so far as possible, of its extent and anticipated duration.” Vitol regarded COOSI as having given notice of force majeure on 1 October 2009.

[143]Essentially for the same reasons I have given in relation to the dispute between Trafigura and Vitol I do not consider that this provision makes compliance with the notice provision a condition precedent to the right to rely upon the force majeure clause.

Conclusions

[144]The Owners’ claim against Trafigura for demurrage succeeds save that for the delay after 7 September 2009 the appropriate rate is half the demurrage rate. The Owner’s claim for additional war risk insurance succeeds.

[145]Trafigura’s claim against Vitol fails.

[146]Vitol has no liability to pass on to COOSI and so its claim against COOSI fails.

Great Elephant Corporation v Trafigura Beheer BV & Ors [2012] EWHC 1745 (Comm)

Events in Nigeria

The procedure governing the loading of crude oil in Nigeria

The following information shall be made available at the time and the places indicated thereon:

Crude Oil Export Documentation Process

Were any offences contrary to Nigerian law committed ?

In these Regulations, unless the context otherwise requires-

Was there a breach of the Procedure Guides ?

Was the action of the Nigerian authorities unlawful ?

The Owners’ claim against Trafigura under the charterparty

Demurrage

Additional war risk premium

Fresh water production and bunker consumption

Trafigura’s claims against Vitol

Article 18 of the NNPC Conditions

The terms implied by section 12 of the Sale of Goods Act 1979

The entire agreement clause

Section 12(1); the “right to sell”

Section 12(2)(a); no charges or encumbrances

(a) ; no charges or encumbrances

Section 12(2)(b): quiet possession

(b) : quiet possession

Article 30 of the NNPC Conditions

Further implied terms and fob sales

Reasonable control

Foreseeability

Vitol’s claim against COOSI

Incoterms

Article VII.5 of the Total Conditions

Terms implied by the Sale of Goods Act 1979

Additional implied terms

Force majeure

Force majeure

Conclusions

Cited in 5 later judgments