Statoil (Nigeria) Limited & Anor V. Federal Inland Revenue Service & Anor (2014)

LawGlobal-Hub Lead Judgment Report – COURT OF APPEAL

JOSEPH TINE TUR, J.C.A. (Delivering the Leading Judgment)

The Federal Inland Revenue Service (1st respondent) took out an Originating Summons before the Federal High Court, FCT, Abuja, against (1) Nigeria National Petroleum Corporation (2) Statoil (Nigeria) Ltd. and (3) Texaco Nigeria Outer Shelf Company Ltd. (“the appellants”) supported by affidavit and documentary exhibits on 27th September, 2011 seeking to be determined the following questions:

“1. Whether the Arbitral Tribunal in the Matter of Arbitration between (1) Statoil ((Nigeria) Limited (2) Texaco Nigeria Outer Shelf Limited AND Nigeria National Petroleum Corporation, has jurisdiction to determine the subject matter of the arbitration which deals with taxation of the defendants by the Federal Inland Revenue Service, which jurisdiction is conferred on the Federal High Court by Section 251 of the Constitution of the Federal Republic of Nigeria, 1999 as amended.

2. Whether the Arbitral Tribunal has jurisdiction to enter a valid award on the taxation the defendants which will have a binding effect on the plaintiff in the interpretation, application and administration of the Petroleum Profit Tax Act and the Deep Offshore Act, Education Tax Act, and Company Income Tax Act, and any other statute for the time being in force in Nigeria, as to entitle the plaintiff to seek reliefs being sought in this suit.
3. Whether upon a proper reading of Section 251(1)(n) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) the questions in dispute raised regarding the operation of Production Sharing Contract the subject matter of dispute between parties therein is not within the exclusive jurisdiction of the Federal High Court and thereby rendering the entire purported arbitral proceedings unconstitutional, null and void ab initio.”

The 1st respondent further sought that she be granted the following reliefs against the defendants if the three questions are answered in her favour:

“1. A declaration that the claim of the 2nd and 3rd defendants touching on taxation upon which reference has been made to arbitration is not one which is allowed by law to be settled by Arbitration.

2. A declaration that the determination or claim by way of award before the said Arbitration will impinge on the right of the plaintiff/applicant to assess and collect tax and generate revenue for the Federal Government of Nigeria.
3. A declaration that the reference to the claim of the other defendants against the 1st defendant upon which terms reference has been made to Arbitration is contrary public policy.
4. An order in addition to, or in alternative to (2) above revoking the Arbitration clause in so far as it relates to taxation or in the alternative an order excluding taxation and matters related thereto from the ambit of the arbitration agreement between the defendants.
5. An order restraining the defendants, by themselves, servants, agents, or counsel from continuing with, or purporting to take any benefit from or abiding by any obligations or rights no matter howsoever described or arising from the arbitral proceedings or awards made pursuant thereto.
6. A declaration that the arbitration provisions in the Production Sharing Contract and the defendants’ submission to an arbitration on matters exclusively reserved for the Federal High Court is unconstitutional, null, void and of no effect.”

The Originating Summons was supported by a 15 paragraph affidavit deposed to by Mr. Ejiro M. Ejemeyovwi, Esq., a Legal Practitioner in the Department of the Federal Inland Revenue Service. The facts in dispute are as follows:

The 1st respondent was established by the Federal Inland Revenue Service (Establishment) Act, 2007 and conferred with powers to assess, collect and account for revenue accruable to the Federal Government of Nigeria and other related matters. This fact is not denied by the appellants and the 2nd respondent. The 1st respondent subsequently became aware that the Nigerian National Petroleum Corporation (NNPC) (2nd respondent) had entered into a Production Sharing Contract (PSC) with Statoil (Nigeria) Ltd. (1st appellant) and Texaco Nigeria Outer Shelf Company Limited (2nd appellant) as evidence in Exhibit FIRS “A.” The purpose of Exhibit FIRS “A” was for the appellants to carry out petroleum operations in the areas covered by the agreement. There was a clause that disputes arising in the course of executing the agreement shall be referred to arbitration. When a dispute subsequently arose, the parties went to Arbitration under the Arbitration and Conciliation Act, Cap. A18, Laws of the Federation of Nigeria, 2004. Exhibits FIRS “B” is the Notice of Arbitration by the appellants before the Arbitral Tribunal. Paragraphs 10-15 of the affidavit of Ejiro M. Ejemeyovwi, Esq. reveals the dispute that led to the 1st respondent instituting this originating summons to wit:

“10. That I was informed by Ike Odume of General Counsel to the plaintiff and I verily believe him that what forms the issues/disputes between the defendants before the Arbitral Tribunal are in essence, issues, and controversies arising from the differing interpretations of the Petroleum Profit Tax Act and other tax Legislations and that these issues/disputes and controversies are within the jurisdiction of the Federal High Court.

11. That the plaintiff had in the past communicated to the defendants, her position on all issues listed in paragraph 9(i) to (iv) above.
12. That one Mr. Mark Anthony Dike in the employ of the plaintiff appeared before the Tribunal and objected to the jurisdiction of the Tribunal to entertain such matters as shown in paragraph 9. I am informed that a ruling by the tribunal on this matter of jurisdiction no matter how perverse shall be binding and final.
13. That the proceedings and ultimately the award of the Arbitral Tribunal will impinge on the functions and powers of the plaintiff to assess, collect and account tor taxes under the tax legislations particularly the Petroleum Profit Tax and Education Tax.
14. That the Tribunal instead of declining jurisdiction to entertain these issues seeing that these issues are non-arbitrable, continued proceedings and thereby acted ultra vires and consequently ousted jurisdiction of the Federal High Court.
15. I swear to this affidavit believing it to be true and in accordance with the Oaths Act of 1990.”

The appellants filed this motion on 20th October, 2011 objecting to the jurisdiction of the Federal High Court to entertain the Originating Summons. The objection was predicated on the grounds that the 1st respondent lacked the legal standing to institute the summons not being a party to Exhibit FIRS “A”. That Originating Summons constituted an abuse of Court process and thirdly, it was filed in violation of Section 34 of the Arbitration and Reconciliation Act (supra) which limits the instances in which a Court can intervene in matters governed by the Act. The appellants gave notice to rely on the contents of the affidavit by Cephas Caleb dated 20th October, 2011 in another motion on notice. On 23rd November, 2011 the appellants also filed a motion praying for stay of further proceedings in the Court below on the grounds that the Originating Summons was vexatious, oppressive and constituted an abuse of judicial process. The grounds upon which the application was hoisted were as follows:

“(a) The applicants and the 1st defendant herein entered into a Production Sharing Contract (PSC) the terns of which provide for the resolution of any disputes arising thereto by arbitration.

(b) Following a dispute which arose between the Applicants and the 1st defendant concerning the interpretation and performance of the PSC, the applicants commenced arbitration against the 1st defendant.

(c) The 1st defendant, at a time that the arbitral proceedings are subsisting, instigated and/or collude (sic) with the plaintiff, a total stranger to PSC and the arbitral proceedings, to commence the present proceedings against the 1st defendant and the applicants.

Particulars of Instigation/Collusion:

(i) The 1st defendant furnished the plaintiff with a copy of the PSC, a confidential document to which the plaintiff is not a party to enable the plaintiff to commence this action. This copy of the PSC is attached to the affidavit in support of the plaintiff’s originating summons as Exhibit FIRS “A”.