Foreign firms violating Nigerian Cabotage Act
TIDEWATER Marine International Incorporated, a foreign firm and PhoenixTide Offshore Nigeria Limited are needlessly embroiled in a complex legal dispute arising from business disagreement.
Both parties entered into series of mutual understanding/agreements, upon the promulgation of the Coastal and Inland Shipping Cabotage Act of 2003 to enable both firms operate in Nigeria.
Under the terms of the executed agreements, both agreed among others, that, to allow for a future transfer of technology as provided for in the Cabotage Act, Tidewater Marine shall largely manage, operate and administer the business activities of PhoenixTide as the agreed vehicle for their joint-venture business. The assigned role was subject to Tidewater’s duty of accounting, transparency and fiduciary responsibility.
PhoenixTide has seven directors, among whom are four Nigerians and three foreigners. A Nigerian, Otunba Bola Kuforiji-Olubi, former minister of Commerce is the chairman, while the three non-Nigerians are Mr. S. Dick, American; Mr. N. Greer, British and Mr. R Mcnee as alternate Managing Director.
But PhoenixTide said its enstranged business partner was never committed to fulfilling the terms of their mutual agreement. As a result, both parties are currently in courts in Nigeria and in London over the dispute which according to PhoenixTide resulted solely from Tidewater’s unwillingness to adopt financial transparency and comply with local laws.
In a suit initiated by PhoenixTide before the Federal High Court, marked as FHC/L/CS/609/2013, both companies formed a partnership after the Cabotage Act of 2003 came into effect. Under the new law, foreign firms interested in operating in Nigeria’s marine services for oil and gas have to do so in association with a wholly owned Nigerian company.
In furtherance of the business relationship with Tidewater, Technical Services Agreement, Bareboat Charter Agreement and Marketing Agreement were signed and executed between PhoenixTide and Tidewater to regulate the relationship.
Under a power of attorney, Tidewater was allowed to manage and control PhoenixTide which did not have marine expertise in the belief that Tidewater will pass technology to Nigerians directors in PhoenixTide in fulfillment of the Nigerian content requirements which sought to empower indigenous citizens to grow capacity and become active in the industry, subject to Tidewater’s duties of accounting, transparency and fiduciary responsibility.
Shortly after the take-off of the relationship, local shareholders in PhoenixTide, including the former minister said they began to notice some suspicious conduct on the part of Tidewater and raised questions, demanding that Tidewater should provide information about its operations.
Despite persistent demand for financial information by local shareholders, Tidewater was said to have persisted in its failure to make full disclosure and deliver all paper trails on its management, operations and revenue in US dollar and naira.
Consequently, the Economic and Financial Crimes Commission (EFCC) in 2011 moved against PhoenixTide, the Nigerian partner of Tidewater for alleged economic sabotage, capital flight as well as aiding and abetting money laundering. This led to the arrest and detention of its Managing Director, Olatokunbo Kuforiji.
He was only left of the hook after Tidewater Marine and its local subsidiary, Tidex Nigeria Limited executed a terms of settlement/non-prosecution agreement with the Nigerian government through the former Attorney General of the Federation, Mohammed Adoke (SAN). Tidewater Marine and Tidex paid US$6million in penalty in addition to undertaking to conduct their businesses in accordance with applicable laws and regulations in Nigeria.
Earlier in 2010, the United States’ Department of Justice found Tidewater wanting for engaging in unethical practices in its operations in Nigeria and Azerbaijan. The US Security and Exchange Commission (SEC) equally indicted the company for allegedly falsifying its accounts and returns. It was made to pay penalties of about $15million to both agencies.
PhoenixTide’s local shareholders/directors stated that they had, since 2010, made frantic and relentless efforts through various meetings and correspondences to engage Tidewater Marine in amicable settlement of issues relating to wrongful technical management of PhoenixTide’s shipping business, financing a restructuring exercise and reaching a compromise that will not violate Nigerian’s laws, particularly the Cabotage Act and Nigerian Oil and Gas Industry laws to no avail.
They added that rather than “open up its operations,” as sought by the Nigerian shareholders, Tidewater in 2012 sought to exit the relationship, a move Mrs. Kuforiji-Olubi and others objected to and insisted that Tidewater must first account for its running of Pheonixtide and settle all outstanding tax liabilities to relevant Nigerian agencies or indemnify them against any future liabilities before the relationship could be terminated. This, they said informed the basis of various complaints they raised to relevant government agencies.
The complaints were highlighted in letters authored by the ex-minister to the former AGF, Mohammed Adoke (SAN), dated February 19, 2014; former Minister of Finance, Dr. Ngozi Okonjo-Iweala dated October 8, 2014; the Comptroller of Customs dated June 28, 2013; the Nigerian Maritime Administration and Safety Agency (NIMASA) – dated September 18, 2014; Rivers State Board of Internal Revenue dated September 12, 2014, among others.
The letters complained about the operational activities of Tidewater, which was suspected to be detrimental to the revenue of the country, as taxes were allegedly not paid as and when due, and sought that the necessary agencies assess Tidewater’s operations and its tax liabilities to date.
Of all the institutions and agencies written to, the firm said it was only the Rivers State’s Internal Revenue Board that came out with a conclusive response, indicating that the Tidewater was indebted to the state to the tune of about N42billion in unpaid taxes while doing business in the name of PhoenixTide.
In a letter dated September 17, 2014 signed by the Executive Chairman, Rivers State Internal Revenue Board, Onene Osila Obele-Oshoko, the agency said: “This letter confirms that the established liability of N4,150,300,529 being the liability of PhoenixTide Offshore Nigeria Limited to the Rivers State Government in respect of expatriate crew PAYE liability relating to the manning of the Fleet of 40 vessels under PhoenixTide’s charter arrangement with NIMASA and other activities stated in our demand notice are still outstanding.”
The firm alleged that neither the then AGF and ex-minister of Finance acted on the complaint. It also states that for unknown reasons, NIMASA has also been reluctant to produce a conclusive report on the actual state of PhoenixTide tax liability, while its relationship with Tidewater lasted.
While parties were yet to agree on how to formally end their relationship, one of the venture clients, Total Nigeria Limited initiated suit number FHC/L/CS/274/2013 before the Federal High Court, Lagos in respect of funds accruing to the partnership. The court in November 8, 2013 judgment ordered Total Nigeria Limited to pay all money due to the joint venture to the court coffers pending the resolution of the dispute.
Nigerian directors of PhoenixTide agreed with the decision of the court on the ground that it supported the intention of its suit, which they had earlier filed.
Consequently, following legal advice, the former minister and other local directors of PhoenixTide declined to sign documents that will allow Tidewater access funds that ought to be utilized to settle all existing debts. The firm’ s sharesholders also endorsed this decision.
Angered by the development, Tidewater proceeded to sue Mrs. Kuforiji-Olubi and her son, Olotokunbo in London, got a default judgment with an order to compel them to sign the documents that will allow Tidewater access the funds that are still with Total Nigeria Limited, and which the Federal High Court had ordered it to pay to the court.
Rather than await the outcome of the appeal it also filed against the November 8, 2013 judgment or the determination of the suit instituted by PhoenixTide, Tidewater went back to the London court, initiated contempt proceedings against Mrs. Kuforiji-Olubi and her son, and obtained an ex-parte order purporting to freeze Kuforiji-Olubi and some of her family members’ assets. These orders now form the basis on which the ex-minister is allegedly being held hostage in London.
Tidewater has however denied any wrongdoing in all the weighty allegations made against it.The company, which has now severed relationship with PhoenixTide and began to operate with another local firm, T1 Marine Services, admitted it had compliance issues with the US and the Nigerian authorities in 2010 and 2011.
The firm however claimed that it reported itself to the authorities after it discovered the irregularities in question. Tidewater insisted that the indemnity against future liabilities, sought by PhoenixTide’s local shareholders has been captured in the earlier agreements between parties.
It equally denied the allegation that it planned to leave Nigeria after severing relationship with PhoenixTide, saying that it had no such plans but would continue to partner with other companies to operate in Nigeria in accordance with the law.
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