Indigenous companies can’t enforce Local Content Act, says court

A Benin High Court in Edo state, has ruled in a case brought by an indigenous company , CMES Flanges and Fittings Limited, against oil giants Shell, Chevron, and Mobil that Nigerian companies have no power to enforce the provisions of the Nigerian Oil and Gas Industry Content Development Act, 2010 against the international petroleum producing companies.

Justice Ikponwen, who is the Chief Judge of the state agreed with the submissions of the counsel to Chevron, Dr. Momodu Kassim-Momodu, that indigenous companies lack the locus standi to bring action against international petroleum producing companies for noncompliance with the provisions of the Act since the Act already provided for mechanism of supervision, coordination, monitoring and implementation  of its provisions  with the establishment of the Nigerian Content Monitoring Board in section 69 of the Act, adding that the power to institute a suit for breach of its provisions resides with the monitoring body only.

 In the ruling, the court stated that, since no reasonable cause of action has been disclosed against the petroleum companies, the court lacked the jurisdiction to determine the suit against them, especially as there was no evidence before the court that the indigenous company bided for any contract with any of the three petroleum companies; or evidence before the court that the oil companies have been awarding  contract to only foreign contractors.

The court also ruled that since none of the Petroleum Companies resided or do any business in Edo State, the High Court of Edo State  had no  territorial jurisdiction to entertain the lawsuit.

Justice Ikponwen ruled that the obvious failure of the claimant to comply with the mandatory provisions of Section 97 of the Sheriff and Civil Processes Act by endorsing the Writ of Summons as specified in the law renders the Writ of Summons fundamentally defective  and therefore null and void.

The Judge stated that it was wrong to have filed the case in the State High Court instead of the Federal High Court since it was the Federal High Court that had jurisdiction over oil and gas matters and not the High Court of the state.

CMES Flanges and Fittings Limited, a Benin based indigenous company in a suit brought by its counsel, LI T Erhabor Esq, claimed that Shell, Chevron, and Mobil did not comply with the Nigerian Content Plan in respect of contracts for provision of flanges.

The company alleged that the defendants are mandated to carry out all fabrication and welding activities in Nigeria, saying that they set up a factory in Benin City to produce flanges, yet the trio of Shell, Chevron and Mobil has refused to patronize the company.

The company sought from the Court a declaration that, by virtue of the provisions of Section 53 of the Nigerian Oil and Gas Industry Content Development Act, 2010, the Defendants are mandated to carry out all fabrication and welding activities in the country.

Specifically, the company sought from the court a declaration that, by virtue of Section 3(2) & (3) of the Act, the company having demonstrated ownership of equipment, Nigerian personnel, and capacity to execute the contract of the production, manufacturing, and/or fabrication of flanges and fittings, is entitled, being a Nigerian company, to the exclusion of foreign companies, in the execution of such contracts in the Nigerian oil and gas industry.

A declaration that the continuous refusal of the Shell, Chevron, and Mobil to engage and/or award contracts to them for the fabrication of flanges and fittings whilst same is sourced abroad, is illegal, unlawful, unconstitutional, and a clear violation of the provisions of the Act.

The company sought the court for an Order of Injunction restraining the oil companies by themselves, their servants, agents, or privies from sourcing, bringing into Nigeria, importing, or contracting the supply, production or fabrication of flanges and fittings to a non-Nigerian company or a local company where foreigners have majority or controlling shares.

An Order directing the oil companies jointly and severally to pay to the Claimant, the sum of N1.5 billion for the losses, damages and sundry expenses incurred and suffered by the Claimant in consequence of the supply and/or failure of the Defendants to engage the Claimant for the supply, production or fabrication of flanges and fittings, the Claimant having established a factory in Benin City, for the manufacture and or production/fabrication of flanges and fittings, in accordance with the provisions of the Nigerian Oil and Gas Industry Content Development Act, 2010.

But the court struck out the suit against the three oil companies.

Peter Fowoyo