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International Law

 

Nigerian Offshore Oil

Federal v Littoral State Ownership

By Alhaji G. V. Kromah

(BA, LL.B., LL.M., MA,, MAIR, SJD-cand.}

 

Posted July 22 2008

Written 2003

 

Abstract

The Supreme Court of Nigeria, the world’s sixth largest oil producer, ruled on April 5th 2002 that the Country’s offshore crude in effect belonged to the Federal government and not states within the federation. Though the Court is the final appellate judicial authority, operating on the doctrine of stare decisis, critical legal and political interpretational issues have been raised based on the history of contention on the distribution of oil revenues between the Federal Government and the oil producing states within the federation. The current constitution of the federation provides for a derivation mechanism - that 13% of national revenue derived from natural resources, including oil and gas, shall go to those states bearing the resources.

The Federal Government, in an apparent bid to limit the scope of the revenue sharing to onshore production, filed the suit against all 36 states, though only nine were coastal, to establish exclusive ownership over offshore revenues. In the majority decision, the Court said the seaward boundary of a state stopped at the low-water mark of the land. This effectively excludes territorial sea and the continental shelf, which is the shallow, near-horizontal sea floor extending from the coast. The decision meant offshore exclusivity for the federal government, and the 13 percent derivation share for states, mentioned in the Constitution, would be computed only on the onshore oil and gas income.

Instead of bringing an end to the existing controversy, the ruling of the nation’s highest court fueled the ongoing political agitation and ignited a rather passionate legal and political debate. The discourse has ranged from whether the Court should have assumed first instance jurisdiction over the case to issues of international law and inequity in the allocation of national revenues. One critic stretched his indignation, saying "it is difficult, if not impossible, to accept (the court’s) recent verdict on resource control as final, because the Justices have proved once again that they are…not infallible, as their pronouncements are replete with contradictions." Before the decision, an already enraged commentator promised that "the Supreme Court will not be the final arbiter in this matter," pledging that "the matter will be appealed in the court of the people because the people's court is superior to the Supreme Court of any country."

The debate has in fact revived the discussion over the legality and legitimacy of the Constitution of the nation, adopted in 1999 just weeks before the military gave up power to the elected administration of President Olusegun Obasanjo. It has also given alibi to even those who have been unsuccessfully pushing for a breakup of Nigeria or regrouping of the 36 states into a few based on regions.

The high court insisted that its decision was inline with Nigerian and international laws defining the difference between onshore and offshore limits and who has the authority over them. This study has attempted to sort out the issues of law and political reality surrounding the case, with the intent of identifying mainstream principles of law that may validate or impeach the holding of the Court. Accordingly, we undertook a succinct comparative analysis of Nigerian law, external precedent cases in common law countries, and the UN laws of the sea, to establish whether the Federal government’s suit and the Court’s decision were the best judicial intervention in the ongoing crisis.

I. Backdrop

Nigeria’s oil has low-sulfur content, and that makes it particularly attractive to Western countries concerned about energy-emitted pollution. That plus the sheer abundance of the commodity in the West African nation has sent nearly all of the US and European major oil companies on a well-entrenched operation in the country for the past 40 years. The ranges from Shell Petroleum Development Company Ltd., which began pre-independence exploration in 1937, to Mobil, Elf, Agip, Statoil, Texaco, Total, Amoco, Chevron and Conoco. Nigeria has therefore become the world’s sixth largest producer and the fifth biggest supplier of oil to the United States behind Saudi Arabia, Mexico, Canada and Venezuela.

Oil has statistically produced aggregate national wealth, generating close to $340 billion for the country in nearly forty years of production. It has also produced the accompanying troubles of how to translate the fortune into individual benefits for its rapidly growing population, which is now put at about 130 million people.

Distribution of national wealth is an age-old issue, essentially creating divisions not only between the major economic systems of capitalism and communism (or socialism), but also within the individual systems. What has made Nigeria’s different is that the wealth source was a sudden discovery, various regions having previously been engaged in agriculture production that earned the country foreign reserves. Cocoa, cotton and palm products produced in various parts of the country, had actually yielded external reserves to the tone of 100 million British Pounds, seven years before the country’s 1960 independence. But cash crop export declined considerably with oil production several years afterwards. Oil replaced cocoa, peanuts and palm products as the national export earner, and the oil boom of the early-mid 1970’s set today’s pace of reliance on oil, accounting for up to 98 percent of export earnings.

The Niger Delta cluster of nine states, all within the former southern protectorate, is home to Nigeria’s onshore oil. Twenty million of the country’s inhabitants live in these states, which in turn make up approximately two-thirds of the country’s coastline with the Atlantic. The Niger Delta Development Commission described the area as one of the most difficult terrain for development. The "coastal line is buffeted throughout the year by the tides of the Atlantic Ocean while the mainland is subjected to regimes of flood by the various rivers." Communities in the region argue that despite their states have produced the wealth for Nigeria, it remains the most undeveloped, citing high fatality rates from water-borne diseases, and expensive transportation with inaccessible roads.

A key complaint from Delta leaders has been the alleged conduct of oil and related companies, which, they say, is below international standard. They claim that for many years, the companies have operated without any serious environmental studies to find out the effect of the huge gas flare and pipeline spillage. As a result, they say, respiratory and other health problems have become severe in the area, fishing and agriculture impaired, and wildlife threatened. The NDDC says that besides the reluctance of companies to carry on any other business activities beyond the messy business of oil exploration, the federal government of refusing to undertake development investment in the region. A Nigerian in the United States contrasted the conduct of American corporations’ exercise of what he referred to as their ‘social responsibility’ to the communities they operate around. Adujie said though American companies can sometime be guilty of wrongdoing, companies like Atlas Oil, Phillips Petroleum, and Getty Oil have been the predominant players in the economic, social cultural activities in the states of Texas, and Oklahoma.

The conflict between the Niger Delta people and the Federal government and oil companies has indeed deteriorated over the years, giving rise to the prominence of protesters like Ken Saro Wiwa, writer, university lecturer and local government official in Rivers State. The military government of the late Sani Abacha eventually executed Saro Wiwa, whose campaign was mainly directed at the British Shell Company. The activist said Shell was at the helm of the environmental destruction and violation of the rights of his Ogoni people, and went on to accuse the military government of genocide. Security forces arrested him along with eight of his people and charged them with the murder of four prominent Ogoni elders, suspected of working for the government. Saro Wiwa and his colleagues were executed a year later in November 1995, following a trial, amidst national and international appeals and protests. Britain and other nations of the Commonwealth reacted by suspending Nigeria, and the UN General Assembly condemned the executions.

In what has now become his frequently quoted last speech before the court, Sara-Wiwa said: "I and my colleagues are not the only ones on trial. Shell is here on trial…. In my innocence of the false charges I face here, in my utter conviction, I call upon the Ogoni people, the peoples of the Niger Delta, and the oppressed ethnic minorities of Nigeria to stand up now and fight fearlessly and peacefully for their rights. History is on their side. God is on their side. For the Holy Quran says in Sura 42, verse 41: ‘All those that fight when oppressed incur no guilt, but Allah shall punish the oppressor, come the day.’"

The disturbances deepened, with youths organizing militant groups and, in some instances, vandalizing company facilities. Labor unions, on other occasions, launched prolonged strikes, thereby reducing production at many of these companies. The late 1990’s saw the commotion cutting Nigeria’s daily crude oil output of about two million barrels by nearly a third.

The agitation for rights in the Delta expanded into demands for a national legal instrument that would appropriately give the states some of the money generated through oil exploited from there. The military government of Gen. Abdulsalami Abubakar, preceding the democratic administration of President Olusegun Obasanjo, announced the adoption of the 1999 Constitution, which provided that at least 13% of natural resource revenue be given to states in a manner relevant to their population, size and other factors. President Obasanjo inherited the constitution, but got bogged down in budgetary implications of the Constitutional provision. The widespread violence had begun to push oil companies from onshore. Obasanjo announced shortly afterwards that he was approving the granting of eleven offshore exploration licenses, seven for shallow water and only four for onshore. Indeed, the shift from the land exploration was now visible to the annoyance of the Delta communities.

The companies and the federal government appeared to have concluded that it was more economical to focus on offshore operations, which would provide distance away from the frequent attacks on company facilities. There was also general assumption that the outlying ocean seabed was within the purview of the Federation. The Obasanjo administration evidently did not want to rely on that assumption, and when states began clamoring for the application of the 13% percent derivation allocation to include the offshore revenue, the federal government filed the suit at the Supreme Court. Niger Delta communities were already complaining about the insufficiency of the constitutional percentage, despite they had not received any of it.

The issue of derivation began when there was no oil resources. In the 1950’s, export earnings from the agricultural produce of various regions of the soon-to-be independent nation were pooled in a single account. A prominent political leader, Obafemi Awolowo, is said to have initiated the distribution of the reserves, which had reached £100 million in 1953. His counterparts from the North and East, Ahmadu Bello and Nmandi Azikiwe agreed. The amount was allocated with the cocoa producing Western region carrying £53m; the cotton area of Northern Nigeria, £23 million; while the palm producing Eastern Region carried £16 million.

A table of Federal-State percentage share in petroleum proceeds shows there was little controversy even after independence, where up to 1967, the producing states carried 50 percent of the petroleum proceeds while the Federal government carried 20 percent, and the rest allocated in a general pool. The next few years saw a fifty-fifty split until 1975, when the state proceeds dropped to 20 percent minus of-shore proceeds, with the federation taking 80 percent plus off-shore proceeds. The federal government simply took 100 percent of the money from 1979 to 1981. It yielded a little to the states (1 ½ to 3 percent) in the following years until the 1999 Constitution provided in principle that the amount would have to be at least 13 percent. The legislative bill required to operationalize the constitutional provision was yet to materialize, and elected state officials under pressure from their constituents to make good on their promises seemed determined to obtain the funds.

II. Judicial Determination

In the Federal Government against the states, the issue was whether, for the purpose of the Federal government constitutionally disbursing at least 13 percent of revenue derived from the natural resources of each state, the southern or seaward boundary of each of the littoral state extended to offshore. The momentum for offshore oil production was on the with new discoveries, while onshore production was on the decline, mainly due to civil disturbances. Plaintiff and the littoral states evidently recognized the huge revenue potential from deepwater exploitation and were therefore mutually poised for the legal battle.

Counsel for Plaintiff argued that the southern or seaward boundary of each of the littoral (seacoast) states is the low-water mark of the land surface of such a state. The Federal government was therefore asking the Court to agree that the natural resources (oil and gas) located anywhere offshore, including the continental shelf, were not part of the derivative revenue source of the states. The Nigerian Constitution requires that all revenues collected by the government, with a few exceptions, be put into a Federation Account. The national legislature is to enact a law on how the funds are to be allocated. In doing so, the Constitution provides that the formula should not give any state less than 13 percent of the money gained from oil or other natural resources from each of the state.

The littoral states rejected the government contention, arguing that they had the right not only to crude drilled from territorial water, but also up to the continental shelf. Each of them claimed that its territory went beyond the low-water mark to these areas indicated supra, which they insisted should be part of the revenue base for the constitutional allocation. In fact, some of the states raised counter claims that the Federal government had been paying the funds due them under the constitutional provision, but the amounts were 40% short, in the case of Akwa Ibom State. Here the states were rejecting government’s argument that they were excluded from any derivable income from resources territorial waters and continental shelf. What would be the legal basis for accepting or rejecting any of the contending claims?

Justice Michael Ekundayo Ogundare, delivering the opinion for the majority, held that the southern boundaries of the littoral States of Nigeria are the sea, meaning the seaward point of the states’ land territory is the low-water mark or the limit of their internal waters toward the sea. Ogundare bases his conclusion first on Common Law, which he said provides that the "seashore…belongs to the Crown," meaning national territory. The Justice further cites Hales as stating that ""The shore is that ground that is between the ordinary high-water and low-water mark. Thus both prima facie and of common right belong to the King, both in the shore of the sea, and the shore of the arms of the sea."

The Court traced the geo-political history of the regions now consisting of the littoral states to support its holding. Justice Ogundare said the coastal states were created out of the old Western, Mid West and Eastern Regions all of whose southern boundary was the sea. He says it goes without saying that the states’ southern or seaward boundary was therefore the sea, citing Section II of the Nigeria Protectorate Order in Council 1922 and the Colony of Niger Order in Council, 1913. The Justice said if the boundary of the old regions was the "sea," it is logical that the states’ boundary cannot go beyond the sea.

Defendant, The State of … countered that constitutionally, Nigeria was the aggregate of all of its states and thus Nigeria cannot exist outside of itself. Drawing on certain sections of the Constitution, the Defendant argued that if the Court agreed with the plaintiff that the seaward boundary of the states was the low-water mark but Nigeria itself went beyond the see, then it would be violating the Constitutional composition of the country. Conversely, if the plaintiff insists that the beyond the low water mark is Nigeria, then the same area has to be part of the states, since the Constitution states that "Nigeria is one indivisible and indissoluble."

The Court said there was a difference between the land territory of a country and the sovereign privileges and rights it enjoys over bodies of water near it under international law. The court generously draw drew on the UN Convention on the Law of the Sea to support its holding that the Federal government had authority over offshore and continental shelf activities. Article 77 of the Convention stipulates that the coastal state (meaning nation) has sovereign rights over the continental shelf and may exploit its resources, including "mineral and other non-living resources." The rights are exclusive to the state (nation) and exploitation of the shelf can only be done by the consent of the state. Justice Ogundare stated that a nation’s sovereign right over the continental shelf is somehow limited and that the shelf is not part of the country’s land territory.

Ogundare relied on Article 78 of the Convention, which makes it clear that "the rights of the coastal state over the continental shelf do not affect the legal status of the superjacent waters or of the air space above those waters.." and that the " exercise of the rights of the coastal state over the continental shelf must not infringe or result in any unjustifiable interference with navigation and other rights and freedom of other states as provided for in this convention." In the high seas next to the country’s territorial sea, the Convention empowers the country to exercise control that would be necessary to deal with regulatory issues of customs, immigration or health, among others. The Convention defines continental shelf to include the seabed and subsoil in area extending beyond a country’s territorial sea to edge of the continental margin, "or to a distance of 200 nautical miles from the baselines from which the breadth of the territorial sea is measured where the outer edge of the continental margin does not extend up to that distance." The circumstances seem to be suggesting that a state may find it difficult to effectively exercise economic or political control in such a body of water, thereby underlining rationale of according the Federal government such a sovereign responsibility.

The same rules of authority have applied in places like the United States, before the 1982 Convention of the Laws of the Sea. In the United States v. Texas, the Court said a government next to the sea must be able to protect itself from dangers because of its exposure to the sea. "It must have powers of dominion and regulation in the interest of its revenues, its health, and the security of its people from wars waged on or too near its coasts." The Court affirmed that whatever that was found under the seas belonged to the country and, but, more relevantly to the Nigerian case under review, "whatever any nation does in the open sea…is a question for consideration among nations as such, and not their separate governmental units."

The authority given to countries under international over the contiguous body of waters is not exclusive, and this contrasts with the land territory under the direct sovereign control of the country. As a result, the Convention on the Law of the Sea stipulates that where two coastal countries are "opposite or adjacent to each other, neither of the two states is entitled, failing agreement between them to the contrary, to extend its contiguous zone beyond the median line ever point of which is equidistant from the nearest points on the baselines from which the breadth of the territorial seas of the two states is measured."

The Nigeria Supreme Court made a passing, but crucial reference to the United States v. California landmark case, in which the US Supreme Court alluded to international law in declaring that the US Federal government’s superior claims to resources under the coastal area of the state. The Federal Government filed for the Court to issue an injunction against the State of California, which had given licenses for oil exploration off the Pacific Ocean coast of the State. The government argued that California was trespassing, as the soil under the three-mile belt along the coast was federal property. The court was to determine which authority had rights to the oil and gas underneath the coastal land off California. In their opinion, the Justices held that California was not owner of the disputed area, and the Federal government had "paramount rights in and power over, the submerged land off the coast of California between the low-water mark and the three-mile, and has a superior right to take or authorize the taking of the vast quantities of oil and gas underneath.."

California’s argument resembled the Nigeria defendant state that since the area was part of California before it became part of the United States and by law the state is part of the US Federation, California was therefore entitled to the area under dispute. The Court said while states may have use for internal bodies of water and even limited use of the seacoast, the protection and control of the coast is part of the external sovereign duties of a country. It said state control over lands or navigable waters is quite different from controlling the ocean and what is under.

Another American case referring to low-water limits and rights over coastal land, though not mentioned by Justice Ogundare, seems relevant to his stipulation that the rights of the individual states were different from national and sovereign rights. The United States filed against the State of Texas to stop it from trespassing the sea lands under the Gulf of Mexico. Texas said it owned the land under the sea and was therefore entitled to the oil revenue from activity in the area. The Supreme Court struck an interesting point over how Texas would have had sovereign rights if it were allowed to exercise control over the land under the coast. Texas had sovereignty rights, including control over the land under the adjacent sea, before joining the Federation of the United States in 1845. The Court said all of these rights passed on to the US government after the inclusion of the state. "The part of the sea beyond the low-water mark was part of the international domain where property rights had to be subordinated to political rights," according to the Court.

The Nigerian littoral states submitted an affidavit presenting arguments similar to the contention of the State of Texas supra. They said the sea areas under dispute once belonged to the indigenous communities, and as such the states had proper claims over them. As proof, they referred to the fact that oil rigs and wells in the offshore areas were carrying the names of indigenous communities of the coastal states.

Justice Ogundare quickly dismissed the evidence presented in the affidavit as "nebulous." He said naming the rigs and wells after the communities was only an internal administrative arrangement made by the Federal government of Nigeria, and was not to be taken as an instrument of ownership. He said the defendants’ evidence was insufficient to prove a case like the one under consideration, where statutory, common or international law does not support the claim of the indigenous community to ownership of the sea.

Ogundare’s dismissal of the littoral state’s argument would not have gone down well in Canada where the indigenous Indians are making similar claims to land and offshore resources. Legal observers believe the Haida Indians might succeed in their court case against the government for the complete control of the Queen Charlotte Islands, which is said to be profoundly rich in offshore oil and natural gas. The Indians have reportedly lived in the area for hundreds of years, and that is not disputed. In their case, unlike Texas supra, the weight of the claim lies behind the fact that they have never signed any treaty with the Canadian government, though they have been considered as a part of Canada. When Texas signed the resolution to join the American Union, The US Supreme Court held supra that Texas gave up its sovereign rights, including offshore authority, when it signed a resolution to join the US union.

The Canadian Supreme Court made decisions on offshore oil authority similar to the Court in the US when it came to provinces that gave up sovereignty by being part of the Federation of Canada. In the case between the Federation and the Province of Newfoundland, the Canadian Supreme Court said the province might have had rights over the continental shelf before becoming a part of Canada. Upon acceding to the Federation, authority over the continental shelf was acquired by the Federation, based on the terms of the Canada Union agreements. The court elaborated that the continental shelf rights belonged to the federal government as whatever claims Newfoundland had over the shelf before joining Canada was an expression of sovereign control, which the province lost when it became a unit within the federation. "These rights are not in pith and substance proprietary: they are an extraterritorial manifestation of external sovereignty," the Court held.

The Canadian Court also reaffirmed the same principle of sovereign rights when it informed the Province of British Columbia that it was only the federation that had property rights under international law to the bed of the territorial sea, and similarly over the continental shelf. The court said Canada, as a sovereign state, is the one that answers if there is a breach of the United Nations Convention relating to the maritime responsibility of a country.

"Equal Footing"

The Attorney General of Jigawa State in its counterclaim advanced an interpretation of the Constitution that rendered the issue of offshore and onshore mute. The state’s lawyers said natural resources exploited from anywhere in Nigeria is for the entire country, and not for a particular place. They said was a "state and not a section thereof hen interpreting the economic agenda prescribed by the constitution." They said Section 162 (2) of the Nigerian Constitution ought to be considered on the basis of equality and justice to all of the states provided for in the Federation. As a point in fact, the State was pushing that all 36 states listed in the suit are part of the nation and therefore resource revenue from any one of them should be equally shared among the 36 states.

Jigawa State’s argument compares with the US doctrine of "Equal Footing" within the context that "equality of states means that they are not less or greater, or different in dignity or power." In the 1950 case United States v. Texas, the Supreme Court said when Texas was an independent nation before joining the United States, it had sovereignty and ownership over the coastal area. But the Joint Resolution that made the State part of the US federation indicated that the new state was to be part of the Union on equal footing with those states it met. The Court said the equal footing clause was "designed not to wipe out economic diversities among the several states but to create parity as respect political and sovereignty." This argument superficially backs Jigawa State in its stance that all states of Nigeria be considered equal and that resources from any part are for the whole of Nigeria and should be divided equally irrespective of which state the resources were found. But the equal footing notion, according to the US Court, was not to affect "economic diversity." The equality mainly referred to political standing of all of the states within the US federation. In fact the Court said "once low-water mark is passed, the international domain is reached," adding that "property rights must then be so subordinated to political rights as in substance to coalesce and unite in the national sovereign." The Justices held that if any property is seaward of low-water mark, it falls under the control of the federation.

The Nigerian Supreme Court told the Jigawa State Attorney General that his state failed to file a written brief to back the State’s claim. Justice Ogundare said even if the affidavit had been presented, the counterclaim could not be accepted as it relates to the Court’s interpretation of Section 162 (2) of the Nigerian Constitution, which provides for the 13 percent derivation revenue allocation.

In their final judgement for the Federal Government of Nigeria, the Supreme Court formally held that "the seaward boundary of a littoral State within the Federal republic of Nigeria, for the purpose of calculating the amount of revenue accruing to the Federation Account directly from any natural resources derived from that State pursuant to section 162(2) of the Constitution of the Federal Republic of Nigeria 1999, is the low water mark of the land surface thereof or (if the case so requires as in the Cross River State with an archipelago of islands) the seaward limits of inland waters within the State." Thirteen States filed counter-claims.

III. Legal Implications and Reactions

The first pointed effect of the April 5th decision was that two littoral states within the federation would be left with virtually no income from oil revenue. Akwa Ibom’s oil was nearly a hundred percent offshore and Ondo’s, 85% offshore. River and Bayelsa had about 15 percent each. This meant that the lost income to the states would be going to the Federal government, a situation that was bound to aggravate the existing tension over oil and gas revenue.

Thus the decision, which fundamentally meant victory for the Obasanjo Administration, immediately posed critical political problems. The National Assembly had not fulfilled its constitutional obligation under the Constitution to enact a bill that would establish the formula for allocating the "not less than 13%" derivation money, and that served as an additional source of state pressure, rendering the Government uneasy.

One of the first reactions came from the State Ministry of Justice of Delta. Its Attorney General questioned the assertion of Justice Ogundare that the issue of determining the seaward boundary of a littoral State for the purpose of determining the 13 percent revenue allocation was a matter of law and not of facts. The Delta State Justice Ministry questioned whether the Court’s decision in favor of the Federal government could be implemented without actually establishing the factual boundary of a coastal state. The Ministry said the low-water mark referred to could not be established unless through actual surveying to identify demarcations, map, geographical coordinates or baselines.

The contention on surveying and knowing baselines raises an issue of international law, which seems to favor the Ministry’s argument to some extent. The UN Convention on the Law of the Sea states that normal baseline for the territorial sea of a country is the low-water line along the coast, but it must be marked on large-scale charts officially recognized by the coastal country. Besides, the Convention requires in Article16 that "The coastal State shall give due publicity to such charts or lists of geographical coordinates and shall deposit a copy of each such chart or list with the Secretary-General of the United Nations." Justice Ogundare offered an elaborate historical review supra to support his stance that the issue in point was a matter of law, citing common law and referring to the fact that the four pre-independence regions that were combined to make up the Federation of Nigeria also indicated the outer boundaries of the country. It is not clear however that had he decided to pursue the facts of the seaward low water boundary of the littoral states, there would have been in existence the charts and lists of geographical coordinates of the country’s territorial water baseline. For sure, there was not publicity about such data.

Justice Franklin Oritseneyiwa Atake, a veteran Nigerian lawyer now deceased, publicly rejected the Supreme Court’s holding that the issue of determining the seaward boundary of the littoral states was a matter of law and not facts. Atake, who retired from Bendel High Court in 1974, said the main issue was for the court to determine the seaward boundary of the littoral states. He said first, ‘littoral’ was not a legal word, but simply meaning the coastal states. If the Court said the boundary of the states were the low water mark, that mark had to be identified because that is what the plaintiff sued for as an issue, affirmed by the court. Specifically, the Federal Government wanted a "determination of the seaward boundary of a littoral state for the purpose of calculating the amount of revenue accruing to the Federation Account directly from natural resources derived from that state pursuant to Section 162(2) of the Constitution of the Federal Republic of Nigeria 1999." The former Associate Justice disagreed with the plaintiff that the case was about the interpretation of the constitution and therefore no evidence was required. Atake took the ordinary meaning of ‘determine,’ relying on the Concise Oxford Dictionary, which defines the word as "to decide to fix precisely, calculate, find out precisely, to ascertain precisely."

Atake said the Court’s stipulation that the seaward boundary was the low-water mark was certainly not a precise finding. The former Justice wanted a literal determination by surveying each of the area to establish where the low-water mark existed. He said surveyors and other experts were first needed to make the determination. Atake said though the Court said it considered the matter as an issue of law, it admitted that "what becomes factual and on which evidence will be required to prove is the actual location of the boundary."

Justice Atake again referred to the dictionary meaning of ‘low-water mark, which states that the "lowest points reached at low tide…" with low tide defined as "the time when the tide is out and far from the shore or river bank." Atake said if the Court has said the seaward boundary of the states is the place where the sea water level is lowest at the time when the tide is our and far from the shore or river bank, that place has to be established, that low water mark has to be identified. Justice Atake said none of this was determined and offered into evidence to convince anyone. He said it is a well-known principle in law that he who alleges has the burden of proof. If the Federal government alleged that the seaward boundary of the coastal states is the low water mark, the government should have actually proven it through definite evidence.

Justice Atake’s insistence on the actual determination of the seaward boundary of the littoral states alludes to a previous stance within the Nigerian Federal Government itself before the suit was filed. A revenue commission had asked the government to set up a committee to actually determine the seaward boundaries as a basis for revenue distribution. As a result, the government Oil and Gas Committee of the Revenue Mobilization, Allocation and Fiscal Commission was expanded to include other government agencies and instructed to determine the seaward boundary, specifically the low-water mark, for the littoral states. The fact that the committee included the National Boundary Commission (NBC), and the Office of the Surveyor-General of the Federation lend some credence to Atake’s argument while at the same acknowledging that the Court’s interpretation of international law was proper, as explained infra. The committee was specifically asked to find out which oil wells in the states were beyond or within the boundaries, pointing to a hybrid of the positions both the Court and Justice Atake.

The special committee, in its findings, said it pursued a scientific approach and the determination of the low-water mark as pronounced by the Supreme Court was a matter of the depth and not distance. The committee identified the coast baseline mentioned under the UN Convention on the Law of the Sea supra, and then went on to give a geodetic determination of where oil and gas wells existed in relation to the baseline. The UN Convention on the Law of the Sea provides that the normal baseline for measuring the breadth of the territorial sea is the low-water line along the coast. But the Committee could establish the baseline if it first determined the low-water line through survey methods. The Convention states that the low-water line has to be "marked on large-scale charts officially recognized by the Coastal State." The committee said that oil wells and fields that fall within the 200-meter water mark or 12 nautical miles could be considered in the allocation of the revenue to the coastal states as that would be an actual application of the Supreme Court decision when it comes to identifying seaward boundaries. The Committee in their survey exercise discovered for example in Delta and Bayelsa states, that onshore oil wells had been wrongly classified as offshore. In Ondo State, several oil stations were also onshore and not offshore as had been earlier classified by the government.

Nigerian legal big name, Prof. Itse Sagay, seemed to have thrown the biggest wrench in the Supreme Court decision by brushing aside the Court’s reliance on certain provision of the Convention on the Law of the Sea and Common Law. He said the case had nothing to do with maritime law, Common Law and there was no need to talk about shoreline and low water mark. Sagay published that the Court was wrong for not considering that the territory under the sea was a territory, though may be classified as marine. He said the Court seems to imply that beyond the onshore land is the end of the country's territory. Interestingly, Sagay cites international law also to back his argument, saying that under international law there is maritime territory closest to which is the continental shelf, which he describes as land territory also. He said the seabed and the subsoil, which adjoin the coast, were a land only covered by water. Sagay said geologists have established that the offshore land is just an extension of the onshore land under water with slopes. He ironically goes back to the Law of the Sea Convention, Section 72, to say that the continental shelf was the "natural prolongation" of the land of the coastal nation. This stretching of territorial land can only be part of the Nigerian coastal states, the popular lawyer insisted.

Sagay dug up historical explanations for his land prolongation claim, saying that the continental shelf is covered by water as a result of the ice melting and the sea level rising to cover part of the land when the Ice Age came to an end. He said it is because of this principle that the US President Truman said in 1945 that he who owns the coastal country owns the continental shelf. The law professor said international law makes it clear that the coastal stated don’t have to declare ownership of the continental shelf because it is naturally theirs.

Sagay also criticized the Nigerian Supreme Court for relying on old English and Common laws that were not applicable. He expressed surprise that the Court cited an 1875 English case (Rix and Kings) in which the shoreline was decided as the end of the English jurisdiction. The English government got reportedly angry over the court’s decision to nullify the jurisdiction of England over a ship that had been arrested within three nautical miles off the English Coast. Sagay says an act was passed within a year to in effect set aside the courts decision. The Nigerian lawyer said it was therefore unfortunate that his country’s Supreme Court would rely on an English court decision that was virtually essentially out a year later.

Former Senator David Dafinone from the Niger Delta argued that the case should not have been brought to the Supreme Court in the first place, as it was more of a political issue than legal. Citing US Supreme Court Justice Hugo Black that the Supreme Court was not infallible and that it was infallible because it was final, Dafinone said it was almost impossible to accept the April 5th Supreme Court decision as final.

The former Nigerian Senator and businessman from the Niger Delta however dwelled on the issues of the case, including the key one dealing with defining the boundaries of the littoral states. Dafinone said the Justices seemed to have forgotten that the Court in an earlier decision that they could not look into a question of boundary between the Federation and the states because the two sides were the same. He said it was therefore baffling that the Court in the April 5th decision backed the plaintiff’s argument that the boundary issue was legally proper to consider, when according to him, there was no supporting "enabling law, constitutional provision, survey maps,…" Dafinone then claimed that concurring Justices presiding over the case contradicted themselves and each other on the lead issue. He said while Justice Ogundare agreed with plaintiff that cited cases of the supreme courts of the United States, Canada and the High Court of Australia were relevant, Justice Kutigi said he found them inapplicable. Ogundare had agreeably referred to the United States v. California case in which the Court ruled that the federal government had superior claim and authority over the continental shelf and the resources therein. Kutigi said the foreign cases addressed their own local situations, which were as dissimilar to the case under review as the Nigerian constitution was to theirs. Kutigi said there was no dispute over whether the Federal government had authority over all minerals, including oil and gas, whether it was onshore or offshore.

Dafinone praised Justice Kutigi for noting that the plaintiff had failed to show that neither the constitution nor any laws in the country identified seaward boundaries of the littoral states, but criticized the Justice for joining the conclusion of the Court holding that the low-water mark was the boundary. In his analysis Kutigi had said the issue of boundary was not a notion to be left to "inference," but firmly defined. Ogundare, for his part, had accepted plaintiff’s argument that the Court deal with the boundary issue as a matter of law, as the issue was the determining the seaward boundary for the purpose of allocating revenue in compliance with the Constitution. The Justice therefore cited the Common Law, the UN Convention on the Law of the Sea and Nigeria pre-independence history to establish Federal authority in varying degrees onshore and offshore.

David Dafinone advances a new legal proposal for the derivation revenue sharing, though it is based on United States law, a move the former senator seemed not to have cherished in pointing out contradictions between the two justices supra. Dafinone suggests that notwithstanding whatever authority the Federal Government may want to establish over off-land waters and their resources, it would be helpful to share with the states some of money generated from offshore oil exploration as practiced in the United States. He is referring to the US Outer Continental Shelf Lands Act (OCSLA), which provides that the Federal Government gives funds from oil activities to coastal states for factors like oil spill liability. More importantly under the Act, a portion of the income from the leasing of mineral resources is given to coastal states, though it has been established in the US v. California supra that the Federal Government had superior authority over the continental shelf. The money that has gone to the US littoral states is put at $127 Billion since 1982 and $6 Billion in 2002 alone.

The OSCLA gives the states a crucial administrative authority over oil activities in their contiguous shores. The law says the Secretary of the Interior shall not give license or permit for any "activity described in detail in an exploration plan and affecting any land use or water use in the coastal zone of a State with a coastal zone management program…unless the State concurs or is conclusively presumed to concur with the consistency certification accompanying such plan…" Clearly, while the Federal government’s ownership of the continental shelf is under no dispute, the Act has given constructive power-sharing authority to the states in the administration of coastal oil activities.

The OCSLA also caters to environmental issues for the protection of the state communities, which activists like the late Ken Sara-Wiwa were concerned about in the oil producing Niger Delta. The US Secretary of the Interior is under obligation to ensure that decisions having severe environmental impact are taken during the exploration phase and not when oil drilling has already started. This gives the government the opportunity to modify or even suspend the operation if it is found to have insufficient environmental safeguards. It is interesting that all of the state benefits being indicated here came out of the 1950 conflict between the US Federal Government and the State of Texas, that gave rise to the OCSLA itself. Albeit the Court told Texas that the Federal government had title to the lands and minerals under the Gulf of Mexico lying seaward of the low-water mark, the subsequent continental shelf act was evidently a blessing that took care of the concerns raised by Texas and other states.

Though David Dafinone’s analysis does not completely coincide with the review supra, his suggestion that the Federal Government of Nigeria adopts the OCSLA policy by granting some of the offshore proceeds to the States was probably one way out of the potentially explosive April 5th Decision of the Nigerian Supreme Court. A Nigerian intellectual Mobolaji Aluko feels the same way. In an essay upon announcement that the Federal government was taking the states to court, Aluko acknowledges that International Law of the Sea confers offshore authority on the Federal Government, but goes on to call on the federation to concede some part of the area for the purposes of equity, environmental concerns and investment.

The protestations and proposals seemed to have yielded something. The Nigerian Senate passed a bill, reportedly supported by President Obasanjo, which in effect gave up some of the offshore areas to the littoral states. Violent demonstrations had already begun against his administration even in states where his fellow partisans were serving as Governors. The trouble was particularly evident in Akwa Ibom State, which stood to lose nearly all of its oil revenue as a result of having no onshore production. Youths in the state capital staged massive street protests, denouncing President Obasanjo. The Governor Victor Attah, a top personality in Obasanjo’s People’s Democratic Party, had earlier convened a meeting of local legislators and accused the President of personally introducing the onshore/offshore dichotomy.

Elsewhere in the Niger Delta, violent protests were threatening major American oil companies like ChevronTexaco. Foreign and local workers of the company were held as hostage, bringing about an interruption of the company’s production. The youth militant violence, which seemed to have subsided a few months earlier, was again on the rise after the April 5th Supreme Court ruling.

President Obasanjo, faced with the uprising, is initially said to have encouraged the Nigerian Legislature. The Senate passed the bill last year, abolishing in effect the dichotomy between onshore and offshore oil revenues, a step that gave the impression of reversing the Court’s decision. But the Senate enacted the bill in accordance with Court’s urge that the legislature follow the constitutional provision to work out a formula for the implementation of the 13 percent natural resource revenue allocation to the states.

The legislative bill provided that "the continental shelf and the exclusive economic zone contiguous to a state of the federation shall be deemed to be a part of that state for the purposes of computing the revenue.." Adeweri Michael Pepple, the Senate’s Chief Whip representing the major oil producing Rivers State, is reported to have described the passing of the bill as the "beginning of absolute calm in the Niger delta region."

The euphoria surrounding the Senate bill has since died as President Obasanjo eventually refused to sign the legislation because it included the continental shelf as part of the concession to the states. The Senate evidently went too far for the President. Prominent Nigerians from the non-oil producing but powerful northern states raised concerns that the Federal government’s sharing revenue with the states from the continental shelf would reduce the money left for the rest of the country. The northern group, which calls itself as Kano Elders' Forum led by Ado Bayero, the Emir of Kano, urged the legislators in a communiqué to rewrite the bill as it was "spirit and letter" of the Nigerian Constitution. Obasanjo officially laid the reason for his reluctance on foreign affairs implications. He said states of the Nigeria federation involvement in offshore activity would means "doomsday regional conflict," apparently referring to the proximity of adjacent countries.

The Supreme Court’s decision has since remained unaffected, except for the increasing unrest in the Niger Delta. Offshore oil continues to yield as an alternative to the troubled land fields. As a result, the country did not only reach its OPEC quota for crude production for July this year despite the troubles, it actually overshot the 2.09 million barrels a day mark to an average of 2.15 million barrels a day.

IV. Conclusion

When the Federal Nigerian Government took the states of the federation to court over the allocation of oil and gas revenue, it was awakening a body of legal jurisprudence beyond Nigeria. It was also putting on display the tenets of a functioning democracy where the government does not impose but resorts to a judicial resolution of a dispute. Given the history of prolonged preceding military rule, one Nigerian enthusiast aptly captured the moment stating that "For the first time in this democratic dispensation, the Federal Government acts as if it does not have all the power to make its own interpretations of the constitution."

The Nigerian Supreme Court held for the federal government, which was seeking to restrict coastal states to onshore oil revenue and establish exclusive control over offshore income from oil and other natural resources. The Court’s citations in the April 5th 2002 decision have combined with a succinct comparative analysis in this paper to establish the relevance of transnational legal principles, spanning ancient common law, international law, landmark cases in the United States, and even indigenous claims in Canada. Counsels for both the Federal Government and the Nigeria littoral states utilized the same legal references with stunning differences in their interpretations. While the plaintiff’s argument, affirmed by the Court, proposed that national, external and UN laws favored their claims, the defendants and outside commentators were citing the same sources to justify why the states were entitled to revenue and amenities from offshore exploitation of natural resources.

The overriding legal precept gleaned from the exercise is that that the national government has greater authority as the sovereign does over offshore land and natural resources. This has been established through the evolution of national admiralty and marines laws, progressively enshrined in the controlling international rules and guidelines called the UN Convention on the Law of the Sea.

The Law of the Sea has fundamentally established the powers of the coastal nation over three key levels of offshore land and resources: Territorial Sea, Exclusive Economic Zone, and Continental Shelf. The Law recognizes the sovereignty of the coastal nation over the water, subsoil and airspace of the immediate outlying portion of the ocean called the territorial sea. This area, which may not exceed 12 nautical miles offshore, begins with a baseline that must be clearly identified, starting with the low-water mark of the land territory. The Exclusive Economic Zone begins with the territorial sea baseline, but goes beyond to 200 nautical miles. It is called economic zone because it is internationally agreed that the coastal nation regulate, in its interest with due regards to other nations, mineral resource, fishing and scientific activities, among others, within that stretch of water. The Continental Shelf is described as the submerged prolongation of the landmass of the coastal nation, including the seabed and subsoil of the shelf, as well as the slope and rise.(note) But it does not extend to the subsoil of the deep ocean floor. Sixty miles from the slope of the shelf is the mark the deep ocean floor begins.

The Nigerian Supreme Court and indeed courts in the United States, Britain, Canada and other nations recognized the foregoing body of laws as controlling when it came to determining the rights of the central government and its subordinate localities like states. Implications for sovereign responsibility in dealing with other states are visible when it comes to the ocean or a body of water shared at some point with other nations. The principle of superior federal authority is compelling within the framework that the central government, and not states within the federation, conduct foreign affairs of the nation. If the national government is vested with the responsibilities of safeguarding the interest of the nation in maritime matters, it seems inherent that such a national organ is better placed to control the affairs of the natural resources of such an oceanic jurisdiction. The comparative advantage accruing to a nation out of the exercise of the federal functions underscored in these principles of law has tended to influence the court’s decision to hold in favor of the federal government in cases like the United States v. California and US v. Texas supra. When the Nigerian Supreme Court refers to Common Law cases, as ancient as some of them may have been, it is the same principles that obtain.

The Supreme Court case has not operated as an ordinary litigation, which happened to have found its way to the nation’s highest judicial forum. The magnitude of the dispute over the sharing of revenue from the country’s 98 percent export earner has been the source of bloody internal strife, threatening the very existence of the federation. The communities of the nine states of the Niger Delta, which produces the country’s onshore oil and gas, have long complained of exploitation and neglect. They accuse the federal government and the American and European oil companies of ignoring their economic and environmental wellbeing. For them, this trend is incomprehensible for a country that is the sixth largest producer of the world’s crude oil, and has $7.7 billion in foreign reserve.

Since independence in 1960, revenue sharing between the federal and state governments have taken various formulas, with the percentage for states vacillating between fifty percent, 45, 3, 1 ½, and at some point zero. The 1979 constitution crafted during the military administration of current civilian President Olusegun Obasanjo established a dichotomy between onshore and offshore oil and gas revenue in favor of the federal government, but was abolished later in another military administration under Ibrahim Babangida. Legal commentators and Niger Delta activists say that though the 1999 constitution provided for 13 percent of revenue of natural resources, it is President Obasanjo who has again introduced a dichotomy between onshore and offshore. This, they say deprive states which previously depended wholly on offshore revenue, and encourages companies to move forward onshore and continue neglecting their onshore responsibilities.

Proponents have therefore proposed the adoption of a scheme that would provide for some littoral state participation in the administration of offshore crude exploitation, including the gaining of taxes and licensing fees. Reference has been made to the US Outer Continental Shelf Land Act, under which coastal states are involved in the approval process for lease licenses and operation plans. The Nigerian legislature has begun enacting a bill in compliance with a Constitutional obligation to fashion out a sharing formula. But that too has run into problems with the Presidency since the Senate version went beyond contiguous sea to include the continental shelf as areas targeted for the computing of the revenue for the states. The economic and political problems will certainly have to be addressed, but as for now, the April 5th Supreme Court decision appears to be holding, grounded in acceptable principles of law, notwithstanding opponents’ claims that it was politically inspired.

 

 

 

 

 

 

 

 

Appendix I

Appendix II Federal Republic of Nigeria –Statistics

COUNTRY OVERVIEW
President: Olusegun Obasanjo (since May 29, 1999)
Vice President: Atiku Abubakar
Independence: October 1, 1960 (from United Kingdom)
Population (2002E): 129.9 million
Location/Size: West Africa, bordering the Atlantic Ocean (on the south and west), Cameroon (on the south), Chad (on the east), Benin (on the west) and Niger (on the north)/923,770 square kilometers (356,700 square miles), slightly more than twice the size of California
Major Cities: Abuja (capital), Lagos, Ibadan, Kano, Kaduna, Port Harcourt
Languages: English (official), Hausa, Yoruba, Ibo (Igbo), Fulani
Ethnic Groups: Hausa, Fulani, Yoruba, Ibo, and over 250 others
Religion (2000E): Islam (50%), Christianity (40%), traditional beliefs (10%)
Defense (9/02): Army (62,000), Navy (15,000), Air Force (15,000)

ECONOMIC OVERVIEW
Currency: Naira
Market Exchange Rate (3/21/03): US$1 = 128.4 Naira
Gross Domestic Product (2001E): $40.9 billion (2002E): $41.1 billion (2003F): $41.9 billion
Real GDP Growth Rate (2001E): 2.9% (2002E): -0.9% (2003F): 3.5%
Inflation Rate (2001E): 18.9% (2002E): 13.4% (2003F): 12.2%
Current Account Balance (2001E): $1.2 billion (2002E): -$3.7 billion (2003F): -$2.5 billion
Major Trading Partners: United States, France, India, United Kingdom, Spain, Germany, Brazil
Merchandise Trade Balance (2001E): $5.6 billion (2002E): $1.6 billion
Merchandise Exports (2001E): $17.9 billion (2002E): $14.9 billion
Merchandise Imports (2001E): $12.3 billion (2002E): $13.3 billion
Major Export Products: Crude oil, natural gas, cocoa, rubber, timber, manufactured goods
Major Import Products: Petroleum products, food, machinery and equipment, manufactured goods
Oil Export Revenues (2002E): $17.2 billion
Oil Export Revenues/Total Export Revenues (2002E): 90%
Total External Debt (2002E): $30.2 billion

ENERGY OVERVIEW
Proven Oil Reserves (1/1/03E): 24.0 billion barrels (Oil & Gas Journal) 31.5 billion barrels (OPEC Statistical Bulletin)
Oil Production (2002E): 2.12 million barrels per day (bbl/d), of which 2.1 million bbl/d is crude oil
OPEC Crude Production Quota (beginning February 1, 2003): 2.018 million bbl/d
Oil Consumption (2002E): 257,000 bbl/d
Net Oil Exports (2002E): 1.9 million bbl/d
Crude Refining Capacity (1/1/03E): 438,750 bbl/d
Major Crude Oil Customers (2001): United States, EU, India
Natural Gas Reserves (1/1/03E): 124 trillion cubic feet (Tcf)
Natural Gas Production (2001E): 0.55 Tcf
Natural Gas Consumption (2001E): 277 billion cubic feet (Bcf)
Recoverable Coal Reserves: 209 million short tons (Mmst)
Coal Production (2001E): 0.07 Mmst
Coal Consumption (2001E): 0.07 Mmst
Electric Generation Capacity (1/1/01E): 5.9 gigawatts
Electricity Generation (2001E): 15.67 billion kilowatthours

ENVIRONMENTAL OVERVIEW
Total Energy Consumption (2001E): 0.92 quadrillion Btu* (0.2% of world total energy consumption)
Energy-Related Carbon Emissions (2001E): 23.5 million metric tons of carbon (0.4% of world carbon emissions)
Per Capita Energy Consumption (2001E): 7.8 million Btu (vs U.S. value of 341.8 million Btu)
Per Capita Carbon Emissions (2001E): 0.2 metric tons of carbon (vs U.S. value of 5.5 metric tons of carbon)
Energy Intensity (2001E): 8,315 Btu/ $1995 (vs U.S. value of 10,736 Btu/ $1995)**
Carbon Intensity (2001E): 0.21 metric tons of carbon/thousand $1995 (vs U.S. value of 0.17 metric tons/thousand $1995)**
Fuel Share of Energy Consumption (2001E): Oil (61.4%), Natural Gas (31.7%), Coal (0.2%)
Fuel Share of Carbon Emissions (2001E): Natural Gas (53.2%), Oil (46.6%), Coal (0.2%)
Status in Climate Change Negotiations: Non-Annex I country under the United Nations Framework Convention on Climate Change (ratified August 29th, 1994). Not a signatory to the Kyoto Protocol
Major Environmental Issues: Soil degradation; rapid deforestation; desertification; recent droughts in north severely affecting marginal agricultural activities
Major International Environmental Agreements: A party to Conventions on Biodiversity, Climate Change, Desertification, Endangered Species, Hazardous Wastes, Law of the Sea, Marine Dumping, Marine Life Conservation, Nuclear Test Ban, Ozone Layer Protection and Whaling

* The total energy consumption statistic includes petroleum, dry natural gas, coal, net hydro, nuclear, geothermal, solar and wind electric power. The renewable energy consumption statistic is based on International Energy Agency (IEA) data and includes hydropower, solar, wind, tide, geothermal, solid biomass and animal products, biomass gas and liquids, industrial and municipal wastes. Sectoral shares of energy consumption and carbon emissions are also based on IEA data.
**GDP based on EIA International Energy Annual 2001

OIL AND GAS INDUSTRIES
Organizations: The Nigerian National Petroleum Corporation (NNPC) manages the state-owned oil industry. NNPC controls majority interests (between 55%-60%) in all joint ventures with foreign oil companies. The NNPC holds 49% in the Nigeria Liquefied Natural Gas (NLNG) Company.
Major Foreign Oil Company Involvement: British Gas, BP, ChevronTexaco, Conoco, Deminex, ENI/Agip, ExxonMobil, Petrobras, Shell, Statoil, Sun Oil, Tenneco, TotalFinaElf
Major Oil Fields: Cawthorn Channel, Edop, Ekulama, Escravos Beach, Forcados Yorki, Jones Creek, Meren, Nembe, Okan, Oso, Ubit
Refineries (nameplate capacity bbl/d) (1/1/03): Port Harcourt-Rivers State (150,000), Warri (118,750), Kaduna (110,000), Port Harcourt-Alesa Eleme (60,000),
Major Terminals: Bonny Island, Brass River, Escravos, Forcados, Odudu, Pennington, Qua (Kwa) Iboe

 

Source: Energy Information Administration at http://www.eia.doe.gov/emeu/cabs/nigeria.html

 

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