Commercial Law

Court declines bid to nullify Section 257 of PIA

The Federal High Court sitting in Abuja has dismissed a suit seeking to nullify Section 257(2)&(3) of the Petroleum Industry Act (PIA) 2021.

Justice Taiwo  Obafemi Taiwo held that there was no inconsistency in Section 257(2)&(3) of the PIA and Section 36(1) and (2) of the 1999 Constitution (as amended), as contended by the plaintiffs.
The section concerns whether payments made by a settlor under Section 240(2) of the PIA are deductible for hydrocarbon tax and companies income tax and under what conditions a host oil community will lose its financial entitlements.

Section 257(2)&(3) of the PIA reads: “Where in any year, an act of vandalism, sabotage or other civil unrest occurs that causes damage to petroleum and designated facilities or disrupts production activities within the host communities, the community shall forfeit its entitlement to the extent of the cost of repairs of the damage that resulted from the activity with respect to the provisions of this Act within that financial year, provided the interruption is not caused by technical or natural cause.

“The basis for computation of the trust fund in any year shall always exclude the cost of repairs of damaged facilities attributable to any act of vandalism, sabotage or other civil unrest.”
Section 36 concerns the right to a fair hearing.

Justice Taiwo Obafemi Taiwo

The first to third plaintiffs in the suit marked FHC/ABJ/CS/9/2022 are Hon. George U. Timinimi, Chief Boro Dose and Comrade Philemon Ugedi. The plaintiffs sued for themselves and on behalf of the entire members of the Gbaramatu – Egbema and Ogulagha Coastal Communities Front (GEOCCE) of Delta State. The first and second defendants are the Attorney-General of the Federation and the National Assembly.

The plaintiffs, by an Originating Summons of January 6, 2022, approached the court seeking three reliefs. They include a declaration that S.257(2)&(3) of the PIA are under Section 36 (1)&(2) of the Constitution, unconstitutional, null and void and of no effect whatsoever.
An order striking down the section for being inconsistent with Section 36 (1) and (2) of the 1999 Constitution.

Lastly, an order of perpetual injunction restraining the Federal Government, its ministries, agencies or subsidiaries and joint venture partners in the oil and gas industry from applying Section 257(2)&(3) of the PIA in the calculation of the Host Communities Development Trust Fund established under Section 240 (2) of the PIA.

In a judgment delivered on June 27, 2022, Justice Taiwo held: “The right of the plaintiffs to challenge any act under section 257(2) and (3) has not been extinguished. The Act has not taken away the rights of the plaintiffs to approach the court if they think that the decision to deduct any percentage from what is due to the host community has not been well thought out. The provisions of Section 257(2) and (3) are very clear and unambiguous.

“While I agree with the submissions of the learned counsel for the plaintiffs that sections 307 and 308 of the PIA deal with suits against regulatory agencies created via sections 4 and 29 of the PIA, it is my humble view that section 257(2)(3) being sought to be struck down has not taken away the constitutional rights of the plaintiffs or any host communities from seeking redress from the court. I so hold.

“The section of the PIA is within the legislative powers of the 2nd defendant to make laws for the peace, order and good government of the Federation or any part thereof as stead in the constitution.
“The PIA is to bring sanity into the operation of the oil sector and not only to develop the host communities but to ensure that there is a conducive atmosphere for all stakeholders in the oil industry to operate. I, therefore, see no inconsistency in Section 257 (2) and (3) of the PIA and section 36(1) and (2) of the Constitution of the Federal Republic of Nigeria.

“The suit ought to be dismissed. Same is accordingly dismissed. This is the judgement of the court.”

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