A CHANGE FROM THE

COMMON LAW PRINCIPLE

TO THE COMPENSATION
REGIME OF THE OIL PIPELINES
ACT IN NIGERIA

MAY, 2023
 A CHANGE FROM THE COMMON LAW PRINCIPLE TO
THE COMPENSATION REGIME OF THE OIL PIPELINES
ACT IN NIGERIA1

1. INTRODUCTION

O
il production in Nigeria dates to the year 1957 with the first major spillage
occurring in 1970 in Ogoni land. This led to an emergence of oil spill litigation with
many litigants founding their claims on common law remedies such as the strict
liability rule laid down in Rylands v Fletcher², negligence, nuisance, and sometimes,
trespass.

The old method of relying on common law principles to bring an action for damages
caused by oil spill because of negligence on the part of oil companies have since been
declared to be incompetent by the Court of Appeal on July 25, 2017, in a landmark
decision. The case of Nigerian Agip Oil Company Limited v Onyemachi Ogbu³
essentially brings a new dispensation with respect to oil spill litigation in Nigeria. This
paper examines the decision of the Court on that issue and provides insight on the need for
aggrieved oil producing communities to strictly comply with the Oil Pipelines Act⁴ in
bringing claims for compensation due to injury caused by oil spill from the negligence of oil
companies.

2. NIGERIAN AGIP OIL COMPANY LIMITED V ONYEMACHI OGBU (SUPRA)

a. Brief Facts of the Case

The Appellant (Nigerian Agip Oil Exploration) had acquired a portion of the
Respondent, Onyemachi Ogbu's family land and built an oil location known as the
Ebocha Oil Well Location. The Respondent's family also owned the neighboring
lands different from the one acquired by the Appellant, which consisted of ponds,
creeks, farmlands, fishing channels and economic trees.

The Respondent averred in its Statement of Claim that during its operations, the
Appellant allowed noxious and lethal chemicals as well as oil waste to be
discharged unto his family land from a waste pit located at the said oil well
location. The Respondent averred that this discharge killed crops, trees, fishes in
the surrounding fishing creeks and channels and blocked their land waterways
leading to a stoppage of economic activities.

¹ By Daze Nga and Onyemauche Ibezim – Senior Associates at Kenna Partners

² (¹⁸⁶⁸) LR ³ HL ³³⁰
³ (²⁰¹⁹) ³⁵ WRN ¹³²
⁴ Cap. ¹⁰⁷, Laws of the Federation of Nigeria, ²⁰⁰⁴

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 A change from The Common Law Principle to The Compensation Regime of The Oil Pipelines Act in Nigeria

The Respondent through his Counsel had informed the Appellant of the damage occasioned
and sought compensation. However, the Appellant refused to pay the compensation, thus
resulting in a claim by the Respondent for monetary damages at the trial court. At the end of
trial, the Court awarded the sum of NGN3,662,375,000.00 (three billion, six hundred and
sixty-two million, three hundred and seventy-five
thousand naira) in favour of the Respondent.
“Section 11 (5) of the Oil Dissatisfied with the decision of the trial court, the
Appellant appealed to the Court of Appeal. The Court of
Pipelines Act has provided
Appeal agreed with the Appellant and held that “Section
a comprehensive
11 (5) of the Oil Pipelines Act has provided a
compensation regime comprehensive compensation regime which must be
which must be strictly strictly complied with and exhausted by anyone affected
complied with and by the activities of a license holder.” The Court also held
exhausted by anyone that “the Respondent's claim was neither made under
affected by the activities nor pursued under the compensation provisions of the
of a license holder.” Oil Pipelines Act and therefore incompetent ab initio.”

b. Case Review

Section 11(5) of the Oil Pipelines Act⁵ hereinafter referred to as ''OPA'') provides inter
alia that it is only when the amount of compensation is not agreed upon between any
person who has suffered injury and the holder of a license that such a person can
approach the court.

In the instant case (NAOC v Ogbu (supra)) however, there was no evidence before the
Court to show that the Respondent had complied with the provisions of section 11(5)
of the OPA. The Respondent's contention is that its claim for damages also means
compensation and as such the suit fell within the purview of section 11(5) of OPA.

In interpreting the provisions of the Act, the Appellate Court stated that, as it relates to
claims arising from oil spill, only compensation can be claimed. The Court of Appeal
made it clear that the OPA, by its Section 11 (5), has provided a comprehensive
compensation regime which must be strictly complied with and exhausted by anyone
affected by the activities of a license holder before approaching the court for redress.

The Court went further to hold that even when the dispute as to the quantum or
amount of compensation is unredressed, the claim that must be filed must be for
compensation and not damages. It follows that the suit lodged in respect of damages
when the condition precedent for assumption of jurisdiction had not been satisfied
and when the appropriate relief was not sought cannot ignite the jurisdiction of this
Court to entertain same.

⁵ Cap. ¹⁰⁷, Laws of the Federation of Nigeria, ²⁰⁰⁴

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 A change from The Common Law Principle to The Compensation Regime of The Oil Pipelines Act in Nigeria

The Court of Appeal further held that where a statute has provided for certain actions,
resort must be had to the statute and not to common law remedies. Therefore,
recourse must be made first to the OPA having superseded the common law
remedies and as such all actions connected with or pertaining to damage or injury
because of oil exploration, production, installation, and related activities must comply
strictly with the Oil Pipelines Act. The Court added that a Plaintiff's pleadings must be
related to the applicable law and since in the instant case, the Respondent's
pleadings were not related to or derived from the OPA, the lower court lacked the
jurisdiction to have entertained same.

Thus, the common law principle of nuisance and the strict liability rule in Rylands v.
Fletcher, upon which the Respondent anchored his claim, and on which the trial Court
based its judgment, was not available to Respondent.

3. CONCLUSION

A court will not have jurisdiction to entertain a suit lodged in respect of damages caused
when the condition precedent for the assumption of jurisdiction had not been satisfied and
when the appropriate relief was not sought. The OPA outlines provisions with respect to
instituting an action and any action instituted otherwise than in strict accordance with the
provision of the Act is incompetent and the Court would have no jurisdiction to entertain the
matter.

The implication of the decision of the Court of Appeal is that the OPA has taken away the right
of action for oil spills in nuisance and the attendant claim for damages based thereon. Rather,
that procedure has been replaced by a claim for compensation under the procedure
specifically provided in the Act. Litigants are accordingly expected to comply with the Act, to
successfully prosecute their claims.

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 A change from The Common Law Principle to The Compensation Regime of The Oil Pipelines Act in Nigeria

LIST OF CONTRIBUTORS/
AUTHORS OF THIS PAPER

Daze Nga
Senior Associate

Onyemauche Ibezim
Senior Associate

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