Esso Explor. & Prod. Nig. Ltd. & Anor. v. NNPC



The respondent and the 1st appellant entered into a Production Sharing Contract. Under the agreement, the respondent is the lease holder while the 1st appellant is the contractor who was to bear all operational costs. Under the arrangement, the lifting allocation of available crude oil is to be determined by the contractor in accordance with the terms of the agreement. It was agreed that the respondent’s lifting nomination shall not exceed the estimated allocation to be determined by the contractor. The contractor, by the agreement, is also required to prepare and file Petroleum Profit Tax, on behalf of the parties with the Federal Inland Revenue Service (FIRS). The lifting entitlement of the parties is shared in reference to four tranches of oil allocation. Royalty oil and Tax oil were to be lifted by the respondent, Cost oil by the appellants while, Profit oil was to be shared by both parties in accordance with the agreement.


The appellants contended that the respondent breached the contract by lifting more cargoes of available crude oil than it was entitled to under the agreement and that the respondent unilaterally altered or submitted Petroleum Profit Tax which was in excess of what was stated in the returns to the Federal Inland Revenue Service. Feeling aggrieved, the appellants commenced arbitral proceedings against the respondent. The arbitral tribunal gave its award in favour of the appellants. The respondent, being dissatisfied with the award, filed an action at the Federal High Court, Lagos Division to challenge the award on the ground that the arbitrators misconducted themselves. It was also the contention of the respondent that the arbitral tribunal lacked the requisite jurisdiction because the matter, being a tax issue is unarbitrable. The trial court gave judgment in favour of the respondent. The appellant feeling aggrieved, filed an appeal at the Court of Appeal, Lagos Division urging the court to set aside the judgment. The respondent also filed a notice urging the court to affirm the decision of the trial court on grounds other than those relied on by the trial court.


Held (Unanimously dismissing the appeal in part and dismissing the cross-appeal in part):   


(2016) 8 CLRN 1
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