FirstBank vs GHL: Supreme Court Orders release of Oil Company’s vessel

The Supreme Court has ordered immediate handing over of the crude oil aboard the FPSO Tamara Tokoni, a floating production storage and offloading (FPSO) vessel, to General Hydrocarbons Limited (GHL). The apex court gave the order while ruling in the dispute between FirstBank and the oil company. In a unanimous judgment delivered on Friday, the […]

The Supreme Court has ordered immediate handing over of the crude oil aboard the FPSO Tamara Tokoni, a floating production storage and offloading (FPSO) vessel, to General Hydrocarbons Limited (GHL).

The apex court gave the order while ruling in the dispute between FirstBank and the oil company.

In a unanimous judgment delivered on Friday, the apex court also dismissed the case instituted by First Bank of Nigeria (FBN), holding that the dispute was contractual in nature and did not fall within the jurisdiction of the Federal High Court as an admiralty matter.

The Supreme Court also set aside the judgment of the Court of Appeal, ruling that justices of the lower courts lacked jurisdiction to entertain the matter as an admiralty case.

The panel comprised Justices Uwani Musa Abba Aji, Adamu Jauro Salawa, Justice Emmanuel A. Agim, Tijjani Abubakar and Habeeb Adewale Abiru.

The dispute involves crude produced from OML 120 and stored aboard the FPSO Tamara Tokoni.

In May 2021, First Bank and GHL entered into a subrogation agreement under which the lender financed the development of the oil block, with proceeds from crude sales expected to be paid into a designated collection account.

First Bank later accused GHL of breaching the financing agreement and diverting proceeds from crude sales instead of remitting them into the agreed account.

The bank claimed that GHL owed about $19 million under the arrangement and sought court orders to arrest the crude cargo.

Denying the allegations, GHL maintained that it did not divert any funds.

The company also accused First Bank of repeatedly breaching the subrogation agreement and abusing ex parte orders obtained to freeze the crude cargo.

A Federal High Court sitting in Port Harcourt had struck out the suit for lack of jurisdiction and abuse of court process.

But when the matter got to the Appeal Court, it ordered that the crude be sold with the proceeds paid into an account under the custody of court officials pending the outcome of a dispute between First Bank of Nigeria and GHL.

But the Supreme Court overruled the Appellate Court, stating that the dispute was contractual and not an admiralty matter.

The court said First Bank’s claim stemmed from an alleged breach of a financing agreement rather than a dispute over ownership of the crude oil, the vessel or maritime rights.

The court ordered the immediate release of the crude oil to GHL.

“The cause of action is breach of the financing agreement by the appellant not paying the proceeds of the crude oil produced and lifted from OML120 into a collection account maintained by the appellant with 1st respondent and diverting same elsewhere.”

“A dispute over the diversion of sale of proceeds of produced and lifted crude oil in breach of a financing agreement is fundamentally a banking and commercial dispute. It is not a dispute over ownership of the FSPO, the cargo of crude oil or a ship’s freight. The contractual promise to pay the sale proceeds into a designated account as a condition for financing the production of the crude oil creates, at most, a contractual right against the appellant not a proprietary right in the crude oil,” said Justice Agim, who read the judgement.

While emphasising that FBN does not have any right to seize the crude cargo, the apex court explained that the fact that FBN financed the appellant’s production of the crude oil and was entitled to recover the facility from the proceeds of sale of the produced crude paid by the appellant into a designated account maintained with it, did not by itself gave FBN ownership of the crude oil or make the crude oil security for the financing of the crude oil production.

“The MoU and the further financing agreements did not create a legal or equitable mortgage or a fixed charge or security interest over the produced crude oil itself or constitute an assignment of title in the Crude by the appellant to the 1st respondent.

“The bare contractual obligation of the appellant to pay the proceeds of Sale of the produced and lifted crude oil from OML120 cannot give the 1st respondent the right to arrest and sell the cargo through an admiralty action.

“First Respondent’s Suit No. FHC/PH/CS/02/2025 being solely for breach of the proceeds domiciliation clause in the MoU and further financing agreements cannot be a valid basis for the arrest, take over and sale of the crude oil cargo at the instance of the 1st respondent as the financier of the production of the said cargo.

“Such a suit cannot be entertained and determined under the admiralty jurisdiction of the trial Federal High Court. The 1st respondent’s claim for diversion of the sale proceeds is ordinarily a contractual or debt recovery claim, not a maritime claim and falls outside the admiralty jurisdiction of the trial court,” the apex court held.