News & Events

MAR 2021 NEWS ISDORE OZUO AND INNOCENT EKPEN

Operators in the Nigerian oil and gas industry are familiar with the Guidelines issued by the Department of Petroleum Resources (“DPR”) on the release of Nigerians working in the industry. The extant Guidelines were released on 17 October 2019 and replaced the Guidelines issued by the DPR on 5 March 2015.

In brief, the Guidelines require employers to obtain the approval of the Minister of Petroleum Resources (“the Minister”) before determining the contract of employment of a Nigerian employee where the anticipated exit is by way of involuntary retirement, dismissal, termination, redundancy, or release on medical grounds. In addition, the Guidelines require employers to notify the Minister where an employee dies, resigns, abandons his/her duty post or voluntarily retires. A breach of any provision of the Guidelines would attract a penalty not exceeding US$250,000 and possible cancellation or withdrawal of the company’s operational permit, lease, or licence. The Guidelines were received in the industry with mixed feelings.

While a lot has been written about the validity of the Guidelines, there was no pronouncement by any Court in Nigeria on the point, until recently. Previously, the National Industrial Court of Nigeria (“NICN”) in the case of Mr. Michael Smith Atoe v Petrofac Energy Services Nig. Ltd (“Atoe v Petrofac”), held that the Guidelines cannot be imported into the parties’ contract by the Court and therefore cannot form the basis for declaring a termination illegal or unlawful. This is consistent with the age-long principle of sanctity of contracts. Notably, the decision in Atoe v Petrofac did not pronounce on the validity of the Guidelines thereby leaving unresolved the issue of whether the DPR can validly impose the sanctions prescribed in the Guidelines on an employer for failure to obtain ministerial consent before termination.

However, in its recent decision in Petroleum and Natural Gas Senior Staff Association of Nigeria & 3 Ors v Chevron Nigeria Limited (“PENGASSAN & Ors v Chevron”) delivered on 26 February 2021, the NICN held that the Guidelines do not find any support in the principal legislation under which the Minister purportedly acted. In this note, we shall highlight the position taken by the NICN in both Atoe v Petrofac and PENGASSAN & Ors v Chevron and examine the implications of the decisions.

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