Landmark ruling orders immediate release of cargo aboard FPSO Tamara Tokoni, declares lower court proceedings a nullity and redraws the limits of admiralty jurisdiction
The Supreme Court has delivered a far-reaching judgment limiting the circumstances under which financial institutions can deploy admiralty proceedings to recover commercial debts, ruling that an alleged breach of a financing agreement does not give a lender proprietary rights over crude oil produced by a borrower.
In a unanimous decision with potentially significant implications for Nigeria’s oil and gas financing sector, the apex court ordered the immediate release of crude oil aboard the Floating Production Storage and Offloading (FPSO) vessel Tamara Tokoni to General Hydrocarbons Limited (GHL), while setting aside every order previously made by the Court of Appeal authorising the arrest and proposed sale of the cargo.
The five-member panel held that the dispute between First Bank of Nigeria and GHL was fundamentally a contractual and banking disagreement—not a maritime claim—and therefore fell outside the admiralty jurisdiction invoked to seize the crude.
In doing so, the court not only restored GHL’s control over the cargo but also declared the proceedings that culminated in the arrest order legally unsustainable.
A Banking Dispute in Admiralty Clothing?
At the centre of the dispute was First Bank’s allegation that GHL breached financing agreements by failing to pay proceeds from crude oil lifted from Oil Mining Lease (OML) 120 into a designated collection account maintained with the bank.
The bank maintained that GHL diverted proceeds that should have been used to service financing obligations and sought sweeping court orders permitting the arrest of crude stored aboard the FPSO Tamara Tokoni.
Those orders eventually resulted in judicial directives authorising the seizure and proposed sale of the cargo, with proceeds to be deposited into an escrow account under the control of court officials pending arbitration and determination of the substantive dispute.
But the Supreme Court ruled that the legal foundation for those orders was fundamentally flawed.
Reading the lead judgment prepared by Justice Emmanuel Agim, Justice Habeeb Abiru said the dispute concerned nothing more than an alleged breach of contractual obligations arising from financing arrangements.
“The cause of action is breach of the financing agreement,” the court held.
It was not, the justices emphasised, a dispute over ownership of a vessel, ownership of crude oil, maritime freight or any recognised proprietary interest capable of invoking admiralty jurisdiction.
No Proprietary Right Over the Oil
One of the most consequential aspects of the judgment concerns the legal distinction between financing a commercial transaction and owning the asset produced through that financing.
The Supreme Court rejected the argument that because First Bank financed crude production, it automatically acquired legal rights over the resulting cargo.
According to the court, financing alone does not transform a lender into the owner of crude oil.
Nor does a contractual promise to remit sale proceeds into a designated account create either a mortgage, fixed charge, equitable security or proprietary interest over the cargo itself.
In clear terms, the justices held that GHL’s obligation to domicile proceeds with First Bank created only contractual rights enforceable through ordinary commercial litigation—not through the extraordinary remedies available under admiralty law.
“The contractual promise to pay the sale proceeds into a designated account… creates, at most, a contractual right… not a proprietary right in the crude oil,” the court ruled.
That distinction proved decisive.
Without a proprietary maritime interest, the bank had no legal basis to arrest or seek the judicial sale of the cargo.
Supreme Court Declares Proceedings a Nullity
Having found that the Federal High Court lacked jurisdiction to entertain the matter under its admiralty powers, the Supreme Court went considerably further.
It held that every subsequent proceeding founded upon that jurisdiction—including the Court of Appeal’s judgment and all consequential orders—was legally void.
“The trial Federal High Court lacked the subject matter jurisdiction,” the court held.
As a result, the appellate proceedings and the orders directing the arrest, preservation and proposed sale of the crude cargo were declared nullities.
The apex court consequently ordered the Chief Registrar of the Court of Appeal and the Admiralty Marshal to immediately release the crude oil aboard FPSO Tamara Tokoni to GHL.
It also awarded ₦5 million costs against First Bank.
A Long Legal Battle
Friday’s judgment brings to a close a protracted legal contest that began after First Bank secured ex parte orders from the Federal High Court in Port Harcourt freezing the cargo and directing its arrest over an alleged indebtedness of approximately $19 million.
Those orders were subsequently revisited by Justice E.A. Obile, who concluded that material facts had not been fully disclosed when the interim reliefs were obtained.
The judge also found that the suit amounted to an abuse of court process because substantially similar issues were already the subject of proceedings before another division of the Federal High Court.
Justice Obile further held that the interim arrest orders had lapsed by operation of law and dismissed the action for want of jurisdiction.
First Bank successfully challenged aspects of that decision before the Court of Appeal, which ordered that the crude be sold and the proceeds placed in escrow pending arbitration and determination of the underlying dispute.
That decision has now been comprehensively overturned by the Supreme Court.
Why the Judgment Matters
Beyond the immediate victory for GHL, legal analysts say the ruling could become one of the most significant recent authorities defining the limits of admiralty jurisdiction in Nigeria.
The judgment reinforces a principle that commercial lenders cannot convert ordinary contractual disputes into maritime claims simply because the underlying transaction involves crude oil transported aboard a vessel.
Instead, the Supreme Court reaffirmed that admiralty jurisdiction remains confined to recognised maritime claims involving matters such as ownership of ships, mortgages over vessels, carriage of goods, maritime freight and other categories expressly recognised by law.
Where the dispute concerns repayment of financing obligations or alleged diversion of sale proceeds, the appropriate remedy lies in conventional commercial litigation—not the arrest and judicial sale of cargo.
For banks financing Nigeria’s upstream petroleum sector, the decision may influence how future lending structures are drafted, particularly where lenders seek stronger security over production assets.
It also serves as a reminder that courts will closely distinguish between contractual rights and proprietary interests, even in high-value oil and gas transactions.
In the end, the Supreme Court’s message was unequivocal: a financing agreement may create a debt, but without a legally recognised security interest, it does not create ownership. And without ownership or a recognised maritime claim, admiralty law cannot be used to seize crude oil.
