This case review offers some evaluation of the court’s reasoning in Shell Petroleum Development Company Ltd v. Minister of Petroleum Resources in light of constitutional and administrative law principles. Our conclusion is that the “Fairness Test”, which appears to the rationale for the Guidelines for the Release of Staff in the Oil and Gas Industry is best evaluated by the National Industrial Court (the “NICN/Court”) and that the NICN ought to guard its jurisdiction jealously.
Background
By virtue of the 2019 Guidelines for the Release of Staff in the Oil and Gas Industry, employee termination in the Nigerian Oil & Gas industry, (the “Guideline”) is legally valid only after obtaining regulatory approval, which scrutinizes reasons and compensation. This Guideline has been the subject of litigation. In the latest judicial matter, the Court upheld the Guideline as binding on employers in the Nigerian Oil & Gas Industry.
In that case, Shell, in the course of an internal restructuring exercise, terminated the employment of Ms. Olanitori. The termination was executed without obtaining prior approval as required under the Guideline. The sector regulator, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), as successor to the DPR, subsequently issued a Notice of Non-Compliance and imposed a $250,000 fine on Shell for failing to comply with the Guideline.
The National Industrial Court, presided over by Justice B.B. Kanyip, upheld the enforcement action against Shell. The Court held that the Guidelines, originally issued under the Petroleum Act, remained valid by virtue of Section 317 of the PIA, which preserves existing regulations and guidelines to the extent they are consistent with the PIA and since the PIA empowers the Minister to formulate, monitor and administer government policy in the petroleum industry, the Guideline remained valid and binding on employers in the Nigerian Oil & Gas industry. The Court dismissed Shell’s claims, affirming that the enforcement of the Guideline and the associated penalty were valid and enforceable under the PIA regime.
Evaluating the Judgement
While the Court’s Judgement reflects a policy-sensitive approach, it raises significant legal questions around the rationale of the Judgement, as follows:
(a) Materiality of the Employment Contract Date: A primary consideration is whether or not the date of the relevant employment agreement should be considered in matters relating to the Guideline. We think it should because of the legal principle of presumption against retroactivity. Generally, courts will presume that new laws and regulations apply prospectively unless clear legislative intent indicates otherwise. Thus, if the relevant employee was employed before the 2019 Guidelines came into effect, then the Guideline was not part of the legal or contractual framework governing her employment at the time she entered into the contract and ought not to bind an employer. In our view, imposing obligations (such as ministerial approval before termination) based on subsequent regulations effectively alters the original contractual bargain, after the fact, which raises serious rule of law issues around certainty and predictability of the law. As an administrative law matter, there are also concerns around fair hearing and due process concerns as new obligations are effectively imposed without consent. Additionally, general principles non-retroactivity of laws affecting private rights remains a constitutional matter, worth investigating.
Lastly, as a matter of administrative law, delegated legislation, like the Guideline, ought not to operate retroactively unless the parent statute expressly authorizes retroactivity; or where the relevant guideline is purely procedural. In our view, the obligation to obtain ministerial approval before termination is clearly substantive, because it affects Shell’s ability to manage its workforce, alters its termination processes, and potentially imposes penalties for breach.
(b) Conditional Preservation under Section 317 of the PIA: We are of the view that Section 317 is a conditional preservation as it preserves regulations issued under the repealed Petroleum Act only to the extent that those regulations are ab-initio issued legally and intra-vires. In other words, statutory preservation is not automatic or absolute. Thus, if the minister has issued the Guideline ultra vires as held in the case of PENGASSAN vs Chevron, no saving provision of the PIA could have saved such illegal act.
(c) Absence of Express Employment Regulation Powers
Although the NICN found broad policy powers in Sections 3 and 10 of the PIA, a strict reading shows that the PIA does not expressly grant the NUPRC or Minister authority to regulate employment relationships or approve staff terminations. The NUPRC’s regulatory remit, as expressly stated in Sections 4, 6, and 10, focuses primarily on technical, commercial, safety, environmental, and operational aspects of upstream petroleum operations. Employment regulation is not enumerated.
(d) Separate Labour Law Jurisdiction: Employment relationships are governed by the Labour Act and enforced by the National Industrial Court. Extending petroleum regulatory authority into core employment matters without express legislative delegation conflicts with constitutional separation of powers and long-established labour law principles.
In essence, the NICN’s expansive interpretation of the PIA’s policy powers conflates general policy authority with specific regulatory jurisdiction. Given that employment regulation implicates contractual and constitutional rights, such authority requires clear and specific legislative mandate.
Conclusion
The Shell v. Minister of Petroleum Resources decision presents a novel and far-reaching interpretation of the PIA’s regulatory scope. While the court upheld the continued enforcement of the 2019 Guidelines under the PIA, a strict constitutional and administrative law analysis suggests that the Petroleum Industry Act does not clearly authorize the NUPRC to regulate employment matters or approve staff terminations. The conditional preservation under Section 317 does not sustain regulatory obligations outside the powers expressly conferred by the enabling legislation or the PIA. Consequently, the continued enforcement of the 2019 Guidelines may ultimately be vulnerable to appellate challenge on grounds of ultra vires and regulatory overreach.
More importantly, it is submitted that, a “Fairness Test”, which appears to the rationale for the Guidelines for the Release of Staff in the Oil and Gas Industry is best evaluated by the NICN and that the NICN ought to guard its jurisdiction jealously.
Balogun Harold insights are shared for general informational purposes only and does not constitute legal advice. For tailored guidance, please contact our Energy & Infrastructure Lawyers at bhlegalsupport@balogunharold.com.
