Demurrage in the Nigerian Maritime Industry: A contractual obligation or a Statutory recognition?

Demurrage remains one of the most contentious financial liabilities within the Nigerian maritime industry. Despite its widespread application by shipping companies, terminal operators, and logistics providers, there remains considerable misunderstanding as to its legal foundation. Many stakeholders in the Nigerian Maritime industry have fallen victim to the demurrage scam! Ranging from Shippers to Clearing and Forwarding Agents, Truckers up to the man on the streets of Apapa and Tincan looking for his daily bread while sourcing for clients This article examines demurrage as a contractual construct, its treatment under Nigerian legislation, and its judicial enforcement both against private entities and state actors.

NATURE AND DEFINITION OF DEMURRAGE
Demurrage refers to the agreed monetary compensation payable by a contracting party who exceeds the stipulated laytime or free period for loading, unloading, or returning a vessel or container. It functions as liquidated damages for delay, enforceable strictly on the basis of contractual consent. It is not a statutory fine nor a regulatory levy. In legal theory and practice, demurrage does not arise automatically, it must be expressly incorporated into a contract of carriage, charter party, haulage agreement, or container lease arrangement.

DISTINCTION BETWEEN DEMURRAGE AND MARITIME CLAIMS
A maritime claim encompasses a broad spectrum of disputes arising out of commercial maritime activities, including cargo damage, charter party breaches, freight recovery, towage, salvage, and similar operations. Demurrage constitutes only one specific species of maritime claim, arising solely from contractual default as to time performance. Accordingly, while demurrage is treated as a maritime claim, the converse does not apply; not all maritime claims amount to demurrage.

STATUTORY RECOGNITION UNDER THE ADMIRALTY JURISDICTION ACT CAP A5 LFN 2004
The Admiralty Jurisdiction Act Cap A5 LFN 2004 does not define demurrage. However, Section 2(3)(f) expressly recognizes “claims for dead freight, demurrage or dispatch money” as falling within the jurisdiction of the Federal High Court, being the competent court of admiralty. This statutory reference confirms two legal positions: 1. Demurrage is contractually grounded rather than legislatively imposed, and 2. Its enforcement is judicially cognisable as a maritime claim. The Nigerian Shippers’ Council (NSC), by virtue of its regulatory mandate, exercises supervisory control over the reasonableness of demurrage practices imposed by terminal operators and shipping lines.

JUDICIAL PRONOUNCEMENTS ON THE CONTRACTUAL STATUS OF DEMURRAGE

● Messrs N.V. Scheep v. M.V. “S. Araz” (2000) 15 NWLR (Pt. 691) 622 The court held that demurrage constitutes liquidated damages, accruing automatically upon expiration of laytime stipulated under the contract of carriage. No further proof of loss is required once delay is established.

● Nigerian Ports Authority v. Panalpina World Transport (Nig.) Ltd (1974) 1 NMLR 82 The Supreme Court affirmed that courts will not interfere with or rewrite commercial agreements. Where demurrage terms are embedded within the contractual or procedural documentation governing port usage, a party who avails itself of such services is deemed bound.

● Nigerian Shippers’ Council v. APM Terminals Limited & Ors (2015) 18 NWLR (Pt. 1490) 377 The Federal High Court upheld the enforceability of demurrage but subject to regulatory oversight against arbitrariness. The Nigerian Shippers’ Council was affirmed as competent to prescribe standards for equitable demurrage practices.

DEMURRAGE AND SOVEREIGN IMMUNITY: LIABILITY OF STATE ACTORS
A pertinent question is whether government agencies involved in port operations or logistics may evade liability for demurrage or related contractual breaches by invoking sovereign immunity. In National American Corp. v. Federal Republic of Nigeria, 597 F.2d 314 (2d Cir. 1979), the Federal Republic of Nigeria entered into a commercial transaction with a private entity and was sued in the United States for breach. Nigeria contended that it was immune from suit on the grounds of sovereignty.

The United States Court of Appeals rejected this defence, applying the restrictive theory of sovereign immunity. The court held that where a sovereign state engages in commercial transactions, it is subject to the same liabilities as private merchants and cannot claim immunity in respect of contractual obligations. This principle is equally applicable within the Nigerian legal framework. Government agencies acting in a commercial capacity such as port authorities or customs operations, cannot invoke sovereign immunity to escape liability for demurrage where they have assumed contractual obligations.

CONCLUSION
Demurrage under Nigerian law is:
● A contractual obligation, not a statutory imposition
● Recognised by statute only to the extent of jurisdictional categorization as a maritime claim
● Enforceable upon proof of agreement and delay, without proof of actual loss
● Regulated to prevent excess, particularly through the Nigerian Shippers’ Council
● Binding upon both private and state actors, where they participate in maritime commerce.

Stakeholders are therefore advised to scrutinize contractual documentation, including bills of lading, haulage agreements, delivery orders, and terminal procedures prior to taking responsibility for cargo or equipment. Liability for demurrage is avoidable where contractual assent is withheld or conditions are negotiated.