Cross Border Dispute Resolution under AfCFTA: A Call for the Establishment of a Pan-African Harmonised Private International Legal Regime to Actualise Agenda 2063*

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Orji Agwu Uka (the author of this piece) is a Senior Associate at Africa Law Practice NG & Company, Lagos. He holds a Masters’ Degree in International Business Law from King’s College London and an LLB from Abia State University, Uturu Nigeria.

 

Introduction

Over three score and ten years ago, Professor G. C. Cheshire, then Vinerian Professor of Law at the University of Oxford, issued a clarion call for the wider study of private international law in general and the renaissance of English private international law in particular.[1] As explored below, it is pertinent for African States to respond to that call today, especially within the context of the need to actualise the Agenda 2063 of the African Union, which aims for the establishment of a continental market with the free movement of persons, goods and services which are crucial for deepening economic integration and promoting economic development in Africa.

 

The Agreement establishing African Continental Free Trade Area

In January 2012, the 18th Ordinary Session of the Assembly of Heads of State and Government of the African Union, which held in Addis Ababa – Ethiopia, adopted a decision to establish an Africa wide Continental Free Trade Area. On 30th May 2019, the Agreement establishing the African Continental Free Trade Area (“AfCFTA”), entered into force.[2] With an expected participation of 55 countries, a combined population in excess of 1.3 billion people and a combined Gross Domestic Product (GDP) of over $2.5 trillion, the AfCFTA will be the largest trade area since the formation of the World Trade Organisation (WTO) in 1995.

Despite the benefits that the AfCFTA is widely expected to bring, Nigeria curiously delayed at first in signing the Agreement. Thankfully, reason ultimately prevailed and Nigerian signed the agreement at the 12th Extraordinary Session of the African Union (AU) Heads of State and Government held in Niamey, Niger. Very recently, the Federal Executive Council of Nigeria has also taken the decision to ratify the AfCFTA. What is now left is for the Nigerian National Assembly to domesticate the Agreement as required by the Nigerian Constitution.

It is pertinent to note that although the AfCFTA has justifiably received – and continues to receive – wide publicity, what is seldom talked about is that the Agreement is only a part of a larger long term plan, christened Agenda 2063, to ultimately establish an African Economic Community with a single Custom Union and a single common market to “accelerate the political and socio-economic integration of the continent” in accordance with Article 3 of the AU’s Constitutive Act.[3]

 

The case for Harmonisation

The economic integration and the concomitant growth in international relationships that are sure to result from these integration efforts will undoubtedly lead to a rise in cross border disputes, which call for resolution using the instrumentality of private international law. When, not if, these disputes arise, questions such as what courts have jurisdiction, what law(s) should apply, and whether a judgment of the courts of one member State will be recognised and enforced by the courts of the other member States, are just some of the key questions that will arise.[4]In the words of Professor Richard Frimpong Oppong, a well-developed and harmonised private international law regime is an indispensable element in any economic community.[5]Curiously however, the role of private international law in facilitating and sustaining the on-going African economic integration efforts is conspicuously missing.[6]

It is against this backdrop that this writer joins others in calling for the establishment of a pan-African harmonised private international legal regime as an instrument of economic development in general and as part of the modalities for the actualisation of Agenda 2063 in particular. Incidentally, one of the first of such calls predates the adoption of the decision to establish the AfCFTA. As far back as 2006, Professor Oppong had argued that given the significant divergence in the approaches to the subject of private international law in Africa, if the idea of a common market is to materialise, African countries must embark on a comprehensive look at, and reform of, the regime of private international law.[7]He specifically stressed the need for harmonised private international law rules to govern the operation of the divergent national substantive rules.[8]Very recently, Lise Theunissen has stated, and rightly too, that the non-harmonised state of private international law in Africa forms an important obstacle to international trade and to cross-border economic transactions and that for this reason, it is crucial for the African economic integration to strive for a harmonisation of private international law.[9]Beyond these, harmonisation has other benefits.

It has been argued that harmonisation helps promote equal treatment and protection of citizens of an economic community as well as other economic actors transacting or litigating in the internal market by subjecting them to a uniform and certain legal regime.[10]As the learned authors of Dicey, Morris and Collins, The Conflict of Laws observed, part of the rationale behind the EU Judgments Regulation and its predecessor Convention is, “to avoid as far as possible the multiplication of the bases of jurisdiction in relation to the same legal relationship and to reinforce legal protection by allowing the plaintiff easily to identify the court before which he may bring an action and the defendant reasonably to foresee the court before which he may be sued”.[11]Accordingly, it has been said that harmonisation boosts certainty in the law, thus reducing transaction and litigation costs for economic actors within the Community.[12]Africa is in dire need of this certainty.

 

Potential Challenges to Harmonisation

This writer is not unmindful of the challenges that such a project will pose especially having regard to the diverse legal traditions in Africa; the underdeveloped nature of the subject of private international law in Africa;[13]and the diversity of approach to the question.[14]These challenges are however not insurmountable. Thankfully, there are precedents and successful examples that the relevant actors can point to, for inspiration. And the first that readily comes to mind is the well-established harmonised private international law system applicable within the European Union. There are also other examples like the Organisation of American States with its Inter-American Conference on Private International Law. Similarly, within the Common Market of the Southern Cone (MECOSUR) [comprising  Argentina, Brazil, Uruguay, and Paraguay] Article 1 of the Asuncion Treaty 1991 expressly recognises the ‘harmonization of legislation in relevant areas’ as cardinal to the strengthening of their stated integration process.

 

Recommendation on the Modalities for Harmonisation

In considering the above examples, however, the question must be asked whether it is desirable to import, for instance, the tried and tested European Union private international law model into Africa or whether it is necessary to develop an autochthonous private international law system that responds to the socio-economic, cultural, and political interests of countries in Africa. In my view, the answer is in the question. It is pertinent to state at this juncture that what this writer advocates at this stage is the harmonisation of the private international law rules of the various member states in the African Union as opposed to the unification of the substantive laws which is the subject of other efforts, a case in point being the Organisation for the Harmonization of Commercial Law in Africa (OHADA).

Lise Theunissen[15]has very helpfully recommended a four-pronged approach to tackling the issue of the underdeveloped and non-harmonised state of private international law in the African Union as follows – (i) sensitization of national courts and the enlargement of regional economic community courts to ensure a harmonised and authoritative interpretation to relevant private international law legislation; (ii) a methodical continent wide engagement effort including the establishment of a private international law orientated body under the African Economic Community; (iii) the ratification of international conventions by African Union member states for instance the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards or the Hague Convention on the Recognition and Enforcement of Foreign Judgments in Civil or Commercial Matters; and (iv) the exploration of a potential collaboration with non-State actors for instance the Research Centre for Private International Law in Emerging Countries at the University of Johannesburg. At the very least, these suggestions deserve to be accorded close consideration.

 

Before now, Oppong had equally suggested the establishment of a specialised body with the specific mandate to deal with private international law regime. He also advocated for the establishment of a court empowered to provide authoritative and final interpretation of the unified rules of private international law and the entrenchment of the principle of mutual trust and respect by all African Union member states of each other’s national judicial competence.[16]Above all, urgent steps must be taken to elicit the requisite political will and obtain the institutional support necessary to actualise the harmonised rules of private international law in Africa. As a starting point, however, this paper calls for the immediate convocation of an Inter-African Conference on Private International Law.

 

Conclusion

 

Despite the enormous challenges that is sure to militate against the harmonisation of the private international law rules in a divergent community like Africa, the general belief is that the African Union and the people of Africa stand a better chance to actualise the aims of establishing a common market, deepening economic integration and promoting economic development in Africa with a harmonised private international legal regime. Since Professor Cheshire issued his clarion call in 1947, European courts, lawyers and academics have largely heeded the call, but the same cannot be said of their African counterparts. The best time to have heeded the call was in 1947, the next best time is now.

 

*This Paper was first published in Law Digest Journal Spring 2020

[1]G. C. Cheshire ‘Plea for a Wider Study of Private International Law’ (1947) Intl L Q 14.

[2]African Union, Agreement establishing the African Continental Free Trade Area, available at https://au.int/en/treaties/agreement–establishing–african–continental–free–trade–arealast accessed on 14 February 2020.

[3]African Union, Constitutive Act of the African Union, available at https://au.int/en/treaties/constitutive–act–african–unionlast accessed on 14 February 2020.

[4]Chukwuma Okoli, ‘Private International Law in Africa: Comparative Lessons’ available at http://conflictoflaws.net/2019/private–international–law–in–africa–comparative–lessons/last accessed on 15 February 2020.

[5]Richard Frimpong Oppong, ‘Private International Law and the African Economic Community: A Plea for Greater Attention’ The International and Comparative Law Quarterly, Vol. 55, No. 4 (Oct., 2006), Cambridge University Press pp.911-928 available at https://www.jstor.org/stable/4092623

[6]Richard Frimpong Oppong, (n 5 above).

[7] Richard Frimpong Oppong, (n 5 above).

[8]Richard Frimpong Oppong, (n 5 above).

[9]Lise Theunissen, ‘Harmonisation of Private International Law in the African Union’ available at https://www.afronomicslaw.org/2020/02/08/harmonisation–of–private–international–law–in–theafrican–union/accessed on 15 February 2020.

[10]Richard Frimpong Oppong, (n 5 above). See also A. Dickinson, “Legal Certainty and the Brussels Convention Too Much of a Good Thing?” in Pascal de Vareilles-Sommieres (ed), Forum Shopping in the European Judicial Area (Oxford, Hart Publishing, 2007), ch 6.

[11]L Collins (gen ed), Dicey, Morris and Collins, The Conflict of Laws (London, Sweet and Maxwell, 14thedn, 2006), observed at para 11-062.

[12]Richard Frimpong Oppong, (n 5 above).

[13]Chukwuma Okoli on his part believes that there has been significant progress and that is a growing interest in the study of private international law in Africa. See Chukwuma Okoli, ‘Private International Law in Africa: Comparative Lessons’ available at http://conflictoflaws.net/2019/private–internationallaw–in–africa–comparative–lessons/accessed on 15 February 2020. While this is true, he must however acknowledge that there is still a lot of room for improvement.

[14]In this regard, Lise Theunissen, (n 8 above) has lamented the lack of any efforts to establish a private international law orientated body under the African Economic Community, despite the necessity and urgent need for same.

[15]Lise Theunissen, (n 8 above).

[16]Richard Frimpong Oppong, (n 5 above).

 

 

 

 

How Chinese Courts Tackle Parallel Proceeding Issues When Offshore Arbitration Proceeding Is Involved?

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(The following case comment is written by Chen Zhi, a PhD candidate at the University of Macau?

The parallel proceeding is a long-debated issue in International Private Law, by which parties to one dispute file two or more separate dispute resolution proceedings regarding the same or similar problems. Such parallel proceedings will increase the cost and burdensome of dispute resolution, and probably result in the risk of conflicting judgements, undermining the certainty and integrity of it.
In the field of international civil and commercial litigation, parallel proceeding issue is always subject to domestic civil procedure rules or principles like lis pendens, res judicata and forum non-convenience, while the problem may be complicated when arbitration proceeding is involved. According to the New York Convention, state court which seizes the dispute has an obligation to refer the case to arbitration at the party’s request, except in case the arbitration agreement is void, inoperable or unable to be performed. Nonetheless, the New York Convention does not address the standards for the validity of arbitration agreement nor the scope of judicial review on such agreement. In particular, it is silent on the scenario where the validity of the same arbitration agreement is filed before the judges and arbitrators simultaneously. This problem can be exacerbated when the court seizure of the issue concerning validity of arbitration agreement is not the court in the place of the seat of arbitration, which in principle does not have the power to put final words on this issue.i
Some jurisdictions are inclined to employ an arbitration-friendly approach called prima facies review, by which the court will constrain from conducting a full review on the substantive facts and legal matters of the case before the tribunal decide on the jurisdictional issues, and grant a stay of litigation proceeding accordingly. This approach derives from a widely accepted principle across the world called “competence-competence” which endows the tribunal with the power to decide on its jurisdiction.ii Admittedly, prima facies review is not a corollary of the competence-competence principle. Still, it was instead thought to maximize the utility of competence-competence and enhance the efficiency of arbitration by minimizing the judicial intervention beforehand.
However, some jurisdictions like Mainland China do not employ a prima facies review, and they are reluctant to acknowledge tribunal’s priority in deciding jurisdiction issue, irrespective of the fact that the seat is outside their territories. This article aims to give a brief introduction on the most recent case decided by the Supreme People’s Court (hereinafter as SPC), and discuss how Chinese courts would like to tackle parallel proceeding.
Case Information
Keep Bright Limited?Appellant?v. SuperAuto Investments Limited and others 2013 Min Zhong Zi No. 3 (hereinafter as Keep Bright Case), decided on 20 December 2018.
Facts and background
The dispute regards four parties, among which two major ones are companies both incorporated in the British Virgin Islands: Keep Bright Limited and SuperAuto Investments Limited (hereinafter as K and S respectively). All parties signed a Letter of Intent (LOI) on 12 April 2006 regarding a complicated transaction which involved two main parts; the first part is the transfer all share of S’s Hong Kong based 100% subsidiary to K, the second part is the transfer of title of a real estate located in Zhuhai, Guangdong Province. The LOI stipulated that it shall be governed by and construed according to the Hong Kong law, while the dispute resolution clause provided that any dispute arises from the LOI can be referred to either arbitration in Hong Kong or litigation in the location of the asset.
Following the conclusion of the contract, both K and S were dissatisfied with the performance of the LOI and commenced separate dispute resolution proceedings. K initiated an arbitration before the Hong Kong International Arbitration Center (HKIAC) in March of 2010, while S filed a lawsuit against H and other parties before the Guangdong Provincial Court in April of the same year. Following two partial awards in 2011 and 2012, the HKIAC tribunal concluded the proceeding through rendering a final award in 2014, and K subsequently sought for enforcement of the awards which was granted by the Hong Kong Court of First Instance in 2015.
The litigation proceeding in Guangdong Court, instead, was still ongoing during the arbitration in Hong Kong, and for this reason, in 2011 K applied for a stay of litigation proceeding due to ongoing arbitration concerning the same matter in Hong Kong before the court, but the latter dismissed such request. The Guangdong Court issued its judgment on August 2012 which was contradictory with the awards given by the HKIAC, by using laws of Mainland China as the governing law by reason of failure to identify relating Hong Kong laws under the choice-of-law clause of LOI. The case was then appealed to the SPC, leaving two main issues to be decided: first, whether the Guangdong Court’s rejection to the stay of proceeding constituted a procedural error, and second, whether the Guangdong Court has wrongfully applied the law of Mainland China instead of the Hong Kong law.
The decision of the SPC
As for the first issue, SPC decided that parallel proceeding phenomenon shall not prejudice the jurisdiction of courts in Mainland China, except in case the arbitration awards rendered offshore has been recognized in China already. Therefore, it is proper for the Guangdong Court to continue litigation proceeding irrespective of the ongoing arbitration in Hong Kong. The SPC also noted in its final decision that H did not raise an objection to jurisdiction before the court based on the arbitration agreement.
As for the second issue, the SPC found that Guangdong Court was in error in the application of law and overturned the substantive part of the Guangdong Court’s decision, making the judgment in line with awards in Hong Kong.
Comment
By the above decision of the SPC, it’s clear that courts are in no position to decide on the stay of proceeding despite a pending arbitration outside the territory of Mainland China, with one exception that is the case of arbitration proceeding concluded, recognized and ready to be or already under enforced by Chinese courts. This approach is in line with the stipulation of the SPC’s Judicial Interpretation on Civil Procedural Law in 2015 which tackle parallel proceedings where parties have filed other litigation proceeding before courts other than Mainland China regarding the same or identical dispute. iii Though the Judicial Interpretation does not cover parallel proceeding involving arbitration, the Keep Bright Case reveals that it makes no difference. There is no comity obligation for arbitration.
Moreover, though no objection to jurisdiction was raised in Keep Bright, it is safe to conclude that Chinese courts would likely grant arbitration tribunals the priority to decide on the jurisdiction issue, even when they are not the court in the place as the seat of arbitration, which, per the New York Convention, should have no power to put the final word on the effectiveness of arbitral agreement or award. As per another case ruled in 2019, a court in Hubei Province refused to recognize and enforce a Hong Kong seated arbitral award based on the reason that court in Mainland China had decided otherwise on the jurisdictional issue, by which the recognition of such an award would constitute a breach of public policy.iv
In a nutshell, Chinese courts’ approach to coping with parallel proceeding is far from pro-arbitration, contrary to other arbitration-friendly jurisdictions like England, Singapore, France and Hong Kong SAR. Admittedly, effective negative approach is not a standard fits for all circumstances, and it may cause prejudice to the parties when the enforcement of arbitration agreement is burdensome (in particular, boiler-plate arbitration clauses in consumer agreement which are intendedly designed by the party with more substantial bargain power for circumvention of judicial proceeding). Nonetheless, in the circumstances like the Keep Bright, proceeding with two parallel processes at the same time could be oppressive to the parties’ rights. It could likely create uncertainty through conflicting results (which occurred in Keep Bright itself). With this respect, the negative effective approach seems to be the best approach to keep dispute resolutions cost and time-efficient.

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i, As per Article 5.1(a) of New York Convention, which stipulates that validity of arbitration agreement shall be subject to the law chosen by parties, failing which shall be subject to the law of the country where the award was made (arbitration seat), see also Article 6 of New York Convention which said that the enforcing court may stay the enforcement proceeding if the setting aside application is seized by competent court.
ii, For instance, English Court of Appeal stated in landmark Fiona Turst that: “[…]that it is contemplated by the Act that it will, in general, be right for the arbitrators to be the first tribunal to consider whether they have jurisdiction to determine the dispute”. Fiona Trust & Holding Corp v Privalov [2007] EWCA Civ 20, at 34. See also judicial opinions by court of Singapore in Tomolugen Holdings Ltd and another v Silica Investors Ltd and other appeals [2015] SGCA 57 , court of Hong Kong PCCW Global Ltd v Interactive Communications Service Ltd [2007] 1 HKLRD 309, and France court in Société Coprodag et autre c Dame Bohin, Cour de Cassation, 10 May 1995 (1995?
iii, See the controversial Article 533 of SPC’s Interpretation on Application of Civil Procedure Law(adopted in 2015) ,which stipulates that: “Where both the courts of the People’s Republic of China and the courts of a foreign country have jurisdiction, the People’s Court may accept a case in which one party files a lawsuit in a foreign court and the other party files a lawsuit in a court of the People’s Republic of China. After the judgment has been rendered, no application by a foreign court or request by a party to the case to the People’s Court for recognition and enforcement of the judgment or ruling made by a foreign court in the case shall be granted, unless otherwise provided in an international treaty to which both parties are parties or to which they are parties. If the judgment or ruling of a foreign court has been recognized by the people’s court, the people’s court shall not accept the case if the parties concerned have filed a lawsuit with the people’s court in respect of the same dispute.”
iv, See the decision of Yichang Intermediate Court on Automotive Gate FZCO’s application for recognition and enforcement of arbitral award in Hong Kong SAR, 2015 E Yi Zhong Min Ren No. 00002, in which the court rejected to enforce a HKIAC award on the basis that the award rendered in 2013 is contradictory with Shijiazhuang Intermediate Court’s ruling on the invalidity of arbitration agreement, which amounted to a breach of public policy in Mainland China, though the ruling was made five year later than the disputed award.

Nigeria and AfCFTA: What Role has Private International Law to Play?

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Written by Abubakri Yekini, Lecturer at Lagos State University, Nigeria.

 

The idea of economic integration is not new to Africa. It is a phenomenon that has been conceived as far back as the 1960s when many African countries gained independence. In 1980, the Organisation of African Unity (now African Union) came up a blueprint for the progressive development of Africa: the Lagos Plan of Action for the Economic Development of Africa, 1980–2000. However, the first concrete step towards achieving this objective was taken in 1991 when the African Heads of State and Government (AHSG) signed the treaty establishing the African Economic Community (AEC) (Abuja Treaty) in Nigeria.  One of the operational stages of the AEC was the creation of a Continental Free Trade Area by 2028. In 2013, the AHSG further signed a Solemn Declaration during the 50th anniversary of the African Union. The Declaration sets another blueprint for a 50-year development trajectory for Africa (Agenda 2068). Item C of that Declaration is a commitment from the Member States to the speedy implementation of the Continental Free Trade Area. At last, this is now a reality.

 

The AfCFTA was adopted 5 years later on 21st March 2018 and it became effective on 30th May 2019. It was expected that trading activities under this framework would commence in July 2020. The ongoing global pandemic and shutdown of national economies frustrated the plan. The Agreement is now scheduled to take effect from 1st January 2021.

 

Africa seems to be showing some seriousness with the AfCFTA compared to previous attempts. Concerns were initially expressed when Nigeria was reluctant to sign the Agreement (Ghana Ports and Harbours Authority, 2020; Mizner, 2019; Financial Times, 2019). Such concerns cannot be dismissed considering that Nigeria is the biggest economy in Africa and has a population of about 200 million people. Happily, the Nigerian Federal Executive Council formally approved the ratification of the Agreement on 11th November 2020(Government of Nigeria, 2020). As at today, all the African countries are members of the AfCFTA except Eritrea. We can safely say that AfCFTA has come to stay.

 

According to the United Nations Economic Commission for Africa, the AfCFTA will be the biggest single market, with a GDP of $2.5 trillion and a whooping population of 2.5 billion people across 55 countries (UNECA, 2020). By 2050, it is also projected that Africa’s population will be 2.5 billion; contributing about 26% of the world’s working-age population (UNECA, 2020). As expected, AfCFTA has been generating interesting debates. Some legal commentators have penned some thoughts on the Agreement largely from international economic/trade law perspectives (Magwape, 2018; Onyejekwe and Ekhator, 2020; Akinkugbe 2019). Only a few private international scholars have written on the framework (Theunissen, 2020; Uka, 2020).

 

Nigeria’s ratification of AfCFTA indicates that AfCFTA will become effective in Nigeria from next year, although Nigerian law requires AfCFTA to be domesticated (Abacha v. Fawehinmi [2000] 6 NWLR (Pt 660) 228). AfCFTA is projected to have significant impacts on the Nigerian economy. Although Nigeria’s trade in goods and services to other African countries stands at 19.6% (export) and 2.13% (import) as indicated in the Q4 2019 statistic (National Bureau of Statistics, 2019), it is expected that this should witness a significant growth when AfCFTA becomes effective. More intra-African trading activities would potentially lead to the increase in cross border litigation in Africa generally and Nigeria in particular. The relevant question is to what extent does Nigerian private international law support trade liberalisation agenda of AfCFTA?

 

The AfCFTA has a dispute settlement mechanism modelled along the WTO system. This affects only disputes between the Member States. The Agreement is conspicuously silent on cross-border disputes amongst private citizens and the divergent systems of law operating in the Member States. It thus appears that for the meantime, the divergent national private international rules which are obsolete in many Member States will continue to govern cross-border disputes. To what extent this can support the objective of intra-African trade facilitation is left to be seen.

 

For Nigeria, it is time we revamped the Nigerian private international law. As a prominent member of AfCFTA, Nigeria should take a special interest in the progressive development of private international law through multilateral platforms both under the AfCFTA and other global bodies such as the Hague Conference. The current lackadaisical attitude to multilateral private international rules needs to change. For instance, Nigeria has neither joined the Hague Conference nor acceded to any of its conventions. The Evidence and Service Conventions would have delivered a more efficient international civil procedure for Nigeria. Also, the 2005 Choice of Court Convention (and hopefully the 2019 Judgments Convention) would give Nigerian judgments wider circulation and respect. At the Commonwealth level, Nigeria did not pay any significant role in the making of the 2017 Commonwealth Model Law on Judgments and has no intention of domesticating it. The point we are making is that Nigeria needs to be responsive to international calls for the development of private international law, not just from AfCFTA when such is made, but also ongoing global private international law projects.

 

To reap the benefit of AfCFTA, the Nigerian justice system must be made to be attractive to foreign businesspersons. No doubt, foreign litigants will be more interested in doing business in countries that have in place an efficient, effective and credible legal system that enforce contracts and dispose of cases timeously. Nigeria will be competing with countries such as South Africa, Egypt, Rwanda and Ghana. In one recent empirical research carried out by Prof Yemi Osibajo, the current Vice President of Nigeria, on the length of trial time in civil cases in Lagos State, it takes an average of 3.4 years to resolve a civil and commercial transaction in Nigeria. A further period of 2.5 and 4.5 years is required if the matter proceeded to the Court of Appeal and the Supreme Court respectively (Osinbajo, 2011). Excessive delays in dispute resolution may make Nigeria unattractive for resolving business disputes. The other side of the coin is the enforcement of contracts, especially jurisdiction agreements. Foreign litigants may be persuaded to trade with Nigeria if they are assured that foreign jurisdiction clauses will be respected by Nigerian courts. The current approach is not too satisfactory as there are some appellate court decisions which suggest that parties’ choice may not be enforced in certain situations (Okoli, 2020b). Some of the local statutes like the Admiralty Jurisdiction Act which grants exclusive jurisdiction over a wide range of commercial matters may equally need to be reviewed.

 

Jurisdiction and judgments are inextricably linked together. Nigerian litigants should now be concerned about how Nigerian judgments would fare in other African countries. Our jurisdictional laws need to be standardised to work in harmony with those of foreign countries. Recent decisions indicate that Nigerian courts still apply local venue rules – designed to determine which judicial division should hear a matter (for geographical and administrative convenience) within a State in Nigeria – to determine jurisdiction in matters involving foreign element; consider taking steps to release property as submission; may even exercise jurisdiction based on temporary presence (Okoli, 2020a; Okoli, 2020b; Bamodu, 1995; Olaniyan, 2012; Yekini, 2013). It is doubtful if judgments from these jurisdictional grounds will be respected in other African countries, the majority of whose legal systems are not rooted in common law. In the same vein, Nigerian courts will recognise and enforce judgments from other African countries notwithstanding that Nigeria has not extended its statutory enforcement scheme to most African countries (Yekini, 2017). Nigerian judgments may not receive similar treatment in other African states as our reciprocal statute can be misconstrued to mean that their judgments are not enforceable in Nigeria without a treaty. Nigerian government should either discard the reciprocity requirement or conclude a treaty with other African states to guarantee the enforcement of Nigerian judgments abroad.

 

Boosting investors’ confidence requires some assurances from the Nigerian government for the respect of rule of law. The government’s rating is not too encouraging in this regard. In its 2020 Rule of Law Index, the World Justice Project ranked Nigeria 108 out of 128 countries surveyed (World Justice Project, 2020). This should not surprise practitioners from Nigeria.  For instance, the Nigerian government does have regard for ECOWAS judgments although court sits in Abuja, Nigeria’s Federal Capital Territory. Such judgments are hardly recognised and enforced thereby contravening art 15(4) of the ECOWAS Revised Treaty which stipulates that judgments of the court shall be binding on Member States (Adigun, 2019).

 

Lastly, AfCFTA should spark the interest of Nigerian practitioners, judges, academia, policymakers and other stakeholders in private international law matters. Nigeria cannot afford to be a spectator in the scheme of things. It should leverage on its status in Africa to drive an Afrocentric and global private international law agenda. More awareness should be created for the subject in the universities. Government and the business community should fund various programmes and research on the impact of AfCFTA, and subsequent frameworks that will be rolled out to drive AfCFTA, on the Nigerian legal system, its economy and people.

 

 

 

 

 

 

Determining the applicable law of an arbitration agreement when there is no express choice of a governing law – Enka Insaat Ve Sanayi A.S. v OOO Insurance Company Chubb [2020] UKSC 38.

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This brief note considers aspects of the recent litigation over the identification of an unspecified applicable law of an arbitration agreement having an English seat. Though the UK Supreme Court concluded that the applicable law of the arbitration agreement itself was, if unspecified, usually to be the same as that of the contract to which the arbitration agreement refers, there was an interesting division between the judges on the method of determining the applicable law of the arbitration agreement from either the law of the arbitral seat (the view favoured by the majority) or from the applicable law of the underlying contract (the view favoured by the minority). As will become clear, the author of this note finds the views of the minority to be more compelling than those of the majority.

In a simplified form the facts were that, in February 2016, a Russian power station was damaged by an internal fire. ‘Chubb’, insurer of the owners of the power station, faced a claim on its policy. In May 2019, Chubb sought to sue ‘Enka’ (a Turkish subcontractor) in Russia to recover subrogated losses. Enka objected to these Russian proceedings claiming that under the terms of its contract of engagement any such dispute was to be arbitrated via the ICC in England: in September 2019, it sought declaratory orders from the English High Court that the matter should be arbitrated in England, that the applicable law of the arbitration agreement was English, and requested an English anti-suit injunction to restrain Chubb from continuing the Russian litigation.

Neither the arbitration agreement nor the contract by which Chubb had originally engaged Enka contained a clear provision specifically and unambiguously selecting an applicable law. Though it was plain that the applicable law of the underlying contract would, by the application of the provisions of the Rome I Regulation, eventually be determined to be Russian, the applicable law of the arbitration agreement itself could not be determined as directly in this manner because Art. 1(2)(e) of the Regulation excludes arbitration agreements from its scope and leaves the matter to the default applicable law rules of the forum.

After an unsuccessful interim application in September 2019, Enka’s case came before Baker J in December 2019 in the High Court. It seems from Baker J’s judgment that Enka appeared to him to be somewhat reticent in proceeding to resolve the dispute by seeking to commence an arbitration; this, coupled with the important finding that the material facts were opposite to those that had justified judicial intervention in The Angelic Grace [1995] 1 Lloyd’s Rep 87, may explain Enka’s lack of success before the High Court which concluded that the correct forum was Russia and that there was no basis upon which it should grant an anti-suit injunction in this case.

In January 2020, Enka notified Chubb of a dispute and, by March 2020, had filed a request for an ICC arbitration in London. Enka also however appealed the decision of Baker J to the Court of Appeal and duly received its requested declaratory relief plus an anti-suit injunction. The Court of Appeal sought to clarify the means by which the applicable law of an arbitration agreement should be determined if an applicable law was not identified expressly to govern the arbitration agreement itself. The means to resolve this matter, according to the court, was that without an express choice of an applicable law for the arbitration agreement itself, the curial law of the arbitral seat should be presumed to be the applicable law of the arbitration agreement. Thus, though the applicable law of the underlying contract was seemingly Russian, the applicable law of the arbitration agreement was to be presumed to be English due to the lack of an express choice of Russian law and due to the fact of the English arbitral seat. Hence English law (seemingly wider than the Russian law on a number of important issues) would determine the scope of the matters and claims encompassed by the arbitration agreement and the extent to which they were defensible with the assistance of an English court.

In May 2020, Chubb made a final appeal to the UK Supreme Court seeking the discharge of the anti-suit injunction and opposing the conclusion that the applicable law of the arbitration agreement should be English (due to the seat of the arbitration) rather than Russian law as per the deduced applicable law of the contract to which the arbitration agreement related. The UK Supreme Court was thus presented with an opportunity to resolve the thorny question of whether in such circumstances the curial law of the arbitral seat or the applicable law of the agreement being arbitrated should be determinative of the applicable law of the arbitration agreement. Though the Supreme Court was united on the point that an express or implied choice of applicable law for the underlying contract usually determines the applicable law of the arbitration agreement, it was split three to two on the issue of how to proceed in the absence of such an express choice.

The majority of three (Lords Kerr, Hamblen and Leggatt) favoured the location of the seat as determinative in this case. This reasoning did not proceed from the strong presumption approach of the Court of Appeal (which was rejected) but rather from the conclusion that since there had been no choice of applicable law for either the contract or for the arbitration agreement, the law with the closest connection to the arbitration agreement was the curial law of the arbitral seat. As will be seen, the minority (Lords Burrows and Sales) regarded there to have been a choice of applicable law for the contract to be arbitrated and proceeded from this to determine the applicable law of the arbitration agreement.

The majority (for the benefit of non-UK readers, when there is a majority the law is to be understood to be stated on this matter by  that majority in a manner as authoritative as if there had been unanimity across all five judges) considered that there was no choice of an applicable law pertinent to Art.3 of Rome I in the underlying contract by which Enka’s services had been engaged. It is true that this contract did not contain a helpful statement drawn from drafting precedents that the contract was to be governed by any given applicable law; it did however make many references to Russian law and to specific Russian legal provisions in a manner that had disposed both Baker J and the minority in the Supreme Court to conclude that there was indeed an Art.3 choice, albeit of an implied form. This minority view was based on a different interpretation of the facts and on the Giuliano and Lagarde Report on the Convention on the law applicable to contractual obligations (OJ EU No C 282-1). The majority took the view that the absence of an express choice of applicable law for the contract must mean that the parties were unable to agree on the identity of such a law and hence ‘chose’ not to make one. The minority took the view that such a conclusion was not clear from the facts and that the terms of the contract and its references to Russian law did indicate an implied choice of Russian law. As the majority was however unconvinced on this point, they proceeded from Art.3 to Art.4 of Rome I and concluded that, in what they regarded as the absence of an express or implied choice of applicable law for the contract, Russian law was the applicable law for the contract.

For the applicable law of the arbitration agreement itself, the majority resisted the idea that on these facts their conclusion re the applicable law of the contract should also be determinative for the applicable law of the arbitration agreement. Instead, due to the Art.1(2)(e) exclusion of arbitration agreements from the scope of the Regulation, the applicable law of the arbitration agreement fell to be determined by the English common law. This required the identification of the law with which the arbitration agreement was ‘most closely connected’. Possibly reading too much into abstract notions of international arbitral practice, the majority concluded that, in this case, the applicable law of the arbitration agreement should be regarded as most closely connected to the curial law of the arbitral seat. Hence English law was the applicable law of the arbitration agreement despite the earlier conclusion that the applicable law of the contract at issue was Russian.

As indicated, the minority disagreed on the fundamental issue of whether or not there had been an Art.3 implied choice of an applicable law in the underlying contract. In a masterful dissenting judgment that is a model of logic, law and clarity, Lord Burrows, with whom Lord Sales agreed, concluded that this contract contained what for Art.3 of Rome I could be regarded as an implied choice of Russian law as ‘… clearly demonstrated by the terms of the contract or the circumstances of the case’. This determination led to the conclusion that the parties’ implied intentions as to the applicable law of the arbitration agreement were aligned determinatively with the other factors that implied Russian law as the applicable law for the contract. Russian law was (for the minority) thus the applicable law of the underlying contract and the applicable law of the ICC arbitration (that, by March, 2020 Enka had acted to commence) was to take place within the English arbitral seat in accordance its English curial law. Lord Burrows also made plain that if had he concluded that there was no implied choice of Russian law for the contract, he would still have concluded that the law of the arbitration agreement itself was Russian as he considered that the closest and most substantial connection of the arbitration agreement was with Russian law.

Though the views of the minority are of no direct legal significance at present, it is suggested that the minority’s approach to Art.3 of the Rome I Regulation was more accurate than that of the majority and, further, that the approach set out by Lord Burrows at paras 257-8 offers a more logical and pragmatic means of settling any such controversies between the law of the seat and the law of the associated contract. It is further suggested that the minority views may become relevant in later cases in which parties seek a supposed advantage connected with the identity of the applicable law of the arbitration. When such a matter will re-occur is unclear, however, though the Rome I Regulation ceases to be directly applicable in the UK on 31 December 2020, the UK plans to introduce a domestic analogue of this Regulation thereafter. It may be that a future applicant with different facts will seek to re-adjust the majority view that in the case of an unexpressed applicable law for the contract and arbitration agreement that the law of the seat of the arbitration determines the applicable law of the arbitration agreement.

As for the anti-suit injunction, it will surprise few that the attitude of the Court of Appeal was broadly echoed by the Supreme Court albeit in a more nuanced form. The Supreme Court clarified that there was no compelling reason to refuse to consider issuing an anti-suit injunction to any arbitral party who an English judge (or his successors on any appeal) has concluded can benefit from such relief. They clarified further that the issuance of an anti-suit injunction in such circumstances does not require that the selected arbitral seat is English. The anti-suit injunction was re-instated to restrain Chubb’s involvement in the Russian litigation proceedings and to protect the belatedly commenced ICC arbitration.

 

The enforcement of Chinese money judgments in common law courts

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By Jack Wass (Stout Street Chambers, Wellington, New Zealand)

 

In the recent decision of Hebei Huaneng Industrial Development Co Ltd v Shi,[1] the High Court of New Zealand was faced with an argument that a money judgment of the Higher People’s Court of Hebei should not be enforced because the courts of China are not independent of the political arms of government and therefore do not qualify as “courts” for the purpose of New Zealand’s rules on the enforcement of foreign judgments.

The High Court rejected that argument: complaints of political interference may be relevant  if a judgment debtor can demonstrate a failure to accord natural justice in the individual case, or another recognized defence to enforcement, but there was no basis for concluding that Chinese courts were not courts at all.

As the court noted, complaints about the independence or impartiality of foreign courts might arise in two circumstances. Where the court was deciding whether to decline jurisdiction in favour of a foreign court, it would treat allegations that justice could not be obtained in the foreign jurisdiction with great wariness and caution.[2] Where the issue arose on an application to enforce a foreign judgment, the enforcement court has the benefit of seeing what actually happened in the foreign proceeding, and can assess whether the standards of natural justice in particular were met. Simply refusing to recognize an entire foreign court system would give rise to serious practical problems,[3] as well as risk violating Cardozo J’s famous dictum that courts “are not so provincial as to say that every solution of a problem is wrong because we deal with it otherwise at home.”[4]

The judge found that Chinese courts were distinct from the legislative and administrative bodies of the state, and that although there was evidence to suggest that Chinese judges sometimes felt the need to meet the expectations of the local people’s congress or branch of the Communist Party, this did not justify refusing to recognize the court system as a whole. In a commercial case resolved according to recognizably judicial processes, where there was no suggestion of actual political interference, the judgment could be recognized.

[1] Hebei Huaneng Industrial Development Co Ltd v Shi [2020] NZHC 2992. The decision arose on an application to stay or dismiss the enforcement proceeding at the jurisdictional stage.

[2] Altimo Holdings and Investment Ltd v Kyrgyz Mobil Tel Ltd [2011] UKPC 7, [2012] 1 WLR 1804.

[3] The judge noted that the House of Lords had rejected the argument that it should not recognize the courts of the German Democratic Republic (Carl Zeiss Stiftung v Rayner &  Keeler Ltd (No 2) [1967] 1 AC 853), and the Second Circuit Court of Appeals was not persuaded that justice could not be done in Venezuela (Blanco v Banco Industrial de Venezuela 997 F 2d 974 (2nd Cir 1993)). By contrast, a Liberian judgment was refused recognition in Bridgeway Corp v Citibank 45 F Supp 2d 276 (SDNY 1999), 201 F 3d 134 (2nd Cir 2000) where there was effectively no functioning court system.

[4] Loucks v Standard Oil Co 224 NY 99 (1918).

The Contractual Function of a Choice of Court Agreement in Nigerian Jurisprudence (Part 2)

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  1. Introduction

In my last blog post, I made mention of a Nigerian Court of Appeal decision that applied the principle of contract law exclusively to a foreign jurisdiction clause.[1] In that case, applying the principles of Nigerian contract law, the Nigerian Court of Appeal held that the alleged choice of court agreement in favour of Benin Republic was unenforceable because the terms were not clear and unambiguous in conferring jurisdiction on a foreign forum.[2]

The purpose of this blog post is to analyse a more recent Nigerian Court of Appeal decision where the court gave full contractual effect to the parties’ choice of court agreement by strictly enforcing a Dubai choice of court agreement.[3]

2. Facts

Damac Star Properties LLC v Profitel Limited (“Damac”)[4] was the fall out of an investment introduced to the 1st plaintiff/respondent by the 2nd respondent allegedly on behalf of the defendant/appellant wherein the 1st plaintiff/respondent paid a deposit of 350,000.00 US Dollars for 9 apartments in Dubai and being 20% of the total cost of the apartments. The contract between the 1st plaintiff/respondent and defendant/appellant contained an exclusive choice of court clause in favour of Dubai. There was a dispute between the parties as to some of the terms of the contract. This resulted in the defendant/appellant selling the apartments to another buyer. The 1st plaintiff/respondent requested for a refund of the deposit that was paid to the defendant/appellant, but its request was declined. As a result of this, the 1st plaintiff/respondent initiated a suit for summary judgment in High Court, Federal Capital Territory, Nigeria, against the defendant/appellant and the 2nd respondent, and got an order to serve the defendant/appellant through the 2nd respondent, its alleged agent in Nigeria. At this stage, the defendant/appellant did not appear and was unrepresented in proceedings at the High Court. The High Court proceeded to hear the suit and entered judgment against the defendant/appellant with an order to refund the sum of 350,000.00 US Dollars with 10% interest from date of judgment till the judgment sum was fully liquidated. The defendant/appellant applied to the High Court to set aside the judgment, but the court dismissed the application.

3. Decision

The defendant/appellant appealed to the Court of Appeal. The Court of Appeal unanimously allowed the appeal. The Court of Appeal held on the basis of the exclusive choice of court agreement in favour of Dubai – which it regarded as valid – the lower court should not have assumed jurisdiction.

4. Judicial statements in Support of Damac

As stated in my last blog post, there is now a trend among appellate Courts in Nigeria (Court of Appeal and Supreme Court) to give choice of court agreements a contractual function. Damac Star Properties LLC (supra) is one of the cases where the Court of Appeal simply gives a choice of court agreement a contractual function without considering whether the choice of court agreement ousted the jurisdiction of the Nigerian courts, or whether Nigeria was the forum conveneins for the action.[5] This point is important, as it appears that there is now some movement in Nigerian jurisprudence towards giving choice of court agreements a contractual function. Given that Nigeria is a common law jurisdiction, it is worth quoting statements from some Nigerian Supreme Court and Court of Appeal judges that have given a choice of court agreements a contractual function.

Nnamani JSC opined that: “I think that in the interest of international commercial relations courts have to be wary about departing from fora chosen by parties in their contract. There ought to be very compelling circumstances to justify such a departure.”[6]

Tobi JSC observed: “The bill of lading contains the contractual terms [foreign jurisdiction clause] between the parties and therefore binding on the parties. Parties are bound by the conditions and terms in a contract they freely enter into… The meaning to be placed on a contract is that which is the plain, clear and obvious result of the terms used… When construing documents in dispute between two parties, the proper course is to discover the intention or contemplation of the parties and not to import into the contract ideas not potent on the face of the document… Where there is a contract regulating any arrangement between the parties, the main duty of the court is to interpret that contract and to give effect to the wishes of the parties as expressed in the contract document… The question is not what the parties to the documents may have intended to do by entering into that document, but what is the meaning of the word used in the document… While a contract must be strictly construed in accordance with the well-known rules of construction, such strict construction cannot be aground for departing from the terms which had been agreed by both parties to the contract… It is the law that parties to an agreement retain the commercial freedom to determine their own terms. No other person. Not even the court, can determine the terms of contract between parties thereto. The duty of the court is to strictly interpret the terms of the agreement on its clear wordings… Finally, it is not the function of a court of law either to make agreements for the parties or to change their agreements as made.”[7]

In Conoil Plc v Vitol SA,[8] the Supreme Court Justices were unanimous on the contractual effect of a choice of court agreement. Nweze JSC in his leading judgment stated that: “In all, the truth remains that if parties, enter into an agreement, they are bound by its terms.”[9] Okoro JSC concurred that: “The law is quite’ settled that parties are bound by the contract they voluntarily enter into and cannot act outside the terms and conditions contained in the said contract. When parties enter into a contract, they should be careful about the terms they incorporate into the contract because the law will hold them bound by those terms. No party will be allowed to read into the contract terms on which there has been no agreement. Any of the parties who does so violates the terms of that contract…. Having agreed that any dispute arising from the contract should be settled at the English court, the appellant was bound by the terms of the contract.”[10] Eko JSC also concurred that: “Where parties, fully cognizant of their rights, voluntarily elect and nominate the forum for the resolution of any dispute arising from their contract, with international flavour as the instant, the courts always respect and defer to their mutual wishes and intention. The courts only need to be satisfied that, in their freedom of contract, the parties negotiated and agreed freely to subject their dispute to the laws and country of their choice.”[11]

Owoade JCA held that: “…it is pertinent to observe that as a general rule in the relationship between national law and international Agreements, freely negotiated private international agreement, unsullied by fraud, undue influence or overwhelming bargaining power would be given full effect. This means that, where such contract provides for a choice of forum, such clause would be upheld unless upholding it would be contrary to statute or public policy of the forum in which the suit is brought.”[12]

In Beaumont Resources Ltd v DWC Drilling Ltd,[13] the Court of Appeal Justices were unanimous on the contractual effect of a choice of court agreement. Otisi JCA held that: “…it is settled that, in the absence of fraud, misrepresentation and illegality, parties to an agreement or contract are bound by the terms and conditions of the contract they signed… It is also well established that the Court cannot make contracts for the parties, rewrite the contract or go outside the express terms of the contract to enforce it…”[14] Sankey JCA concurred that: “The Court of law, on the other hand, must always respect the sanctity of the agreement of the parties – the role of the Court is to pronounce on the wishes of the parties and not to make a contract for them or to rewrite the one they have already made for themselves. The judicial attitude or disposition of the Court to terms of agreement freely entered into by parties to contract is that the Court will implement fully the intention of the contracting parties. This is anchored on the reasoning that where the terms of a contract are clear and unambiguous, the duty of the Court is to give effect to them and on no account should it re-write the contract for the parties. In the absence of fraud, duress or misrepresentation, the parties are bound to the contract they freely entered into.”[15]

The above judicial statements are replete with applying the principles of Nigerian contract law to the terms of a choice of court agreement. In essence, parties are bound by the clear and unambiguous terms of a choice of court agreement, which the Nigerian court will strictly enforce.  On this score, Damac is on strong footing and unassailable.

5. Judicial decisions that might be against Damac

Some of the above stated judicial cases, though giving a choice of court agreement a contractual function also considered whether such agreements oust the jurisdiction of the Nigerian court, and whether Nigeria was the more appropriate forum to resolve such disputes despite the presence of a choice of court agreement. Damac is one of the few Court of Appeal cases that exclusively give a choice of court agreement a contractual function without a consideration of whether it is an ouster clause or the Nigerian Court is the forum conveniens.[16]

            5.1 Ouster Clause

On the issue of ouster clause, in the early case of Ventujol v Compagnie Francaise De L ’ Afrique Occidentale,[17] Ames J held that in a contract of employment which was entered into in France to be performed in Nigeria, where the defendant also had agents (in Nigeria), the clause for submission of disputes to a Tribunal de Commerce de Marseilles (a French Court at that time) was an agreement to oust the jurisdiction of the court and of no effect. Similarly, in Allied Trading Company Ltd v China Ocean Shipping Line,[18] the plaintiff sought to recover damages for non-delivery of goods. The defendant entered an unconditional appearance, admitted the goods were lost, and denied liability on the grounds, inter alia, that the court had no jurisdiction since the parties had agreed that all disputes arising under or in connection with the bill of lading should be determined in the People’s Republic of China. It was held, inter alia, that this provision purported to oust the jurisdiction of the Nigerian court entirely and was therefore contrary to public policy. In Sonnar (Nig) Ltd v Partenreedri MS Norwind[19]  Oputa JSC opined  that as a matter of public policy Nigerian Courts “should not be too eager to divest themselves of jurisdiction conferred on them by the Constitution and by other laws simply because parties in their private contracts chose a foreign forum … Courts guard rather jealously their jurisdiction and even where there is an ouster clause of that jurisdiction by Statute it should be by clear and unequivocal words. If that is so, as is indeed it is, how much less can parties by their private acts remove the jurisdiction properly and legally vested in our Courts? Our courts should be in charge of their own proceedings. When it is said that parties make their own contracts and that the courts will only give effect to their intention as expressed in and by the contract, that should generally be understood to mean and imply a contract which does not rob the Court of its jurisdiction in favour of another foreign forum.”[20]

If the above judicial postulations were given literal effect by the Court of Appeal in Damac the exclusive choice of court agreement in favour of Dubai would be regarded as null and void. In effect, treating a choice of court agreement as an ouster clause has the effect of making a choice of court agreement illegal, unlawful or at best unenforceable. Recently, Nweze JSC has interpreted the concept of ouster clause to the effect “that our courts will only interrogate contracts which are designed to rob Nigerian courts of their jurisdiction in favour of foreign fora or where, by their acts, they are minded to remove the jurisdiction, properly and legally, vested in Nigerian courts.”[21] I will interpret Nweze JSC’s statement to mean that where a Nigerian court as a matter of state interest is exclusively vested by statute, the constitution or common law with a subject matter, then no foreign court can have jurisdiction in such matters.[22] Under common law, a clear example of this is a matter relating to immovable property, where the Nigerian court has exclusive jurisdiction. So the implication of this is that the concept of ouster clause has very limited effect in Nigerian jurisprudence.

       5.2 Brandon Tests

Damac did not consider the application of the Brandon tests in Nigerian jurisprudence. The Brandon test is a form of application of forum non conveniens to choice of court agreements.

Brandon J, in The Eleftheria,[23] delivered a brilliant decision on this subject. The decision provided comprehensive guidelines that the English court should take into account in deciding whether to give effect to a foreign jurisdiction clause. This is often referred to as “the Brandon test” in Nigerian jurisprudence. Nigerian courts have regularly referred to the Brandon test and utilised it with approval in decided cases.[24] The test is stated hereunder as follows (as it has been referred to and applied) in the Nigerian context: 1. Where plaintiffs sue in Nigeria in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the Nigerian court, assuming the claim to be otherwise within the jurisdiction is not bound to grant a stay but has a discretion whether to do so or not. 2. The discretion should be exercised by granting a stay unless strong cause for not doing it is shown. 3. The burden of proving such strong cause is on the plaintiffs. 4. In exercising its discretion the court should take account of all the circumstances of the particular case. 5. In particular, but without prejudice to (4), the following matters where they arise, may be properly regarded: (a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the Nigerian and foreign courts. (b) Whether the law of the foreign court applies and, if so, whether it differs from Nigerian law in any material respects. (c) With what country either party is connected and how closely (d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages. (e) Whether the plaintiff s would be prejudiced by having to sue in the foreign country because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in Nigeria; or (iv) for political, racial, religious, or other reasons be unlikely to get a fair trial (v) the grant of a stay would amount to permanently denying the plaintiff any redress.

The only reported cases where the plaintiff(s) have successfully relied on the Brandon test is where their claim is statute barred in the forum chosen by the parties.[25] Indeed, the burden is on the plaintiff to show strong cause why Nigerian proceedings should be stayed in breach of a choice of court agreement; if not Nigerian courts will give effect to the choice of court agreement.[26]

In Damac, the plaintiff did not demonstrate strong reasons why the choice of court agreement should not be enforced. So even if the Brandon test was considered by the Court of Appeal, the claimant will not have succeeded.

6. Some Reservations

There are three reservations I have about the Court of Appeal’s decision in Damac. First, the Court of Appeal should have ordered a stay of proceedings rather than holding that the lower court did not have jurisdiction. This is what is done in other common law countries. There is wisdom in this approach. If it turns out that the claimant cannot institute its claims in Dubai, the Nigerian forum should remain available to promptly institute its actions against the defendant in this case.

Second the Court of Appeal held that jurisdiction can be raised for the first time on appeal. This statement only applies to substantive jurisdiction. Procedural jurisdiction cannot be raised on appeal for the first time. Thus, if it is established that the defendant/appellant did not promptly raise the issue of choice of court agreement in favour of Dubai at the High court, this might be a ground upon which the defendant/appellant can successfully challenge the decision of the Court of Appeal. This is because the issue of choice of court agreement is a procedural matter and a defendant that wants to raise the issue of choice of court agreement must do so promptly, or it will be deemed to have waived its right by submitting to the jurisdiction of the Nigerian court.

Finally, the Court of Appeal made wrong reference to choice of venue rules[27] as applicable, assuming the choice of court agreement in this case is invalid. Choices of venue rules are only applicable to determine the judicial division to institute a matter for geographic convenience. For example, Lagos State has four judicial divisions: Lagos, Ikeja, Epe and Ikorodu. In the event there is a dispute as to which of the judicial divisions should hear a matter, the rules of court are to be relied on.[28] Choice of venue rules do not apply to determine private international law matters as in this case.

In particular, given that Damac was a contractual private international law matter where the defendant was neither resident or submitted to the jurisdiction of the court,[29] Order 8(1)(e)(ii) of the High Court of Federal Capital Territory, Abuja (Civil Procedure) Rules, 2018 may have been considered.[30] Order 8(1)(e)(ii) provides that the court may allow any originating or other processes to be served outside Nigeria where: the claim is brought against a defendant to enforce, rescind, dissolve, annul or otherwise affect a contract or to recover damages or other relief for or in respect of a contract made by or through an agent residing or carrying on business within jurisdiction on behalf of a principal residing or carrying on business outside jurisdiction.

7. Conclusion

Damac is a recent trend among Nigerian courts to give a choice of court agreement a contractual function. Indeed, Damac is one of the few cases where issues of ouster clause and forum non conveniens no longer feature in the judgment of the court. There are good reasons why a choice of court agreement should be strictly enforced contractually. It promotes certainty and enhances the efficacy of international commercial transactions. However, given contractual enforcement to a choice of court agreement should only be regarded as a general rule and not an absolute rule. Nigerian courts should retain its discretion not to enforce choice of court agreements especially in the interest of justice and the protection of economically weaker parties.

[1]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90.

[2] Ibid  114-6.

[3] Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699(CA).

[4] Ibid.

[5]For an extended analysis see generally CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart, 2020) 107 – 125.

[6]Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, 541.

[7] Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509, 542-3.

[8] ( 2018 ) 9 NWLR 463, 489.

[9] Ibid

[10]Ibid 500-1.

[11]Ibid 502.

[12] Captain Tony Nso v Seacor Marine ( Bahamas) Inc ( 2008 ) LPELR-8320 (CA) 12-3.

[13]( 2017 ) LPELR-42814.

[14] Ibid 30.

[15]Ibid 49-50.

[16] See also Megatech Engineering Limited v Sky Vision Global Networks Llc (2014) LPELR-22539 (CA); Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90; Unipetrol Nigeria Ltd v Prima Alfa Enterprises (Nig) Ltd ( 1986 ) 5 NWLR 532.

[17] (1949) 19 NLR 32.

[18] (1980) (1) ALR Comm 146.

[19](1987) 4 NWLR 520.

[20] Ibid 544-5.

[21] Conoil Plc v Vitol SA ( 2018 ) 9 NWLR 463, 489

[22]See generally CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart, 2020) 117 – 124.

[23]The Owners of Cargo Lately Laden on Board the Ship or Vessel ‘ Elftheria ’ v ‘ The Elftheria ’ (Owners), ‘ Th e Elft heria ’ [1969] 1 Lloyd ’ s Rep 237.

[24] See generally GBN Line v Allied Trading Limited ( 1985 ) 2 NWLR (Pt. 5) 74 ; Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520 ; Nika Fishing Company Ltd v Lavina Corporation ( 2008 ) 16 NWLR 509 ; Captain Tony Nso v Seacor Marine ( Bahamas ) Inc ( 2008 ) LPELR-8320 (CA) ; Beaumont Resources Ltd v DWC Drilling Ltd ( 2017 ) LPELR-42814 (CA) .

[25] Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520.

[26] Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509.

[27] In applying the choice of venue rules of Abuja on matters of contract, it considered where the contract was made, place of performance and residence of the parties as prescribed in the rules of court.

[28] Order 4 of the High Court of Lagos (Civil Procedure) Rules 2019 (formerly Order 2 of the High Court of Lagos (Civil Procedure) Rules 2012).

[29]In Nigerian common law private international law, a court has jurisdiction as a matter of right where the defendant is either resident or submits to the jurisdiction of the court. See generally CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart, 2020) 50 -86.

[30]This is on the assumption that there was no valid choice of court agreement.

 

 

Changzhou Sinotype Technology Co., Ltd, Hague Service Convention and Judgment Enforcement in China

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Jie (Jeanne) Huang, University of Sydney Law School, Australia

 

Changzhou Sinotype Technology Co, Ltd. v. Rockefeller Technology Investments (Asia) VII is a recent case decided by the Supreme Court of California on April 2, 2020. The certiorari to the Supreme Court of the US was denied on 5 October 2020. It is a controversial case concerning the interpretation of the Convention on the Service Abroad of Judicial and Extra Judicial Documents in Civil or Commercial Matters of November 15, 1965 (the “Hague Service Convention”) for service of process in China.

  1. Facts:

Changzhou SinoType Technology Co. (SinoType) is based in China. Rockefeller Technology Investments (Asia) VII (Rockefeller) is an American investment firm. In February 2008, they signed a memorandum of understanding (MOU) which provided that:

“6. The parties shall provide notice in the English language to each other at the addresses set forth in the Agreement via Federal Express or similar courier, with copies via facsimile or email, and shall be deemed received 3 business days after deposit with the courier.

7. The Parties hereby submit to the jurisdiction of the Federal and State courts in California and consent to service of process in accord with the notice provisions above.

8. In the event of any disputes arising between the Parties to this Agreement, either Party may submit the dispute to the Judicial Arbitration & Mediation Service in Los Angeles for exclusive and final resolution pursuant to according to [sic] its streamlined procedures before a single arbitrator who shall have ten years judicial service at the appellate level, pursuant to California law, and who shall issue a written, reasoned award. The Parties shall share equally the cost of the arbitration. Disputes shall include failure of the Parties to come to Agreement as required by this Agreement in a timely fashion.”

Due to disputes between the parties, in February 2012, Rockefeller brought an arbitration against SinoType. SinoType was defaulted in the arbitration proceeding. According to the arbitrator, SinoType was served by email and Federal Express to the Chinese address listed for it in the MOU. In November 2013, the arbitrator found favorably for Rockefeller.

Instead of enforcing the award in China according to the New York Convention,[1] Rockefeller petitioned to confirm the award in State courts in California. Cal. Civ. Proc. Code § 1290.4(a) provides that a petition to confirm an arbitral award “shall be served in the manner provided in the arbitration agreement for the service of such petition and notice.” Therefore, Rockefeller transmitted the summons and its petition to SinoType again through FedEx and email according to paragraph 7 of the MOU. SinoType did not appear and the award was confirmed in October 2014. SinoType then appeared specially and applied to set aside the judgment. It argued that the service of the Californian court proceeding did not comply with the Hague Service Convention; therefore, it had not been duly served and the judgment was void.

  1. Decision

The California Supreme Court rejected SinoType’s argument.

The Court discerned three principles for the application of the Hague Service Convention. First, the Convention applies only to “service of process in the technical sense” involving “a formal delivery of documents”. The Court distinguished “service” and “notice” by referring to the Practical Handbook on the Operation of the Service Convention, published by the Permanent Bureau of the Hague Conference on Private International Law (‘Handbook’). The Court cited that

“the Convention cannot—and does not—determine which documents need to be served. It is a matter for the lex fori to decide if a document needs to be served and which document needs to be served. Thus, if the law of the forum states that a notice is to be somehow directed to one or several addressee(s), without requiring service, the Convention does not have to be applied.”[2]

Second, the law of the sending forum (i.e. the law of California) should be applied to determine whether “there is occasion to transmit a judicial or extrajudicial document for service abroad.”

Third, if formal service of process is required under the law of the sending forum, the Hague Convention must be complied for international transmission of service documents.

The court held that the parties have waived the formal service of process, so the Hague Service Convention was not applicable in this case.[3]

  1. Comments

The Changzhou Sinotype Technology Co, Ltd has a number of interesting aspects and has been commented such as here, here and here.

First, the Hague Service Convention is widely considered as ‘non-mandatory’ but ‘exclusive’.[4]  Addressing the non-mandatory nature of the Convention, the Handbook states that “the Convention can not—and does not—determine which documents need to be served. It is a matter for the lex fori to decide if a document needs to be served and which document needs to be served.”[5] However, this statement does not necessarily mean, when judicial documents are indeed transmitted from a member state to another to charge a defendant with notice of a pending lawsuit, a member state can opt out of the Convention by unilaterally excluding the transmission from the concept of service. Volkswagen Aktiengesellschaft v Schlunk decided by the Supreme Court of the US and Segers and Rufa BV v. Mabanaft GmbH decided by the Supreme Court of the Netherlands (Hoge Raad) are the two most important cases on the non-mandatory nature of the Convention. Both cases concentrate on which law should be applied to whether a document needed to be transmitted abroad for service.[6] However, Rockefeller is different because it is about which law should be applied to determine the concept of service when the transmission of judicial documents takes place in the soil of another member state. The Handbook provides that the basic criterion for the Convention to apply is “transmission abroad” and “place of service is determining factor”.[7] When judicial documents are physically transmitted in the soil of a member state, allowing another member state to unilaterally determine the concept of service in order to exclude the application of the Convention will inappropriately expand the non-mandatory character of the Convention. This will inevitably narrow the scope of the application of the Convention and damage the principle of reciprocity as the foundation of the Convention. The Hague Convention should be applied to Rockefeller because the summons and petitions were transmitted across border for service in China.

Second, as part of its accession to the Hague Convention, China expressly stated that it does not agree to service by mail.  Indeed, the official PRC declarations and reservations to the Hague Convention make it clear that, with the limited exception of voluntary service on a foreign national living in China by his country’s own embassy or consulate, the only acceptable method of service on China is through the Chinese Central Authority. Therefore, although China has recognized monetary judgments issued in the US according to the principle of reciprocity, the judgment of Changzhou Sinotype Technology Co, Ltd probably cannot be recognized and enforced in China.

The California Supreme Court decision has important implications. For Chinese parties who have assets outside of China, they should be more careful in drafting their contracts because Changzhou Sinotype Technology Co, Ltd shows that a US court may consider their agreement on service by post is a waiver of China’s reservation under the Hague Service Convention. For US parties, if Chinese defendants only have assets in China for enforcement, Changzhou Sinotype Technology Co, Ltd is not a good case to follow because the judgment probably cannot be enforced in China.

 

 

[1] China is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, Jun. 10, 1958, 21 U.S.T. 2517, 330 U.N.T.S. 38 (“New York Convention”).

[2] Practical Handbook on the Operation of the Service Convention (4th ed. 2016) par. 54, p. 23, fn. Omitted.

[3] The Court emphasized that their conclusions should be limited to Section 1290.4, subdivision (a): “Our conclusions as to California law are narrow. When parties agree to California arbitration, they consent to submit to the personal jurisdiction of California courts to enforce the agreement and any judgment under section 1293. When the agreement also specifies the manner in which the parties “shall be served,” consistent with section 1290.4, subdivision (a), that agreement supplants statutory service requirements and constitutes a waiver of formal service in favor of the agreed-upon method of notification. If an arbitration agreement fails to specify a method of service, the statutory service requirements of section 1290.4, subdivisions (b) or (c) would apply, and those statutory requirements would constitute formal service of process. We express no view with respect to service of process in other contexts.”

[4] Martin Davies et al., Nygh’s Conflict of Laws in Australia 36 (10th ed. 2020).

[5] Paragraph 54 of the Handbook.

[6] Ibid., paragraphs 31-45, and 47.

[7] Ibid., paragraph 16.

The Contractual Function of a Choice of Court Agreement in Nigerian Jurisprudence

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Many international commercial parties usually provide for a choice of court agreement as a term of their contract. This is done to enhance predictability, certainty and reduction of costs in the event a dispute arises between the parties. Since a choice of court agreement is a term of the contract, does the principle of contract law apply to determine a choice of court agreement? Though this is a matter of controversy in Nigerian law,[1] some recent appellate courts (Court of Appeal and Supreme Court) have  given a foreign choice of court agreement a contractual function.[2]

Kashamu v UBN Plc[3] is a most recent Court of Appeal decision that analyses a foreign choice of court agreement exclusively from the principles of contract law. In this case, The Banque International Du Benin (“BIDB”), a limited financial institution in Benin Republic, granted medium term loan facilities, in different sums, to the Societe d’ Egrenage Industrial De Cotonu du Benin (“SEIC-B”), a private limited company registered in Benin Republic, for construction of its Cotton Ginning factory. The facilities were secured by, inter alia, SEIC-B’s goodwill, factory and land. In addition, the defendant/appellant, the alter ego of SEIC-B, personally guaranteed the facilities in a personal guarantee agreement. The loan agreement between BIDB and SEICB provided that the law and courts of Benin Republic should determine their dispute. However, the guarantee agreement between BIDB and the defendant/appellant did not explicitly provide for a choice of court agreement.

SEIC-B defaulted in the repayment of the loans despite repeated demands. As a result, BIDB appointed the plaintiff/respondent, a public limited financial institution in Nigeria, as its attorney to recover the outstanding facility. Further to the donated power of attorney, the plaintiff/respondent claimed recovery of the debt from the defendant/appellant in the Lagos High Court, Nigeria. The defendant/appellant counter-claimed and also challenged the jurisdiction of the Lagos High Court as being the wrong forum to institute the action. The Lagos High Court held that it had jurisdiction.

The defendant/appellant was dissatisfied with this decision and appealed to the Court of Appeal. The defendant/appellant argued that the proper forum for the action was the Courts in Benin Republic, given that the loan agreement between BIDB and SEICB provided that the law and courts of Benin Republic should determine their dispute. He argued that the choice of court agreement in the loan contract should also be incorporated into the guarantee agreement, so that it was the intention of the parties that the courts  of Benin Republic should determine their dispute. He also argued that the execution and performance of the contract were to be in Benin Republic hence the agreement was in French Language.

The plaintiff/respondent argued that the loan agreement and guarantee agreement were distinct. It observed that the parties were bound by the terms in the guarantee agreement. It added that the parties in the guarantee agreement did not agree that the court in Benin Republic would have exclusive jurisdiction over disputes arising from it. It asserted that the guarantee agreement was not expressly incorporated in the loan agreement. It opined that the defendant/appellant was not privy to the loan agreement and would not take a benefit from or enforce it for want of privity of contract. It claimed that the content of the guarantee agreement was clear and must be given its literal meaning.

The Court of Appeal unanimously dismissed the appeal. In construing the loan and guarantee agreement to determine if the parties chose the courts of Benin Republic, it applied the principles of Nigerian contract law to the effect that courts are allowed to read a document holistically so as to reach and garner harmonious results of its content. In construing a document, the court is enjoined or mandated by law to apply the literal rule as a canon of interpretation, that is, to accord the words employed there in their ordinary grammatical meaning without any embellishment.[4] It then held that for the document of parties to a private contract to confer jurisdiction on a court, the words used must be clear and explicit and devoid of woolliness and ambiguity. In the instant case, the guarantee contract did not precisely confer jurisdiction on the Benin Republic court.[5] It further held that loan contract did not in any way allude to the guarantee to benefit from the doctrine of incorporation by reference. The doctrine of incorporation could not be invoked because of the want of connection between the two documents.[6]

Kashamu’s case demonstrates the recent attitude of some Nigerian appellate courts to treat choice of court agreements as a term of the contract which should be construed strictly according to the literal and ordinary words used in the contract. In effect in the absence of vitiating circumstances, the parties are bound by the terms of a choice of court agreement, and a Nigerian court will not add or subtract from the way the parties drafted the contract. The Court of Appeal’s approach in Kashamu reflected Nigeria’s law that interprets contractual documents strictly. Kashamu is a modern approach that applies the principles of contract law to choice of court agreements.

[1]For an extended analysis see generally CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart, 2020) 107 – 125.

[2]Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509, 542 (Tobi JSC); Conoil Plc
v Vitol SA ( 2018 ) 9 NWLR 489 – 490 (Nweze JSC); 497 (Kekere-Ekun JSC); 500 (Okoro JSC); 501 – 2
(Eko JSC); Captain Tony Nso v Seacor Marine ( Bahamas) Inc ( 2008 ) LPELR-8320 (CA); Megatech Engineering Limited v Sky Vision Global Networks Llc (2014) LPELR-22539 (CA); Beaumont Resources Ltd v DWC Drilling Ltd ( 2017 ) LPELR-42814 (CA); Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90. See also Felshade International (Nig.) Ltd v Trafugura Beheer BV Amsterdam (2020) 14 NWLR (Pt. 1743) 107, 144.

[3]Kashamu (Ibid)

[4] Kashamu (Ibid) 114-5 (Ogbuinya JCA).

[5] Kashamu (Ibid) 115 (Ogbuinya JCA).

[6] Kashamu (Ibid) 116 (Ogbuinya JCA).

Chris Thomale on the EP Draft Report on Corporate Due Diligence

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Professor Chris Thomale, University of Vienna and Roma Tre University, has kindly provided us with his thoughts on the recent EP Draft Report on corporate due diligence and corporate accountability.

 

In recent years, debate on Corporate Social Responsibility (CSR) has picked up speed, finally reaching the EU. The Draft Report first and foremost contains a draft Directive on corporate due diligence and corporate accountability, which seems a logical step ahead from the status quo developed since 2014, which so far only consists of reporting obligations (see the Non-Financial Reporting Directive) and sector specific due diligence (see the Regulations on Timber and Conflict Minerals). The date itself speaks volumes: Precisely, to the very day (!), 8 years after the devastating fire in the factory of Ali Enterprises in Pakistan, which attracted much international attention through its follow-up litigation against the KiK company in Germany, the EU is taking the initiative to coordinate Member State national action plans as required under the Ruggie Principles. Much could be said about this new Directive in terms of company law and business law: The balancing exercise of on the one hand, assuring effective transparency of due diligence strategies and, on the other hand, avoiding overregulation in particular with regard to SMEs still appears somewhat rough and ready and hence should see some refinement in due course. The same applies to the private enforcement of those due diligence duties: By leaving the availability and degree of private enforcement entirely to the Member States (Art. 20), the Directive seems to gloss over one of the most pressing topics of comparative legal debate. The question of availability, conditions and extent of private liability imposed on parent companies for human rights violations committed in their value chains abroad, must be addressed by the EU eventually.

To this forum, however, the private international implications of the Draft Report would appear even more important:

As regards the conflicts of laws solution, the proposed Art. 6a Rome II Regulation seeks to make available, at the claimant’s choice, several substantive laws as conveniently summarized by Geert van Calster in the terms of lex loci damni, lex loci delicti commissi, lex loci incorporationis and lex loci activitatis. Despite my continuous call for a choice between the first two de regulatione lata, to be reached by applying a purposive reading of Art. 4 para 1 and 3 Rome II (see JZ 2017 and ZGR 2017), the latter two, lex loci incorporationis and lex loci activitatis, seem very odd to me. First, they are supported, to my humble knowledge, by no existing Private International Law Code or judicial practice. Second, the lex loci incorporationis has no convincing rationale, why it should in any way be connected with the legal relationship as created by the corporate perpetrator’s tort. Lex loci activitatis is excessively vague and will create threshold questions as well as legal uncertainty. Third, I would most emphatically concur with Jan von Hein’s opinion of a quadrupled choice being excessive and impractical in and of itself.

The solution proposed in terms of international jurisdiction, I will readily admit, looks puzzling to me. I fail to see, which cases the proposed Art. 8 para 5 Brussels Ibis Regulation is supposed to cover: As far as international jurisdiction is awarded to the courts of the “Member State where it has its domicile”, this adds nothing to Art. 4, 63 Brussels Ibis Regulation. In fact, it will create unnecessary confusion as to whether this venue of general jurisdiction is good even when there is no “damage caused in a third country [which] can be imputed to a subsidiary or another undertaking with which the parent company has a business relationship.” Thus, we are left with the courts of “a Member State […] in which [the undertaking] operates.” As already pointed out, this term itself will trigger a lot of controversy regarding certain threshold issues. But there is more: Oftentimes this locus activitatis will coincide with the locus delicti commissi, e.g., when claimants want to rely on an omission of oversight by the European parent company. In that case, Art. 7 No. 2 Brussels Ibis Regulation offers a venue at the very place, i.e. both in terms of international and local jurisdiction, where that omission was committed. How does the new rule relate to the old one? And, again, which cases exactly are supposed to be captured by this provision? In my view, this is a phantom paragraph that, if anything, can only do harm to the fragile semantic and systematic architecture built up by the Brussels Ibis Regulation and CJEU case law.

The same seems true of the proposed Art. 26a Brussels Ibis: First, there is no evident need for such a forum necessitatis, rendering Member State courts competent to hear foreign-cubed cases with no connection to the EU whatsoever. To the contrary, recent development of the US Alien Torts Statute point in the opposite direction. Second, the EU might be overreaching its legislative jurisdiction: Brussels Ibis Regulation is based on the EU’s competence to legislate on judicial cooperation in civil matters (Art. 81 para 2 TFEU). Such a global long-arm statute may not be covered by that competence, if it is legal at all under the public international confines incumbent upon civil jurisdiction (for details, see here). Third, it will be virtually anybody’s guess what a court seized with a politicised and likely emotional case like the ones we are talking about will deem a “reasonable” Third State venue. In fact, this would be a forum non conveniens test with inverted colours, i.e. the very test the CJEU, in 2005, deemed irreconcilable with the exigencies of foreseeability and legal certainty within the Brussels Ibis Regulation.

 

Does a United States’ Court have jurisdiction to make an order affecting immovable property in Lagos, Nigeria?

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In the very recent case of Yankey v Austin (2020) LPELR-49540(CA)  the Nigerian Court of Appeal was faced with the issue of whether a court in the United State has jurisdiction to make an order affecting immovable property in Lagos, Nigeria.

The facts of the case was that the claimant/respondent previously sued the defendant/appellant before the Family Court Division, of the District of the Fourth Judicial District, County of Hennepin, State of Minnesota (“US Court”) – where they resided at the time, for dissolution of their marriage that was celebrated in Nigeria. The defendant/appellant as respondent before the US Court did not contest the dissolution of the marriage. They entered into a Mutual Termination Agreement, which is called Terms of Settlement in the Nigerian legal system. There was no trial and no evidence was adduced. Their homestead at 4104 Lakeside Avenue, Brooklyn Center, Minesota was awarded exclusively to the claimant/respondent as petitioner before the US Court. It did not end there.

The claimant/respondent subsequently instituted proceedings before the Lagos State High Court, Nigeria, and claimed joint ownership of the defendant/appellant’s immovable property situated in Lagos, by relying on the US judgment. The lower court granted the claim.

The defendant/appellant appealed to the Court of Appeal, which unanimously allowed the appeal by overturning the decision of the lower court. The Court of Appeal (Ogakwu JCA) thoroughly analysed the documents which were in issue: (1) Mutual Termination Agreement, (2) Judgment of the US Court, and (3) petition for the dissolution of the parties marriage in the US Court. The Court of Appeal reached the conclusion that there was nothing in the documents in issue which suggests that the US judge granted joint ownership of the defendant/appellant’s immovable property with the plaintiff/respondent. It also held that based on the principle of lex situs the US Court cannot make an order affecting immovable property in Nigeria.

The decision in Yankey  is an important decision from the perspective of public and private international law. Based on the principle of territorial sovereignty, a foreign court cannot make an order affecting immovable property in another country.  This rule as applied in Nigeria  –  often referred to as the  Mocambique  rule  –  is derived from the English case of British South Africa Company v Companhia de Mocambique [1893] AC 602. In that case, the plaintiff s’   statement of claim alleged that they were rightful owners of large tracts of land in South Africa, yet agents of the defendants unlawfully took possession of the lands and displaced the plaintiff  company and its servants, agents, and tenants. The plaintiffs also alleged that the defendants not only stole the plaintiff s’  personal property, but also assaulted and imprisoned some of them. It was held that an English court would not entertain an action to recover damages for a trespass to land situated abroad.

It is worth mentioning that in Nigeria, an  exception to the Mozambique rule exists where the action between the parties is founded on some personal obligation arising out of a contract or implied contract, a fiduciary relationship, fraud or other unconscionable conduct, and does not depend on the law of the  locus  of the immovable property to exist (British Bata Shoe Co Ltd v Melikian   ( 1956 )  1 FSC 100;     Aluminium Industries Aktien Gesellschaft  v Federal Board of Inland Revenue   ( 1971 )  2 ALR Comm 121   , (1971) 2 NCLR 1)

The Mozambique rule has been applied  by the Nigerian  Supreme Court only in inter-state matters such as in Lanleyin v Rufai  ( 1959 )  4 FSC 184. Yankey is the first case where it was applied in a case with truly international dimensions. Admittedly, the Court of Appeal did not explicitly mention the Mozambique rule or the Nigerian Supreme Court cases that have applied it in inter-state matters. The truth is that there was no need for the Court of Appeal to do so. Based on the facts of the case, the US Court never made an order for joint ownership of the immovable property in Lagos.

Yankey is a most welcome decision. If the lower court’s decision was allowed to stand, it would mean that any foreign court can generally make an order affecting immovable  property in Nigeria. The Court of Appeal was therefore right to hold that the US Court never made an order for joint ownership of immovable  property for the parties in this case. It was also right to hold that a foreign court cannot make an order of joint ownership of immovable property in Nigeria.