Views
Does a United States’ Court have jurisdiction to make an order affecting immovable property in Lagos, Nigeria?
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.
A step in the right direction, but nothing more – A critical note on the Draft Directive on mandatory Human Rights Due Diligence
Written by Bastian Brunk, research assistant at the Humboldt University of Berlin and doctoral candidate at the Institute for Comparative and Private International Law at the University of Freiburg.
In April of 2020, EU Commissioner Didier Reynders announced plans for a legislative initiative that would introduce EU-wide mandatory human rights due diligence requirements for businesses. Only recently, Reynders reiterated his intentions during a conference regarding “Human Rights and Decent Work in Global Supply Chains” which was hosted by the German Federal Ministry of Labour and Social Affairs on the 6. October, and asseverated the launch of public consultations within the next few weeks. A draft report, which was prepared by MEP Lara Wolters (S&D) for the European Parliament Committee on Legal Affairs, illustrates what the prospective EU legal framework for corporate due diligence could potentially look like. The draft aims to facilitate access to legal remedies in cases of corporate human rights abuses by amending the Brussels Ibis Regulation as well as the Rome II Regulation. However, as these amendments have already inspired a comments by Geert van Calster, Giesela Rühl, and Jan von Hein, I won’t delve into them once more. Instead, I will focus on the centre piece of the draft report – a proposal for a Directive that would establish mandatory human rights due diligence obligations for businesses. If adopted, the Directive would embody a milestone for the international protection of human rights. As is, the timing could simply not be better, since the UN Guiding Principles (UNGPs) celebrate their 10th anniversary in 2021. The EU should take this opportunity to present John Ruggie, the author of the UNGPs, with a special legislative gift. However, I’m not entirely sure if Ruggie would actually enjoy this particular present, as the Directive has obvious flaws. The following passages aim to accentuate possible improvements, that would lead to the release of an appropriate legal framework next year. I will not address every detail but will rather focus on the issues I consider the most controversial – namely the scope of application and the question of effective enforcement.
General Comments
To begin with a disclaimer, I believe the task of drafting a legal document on the issue of business and human rights to be a huge challenge. Not only does one have to reconcile the many conflicting interests of business, politics, and civil society, moreover, it is an impossible task to find the correct degree of regulation for every company and situation. If the regulation is too weak, it does not help protect human rights, but only generates higher costs. If it is too strict, it runs the risk of companies withdrawing from developing and emerging markets, and – because free trade and investment ensure worldwide freedom, growth, and prosperity – of possibly inducing an even worse human rights situation. This being said, the current regulatory approach should first and foremost be recognised as a first step in the right direction.
I would also like to praise the idea of including environmental and governance risks in the due diligence standard (see Article 4(1)) because these issues are closely related to each other. Practically speaking, the conduct of companies is not only judged based on their human rights performance but rather holistically using ESG or PPP criteria. All the same, I am not sure whether or not this holistic approach will be accepted in the regulatory process: Putting human rights due diligence requirements into law is difficult enough, so maybe it would just be easier to limit the proposal to human rights. Nonetheless, it is certainly worth a try.
Moving on to my criticism.
Firstly, the draft is supposed to be a Directive, not a Regulation. As such, it cannot impose any direct obligations on companies but must first be transposed into national law. However, the proposal contains a colourful mix of provisions, some of which are addressed to the Member States, while others impose direct obligations on companies. For example, Article 4(1) calls upon Member States to introduce due diligence obligations, whereas all other provisions of the same article directly address companies. In my eyes, this is inconsistent.
Secondly, the Directive uses definitions that diverge from those of the UNGPs. For example, the UNGPs define “due diligence” as a process whereby companies “identify, prevent, mitigate and account for” adverse human rights impacts. This seems very comprehensive, doesn’t it? Due diligence, as stipulated in the Directive, goes beyond that by asking companies to identify, cease, prevent, mitigate, monitor, disclose, account for, address, and remediate human rights risks. Of course, one could argue that the UNGP is incomplete and the Directive fills its gaps, but I believe some of these “tasks” simply redundant. Of course, this is not a big deal by itself. But in my opinion, one should try to align the prospective mechanism with the UNGPs as much as possible, since the latter are the recognised international standard and its due diligence concept has already been adopted in various frameworks, such as the UN Global Compact, the OECD Guidelines for Multinational Enterprises, and the ISO 26000. An alignment with the UNGP, therefore, allows and promotes coherence within international policies.
Before turning to more specific issues, I would like to make one last general remark that goes in the same direction as the previous one. While the UNGP ask companies to respect “at minimum” the “international recognized human rights”, meaning the international bill of rights (UDHR, ICCPR, ICESCR) and the ILO Core Labour Standards, the Directive requires companies to respect literally every human rights catalogue in existence. These include not only international human rights documents of the UN and the ILO, but also instruments that are not applicable in the EU, such as the African Charter of Human and People’s Rights, the American Convention of Human Rights, and (all?) “national constitutions and laws recognising or implementing human rights”. This benchmark neither guides companies nor can it be monitored effectively by the authorities. It is just too ill-defined to serve as a proper basis for civil liability claims or criminal sanctions and it will probably lower the political acceptance of the proposal.
Scope of Application
The scope of application is delineated in Article 2 of the Directive. It states that the Directive shall apply to all undertakings governed by the law of a Member State or established in the territory of the EU. It shall also apply to limited liability undertakings governed by the law of a non-Member State and not established within EU-territory if they operate in the internal market by selling goods or providing services. As one can see, the scope is conceivably broad, which gives rise to a number of questions.
First off, the Directive does not define the term “undertaking”. Given the factual connection, we could understand it in the same way as the Non-Financial Reporting Directive (2014/95/EU) does. However, an “undertaking” within the scope of the Non-Financial Reporting Directive refers to the provisions of the Accounting Directive (2013/34/EU), which has another purpose, i.e. investor and creditor protection, and is, therefore, restricted to certain types of limited liability companies. Such a narrow understanding would run counter to the purpose of the proposed Directive because it excludes partnerships and foreign companies. On the other hand, “undertaking” probably does mean something different than in EU competition law. There, the concept covers “any entity engaged in an economic activity, regardless of its legal status” and must be understood as “designating an economic unit even if in law that economic unit consists of several persons, natural or legal” (see e.g. CJEU, Akzo Nobel, C-97/08 P, para 54 ff.). Under EU competition law, the concept is, therefore, not limited to legal entities, but also encompasses groups of companies (as “single economic units”). This concept of “undertaking”, if applied to the Directive, would correspond with the term “business enterprises” as used in the UNGP (see the Interpretive Guide, Q. 17). However, it would ignore the fact that the parent company and its subsidiaries are distinct legal entities, and that the parent company’s legal power to influence the activities of its subsidiaries may be limited under the applicable corporate law. It would also lead to follow-up questions regarding the precise legal requirements under which a corporate group would have to be included. Finally, non-economic activities and, hence, non-profit organisations would be excluded from the scope, which possibly leads to significant protection gaps (just think about FIFA, Oxfam, or WWF). In order to not jeopardise the objective – ensuring “harmonization, legal certainty and the securing of a level playing field” (see Recital 9 of the Directive) – the Directive should not leave the term “undertaking” open to interpretation by the Member States. A clear and comprehensive definition should definitely be included in the Directive, clarifying that “undertaking” refers to any legal entity (natural or legal person), that provide goods or services on the market, including non-profit services.
Secondly, the scope of application is not coherent for several reasons. One being that the chosen form of the proposal is a Directive, rather than a Regulation, thus providing for minimum harmonisation only. It is left to the Member States to lay down the specific rules that ensure companies carrying out proper human rights due diligence (Article 4(1)). This approach can lead to slightly diverging due diligence requirements within the EU. Hence, the question of which requirements a company must comply with arises. From a regulatory law’s perspective alone, this question is not satisfactorily answered. According to Article 2(1), “the Directive” (i.e. the respective Member States’ implementation acts) applies to any company which has its registered office in a Member State or is established in the EU. However, the two different connecting factors of Article 2(1) have no hierarchy, so a company must probably comply with the due diligence requirements of any Member State where it has an establishment (agency, branch, or office). Making matters worse (at least from the company’s perspective), in the event of a human rights lawsuit, due diligence would have to be characterised as a matter relating to non-contractual obligations and thus fall within the scope of the new Art. 6a Rome II. The provisions of this Article potentially require a company to comply with the due diligence obligations of three additional jurisdictions, namely lex loci damni, lex loci delicti commissi, and either the law of the country in which the parent company has its domicile (in this regard, I agree with Jan von Hein who proposes the use not of the company’s domicile but its habitual residence as a connecting factor according to Article 23 Rome II) or, where it does not have a domicile (or habitual residence) in a Member State, the law of the country where it operates.
That leads us to the next set of questions: When does a company “operate” in a country? According to Article 2(2), the Directive applies to non-EU companies which are not established in the EU if they “operate” in the internal market by selling goods or providing services. But does that mean, for example, that a Chinese company selling goods to European customers over Amazon must comply fully with European due diligence requirements? And is Amazon, therefore, obliged to conduct a comprehensive human rights impact assessment for every retailer on its marketplace? Finally, are states obliged to impose fines and criminal sanctions (see Article 19) on Amazon or the Chinese seller if they do not meet the due diligence requirements, and if so, how? I believe that all this could potentially strain international trade relations and result in serious foreign policy conflicts.
Finally, and perhaps most controversially in regard to the scope, the requirements shall apply to all companies regardless of their size. While Article 2(3) allows the exemption of micro-enterprises, small companies with at least ten employees and a net turnover of EUR 700,000 or a balance sheet total of EUR 350,000 would have to comply fully with the new requirements. In contrast, the French duty of vigilance only applies to large stock corporations which, including their French subsidiaries and sub-subsidiaries, employ at least 5,000 employees, or including their worldwide subsidiaries and sub-subsidiaries, employ at least 10,000 employees. The Non-Financial Reporting Directive only applies to companies with at least 500 employees. And the due diligence law currently being discussed in Germany, will with utmost certainty exempt companies with fewer than 500 employees from its scope and could perhaps even align itself with the French law’s scope. Therefore, I doubt that the Member States will accept any direct legal obligations for their SMEs. Nonetheless, because the Directive requires companies to conduct value chain due diligence, SMEs will still be indirectly affected by the law.
Value Chain Due Diligence
Value chain due diligence, another controversial issue, is considered to be anything but an easy task by the Directive. To illustrate the dimensions: BMW has more than 12,000 suppliers, BASF even 70,000. And these are all just Tier 1 suppliers. Many, if not all, multinational companies probably do not even know how long and broad their value chain actually is. The Directive targets this problem by requiring companies to “make all reasonable efforts to identify subcontractors and suppliers in their entire value chain” (Article 4(5)). This task cannot be completed overnight but should not be impossible either. For example, VF Corporation, a multinational apparel and footwear company, with brands such as Eastpack, Napapijri, or The North Face in its portfolio, has already disclosed the (sub?)suppliers for some of its products and has announced their attempt to map the complete supply chain of its 140 products by 2021. BASF and BMW will probably need more time, but that shouldn’t deter them from trying in the first place.
Mapping the complete supply chain is one thing; conducting extensive human rights impact assessments is another. Even if a company knows its chain, this does not yet mean that it comprehends every potential human rights risk linked to its remote business operations. And even if a potential human rights risk comes to its attention, the tasks of “ceasing, preventing, mitigating, monitoring, disclosing, accounting for, addressing, and remediating” (see Article 3) it is not yet fulfilled. These difficulties call up to consider limiting the obligation to conduct supply chain due diligence to Tier 1 suppliers. However, this would not only be a divergence from the UNGP (see Principle 13) but would also run counter to the Directive’s objective. In fact, limiting due diligence to Tier 1 suppliers makes it ridiculously easy to circumvent the requirements of the Directive by simply outsourcing procurement to a third party. Hence, the Directive takes a different approach by including the entire supply chain in the due diligence obligations while adjusting the required due diligence processes to the circumstances of the individual case. Accordingly, Article 2(8) states that “[u]ndertakings shall carry out value chain due diligence which is proportionate and commensurate to their specific circumstances, particularly their sector of activity, the size and length of their supply chain, the size of the undertaking, its capacity, resources and leverage”. I consider this an adequate provision because it balances the interests of both companies and human rights subjects. However, as soon as it comes to enforcing it, it burdens the judge with a lot of responsibility.
Enforcement
The question of enforcement is of paramount importance. Without effective enforcement mechanisms, the law will be nothing more than a bureaucratic and toothless monster. We should, therefore, expect the Directive – being a political appeal to the EU Commission after all – to contain ambitious proposals for the effective implementation of human rights due diligence. Unfortunately, we were disappointed.
The Directive provides for three different ways to enforce its due diligence obligations. Firstly, the Directive requires companies to establish grievance mechanisms as low-threshold access to remedy (Articles 9 and 10). Secondly, the Directive introduces transparency and disclosure requirements. For example, companies should publish a due diligence strategy (Article 6(1)) which, inter alia, specifies identified human rights risks and indicates the policies and measures that the company intends to adopt in order to cease, prevent, or mitigate those risks (see Article 4(4)). Companies shall also publish concerns raised through their grievance mechanisms as well as remediation efforts, and regularly report on progress made in those instances (Article 9(4)). With these disclosure requirements, the Directive aims to enable the civil society (customers, investors and activist shareholders, NGOs etc.) to enforce it. Thirdly, the Directive postulates public enforcement mechanisms. Each Member State shall designate one or more competent national authorities that will be responsible for the supervision of the application of the Directive (Article 14). The competent authorities shall have the power to investigate any concerns, making sure that companies comply with the due diligence obligations (Article 15). If the authority identifies shortcomings, it shall set the respective company a time limit to take remedial action. It may then, in case the company does not fulfil the respective order, impose penalties (especially penalty payments and fines, but also criminal sanctions, see Article 19). Where immediate action is necessary to prevent the occurrence of irreparable harm, the competent authorities may also order the adoption of interim measures, including the temporary suspension of business activities.
At first glance, public enforcement through inspections, interim measures, and penalties appear as quite convincing. However, the effectiveness of these mechanisms may be questioned, as demonstrated by the Wirecard scandal in Germany. Wirecard was Germany’s largest payment service provider and part of the DAX stock market index from September 2018 to August 2020. In June of 2020, Wirecard filed for insolvency after it was revealed that the company had cooked its books and that EUR 1.9 billion were “missing”. In 2015 and 2019, the Financial Times already reported on irregularities in the company’s accounting practices. Until February 2019, the competent supervisory authority BaFin did not intervene, but only commissioned the FREP to review the falsified balance sheet, assigning only a single employee to do so. This took more than 16 months and did not yield any results before the insolvency application. While it is true that the Wirecard scandal is unique, it showcased that investigating malpractices of large multinational companies through a single employee is a crappy idea. Public enforcement mechanisms only work if the competent authority has sufficient financial and human resources to monitor all the enterprises covered by the Directive. So how much manpower does it need? Even if the Directive were to apply to companies with more than 500 employees, in Germany alone one would have to monitor more than 7.000 entities and their respective value chains. We would, therefore, need a whole division of public inspectors in a gigantic public agency. In my opinion, that sounds daunting. That does not mean that public enforcement mechanisms are completely dispensable. As Ruggie used to say, there is no single silver bullet solution to business and human rights challenges. But it is also important to consider decentralised enforcement mechanisms such as civil liability. In contrast to public enforcement mechanisms, civil liability offers victims of human rights violations “access to effective remedy”, which, according to Principle 25, is one of the main concerns of the UNGP.
So, what does the Directive say about civil liability? Just about nothing. Article 20 only states that “[t]he fact that an undertaking has carried out due diligence in compliance with the requirements set out in this Directive shall not absolve the undertaking of any civil liability which it may incur pursuant to national law.” Alright, so there shouldn’t be a safe harbour for companies. But that does not yet mean that companies are liable for human rights violations at all. And even if it were so, the conditions for asserting a civil claim can differ considerably between the jurisdictions of the Member States. The Directive fails to achieve EU-wide harmonisation on the issue of liability. That’s not a level playing field. This problem could be avoided by passing an inclusive Regulation containing both rules concerning human rights due diligence and a uniform liability regime in case of violations of said rules. However, such an attempt would probably encounter political resistance from the Member States and result in an undesirable delay of the legislative process. A possible solution could be to only lay down minimum requirements for civil liability but to leave the ultimate drafting and implementation of liability rules to the Member States. Alternatively, the Directive could stipulate that the obligations set out in Articles 4 to 12 are intended to determine the due care without regard to the law applicable to non-contractual obligations. At least, both options would ensure that companies are liable for any violation of their human rights due diligence obligations. Is that too much to ask?
Waiving the Right to a Foreign Arbitration Clause by submitting to the Jurisdiction of the Nigerian Court
Introduction
Commercial arbitration is now very popular around the globe. It forms an important part of Nigerian jurisprudence. In Nigeria, it is regulated by the Arbitration and Conciliation Act (“ACA”).[1]
Clauses designating an arbitral tribunal to resolve dispute between parties are now common place in international commercial transactions. Generally, the Nigerian courts respect and strictly enforce the parties’ choice to resolve their dispute before an arbitral tribunal in both domestic and international cases.[2] This right is however not absolute. The right to resolve disputes before an arbitral tribunal could be waived by submitting to the jurisdiction of the Nigerian court. Indeed, Section 5(1) of the ACA provides that: “If any party to an arbitration agreement commences any action in any court with respect to any matter which is the subject of an arbitration agreement any party to the arbitration agreement may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceeding.”[3] In essence, if a party to an international arbitration clause delivers any pleadings or takes any steps in the proceedings, such a party is deemed to have waived its right to an arbitration clause by submitting to the jurisdiction of the Nigerian court,
What provokes this comment is that in a recent Nigerian Court of Appeal decision in The Vessel MT. Sea Tiger & Anor v Accord Ship Management (HK) Ltd[4] (“Tiger”), the Court of Appeal held inter alia that where a party is served with a judicial claim, in breach of a foreign arbitration clause, but fails or refuses to appear before the court, such a party is deemed to have waived its right to an arbitration agreement by submitting to the jurisdiction of the Nigerian Court. It also held that payment of an out of court settlement amounts to submission.
This comment opines that the Court of Appeal’s decision was wrongly decided insofar as it held that where proceedings are instituted in breach of a foreign arbitration clause, failure or refusal to appear before judicial proceedings, and payment of an out of court settlement amounts to waiver by submitting to the jurisdiction of the court.
Facts
In Tiger, the 2nd plaintiff-appellant and the 1st defendant-respondent – both foreign companies before the Nigerian Court – entered into a ship management agreement on 18th of February 2012 in Hong Kong for the management of the 1st plaintiff-appellant vessel. The parties agreed in clause 23 and 25 of the ship management agreement that any dispute arising from their agreement shall be referred to international arbitration in London.
When a dispute arose as to the payment of the management fees between the parties, the 1st defendant-respondent instituted proceedings (suit No. FHC/L/CS/1789/2013) at the Federal High Court, Nigeria for the arrest of the 1st plaintiff-appellant vessel. In that proceeding, the 1st defendant-respondent (as plaintiff) sued the plaintiff-appellants (the vessel and owners of the vessel) as the defendants in that case. The plaintiff-appellants settled the claim out of court by making payments to the 1st defendant-respondent. Subsequently, on 27th February 2014, the 1st defendant-respondent as plaintiff in suit No. FHC/L/CS/1789/2013 withdrew its suit and the vessel was ordered to be released.
In consequence of the arrest of the 1st plaintiff-appellant from 31st December 2013 to 27th February 2018, the appellants sued the defendant-respondents in the Federal High Court, Lagos for a significant amount of compensation arising from what it claimed to be the wrongful arrest of the 1st plaintiff-appellant in breach of their agreement to settle their dispute by international arbitration in London.
Decision
The Court of Appeal unanimously dismissed the claim of the plaintiff-appellants by holding that they had waived their right to the international arbitration clause by submitting to the jurisdiction of the Nigerian Court. The decision was reached on two principal grounds. The first ground was failure or refusal to appear and challenge the proceedings after being served with court processes. The second ground was the payment of an out of court settlement in order to release the vessel. In order to provide more clarity, the relevant portions of the decisions are quoted.
First, Garba JCA in his leading judgment held that:
The failure or refusal by it (plaintiff-appellants) to appear in reaction to the originating processes to enable the appellant challenge the jurisdiction of the lower court on the ground of the arbitration clauses in the Ship Management Agreement…left no other reasonable presumption in law and option to the lower court than that the appellants had submitted to the jurisdiction of that court to adjudicate over the suit since the only challenge to the suit by the appellants was entirely and completely predicated and founded on the arbitration clauses in the Ship Management Agreement and not on the lack of jurisdiction on the part of the court, in any event, entertain the suit on any cognizable ground of law. The failure or refusal to enter an appearance and be represented in the suit constituted and amounted to a muted but clear submission to the jurisdiction of the lower court in the case.[5]
Second, Garba JCA held that: “…the lower court is right that the appellants submitted to its jurisdiction in the suit no:FHC/L/CS/1789/2013 by the payment and settlement of the 1st respondent’s claim in order to secure the release of the 1st appellant from the arrest and detention it was placed under in the case thereby not only taking a step in the case, but actively and effectively so, in the circumstances of the case.”[6]
Comments
The Court of Appeal’s decision in Tiger is very important from the perspective of private international law and international commercial arbitration. The implication of Tiger is that where proceedings are instituted in a Nigerian court in breach of a foreign arbitration clause, the party requesting arbitration would be wise to appear before the court and immediately request the court to stay its proceedings in favour of a foreign arbitration clause. If this is not done, an international arbitration clause is ineffective in Nigerian law on the basis that the party requesting arbitration would be deemed to have waived its right by submitting to the jurisdiction of the court. In addition, the payment of an out of court settlement would amount to waiver by submitting to the jurisdiction of a Nigerian court.
Prior to Tiger, waiver to an arbitration clause by submitting to the jurisdiction of the Nigerian court could only be established where the defendant enters an unconditional appearance or defends the case on its merits without challenging the jurisdiction of the court.[7]
It is submitted that Tiger is a wrong extension of the principle to the extent that it holds that failure or refusal to appear before proceedings which breach an international arbitration clause constitutes waiver by submission to the jurisdiction of a court. A defendant that does not appear before court proceedings cannot be deemed to have waived its right by submitting to the jurisdiction of the Nigerian court. In other words, failure or refusal to appear to proceedings upon being duly notified is the very antithesis of submission to the jurisdiction of a court. Indeed, there is an earlier Nigerian Supreme Court’s decision that clearly held that failure or refusal of a defendant resident in Nigeria to appear in the English court despite being duly notified of judicial proceedings in England, did not qualify as submission to the jurisdiction of the English court.[8] Though this Supreme Court case was concerned with the recognition and enforcement of foreign judgments under the 1922 Ordinance, the logic of this decision can be way of analogy be applied in Tiger’s case to the effect that failure or refusal to appear to court proceedings cannot constitute submission. In this connection, the Court of Appeal’s decision in Tiger is therefore per incuriam.
It is illogical to hold that that a defendant who has failed or refused to appear to court proceedings has “delivered pleadings” or “taken steps in the proceedings” in the eyes of Section 5 of the ACA. A defendant is entitled to ignore court proceedings by sticking to the arbitration clause. This should also be seen as a pro-arbitration stance that is consistent with Nigeria’s approach of upholding the sanctity of arbitration agreements. Indeed, as stated in the introduction, Nigerian courts generally enforce arbitration agreements strictly.
The truth is that Tiger’s case reflects the attitude of some Nigerian judges to absentee defendants. Some Nigerian judges regard it as impolite for a defendant not to appear to court proceedings upon being duly notified. The preferable approach in Nigerian jurisprudence is to enter a conditional appearance and then challenge the jurisdiction of the court. Indeed, in Muhammed v Ajingi,[9] the Court of Appeal (Abiru JCA) unanimously held that a defendant who has been duly notified of proceedings but fails or refuses to appear to promptly challenge the jurisdiction of the court is deemed to have waived its right by submitting to the jurisdiction of the Nigerian court. Though, Muhammed v Ajingi was not an arbitration case, it demonstrates the attitude of some Nigerian judges to absentee defendants.
The Court of Appeal in Tiger was also wrong to have regarded the payment of an out of court settlement sum by the plaintiff-appellants to release the vessel as waiver by submitting to the jurisdiction of the court. Such an approach does not amount to delivering pleadings or taking steps in the proceedings in the eyes of Section 5 of the ACA. Indeed, in the earlier case of Confidence Insurance Ltd,[10] the Court of Appeal (Achike JCA) unanimously held that: “effort made out of court to settle the matter in controversy between the parties”[11] does not amount to submission in the eyes of Section 5 of the ACA. Nigerian courts should be seen to encourage out of court settlement. The Court of Appeal in Tiger did not explicitly have regard to Achike JCA’s judicial opinion in Confidence Insurance Ltd, though it cited the case. There is wisdom in Achike JCA’s judicial opinion. If the law is that efforts made towards out of court settlement amounts to submission, this might discourage a potential defendant from making out of court settlements, where there is the presence of a foreign arbitration clause.
Moreover, the payment of the settlement sum by the plaintiff/appellants was for the purpose of releasing their vessel which had been detained on the order of a Nigerian court. Comparatively, this has never qualified as submission to the jurisdiction of the court in England. Payment of settlement to release the vessel is hardly ever voluntary – the claimant in such maritime claims can use the arrest of the vessel as a way of wrongfully obtaining settlement. Indeed, there are English cases where damages have been awarded for wrongful detention of vessel despite the other party paying a settlement sum to the party that arrested the vessel.[12]
Tiger properly so called was an action in damages for breach of an international arbitration clause. Since it has been argued in this case that the plaintiff-appellants did not submit to the jurisdiction of the Nigerian court, damages should have been awarded for breach of the international arbitration clause.[13] If the Court of Appeal had adopted this approach, it would have honoured the Nigerian judiciary’s approach to generally and strictly enforce the sanctity of arbitration agreements. It was obvious in this case that the plaintiff-appellants suffered loss from the arrest of their ship in breach of an international arbitration clause. It is quite unfortunate that the Court of Appeal did not award compensation in this case.
Conclusion
It remains to the seen whether Tiger will go on appeal to the Nigerian Supreme Court. If it does go on appeal, it is proposed that the Supreme Court overturns the Court of Appeal’s decision. If it does not go on appeal to the Supreme Court, it is proposed that the Nigerian Court of Appeal and Supreme Court in future holds that the failure or refusal to appear to proceedings in breach of an international arbitration clause, and the payment of out of court settlement does not constitute waiver by submission to the jurisdiction of the Nigerian court.
*Postdoctoral Researcher in Private International Law at TMC Asser Institute, The Hague, and Barrister and Solicitor of the Supreme Court of Nigeria. The author can be reached at chukwuma.okoli@yahoo.com.
[1]Cap. A18, LFN 2004.
[2]The cases in support of this are numerous. It is sufficient to cite the Nigerian Supreme Court authorities: Owners of MV Lupex v Nigerian Overseas Chartering and Shipping Ltd (2003) 15 NWLR 469; Mainstreet Bank Capital Limited & Another v Nigeria Reinsurance Corporation Plc (2018) 14 NWLR (Pt. 1640) 423, 444 (Kekere-Ekun JSC). See also CSA Okoli and RF Oppong, Private International Law in Nigeria (Hart, 2020) 127-138.
[3]It is a matter if Section 5 of the ACA applies to only domestic arbitration, and not international commercial arbitration. In Owners of MV Lupex (supra n 2) the Nigerian Supreme Court applied Section 5 of the ACA to international commercial arbitration. However, in a later case of SPDCN Ltd v CIRN Ltd (2016) 9 NWLR (Pt. 1517) 300, 323 (Obaseki-Adejumo JCA), the Court of Appeal, relying on Section 58 of the ACA, held that the ACA only applies to domestic arbitration. If the Court of Appeal’s decision is correct, then Section 5 of the ACA only applies to domestic arbitration.
It is submitted that the Supreme Court’s position in Owners of MV Lupex is preferred for three reasons. First, Section 58 of the ACA means that the ACA applies in all States of the Federation, and not that the ACA applies only to domestic arbitration. Second, there is no specific provision that states that the ACA does not apply to international arbitration. Third, Part III of the ACA has a title which states that it relates to “ADDITIONAL PROVISIONS RELATING TO INTERNATIONAL ARBITRATION AND CONCILIATION.” This implies that the ACA governs domestic and international commercial arbitration, with Part III of the ACA making additional provisions relating to arbitration.
[4](2020) 14 NWLR (Pt. 1745) 418.
[5]Tiger (n 4) 453-4.
[6] Ibid 457.
[7]Obembe v Wemabod Estates Ltd. (1977) 5 SC 115 (Fatayi-Williams JSC as he then was); K.S.U.D.B. v Fanz Const; Ltd. (1990) 4 NWLR (Pt. 142) 1, 27 (Agbaje JCS), 50 (Obaseki JSC); Mainstreet Bank Capital Limited & Another v Nigeria Reinsurance Corporation Plc (2018) 14 NWLR (Pt. 1640) 423, 445-6, 452 (Kekere-Ekun JSC); Onward Ent. Ltd. v MV Matrix (2010) 2 NWLR (Pt. 1179) 530, 551; Federal Ministry of Health v Dascon (Nig.) Ltd (2019) 3 NWLR (Pt. 1658) 127, 139-140 (Abiriyi JCA); SCOA (Nig) Plc v Sterling Bank Plc ( 2016 ) LPELR-40566 (CA) (Oseji JCA as he then was) Sino-Africa Agriculture & Ind Company Ltd and Others v Ministry of Finance Incorporation and Another (2013) LPELR-22379 (CA) 1, 33 – 36, (2014) 10 NWLR (Pt. 1416) 515, 537 (Orji-Abadua JCA); Osun State Government v Dalami (Nig.) Ltd (2003) 7 NWLR (Pt. 818) 72, 93, 101 (Onalaja JCA); Confidence Insurance Ltd v Trustees of O.S.C.E. (1999) 2 NWLR (Pt.591) 373, 386 (Achike JCA as he then was).
[8]Grosvenor Casinos Ltd v Ghassan Halaoui (2009 ) 10 NWLR 309. In this case the Supreme Court was interpreting Section 3(2)(b) of the Reciprocal Enforcement of Judgments Act 1922, Cap 175 LFN 1958 (“1922 Ordinance”), which provides that the Nigerian court will refuse to register a foreign judgment where a judgment-debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit or agree to submit to the jurisdiction of that court. This implies that not voluntarily appearing before a Nigerian court does not constitute submission despite being duly notified with court processes. Indeed, Section 3(2)(b) is a codification of Nigerian common law on what qualifies as submission as a basis of jurisdiction in private international law matters. Under common law, submission in establishing jurisdiction in private international law against a defendant can only be established where there is unconditional appearance, defending the case on its merits without challenging the court’s jurisdiction or counter-claim.
[9] (2013) LPELR-20372 (CA).
[10] (n 7).
[11] Ibid 386.
[12] See Gulf Azov Shipping Co Ltd v Chief Idisi (No.2) [2001] EWCA Civ 505; Kallang Shipping SA v AXA Assurance Senegal [2008] EWHC 2761 (Comm).
[13]See Okoli and Oppong (n 2) 138; JC Betancourt, “Damages for Breach of an International Arbitration Agreement under English Arbitration Law” (2018) 34 Arbitration International 511-532.
News
Virtual Workshop (in English) on December 7: Mary Keyes on Trends in Australian Private International Law
On Tuesday, December 7, 2023, the Hamburg Max Planck Institute will host its 39th monthly virtual workshop Current Research in Private International Law at 10:00-11:30 (CET). Mary Keyes (Griffith University Brisbane) will speak, in English, about the topic
Trends in Australian Private International Law
This presentation will describe and analyse five important trends in Australian private international law, some but not all of which are not uniquely Australian. These are increasing independence from the English law on which Australian private international law is based; an astonishing increase in the volume of cross-border litigation; the rise and rise of jurisdiction; a broad attitude to the Australian courts’ jurisdiction; and the lack of systemic development of this area of the law.
The presentation will be followed by open discussion. All are welcome. More information and sign-up here.
If you want to be invited to these events in the future, please write to veranstaltungen@mpipriv.de.
Second Issue of the Journal of Private International Law for 2023
The second issue of the Journal of Private International Law for 2023 has just been published. It contains the following articles:
DJB Svantesson & SC Symeonides, “Cross-border internet defamation conflicts and what to do about them: Two proposals”
Conflicts of laws in cross-border defamation cases are politically and culturally sensitive and their resolution has always been difficult. But the ubiquity of the internet has increased their frequency, complexity, and intensity. Faced with the realities of the online environment—including the virtual disappearance of national borders—several countries have acted unilaterally to preserve their values and protect their interests. Some countries enacted laws favouring consumers or other potential plaintiffs, while other countries took steps to protect potential defendants, including publishers and internet service providers. As a result, these conflicts are now more contentious than ever before. We believe there is a better way—even-handed multilateral action rather than self-serving unilateral action. In this article, we advance two proposals for multilateral action. The first is a set of soft law principles in the form of a resolution adopted by the Institut de Droit International in 2019. The second is a proposed Model Defamation Convention. After presenting and comparing these two instruments, we apply them to two scenarios derived from two leading cases (the first and one of the latest of the internet era) decided by courts of last resort. The first scenario is based on Dow Jones & Company Inc v Gutnick, which was decided by the High Court of Australia in 2002. The second is based on Gtflix Tv v. DR, which was decided by the Court of Justice of the European Union at the end of 2021. We believe that these two instruments would produce more rational solutions to these and other cross-border defamation conflicts. But if we fail to persuade readers on the specifics, we hope to demonstrate that other multilateral solutions are feasible and desirable, and that they are vastly superior to a continuing unilateral “arms race.” In any event, we hope that this article will spur the development of other proposals for multilateral action.
Conference on Digital Justice for Cross-border Cases: University of Alicante, 23 November 2023 (in Spanish)
The Private International Law Department of the University of Alicante is organizing a conference entitled “Digital Justice for Cross-border Cases” (both onsite and online – in Spanish). The event will take place on 23 November 2023 at the Salón de Grados “Rector Ramón Martín Mateo” of the Faculty of Law at the University of Alicante.