Views
The Contractual Function of a Choice of Court Agreement in Nigerian Jurisprudence
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
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?
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.
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Call for Papers for the European Central Bank Legal Research Programme scholarship 2024
Call for Papers for the European Central Bank Legal Research Programme (LRP) scholarship 2024, which can be found on the ECB website via this link: https://www.ecb.europa.eu/pub/economic-research/programmes/legal_research/html/index.en.html.
Revue Critique de droit international privé – issue 2023/3
The third issue of the Revue critique de droit international privé of 2023 will be released shortly. It contains a thematic dossier of five articles, as well as several case notes.
The doctrinal part of the volume is entirely devoted to the reflections arising from the symposium held at Université de Tours on January 6, 2023 about notarial practice in international family property law in the Ukrainian context. Under the direction of Dr. Fabienne Labelle (Université de Tours), it explores the role of the notarial profession in the development of private international law during the Ukrainian crisis
Hague Service Convention Enters into Force in Singapore
Singapore acceded to the Hague Convention on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters (‘Service Convention’) on 16 May 2023. It has now entered into force in Singapore on 1 December 2023. Two declarations were lodged: first, against Article 8(1) objecting to the direct service of judicial documents upon persons in Singapore through foreign diplomatic or consular agents unless the documents are to be served upon a national of the State from which the documents originate; and secondly, objecting to service of judicial and extrajudicial documents in Singapore by the methods of transmission set out in Article 10. These methods are:
‘a) the freedom to send judicial documents, by postal channels, directly to persons abroad,
b) the freedom of judicial officers, officials or other competent persons of the State of origin to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination,
c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination.’
The enactment was accompanied by amendments to the Rules of Court 2021, Singapore International Commercial Court Rules 2021 and Family Justice Rules 2014.