Views
The Nigerian Court of Appeal recently revisits the principles for the grant of Mareva Injunction
The focus of this write-up is a brief case note on a recent decision of the Nigerian Court of Appeal (reported two days ago) on Mareva injunction.
The principal concern of a judgment creditor is that it should reap the fruits of the judgment. A judgment is useless or nugatory if the judgment debtor has no assets within the jurisdiction of the court and the judgment debtor is unwilling to comply with the court’s judgment. A prospective judgment debtor could frustrate the administration of justice and commercial effectiveness of a judgment by moving away all its assets from the Nigerian jurisdiction to another jurisdiction. The remedy of a Mareva injunction (or freezing injunction) was developed as a means of curtailing this form of bad litigation tactics by a judgment debtor. In reality, a Mareva injunction is similar to interlocutory and anticipatory injunctions. It is similar to an interlocutory injunction because it is granted pending the determination of the dispute between the parties. It is similar to an anticipatory injunction because it anticipates that there is a real likelihood that a prospective judgment debtor would take its assets out of the court’s jurisdiction in order to frustrate the effectiveness of a judgment.[1]
The Mareva injunction (as applied in Nigeria) was developed in the English case of Mareva Compania Naviera SA v International Bulkcarriers SA The Mareva (“The Mareva”).[2] It is also described as a “freezing injunction” on the basis that the order freezes the assets of a prospective judgment debtor, pending the determination of the case.[3]
Prior to the decision of the English Court of Appeal in The Mareva, it was uncertain[4] whether the English court had jurisdiction to protect a creditor before it obtained a judgment. The English Court of Appeal, in 1975,[5] had initially granted a “Mareva injunction” in the form of an interlocutory injunction, but the application of this concept in that case remained controversial.[6] The remedy of the Mareva injunction was later accepted by the then English House of Lords,[7] and is available in other Commonwealth jurisdictions.[8]
In the landmark case of Sotuminu v Ocean Steamship (Nig) Ltd(“Sotuminu”),[9] the Supreme Court of Nigeria legitimised the Mareva injunction, though on the facts of the case, the court did not think it was appropriate to grant a Mareva injunction.
Interestingly, although the decision of the Supreme Court was unanimous in dismissing the plaintiff-appellant’s case, Uwais JSC (as he then was), with whom two other Justices of the Supreme Court simply concurred, treated the plaintiff-appellant’s case as one involving an interlocutory injunction, and applied the principles relating to the grant of interlocutory injunction. It was Nnaemeka-Agu JSC and Omo JSC in their concurring judgments who qualified the plaintiff-appellant’s case as one involving a Mareva injunction.
Nnaemeka-Agu JSC made reference to Section 18(1) of the then High Court of Lagos Civil Procedure Rules, which provides that “[t]he High Court may grant an injunction by an interlocutory order in all cases in which it appears to the Court to be just and convenient to do so”; and Section 13 (of the then High Court of Lagos State Civil Procedure Rules), which provides that “subject to the express provisions of any enactment, in every civil cause or matter commenced in the High Court, law and equity shall be administered by the High Court concurrently and in the same manner as they are administered by the High Court of Justice in England.” He was of the view that these provisions enabled a court in Nigeria to apply the principles of a Mareva injunction. The learned Justice provided the criteria to grant a Mareva injunction when he held that:
“Now, all decided cases on the point show that the Courts are ever conscious of the fact that because of its very nature, Mareva injunctions could be open to abuses. So they have evolved some rules and principles which are designed to guard against such abuses. By these rules, before a Mareva injunction could be granted the applicant must show:-
(i) that he has a cause of action against the defendant which is justiciable in Nigeria:[10] See – Siskina (Owners of Cargo lately laden on borad) v distas Compania S.A (1979) A.C 210;
(ii) that there is a real and imminent risk of the defendant removing his assets from jurisdiction and thereby rendering nugatory any judgment which the plaintiff may obtain: See – Barclay-Johnson v. Ynill(1980) 1 WLR 1259, at p.1264: also –Rahman (Prince Abdul) him Turki al Sudiary v Abu-Taha(1980) 1 WLR 1268, at p.1272;
(iii) that the applicant has made a full disclosure of all material facts relevant to the application: see – Negocios Del Mar SA v. Doric Shipping Corp. SA. (The Assios) (1979) 1 LI. Rep. 331;
(iv) that he has given full particulars of the assets within the jurisdiction;
(v) that the balance of convenience is on the side of the applicant; and
(vi) that he is prepared to give an undertaking as to damages.
If he fails to satisfy the Court in any of these preconditions for a grant of a Mareva injunction, it ought not to be granted.”[11]
Nnaemeka-Agu JSC’s concurring judgment in Sotuminu has become the standard test for the application of Mareva injunction in Nigeria. However, it was not obvious whether this test provided by Nnaemeka Agu JSC was strict.
In the recent case of Haladu v Access Bank, (Haladu)[12] the Court of Appeal (Ojo JCA) interpreted the Supreme Court’s decision (Nnaemeka Agu JSC) in Sotuminu as follows:
“The apex court in the above case has stated clearly the conditions that must be met for the grant of a Mareva Injunction. In other words, they are pre-conditions that must be met. To my mind, the conditions are of strict liability. It follows therefore that an applicant who seeks an order of Mareva Injunction must place sufficient materials before the court upon which it can exercise its discretion.”[13]
In the instant case, the applicant’s case failed at the Court of Appeal because it failed to provide an undertaking as to damages in its application for Mareva injunction, and did not sufficiently prove that the defendant intends to remove its asset in Nigerian banks to a foreign country.[14]
The take away of Haladu is that an applicant that wants to obtain a Mareva injunction in Nigeria has to be thorough, hardworking, and diligent in its case. All the conditions for the grant of Mareva injunction as stated in Nnaemeka-Agu JSC’s concurring judgment in Sotuminu must be met. Indeed, this is not an easy task. As stated by Ojo JCA in Haladu, “solid evidence” must be provided to succeed in a prayer for Mareva injunction. It is submitted that there is justice in this approach because if a Mareva injunction is granted without the right justification, it would cause great hardship to the respondent. A balance is thus struck between ensuring that a claimant should be able to reap the fruits of its judgment, and on the other hand the defendant should not be subjected to great hardship by a wrongful grant of Mareva injunction. Haladu’s case demonstrates that Nigerian law tilts more towards the side of the defendant as a matter of evidence and procedure.
[1]See Omo JSC in Sotuminu v Ocean Steamship (Nig) Ltd (1992) LPELR-SC 55/1990 approving the English case of Z Ltd v AZ and AA-LL (1982) 2 QB 558, 584-6.
[2](1980) 1 All ER 213.
[3]See generally Dangabar v Federal Republic of Nigeria (2012) LPELR-19732 (CA).
[4]“I know of no case where, because it was highly improbable that if the action were brought to a hearing the plaintiff could establish that a debt was due to him from the defendant, the defendant has been ordered to give security until that has been established by the judgment or decree.” – Lister & Co v Stubbs (1886-90)] All ER Rep 797, 799 (Cotton LJ).
[5]Nippon Yusen Kaisha v Karageorgis (1975) 3 All ER 282.
[6]Cf. Sotuminu v Ocean Steamship (Nig) Ltd (1992) LPELR-SC 55/1990 (Nnaemeka-Agu JSC); Adeyemi Durojaiye v Continental Feeders (Nig) Limited (2001) LPELR-CA/L/445/99 (Aderemi JCA, as he then was).
[7]Owners of Cargo Lately Laden on Board the Siskina v Distos Compania Naveria SA (1979) AC 210.
[8] AJ Moran and AJ Kennedy, Commercial Litigation in Anglophone Africa (Cape Town, Juta and Company (Pty) Ltd, 2018) at 47–50, 87.
[9](1992) LPELR-SC 55/1990.
[10]The original judgment contains “in England”. We have substituted it with the phrase “in Nigeria” to appropriately suit the Nigerian context.
[11]Sotuminu v Ocean Steamship (Nig) Ltd (1992) LPELR-SC 55/1990. See also AIC LTD v. NNPC (2005) LPELR-6 (SC) 33-4 (Edozie JSC); Extraction System And Commodity Services Ltd. v. Nigbel Merchant Bank Ltd.(2005) 7 NWLR (Pt. 924) 215; R Benkay (Nig.) Ltd v Cadbury (Nig) Plc (2006) 6 NWLR (Pt. 976)338; International Finance Corporation v DSNL Offshore Ltd (2007) LPELR-5140(CA) 12-3 (Rhodes Vivour JCA (as he then was); Union Bank of Nig. Plc v. Pam (2016) 14 NWLR (Pt. 1533) 400; Haladu v Access Bank (2021) 13 NWLR (Pt. 1794) 434. The Nigerian Court of Appeal has granted Mareva injunction in some cases : Adeyemi Durojaiye v Continental Feeders (Nig) Ltd (2001) LPELR-CA/L/445/99; Compact Manifold and Energy Services Ltd v West Africa Supply Vessels Services Ltd (2017) LPELR-43537 (CA). See also AIC Ltd v Edo State Government (2016) LPELR-40132 (CA).
[12] (2021) 13 NWLR (Pt. 1794) 434.
[13] Haladu v Access Bank (2021) 13 NWLR (Pt. 1794) 434, 458.
[14] ibid.
Service of process on a Russian defendant by e-mail. International treaties on legal assistance in civil and family matters and new technologies
Written by Alexander A. Kostin, Senior Research Fellow at the Private Law Research Centre (Moscow, Russia) and counsel atAvangard law firm
and Valeria Rzyanina, junior associate, Avangard Law Firm
The Decree of the Arbitrazh (Commercial) Court of the Volga District of December 23, 2019 N F06-55840 / 2019 docket numberN A12-20691 / 2019, addresses service of process on the Russian party by the Cypriot court by e-mail and thus the possibility of further recognition of a foreign judgment.
- Factual background
1.1. Within the framework of the court proceedings, the Russian party (the defendant in the Cypriot proceedings) was notified by the Cypriot court by sending a writ of service of process to the known e-mail addresses of the defendant. In order to substantiate the manner of service, the Cypriot court referred to Art. 9 of Decree 5 of the Rules of Civil Procedure (Cyprus), according to which “In any case, when the court considers that, for any reason, the service provided for in Rule 2 of this Decree will not be timely or effective, the court may order a substitute for personal service, or other service, or substitute for a notice of service in any way that will be found to be fair and correct in accordance with the circumstances”.
1.2. After the default judgment of the Cypriot court was rendered, an application for its recognition was lodged with the Arbitrazh Court of the Volgograd Region. In addressing the issue of compliance with the notification rules, the Russian court referred to paragraph 2 of Art. 24 of the Treaty on Legal Assistance of the USSR-Cyprus 1984 on civil and family matters, according to which judgments are recognized and enforced if the party against whom the judgment was made, who did not appear and did not take part in the proceedings, was promptly and duly notified under the laws of the Contracting Party in the territory of which the judgment was made. The foreign judgment in question was recognized and enforced by the Russian court based on the fact that the proper manner of the notification was confirmed by the opinion of experts under Cypriot law. The Ruling of the Supreme Court of the Russian Federation of March 27, 2020 N 306-ES20-2957 in case N A12-20691 / 2019 left the acts of the lower courts unchanged.
- Analysis of the Decree of the Arbitration Court of the Volga District of December 23, 2019 N F06-55840 / 2019 in the case N A12-20691 / 2019
2.1. At first glance the logic of the Supreme Court and lower courts appears to be flawless. Nevertheless we find it important to correlate the provisions of paragraph 2 of Art. 24 of the 1984 Legal Aid Treaty with the provisions of Art. 8 of the Treaty. Article 8 requires that: “the requested institution carries out the service of documents in accordance with the rules of service in force in its state, if the documents to be served are drawn up in its language or provided with a certified translation into this language. In cases where the documents are not drawn up in in the language of the requested Contracting Party and are not provided with a translation, they are handed over to the recipient if only he agrees to accept them. ”
2.2. In this regard, it should be taken into account that when using the wording “notified under the laws of a Contracting Party,” the Treaty States simultaneously tried to resolve the following situations:
1) where the parties were in the state of the court proceedings at the time of the consideration of the case. In this case, the national (“domestic”) law of the State in which the dispute was resolved shall apply;
2) where the parties were in different states at the time of the consideration of the case. In this case, the provisions of the relevant international treaty shall apply, since the judicial notice is [a] subject to service in a foreign state and, therefore, it affects its sovereignty.
2.3. In this regard, attention should be paid to the fact that under the doctrine and case law of the countries of continental law, the delivery of a judicial notice is considered as an interference with the sovereignty of the respective state. The following are excerpts from case law. Excerpts from legal literature are provided for reference purposes:
- a) “The negotiating delegations in The Hague faced two major controversies: first, some civil law countries, including Germany, view the formal service of court documents as an official act of government; accordingly, they view any attempt by a foreign plaintiff to serve documents within their borders as an infringement on their sovereignty ” – Volkswagen Aktiengesellschaft v. Schlunk, 486 U.S. 694 (1988);
- b) “The exclusive competence to carry out acts of state power on its own territory follows from the sovereignty of states. As a rule, a state cannot perform actions of this kind within the borders of another state without violating its sovereignty and, therefore, without violating international law. An act is compatible with this right only if it is permitted by a specific international regulation, for example, if it is agreed in a treaty concluded between the states concerned, or if it is unilaterally accepted by the state in which it is carried out. When the notification is given abroad without permission under international law, this notification is invalid under Swiss domestic law due to its supremacy – Decision of the Swiss Federal Court of 01.07.2008 in case No. BGer 4A_161 / 2008.
- c) “According to the traditional German law approach, delivery is considered to be an act of sovereignty.”- Rasmussen-Bonne H-E., The pendulum swings back: the cooperative approach of German courts to international service of process P. 240;
- d) “From prospective of the Japanese state, certain judicial acts of foreign courts, such as the service of court notices and the receipt of evidence, are considered as a manifestation of sovereignty.”- Keisuke Takeshita, “Sovereignty and National Civil Procedure: An Analysis of State Practice in Japan,” Journal of East Asia and International Law 9, no. 2 (Autumn 016): 361-378
2.4. In light of the above, the interpretation of the Treaty on Legal Assistance of the USSR-Cyprus 1984, according to which a party located in the territory of Russia is subject to notification in accordance with Art. 8 of the Treaty, seems to be preferable.
We welcome further discussion on this intricate matter.
Avoidance of the debtor’s transactions within the framework of a foreign insolvency before a Russian court
Written by Alexander A. Kostin, Senior Research Fellow at the Private Law Research Centre (Moscow, Russia) and counsel atAvangard law firm
and Valeria Rzyanina, junior associate, Avangard Law Firm
(This is a synopsis of an article published in the Herald of Civil Procedure Law Journal N 1/2021 in Russian)
Issues concerning cross-border insolvency rarely arise in Russian case law. For this reason, the Decree of the Arbitrazh Court of the Moscow District dated 22.11.2018 docket number N A40-39791 / 2018 is of particular interest to both practitioners and academics.
- The factual background of case No. ?40-39791 / 2018
A bankruptcy procedure had been introduced at a German court against the Russian individual having the status of an individual entrepreneur under German law. After the opening of this procedure in Germany, the Russian debtor donated an apartment in Moscow to her daughter.
As a consequence of the said acts the bankruptcy trustee of the Russian debtor brought an action before the Moscow Arbitrazh (Commercial) Court, requesting the following relief: 1) to recognize the judgment of the German court opening the bankruptcy proceedings; 2) to set aside the agreement for donation of the apartment; 3) to enforce the judgment of the German court by prohibiting the alienation of this immovable property upon the completion of the bankruptcy procedure in Germany; 4) to attach the said immovable property in Russia.
On 01.10.2018 the Moscow Arbitrazh (Commercial) Court (First instance) dismissed the claim relating to the setting aside of the agreement of donation on the ground that that application was not heard by the German court and consequently it could not be resolved within the framework of the procedure for recognition of the German judgment. The court of First instance specifically held that the question relating to the validity of the agreement of donation should be resolved in separate proceedings to be brought before the Russian courts.
In further proceedings the Moscow Arbitrazh (Commercial) Court (First instance) recognized the judgment of the German court on the opening of the bankruptcy proceedings (decision of 07.12.2018). With reference to Art. 343 of the German Bankruptcy Ordinance and the Russian case Law (docket number No. A56-22667 / 2007), the Russian court acknowledged the existence of reciprocity in relation to the recognition of Russian court judgments in Germany as prescribed by the German Federal Law “On insolvency (bankruptcy)”. The Russian court made an express finding that the foreign court order did not violate the exclusive jurisdiction over bankruptcy matters, because the debtor’s activities as an individual entrepreneur are regulated by the law of the Federal Republic of Germany (Article 1201 of the Civil Code of the Russian Federation – “The law applicable to determination of the ability an individual to engage in entrepreneurial activity”).
However, the Moscow Arbitrazh (Commercial) Court (1-st instance) rejected the part of the foreign insolvency judgment relating to the prohibition of the debtor to dispose of immovable property until the completion of the insolvency proceedings. In the court’s opinion, in this respect the exclusive competence of the Russian courts and the public order of the Russian Federation had been violated (Article 248 of the Arbitrazh [Commercial] Procedure Code of the Russian Federation). At the same time, the court of first instance also noted that the bankruptcy trustee is entitled to institute separate bankruptcy proceedings against the debtor in order to set aside the agreement for donation of the apartment before the Russian courts.
2. Analysis of case ?40-39791 / 2018
The key question in this situation concerns the correct procedure for setting aside the transaction for the transfer of the immovable property as the restitution of the proper value is dependent on the said action. In turn the success of the said action depends on the following issues: 1) procedural capacity of a bankruptcy trustee, including the issue whether the recognition of a foreign judgment is a prerequisite for granting procedural capacity to a foreign bankruptcy trustee; 2) the law applicable to avoidance of the donation agreement.
2.1. Procedural capacity of a foreign bankruptcy trustee.
In view of the fact that the foreign bankruptcy trustee is regarded as the legal representative of the debtor, his/her powers (including the power to bring an action) are recognized if the corresponding limitation of the capacity of the debtor is recognized in its turn.
Under Art. 1197 of the Civil Code of the Russian Federation, the legal capacity of an individual is governed by his personal law (lex personalis).The personal law of an individual refers to the law of the country of his/her nationality (clause 1 of article 1195 of the Civil Code of the Russian Federation). Consequently, the personal law of a Russian national is the law of the Russian Federation.
In the present situation, the legal capacity of the Russian debtor had been limited by a foreign judgment. In this case, the legal effect of the foreign judgment on limitation of capacity did not fall within the scope of the applicable substantive law since the judgment was not rendered by the country of his/her nationality. For that reason, the bankruptcy trustee’s legal capacity (including procedural capacity) could not be recognized by virtue of the Russian national conflict of laws rule.
In its turn the possibility of recognition of the foreign judgment on the opening of bankruptcy proceedings is questionable for the following reasons. Although in the present matter the Moscow Arbitrazh (Commercial) Court argues that the capacity of the debtor shall be governed by the German law as the law of the country where the defendant was doing business (Art. 1201 of the Russian Civil Code) it needs to be noted that the capacity of the person to conduct business-related activities arises from general civil legal capacity (Art. 1195-1197 of the Civil Code of the Russian Federation). Taking into account the above, the said judgment on the opening of the insolvency proceedings appears to be in conflict with the Russian public order.
2.2. Law applicable to avoidance of the donation agreement.
In order to establish that the agreement for donation of the apartment is void the bankruptcy trustee referred to the fact that the apartment forms an integral part of the bankruptcy estate pursuant to paragraph 1 of Art. 35 of the German Insolvency Ordinance, as well as under clause 1 of Art. 213.25 of the Federal Law “On Insolvency (Bankruptcy)”. With reference to the fact that the agreement for donation of the apartment was concluded after the commencement of foreign bankruptcy proceedings against the Russian debtor, the trustee argued that the transaction should be deemed void under Art. 61.2. of The Federal Law “On Insolvency (Bankruptcy)” as a “suspicious transaction”.
In our view application of Art. 61.2. of The Federal Law “On Insolvency (Bankruptcy)” to invalidate the debtor’s agreements within the framework of a foreign insolvency does not seem to be entirely justified due to the following. Due to the fact that the bankruptcy procedure against the Russian debtor had been opened by a German court, the legal consequences of this procedure should also be determined by German law. Another question is whether these legal consequences are recognized in the Russian Federation). In this case, the fact of initiation of bankruptcy proceedings against a Russian national at a foreign court does not provide grounds for the application of Russian bankruptcy law.
In our view the following ways to set aside the agreement within the framework of the foreign insolvency exist.
Primarily, it appears that the donation agreement entered into after the commencement of foreign insolvency proceedings may be regarded as a void transaction under the Russian law due to the fact that it was intended to defraud creditors (Articles 10 and 168 of the Civil Code of the Russian Federation).
Secondly, it could be argued that the recognition of a foreign bankruptcy entails that the effects of that foreign bankruptcy also apply to all actions that took place in the territory of Russia, including the possibility to apply foreign bankruptcy grounds to avoid contracts. However, this line of argument may not be entirely in line with the provisions of the Russian Civil Code under which Russian law applies to contracts in relation to land plots, subsoil plots and other real estate located in the territory of the Russian Federation (paragraph 2 of Art. 1213 of the Civil Code of the Russian Federation).
Conclusion
The Decree of the Arbitrazh (Commercial) Court of the Moscow District dated 22.11.2018 docket number N A40-39791 / 2018 as well as other court findings represent an interesting interplay between the legal provisions relating to the recognition of foreign insolvency and the application of Russian law for avoidance of the debtor’s transactions. In the present matter the Russian court clearly ruled in favor territoriality of foreign insolvency proceedings. However, we remain hopeful that one day the approach will change and the Russian courts will uphold the principle of universality of foreign insolvency.
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