Nigeria: Enforcebility of Foreign Jurisdiction Clauses "The Nigerian Perspective"

Last Updated: 29 November 2004

By Adewale Atake*

Abstract

Foreign Jurisdiction clauses are of critical importance to international transactions. Together with choice of law provisions they are almost indispensable preconditions to achieving the orderliness and predictability, essential to any international business transaction1. Thus, it is not uncommon these days for parties involved in International transactions to specify in the contractual agreements a court of a particular country where they want their dispute resolved. Such clauses or provisions in a commercial agreement are known as jurisdictional clauses. By inserting such provisions no other court, (including the forum court) has jurisdiction to adjudicate over the disputes of the parties. However, in spite of such provisions, you still find parties to such agreements referring their disputes to the forum court in breach of the foreign jurisdiction clause. This article is an attempt to trace the approach of Nigerian courts to foreign jurisdiction clauses in international commercial agreements. However, before considering the legal position in Nigeria, it is perhaps pertinent, albeit briefly, to state the position of the English courts on this issue.

English Position

At common law, where the provisions of a contract contain a foreign jurisdiction clause, then prima facie the English court would stay any proceedings brought in breach of such a clause and would only allow the action to proceed where it is satisfied that it is just and proper to do so2.

However, the more modern approach is traceable to the judgement of Brandon J, in the Elefhteria where the facts were as follows: the plaintiffs were the owners of cargo laden on the vessel, "The Eleftheria", which was to have been carried from Romania to Hull, but was discharged at Rotterdam. The clause in the relevant bill of lading provided for the jurisdiction of the Court in Greece. The Romanian plaintiffs began an action in England but the Defendant applied for stay of proceedings on the ground of the presence of a valid foreign jurisdiction clause.

In reviewing the authorities, Brandon J formulated the following principles which have become known in our legal jurisprudence as the "Brandon Test". These principles are as follows:

  1. Where plaintiffs sue in England in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the English court, assuming the claim to be otherwise within its jurisdiction is not bound to grant a stay, but has a discretion whether to do so or not.
  2. The discretion should be exercised by granting a stay, unless strong cause for not doing so is shown.
  3. The burden of proving such strong cause is on the plaintiffs.
  4. In exercising its discretion, the court should take into account all the circumstances of the particular case.
  5. In particular, but without prejudice to (4), the following matters, where they arise, may properly be regarded:
    1. In what country the evidence on issues of fact is situated or more readily available and the effect of that on the relative convenience and expense of trial as between England and foreign courts.
    2. Whether the law of the foreign court applies and, if so, whether it differs from English law in any material respects.
    3. With what country either party is connected, and how closely.
    4. Whether the defendants genuinely desire trial in a foreign country or are only seeking procedural advantages.
    5. Whether the plaintiffs would be prejudiced because they would:

i) Be deprived of security for their claim

ii) Be unable to enforce any judgement obtained

iii) Be faced with a time bar not applicable in England: or

iv) For political, racial, religious or other reasons be unlikely to get a fair trial.

It would therefore seem that the English courts in exercising their discretion are encouraged to take into cognizance the surrounding circumstances of the case. Thus, where the circumstances are such that there are no compelling reasons for granting a stay, the courts would hold the parties to their agreement by giving effect to the foreign jurisdiction clause. It is worthy to note that the principles enunciated by Brandon J. in the Eleftheria have been accepted by the Court of Appeal3 and the House of Lords4 and represents the current state of the law on the discussion of foreign jurisdiction clauses in England.

Nigerian Approach

Prior to the decision of the Supreme Court (The Apex Court), in Sonnar Nig Limited v. Partenreedri M.S. Nordwind (owners of the ship M.V. Nordwind)5 which followed the decision in The Eleftheria, the attitude of the Nigerian courts to foreign jurisdiction clauses had varied between a strict adherence to its terms, on the one hand and an intricate attempt to avoid its effect, on the other.

No case better illustrates such intricate attempt to avoid the effect of a foreign jurisdiction clause in a contract than the case of Adesanya v. Palm Line Ltd6 where Adefarasin J. stated thus:

"The appellants contention, if I understand it rightly, is not that this court lacks jurisdiction but rather that the court should in exercise of its discretion grant a stay of this proceedings on the ground that the proper law to be applied is English law. ….The principle of law to be followed to my mind is that which requires that where the parties expressly stipulate that their contract shall be governed by a particular law, that law shall be the proper law of the contract….. This principle must however be applied subject to the circumstances of each case".

Further dwelling on this point, the learned trial judge remarked:

"What I must apply my mind to is whether in the peculiar circumstances of this case I ought to exercise my discretion in favour of the Respondent notwithstanding that the parties had by their own act chosen a foreign tribunal".

Having reviewed the surrounding circumstances of the case, the learned trial judge in that case refused to adhere to the foreign jurisdiction clause on the basis that the case was more closely connected with Nigeria.

However, since the decision of the Supreme Court in The Nordwind, the approach of the Nigerian courts with regard to foreign jurisdiction clauses, it would seem, has become settled. These days, the courts are no longer bound to stay its proceedings on the face of a foreign jurisdiction clause, but would exercise a discretion whether or not to do so.

The Nordwind case

The dispute in the Nordwind arose out of an international contract of affreightment. The Plaintiffs, (Nigerian Companies), were claiming damages for breach of contract arising from non-delivery of par-boiled long grain rice shipped to Lagos from Bangkok on board the M.V. Nordwind. The 1st Defendant, (owners of the M.V. Nordwind) carries on business in Germany. The 2nd Defendant Barbridge shipping company carries on business in Liberia and issued the bill of lading involved in this case, while the 3rd Defenant, Chaiyaporn rice company Ltd is based in Thailand and supplied the rice involved in this case. The Plaintiffs and the Defendants entered into an agreement which was evidenced by a bill of lading. Clause 3 of which provides: "….. any dispute arising under the bill should be decided in the country where the carrier has its principal place of business and according to the law of such country".

In breach of the above clause, an action was instituted by the Plaintiffs before the Federal High Court in Nigeria. In an application challenging the suit filed by the Plaintiffs, evidence was led to show that the 1st Defendant as the carrier had its principal place of business in Germany. Thus, the Federal High Court granted the application of the 1st Defendant on ground that since the 1st Defendant had its principal place of business in Germany, the German Court should decide the dispute according to German law. The Plaintiffs dissatisfied with the decision of the Federal High Court appealed to the Court of Appeal which dismissed the appeal. Still dissatisfied, the Plaintiffs further appealed to the Supreme Court. At the Supreme Court, the learned Justices restated the principles enunciated by Brandon J. in the Eleftheria as the proper state of the law with regard to foreign jurisdiction clauses, but however, declined to give effect to the foreign jurisdiction clause on the basis that the Plaintiffs claim was already statute barred under German law and as such the Nigerian Court ought to exercise its discretion to entertain the suit.

The above decision I dare say, stands out as the most illuminating discussion on the approach to foreign jurisdiction clauses in Nigeria and represents the current state of our laws. Apart from clearly adopting the Brandon test as the current legal position, it went on to state that such clauses in commercial contracts are no longer seen as conclusive. It would therefore seem, that where proceedings are commenced in breach of an agreement to refer dispute to a foreign court, the Nigerian Courts are not bound to stay its proceedings on account of the foreign jurisdiction clause but will exercise a discretion in the matter. The court proceeds from the principle that parties should be held to their contract (Pacta Sunt Sarvanda) and this puts the burden on the Plaintiff to show why the proceedings should continue in Nigeria in spite of the foreign jurisdiction clause.

However, with regards to Admiralty matters the position is somewhat different. This is so because S. 20 of the Admiralty Jurisdiction Act7 declares null and void any agreement, which purports to oust the jurisdiction of the Nigerian courts where any of the conditions listed in paragraphs (a) – (h) of the said Act apply.

It should however be noted that the use of the words "null and void" in S. 20 admits of significant problems of interpretation as the intention is not to nullify the entire agreement but to give the court the power to disregard any jurisdiction clauses in commercial agreements.

It was for the above reason that Uwaifo JCA (as he then was) in Owners of M.V. LUPEX v. Nigerian Overseas Chartering and Shipping Ltd.8 criticised the section as being "wrongly thought and badly drafted", and I am inclined to agree.

Conclusion

Save for Admiralty matters where foreign Jurisdiction clauses have been disregarded by force of statute, the current attitude of the Nigerian courts to such clauses remains as stated in the Nordwind. Thus, the Courts are not bound to stay its proceedings on account of a foreign jurisdiction clause in a contract, but would exercise a discretion whether or not to do so.

* Adewale Atake is a Partner and Head of the Litigation and Alternative Dispute Resolution Group of Templars Barristers & Solicitors

Footnotes

1 Choice of Law: Beware Foreign Illegality by Thomas J. Hall and Melissa Lavocca

2 Anthenee (1922) Vol. II, Lloyds Rep. 6 and the Fehmarn (1958) 1 All E.R. 333, 335

3 The El Amiva (1981) 2 L.R. 119

4 Trendtex Trading Corporation J. Credit Suisse (1982) A.C. 679

5 (1987) 4 NWLR 520, 546

6 (1967) Vol. 1 NSL 118

7 Admiralty Jurisdiction Act, 1990

8 Unreported, Suit No. CA/L/309/92

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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