Nigeria: Nigerian Court Has Jurisdiction To Make Orders Of Injunction In Respect Of Foreign Arbitration

Last Updated: 23 November 2018
Article by Mofesomo Tayo-Oyetibo

INTRODUCTION

Over the years, Nigeria has continued to develop as a suitable place for arbitration in Africa. This development has come partly as a result of some occurrences like the increase in arbitration institutions in the country, growing number of counsel and arbitrators with the requisite knowledge and capacity to handle increasingly complex arbitrations and finally, more attention being paid by the Courts to arbitration, which has resulted in the growth of Nigerian arbitration law and jurisprudence.

In a further addition to the legal and jurisprudential development of arbitration in Nigeria, in the case of THE SHELL PETROLEUM DEVELOPMENT COMPANY OF NIGERIA LIMITED & OTHERS V CRESTAR INTEGRATED NATURAL RESOURCES LIMITED (APPEAL NO. CA/L/331/2015, UNREPORTED) (SPDC V CRESTAR) the Lagos Division of the Court of Appeal recently had to determine the novel issue of whether, in Nigeria, the Courts have jurisdiction to make Orders of injunction to restrain a party from taking further steps in respect of an international arbitration seated outside Nigeria. In resolving this novel issue, the Court had to consider section 34 of the ACA, which limits the powers of Courts in Nigeria with respect to arbitration and its previous decisions in the cases of STATOIL NIGERIA LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION [2013] 14 NWLR (PT 1373) 1 and NIGERIAN AGIP EXPLORATION LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION (Unreported Appeal No. CA/A/628/2011 delivered on 25/2/2014) where it had decided that no Court in Nigeria had jurisdiction to make injunctive Orders in respect of arbitrations.

The decision of the Court of Appeal in this case is a landmark one because it represents a pioneer decision of an appellate Court on the issue of whether Nigerian Courts have jurisdiction to make Orders of injunction to restrain a party from taking further steps in respect of an international arbitration seated outside Nigeria.

BACKGROUND FACTS LEADING TO DECISION OF THE COURT OF APPEAL

Several disputes have arisen from the recent divestment process embarked upon by international oil companies operating in the Nigerian oil and gas industry, which have led to arbitrations and litigations both locally and in some cases internationally. The SPDC V CRESTAR case is one of such litigations and is a fallout of the dispute between The Shell Petroleum Development Company Of Nigeria Limited, Total E&P Nigeria Limited and Nigerian Agip Oil Company Limited on one hand (The Shell JV) and Crestar Integrated Natural Resources Limited (Crestar) on the other hand in respect of an Agreement (the SPA) between the parties on both sides of the SPA for the Shell JV to assign its participating interest in Oil Mining Lease 25 (OML 25) to Crestar.

In early 2015, when the dispute originally broke out between the parties, Crestar instituted an action at the Federal High Court (Lagos Division) seeking to enforce the terms of the SPA. After entering appearance in the suit, the Shell JV brought an Application seeking an Order staying further proceedings in the action pending reference of the dispute to arbitration in London, pursuant to the arbitration clause in the SPA. In a Ruling on the Shell JV's Application, the Federal High Court dismissed the Application and refused to stay its proceedings in deference to arbitration in London. The Shell JV was dissatisfied with this Ruling of the Federal High Court and appealed to the Court of Appeal against the Ruling.

Meanwhile, after appealing to the Court of Appeal against the Ruling of the Federal High Court, the Shell JV commenced arbitration proceedings against Crestar in London pursuant to the arbitration clause in the SPA. Also, in the Court of Appeal proceedings, Crestar filed a Respondent's Notice by which it prayed the Court of Appeal to affirm the decision of the Federal High Court dismissing the Shell JV's Application for stay of proceedings pending arbitration on grounds other than those relied upon by the Federal High Court. The other grounds contained in Crestar's Respondent's Notice were essentially to the effect that the arbitration clause in the SPA, pursuant to which the London arbitration had been commenced against Crestar by the Shell JV, was illegal and unenforceable for being in violation of the provisions of the Nigerian Oil And Gas Industry Content Development Act 2010. Crestar also filed an Application seeking an Order of injunction to restrain the Shell JV from taking further steps in respect of the London arbitration pending the determination by the Court of Appeal of the validity and enforceability of the arbitration clause in the SPA, which had been challenged by Crestar in its Respondent's Notice. It is this Application by Crestar for an injunction to restrain the Shell JV from taking further steps in respect of the London arbitration that led to the decision of the Court of Appeal presently under review.

THE DECISION OF THE COURT OF APPEAL

In its Application for an Order of injunction to restrain the Shell JV in respect of the London arbitration, Crestar had argued through its lead counsel, Mr Tayo Oyetibo, SAN, that the arbitration was oppressive, vexatious and unconscionable for several reasons, part of which included the fact that allowing the arbitration to continue will not only involve Crestar engaging in duplication of work and needless expense, but also expose Crestar to the risk of a decision that it has submitted to the jurisdiction of the arbitral tribunal in respect of the substantive matter before it.

In opposing Crestar's Application for injunction, the Shell JV raised a preliminary objection to the jurisdiction of the Court of Appeal to grant the Application and argued through its lead counsel, Mr Tunde Fagbohunlu, SAN, that by virtue of section 34 of the ACA, the Court lacked jurisdiction to make an Order of injunction to restrain the Shell JV from taking further steps in its arbitration against Crestar in London. Due to the fact that the Shell JV raised an objection to the jurisdiction of the Court to grant Crestar's Application for injunction in respect of the arbitration, the Court had to first determine the objection before it could proceed to determine the substantive Application. As a result, the first issue that the Court had to determine, and which is also the focus of this paper, is the issue of whether the Court has jurisdiction to issue an anti-arbitration injunction in respect of an arbitration seated outside Nigeria.

In deciding this novel issue, the Court first considered the arguments made by counsel to the Shell JV in respect of Section 34 of the ACA, which provides that "a Court shall not intervene in any matter governed by this Act except where so provided in this Act". The Shell JV had relied on two previous decisions of the Court of Appeal in the cases of STATOIL NIGERIA LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION [2013] 14 NWLR (PT 1373) 1 and NIGERIAN AGIP EXPLORATION LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION (Unreported Appeal No. CA/A/628/2011 delivered on 25/2/2014) where the Court of Appeal had interpreted section 34 of the ACA to the effect that no Court could intervene in arbitration proceedings through the grant of an injunction as this was prohibited by the ACA. With respect to its two previous decisions cited by the Shell JV, the Court considered both decisions and held that it is apparent from the decisions that generally, a Nigerian Court shall not intervene by granting any injunction enjoining any arbitration proceedings brought pursuant to the provisions of the ACA. However, the Court went further to state that with respect to section 34 of the ACA, it is important to note that the section is only applicable to matters which are "governed by the Act", such that if it is found in any proceeding that the particular facts and circumstances are not within the purview of the ACA, the provisions of section 34 cannot apply with full force.

With respect to its conclusion stated above, the Court made reference to the fact that section 34 of the ACA is identical to Article 5 of the UNCITRAL Model Law 1985 and proceeded to rely on several commentaries on the genesis and interpretation of Article 5 of the Model Law by several learned authors, which included the Note of the UNCITRAL Secretariat on Article 5 of the Model Law where it was stated that:

"Another important consideration in judging the impact of Article 5 is that the above necessity to list all instances of Court involvement in the model law applies only to the "matters governed by this Law." The scope of Article 5 is, thus, narrower than the substantive scope of application of the model law, i.e. "international commercial arbitration" (Article 1), in that it is limited to those issues which are in fact regulated, whether expressly or impliedly, in the model law. Article 5 would, therefore, not exclude Court intervention in any matter not regulated in the model law."

as well as Emmanuel Gaillard in his text, 'Anti-Suit Injunctions in International Arbitration', Juris Publishing Inc., 2005, p. 111 where he stated that:

"...It is important to point out that Article 5 of the Model Law, is only applicable if the arbitration is taking place where judicial intervention is sought; the prohibition on judicial intervention not provided for in the Model Law is therefore not applicable in connection with an arbitration taking place abroad or an arbitration the place of which has yet to be determined. This limit to the scope of Article 5...matters, because Courts in many common law jurisdictions construe their injunctive powers as also allowing them to enjoin foreign arbitral proceedings."

On the basis of the foregoing, the Court then raised the sub-issue of whether the London arbitration in question is governed by the provisions of section 34 of the ACA, such that the Court had no jurisdiction to make an Order of injunction being sought by Crestar. In determining this sub-issue in the negative, the Court identified the fact that by virtue of the provisions of section 57(2)(b)(i) of the ACA, the arbitration in question in this case is an international arbitration, due to the fact that the place of arbitration (London) is outside Nigeria, where the parties have their various places of business. As a result, the Court held that, to the extent that the arbitration in question is an international arbitration, section 34 of the ACA and the judicial interpretation given to it in the cases of STATOIL NIGERIA LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION and NIGERIAN AGIP EXPLORATION LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION are inapplicable, with respect to the powers of the Court to intervene in the London arbitration.

In its final decision, the Court held that the implication of the inapplicability of section 34 of the ACA to this case was that the Court of Appeal (as well as the High Court) can make an Order of injunction to restrain the Shell JV from taking further steps in respect of the London arbitration. Consequently, the Court dismissed the objection raised by the Shell JV and after making findings to the effect that the continuation of the London arbitration by the Shell JV would indeed be vexatious and oppressive towards Crestar, the Court granted Crestar's Application by making the Order of injunction.

CONCLUSION

With respect to the application of section 34 of the ACA, there is no doubt that the two decisions of the Court of Appeal in the cases of STATOIL NIGERIA LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION and NIGERIAN AGIP EXPLORATION LIMITED V NIGERIAN NATIONAL PETROLEUM CORPORATION currently represent the position of the law in Nigeria as to the jurisdiction of the courts to make Orders of injunction in respect of arbitration proceedings seated in Nigeria. However, this recent decision of the same court in the SPDC v Crestar case is certainly a landmark one which has further deepened Nigeria's jurisprudence in the area of arbitration as it represents the first decision of an appellate court and the current position of the law in Nigeria with respect to the implication of section 34 of the ACA on the jurisdiction of the courts to make Orders of injunction with respect to arbitrations seated outside Nigeria.

Originally published October 2018

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