PS Offshore Nigeria Ltd v. Miden Systems Nigeria Ltd & Chasewood Ltd: Insights Into The Federal High Court's Decision On The Recognition And Enforcement Of Foreign Arbitral Awards In Admiralty Matters

Introduction

The enforcement of foreign arbitral awards in maritime disputes involving Nigerian interests came under judicial scrutiny in PS Offshore Nigeria Ltd v. Miden Systems Nigeria Ltd & Chasewood Ltd.¹ The decision of the Federal High Court raises significant questions about the interaction between arbitration clauses in maritime contracts and the constitutional and statutory framework governing admiralty jurisdiction in Nigeria. This article provides an analytical overview of the Court's reasoning, the legal framework within which the decision was reached, and the practical implications for maritime operators and contracting parties. It does not seek to advance an argument as to whether Section 20 of the AJA indeed renders the underlying arbitration clause in a maritime contract a nullity by extension foreign arbitral awards. Rather, its objective is to offer clarity and insight into the Court's approach, situating the judgment within existing jurisprudence and highlighting the commercial realities that flow from it.

Background

PS Offshore Nigeria Ltd, as award creditor in a charterparty dispute, applied to enforce an arbitral award rendered by a sole arbitrator under the auspices of the Singapore Chamber of Maritime Arbitration. It sought an order of the Federal High Court recognising the award and granting leave to enforce it against the award debtors, Miden Systems Nigeria Limited and Chasewood Limited.

The award debtors resisted the application, contending that the award was contrary to public policy and that it effectively excluded the Court's jurisdiction, contrary to Section 251(g) of the Constitution of the Federal Republic of Nigeria (1999, as amended) and Sections 19 and 20 of the Admiralty Jurisdiction Act (AJA).

The principal question before the Court was whether a foreign arbitral award arising from a charterparty dispute could be recognised and enforced in Nigeria despite the provisions of Section 20 of the AJA. The Court held that Section 20 of the AJA, which invalidates agreements that purport to oust the Court's jurisdiction, restricts the enforceability of foreign arbitral awards in maritime transactions connected with Nigeria. Accordingly, the Court found that because Section 20 of the AJA prohibits agreements that exclude the Court's jurisdiction in admiralty matters relating to Nigeria, the arbitration agreement in question was null and void.

Legal Analysis of the Court's Decision

A court can only assume jurisdiction over a matter where it has been expressly authorized to do so by statute. Under the Constitution, exclusive jurisdiction in respect of matters concerning shipping and navigation, inland waterways designated as international waterways, and Federal Ports is vested in the Federal High Court of Nigeria.² In conformity with the Constitution, the Admiralty Jurisdiction Act vests exclusive jurisdiction in the Federal High Court over all admiralty causes and matters, whether of a civil or criminal nature.³

Having established that the Federal High Court is vested with jurisdiction to hear and determine admiralty causes or matters, it is necessary to consider whether the subject matter of the dispute falls within the scope of an admiralty matter.

Under the Act, a maritime claim is broadly classified into two categories: a proprietary maritime claim and a general maritime claim. A proprietary maritime claim includes, but is not limited to, claims relating to possession of a ship; title to or ownership of a ship or any share therein; a mortgage of a ship or of a share in a ship; and claims for the enforcement or satisfaction of a judgment delivered by the Court or any other court (including a foreign court) against a ship or other property in an admiralty proceeding in rem.⁴

Conversely, a general maritime claim encompasses, among other things, claims for damage caused by a ship; claims arising from loss of life or personal injury; claims for loss of or damage to cargo carried by a ship; and claims arising from agreements relating to the carriage of goods or passengers by sea, or to the use or hire of a ship, whether under a charterparty or otherwise.⁵

The dispute between the parties, having arisen from a charterparty agreement, can properly be characterised as a general maritime claim.

In the case under review, the Federal High Court was tasked with determining whether such a maritime claim ought to have been commenced before it notwithstanding the existence of an arbitration clause in the underlying agreement, and, by extension, whether a foreign arbitral award could be recognised and enforced where the matter had not been instituted before the Court. In resolving this issue, the Court was required to interpret and pronounce on Section 20 of the Admiralty Jurisdiction Act.

Section 20 provides that any agreement by parties to a cause, matter, or action which seeks to oust the jurisdiction of the Court shall be null and void where it relates to an admiralty matter under the Act.⁶

In arriving at its decision, the Court placed primary reliance on the judgment of the Court of Appeal in Fugro Subsea LLC v. Petrolog Limited.⁷ In Fugro Subsea LLC v. Petrology Limited, the Court of Appeal declined to stay proceedings pending arbitration. In that case, the appellant, a foreign-owned company, entered into a BIMCO Charter Party agreement with the respondent, an indigenous Nigerian oil and gas company and owner of the vessel DSV VINNICE. The parties also executed a Memorandum of Agreement. Clauses 34 and 12 of the respective contracts provided that any disputes arising therefrom were to be referred to arbitration in London.

Following an alleged breach arising from non-payment of hire, the respondent commenced an action by writ of summons and filed an ex parte application seeking leave to serve the appellant outside jurisdiction, as well as a Mareva injunction against the appellant's assets within jurisdiction. The appellant applied for a stay of proceedings in favour of arbitration, but the trial court refused the application on the ground that the arbitration clause was null and void pursuant to Section 20 of the Admiralty Jurisdiction Act (AJA). The appellant appealed.

The Court of Appeal dismissed the appeal and affirmed the decision of the trial court. One of the issues before the appellate court was whether the appellant had challenged the trial court's findings that the contract was an admiralty contract and that the arbitration clauses (Clause 12 of the MOA and Clause 34 of the BIMCO Charter Party) were null and void for purporting to oust the Court's jurisdiction in the face of constitutional and statutory provisions. Although the Court resolved this issue against the appellant, it nevertheless proceeded to consider the merits.

In doing so, the Court relied on the dictum of Oputa JSC in Sonnar (Nig.) Ltd & Anor v. Partenreedri M.S. Nordwind & Anor, where it was emphasised that courts should not be quick to divest themselves of jurisdiction conferred by the Constitution and other laws merely because parties have chosen a foreign forum in their private agreement. The Court reiterated that jurisdiction is jealously guarded and cannot be removed by private contract in favour of a foreign forum, except by clear and unequivocal statutory words. It further observed that a court can only give effect to the parties' contractual intentions where there are no statutory limitations.

In the case under review, the Court consequently dismissed the action, holding that the arbitral award could not be enforced because Section 20 of the AJA rendered the underlying arbitration clause null and void. Since the arbitration agreement was a nullity, the foreign arbitral award founded upon it was likewise unenforceable.

The Court's reasoning underscores a firm commitment to safeguarding the admiralty jurisdiction of the Federal High Court. Nonetheless, uncertainty remains as to whether the Court would adopt a different approach in respect of an arbitration clause that does not designate a foreign forum. To date, there appears to be no definitive pronouncement from the Supreme Court on whether an arbitration clause incorporating a foreign jurisdiction clause effectively ousts the admiralty jurisdiction of Nigerian courts.

Practical Recommendations for Maritime Operators and Contracting Parties

1. Reconsider Foreign Arbitration Clauses in Nigeria-Connected Maritime Contracts:  Avoid assuming that a London or Singapore arbitration clause will automatically be upheld and enforceable in Nigeria.
2. Consider Nigerian-Seated Arbitration as a Safer Alternative:  Consider arbitration seated in Nigeria under Nigerian arbitration law.
3. Conduct Enforcement Planning at Contract Formation Stage:  The key commercial question is not where you arbitrate but where you will enforce. If enforcement is likely to occur in Nigeria (e.g., assets located in Nigeria, vessels calling Nigerian ports), then evaluate whether counterparties have attachable assets outside Nigeria.
4. Review Existing Contracts: Companies currently operating under foreign arbitration clauses involving Nigerian maritime performance should renegotiate dispute resolution clauses where commercially feasible.
5. Monitor Supreme Court Developments:  The interpretation of Section 20 AJA could evolve. Monitor pending appeal or future Supreme Court clarification.

Conclusion

Until clarified by the Supreme Court, companies should proceed on the assumption that a foreign arbitration clause in a Nigeria-connected maritime contract carries significant enforcement risk in Nigeria. The safest approach for companies involved in Nigerian maritime activities is to align dispute resolution clauses with Nigeria's constitutional and statutory admiralty framework.

Footnotes

1. Suit No: FHC/L/CS/079/2019, unreported.

2. Section 251 (1) (g) of the Constitution of the Federal Republic of Nigeria 1999 (as amended)

3. Section 19 Admiralty Jurisdiction Act 1991

4. Section 2(2) of Admiralty Jurisdiction Act 1991

5. Section 2(3) of Admiralty Jurisdiction Act 1991

6. Section 20 of Admiralty Jurisdiction Act 1991

7. 2021. LPELR-53133(CA), 67 – 74, paras E – E.

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.