The Attitude of Nigeria Courts in Assuming Jurisdiction vis-à-vis Enforcing Contract Agreement where Such Contract Provides Foreign Forum for Adjudication

Introduction

As a general rule, the place of adjudication of dispute arising from a contract is always agreed upon by parties. For instance, where dispute arises in a contract with foreign forum, parties may submit to the agreed jurisdiction and the adjudicatory body in that jurisdiction may decide on that matter. Therefore, choosing any jurisdictional forum such as the foreign forum to adjudicate on a dispute arising from contract is a party autonomy that has been embraced in almost all jurisdictions. In arbitration agreements, parties are allowed to contract out of certain jurisdictions and while a contract may be formed or executed in jurisdictions A and B, the parties may wish that their disputes be resolved in jurisdiction C.

However, there are instances where the jurisdiction of Nigeria Court is challenged that another foreign Court or body aside from the Nigeria Court has jurisdiction. For instance, a foreign forum is chosen in a contract in Australia and the parties are in Nigeria or one of them is in Nigeria, and (or) they executed the contract in Nigeria. Where either of the parties instituted the action in Nigeria Court and the other party challenges such jurisdiction, what will be the position as to the enforceability of that contract vis-à-vis the adjudicatory power of the Nigeria Court in assuming jurisdiction? That is what this article tries to address and do justice to the recent and current trend of doing business in the country in the light of Nigeria Courts and their position towards their jurisdictions vis-à-vis the enforcement of contract with international flavour.

Agreement of Parties on Foreign Forum vis-à-vis Court’s Jurisdiction

Generally, the law gives credence that parties have the discretion to freely negotiate and enter into a contract and the Nigeria Court is always ready to enforce contracts freely negotiated and entered into by parties. Where parties in their contract/agreement choose a foreign forum to adjudicate on such contract and any dispute arises, the Court is to respect the free will of the parties. However, where such a contract tries to rob the Nigeria Court of its jurisdiction, the Court is always ready to protect its jurisdiction jealously and assume jurisdiction over such matter. The Nigerian locus classicus on the choice of foreign law vis-à-vis Nigeria stand is the Supreme Court’s decision in SONNAR (NIG.) LTD & ANOR v. PARTENREEDRI M.S. NORDWIND & ANOR.

In that case, the parties (the Plaintiffs were Nigerians while the 1st Defendant was a ship-owner in Germany) entered into an admiralty contract evidenced by a Bill of Lading for the importation of rice from Germany to Nigeria. The Bill of Lading contained a clause that “any dispute arising under this bill shall be decided in the country where the ‘Carrier’ has his principal place of business and the law of such country shall apply except as provided elsewhere herein.”

The Plaintiffs then sued at the Federal High Court in Nigeria for damages for breach of contract arising from non-delivery of par boiled long grain rice shipped to Lagos from Bangkok. Both the Federal High Court and the Court of Appeal gave effect to the choice of law. However, the Supreme Court held otherwise and allowed the appeal. Oputa JSC (of blessed memory) held thus:

“…our Courts should not be too eager to divest themselves of jurisdiction conferred on them by the Constitution and by other laws, simply because parties in their private contracts chose a foreign forum and a foreign law. Courts guard, rather jealously, their jurisdiction and even where there is an ouster of that jurisdiction by Statute it should be by clear and unequivocal words. If that is so, as indeed it is, how much less can parties by their private acts remove the jurisdiction properly and legally vested in our Courts? Our Courts should be in charge of their own proceedings. When it is said that parties make their own contracts and that the Courts will only give effect to their intention as expressed in and by the contract that should generally be understood to mean and imply a contract which does not rob the Court of its jurisdiction in favour of another foreign forum.”

The Court of Appeal also followed suit in the case of AHMADU BELLO UNIVERSITY v. VTLS INC. One of the issues raised on appeal here was whether having regards to the provisions of Articles 12 and 13 of the Agreement entered by the parties, the lower Court possess the requisite jurisdiction to try and determine the suit. The Court of Appeal held that it is not in all cases that local Court would divest itself of assuming jurisdiction on matters such as this and it relied on section 272 of the Constitution and that parties ought to have considered the procedural difficulties in submitting themselves to a foreign forum for adjudication of their case. Hence, in contract that has International flavour but robs local Court from exercising jurisdiction in favour of foreign forum, the Court has the discretion to apply the blue pencil rule to severe those clauses from such contract or ignore same by virtue of the constitutional provision.

Another instance that the Nigeria Court would protect its jurisdiction over foreign forum and dispense with parties’ free will to submit to that foreign forum in their agreement is on mandatory statute provision in place. For example, the Admiralty Jurisdiction Act and the Civil Aviation Act vest exclusive jurisdiction on the Federal High Court in Nigeria over a wide range of purely private commercial transactions that only that Court could entertain.

Using the example that where foreign forum chosen in a contract is Australia and parties are in Nigeria or one of them is in Nigeria and (or) they executed the contract in Nigeria, one may conclude that the Nigeria Court will want to assume jurisdiction. However, it is not a straight-jacketed conclusion as the Court must also put some yardsticks into consideration to wit: public policy, reasonableness, party autonomy, due process, proximity, foreseeability, among others.

The Court may also consider justice of the case such as the inability to sue in the chosen forum for reasons beyond parties’ control such as the recent global lockdown or the protection of weaker parties like consumers and employees. A very recent case that is apposite is the case of BUPA INSURANCE v. CHAKRAVERTI & ANOR. In that case, the insurance agreement between the parties provided for both an exclusive choice of Court and choice of law agreement in favour of England. The Respondents at the trial Court issued a claim for significant compensation before the High Court of Cross Rivers State, Nigeria for breach of contract and negligence on the part of the Appellant. The Appellant challenged the jurisdiction of the High Court of Cross Rivers State, and asked for a stay of proceedings on the basis that there was an exclusive choice of Court agreement in favour of England. The trial Court declined to uphold the exclusive choice of Court agreement in the interest of justice. On appeal, the Court of Appeal unanimously dismissed the appeal and held that in exercising its discretion to grant a stay of proceedings in a case filed in breach of an agreement to refer disputes to a foreign country, the Court would take into consideration a situation where the granting would spell injustice to the plaintiff as where the action is already time barred in the foreign country and the grant of stay would amount to permanently denying the plaintiff any redress.”

Jurisdictional Discretion of Court 

Despite the above position, there are some other instances where the Nigeria Court would have jurisdiction over a matter and the Court may still exercise its discretion declining jurisdiction at that moment or suspend the proceedings so as to allow parties’ freewill to submit to a foreign forum for adjudication as expressly agreed in their contract. For instance, the Court can decline jurisdiction to allow parties to litigate in a more convenient forum to both parties. Also, in an arbitration agreement, parties’ freewill are always respected and given credence to by the Court. See the cases of FELAK CONCEPT LTD. v. A.-G., AKWA IBOM STATE and MAINSTREET BANK CAPITAL LTD. v. NIG. REINSURANCE CORPORATION PLC.

In the latter case, the Supreme Court held that arbitration clause in a contract does not necessarily oust the jurisdiction of Court to entertain the matter in dispute. It is only a condition precedent, which parties to the dispute must adhere to before commencing the action in a Court of competent jurisdiction. In other words, the Court will not necessarily decline its jurisdiction, rather it will stay the proceeding and direct parties to explore the arbitration, before coming to the Court.

Conclusion

The notorious fact is that parties are bound by their agreements and our Courts should also respect the sanctity of the parties in their agreement which is expressly made by them without any vitiating element.

It is recommended that the Nigeria Courts should take cognizance of the agreement between the parties on the adjudication even when the Courts seek to protect their jurisdictions jealously as a party who agreed to litigate in a particular forum had already contracted to be bound by the law and procedure of that jurisdiction. Limitation period, location of parties, and evidence should not be a valid excuse without more and should be discountenanced especially when those factors were foreseeable when parties were negotiating the contract.

Therefore, Courts ought to help parties to achieve their contractual goals. They should neither frustrate negotiated terms nor rewrite them for the parties provided it is a contract that is negotiated at arm’s length. Nigeria Courts should also promote party autonomy as much as practicable. With this approach, foreign businesses would take the Nigerian justice system seriously and would be confident to do business with Nigeria.

Ahmod Babatunde Ariyibi, Esq. is an Associate at Synergy Attornies. His areas of interest include; Dispute Resolution through Advocacy, Corporate and Commercial Law Practices, Labour/Employment Law, Aviation and Maritime Law, Real Estate Investment, Intellectual Property, Digital Development, Project and Human Resources Management.

References

Statutory Authorities

  • Constitution of the Federal Republic of Nigeria 1999 (as amended)
  • Admiralty Jurisdiction Act, Laws of the Federation of Nigeria (LFN) 2004, Chapter A5
  • Civil Aviation (Repeal and Re-Enactment) Act 2006.

Judicial Authorities

  • Sonnar (Nig.) Ltd & Anor v. Partenreedri M.S. Nordwind & Anor (1987) 4 NWLR (Pt. 66), 520.
  • Ahmadu Bello University v. VTLS Inc. (2021) 10 NWLR (PART 1783) 33 C.A.
  • Bupa Insurance v. Chakraverti & Anor (2021) LPELR-55940 (CA).
  • Felak Concept Ltd. v. A.-G., Akwa Ibom State (2019) 8 NWLR (Pt. 1675) 433.
  • Mainstreet Bank Capital Ltd. v. Nig. Reinsurance Corporation Plc. (2018) 14 NWLR (Pt. 1640) 423.

Literatures


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