1.
Introduction
Arbitration is one of the
alternative dispute mechanisms recognized by law in Nigeria. Parties, in making
their contracts, sometimes have an Arbitration clause that prescribes referral
of any dispute arising from the contract to arbitration. It is therefore not
unusual to find parties, in response to court summons, apply that a case
currently being litigated be stayed pending arbitration. On the other hand, it
is uncommon to find cases in Nigeria where a party, who after commencing
arbitration proceedings, approach the court for an injunction in aid of
arbitration. In this article, the author examines the legal framework for this
injunctive relief vis-a-vis the recent decision of the Federal High Court,
Lagos per Oweibo, J. in the case of Intels & Anor v. Nigerian Ports
Authority.[2] The writer is mindful of the
fact that the decision is currently a subject of appeal hence, this commentary
shall be limited to the law, arguments of parties in the matter and the
eventual decision of the learned trial Judge. The issues submitted for
determination at the appellate court are deliberately excluded from this
article while ending the piece with some recommendations for law reform.
2.
The use of Injunction pending
arbitration under the Nigerian law.
Injunctions are equitable
reliefs that are granted solely at the discretion of the court. They are to be
issued only when the court is presented with cogent, peculiar or relevant facts
capable of convincing the court that it is an appropriate case in which an
injunction should issue and of course upon settled principles of law and
justice. This discretion, like all judicial discretions are to be exercised
judicially and judiciously.
The Federal substantive law
that governs arbitration under the Nigerian jurisprudence is the Arbitration
and Conciliation Act.[3] The preamble to that law states
clearly that it is intended to provide a unified framework for the fair and
efficient settlement of commercial disputes in Nigeria and making applicable
Conventions for the recognition of awards arising out of international
commercial arbitration.
Generally, there are two
ways in which injunction pending arbitration may be construed under the
Nigerian law. First, is where the applicant seeks a stay of proceedings pending
arbitration in a matter already instituted before a competent court. The second
scenario is where the Applicant has commenced arbitration proceedings against
the opponent, but the Respondent is taking steps that may foist a situation
of fait accompli on the Arbitral Tribunal. The Applicant
therefore approaches a competent court of law to seek an injunction in aid of
the on-going arbitral proceedings. In each of these scenarios, the writer is of
the view that different considerations will apply.
Statutorily, by virtue of
Sections 4 and 5 of the Arbitration and Conciliation Act, a court of competent
jurisdiction is empowered to order a stay of proceedings in a matter brought
before it and to direct parties to pursue arbitration as contractually agreed.
This power vested in the court is a discretionary one, which like all judicial
discretions must be exercised judicially and judiciously.[4]
Similarly, – Article
26 (3) of the Arbitration Rules,[5] provides that “A request for
interim measures addressed by any party to court shall not be deemed
incompatible with the agreement to arbitrate, or as a waiver of the
agreement.” In essence, a party may on showing special circumstances
approach the court to seek a preservatory order from court, and such move by
that party shall not be deemed to be inconsistent with the agreement to submit
to arbitration. In this piece, we shall also be discussing each of these cases
briefly.
The law is that where a
contract provides that all disputes arising from a commercial transaction are
to be first referred to arbitration, courts will normally be disposed to
staying the proceedings unless the Plaintiff can establish that it is just and
proper to allow proceedings to continue by showing exceptional circumstances.[6] In COTECNA DESTINATION
INSPECTION LIMITED v. BOYSON NIGERIA LIMITED,[7] the Court of Appeal per Ikyegh,
Pemo, and Abubakar JJCA held:
“In considering an
application for stay of proceedings brought pursuant to Sections 4 and 5 of the
Arbitration Act, the sanctity of the contract between the parties is usually of
paramount importance to the Court. So long as there is a contract agreement
which contains the terms which the parties freely and mutually adopt, sign and
is not illegal or contrary to public policy, the Court would respect their will
and grant the application as prayed. Ipso facto where an agreement made and
signed by the parties stipulates that any dispute arising from it must first be
referred to a referee none of the parties has a right to go to Court first
before the dispute between them is referred to arbitration as provided in the
agreement. But the Court can only give effect to what is legal in its basis.”
Thus, the court’s
disposition to ordering a stay of proceedings is a derivative of the principle
of sanctity of contract. OGAKWU, JCA puts this position clearer in the case
of SACOIL 281 (NIG) LTD & ANOR v. TRANSNATIONAL CORPORATION OF
(NIG) PLC[8] where he held as follows:
“…I only wish to say a few
words on the settled legal position on sanctity of contracts. The abecedarian
principle of law in respect of contracts and agreements is expressed in the
Latinism pacta convent quae neque contro leges neque dolo malo inita sunt omni
modo observanda sunt, more commonly expressed as pacta sunt servanda, meaning
that agreements which are neither contrary to the law nor fraudulently entered
into should be adhered to in every manner and in every detail… The parties in
their agreement provided for reference of any dispute to arbitration. In
violation of this provision, the Respondent commenced an action at the lower
Court. The Respondent cannot be heard to so do; it is bound to keep to the pact
to which it voluntarily entered into, id est, reference of any dispute to
arbitration. That is the bargain to which the Respondent must be held. The
lower Court was therefore wrong when it dismissed the Appellants’ application
for stay of proceedings pending arbitration. The Appellants had not taken any
steps in the proceedings before they applied for stay of proceedings pending
arbitration and the Respondent did not depose to any counter affidavit in
opposition to the application giving sufficient reasons why the dispute should
not be referred to arbitration in line with the agreement between the parties.
Section 5 of the Arbitration and Conciliation Act preserves the power of the
Court to stay proceedings in order for a matter to be referred to arbitration
and the lower Court was in error when it failed to exercise the said power.”
It is therefore in exercise
of this bona fide powers that the various courts have
formulated various principles to guide a court considering a grant or refusal
of an application for stay of proceedings pending appeal.[9]
The second variant of this
interim relief is when the Applicant simply seeks a preservatory order so that
the Respondent does not deal with the subject matter inappropriately before the
Arbitration Tribunal has had an opportunity of looking at the issues. In this
instance, Applicant seeks injunction in aid of arbitration.
A review of all the reported
cases by the appellate courts on this principle of injunctions pending
arbitration reveal that most of them relate to the first category; applications
for stay of proceedings in a pending lawsuit. Upon a review of a few cases,[10] it can be safely concluded that so
far, the appellate courts have only had the opportunity of pronouncing on the
state of the law where the injunction is sought to halt an on-going
proceedings.
The question then is, what
happens when for instance, the Arbitral panel is yet to be constituted after
the commencement of arbitration proceedings?[11] This was the scenario in Intels v.
NPA.
3.
Brief facts of Intels & Anor v.
Nigerian Ports Authority (NPA)
Intels Nigeria Limited
entered into a contract with the NPA and was appointed the Managing Agent in
some of the pilotage districts of the Exclusive Economic Zone of the Federal
Republic of Nigeria, to monitor and supervise oil industry related activities
with a view to earning more revenue. By the agreement of parties, the contract
was to last for ten (10) years between August 2010 and August 2020. By the parties
agreement, Intels is entitled to withhold its commission from the revenue
before remitting the balance to the NPA. During the pendency of the agreement,
however, NPA as an agency of the Federal Government of Nigeria keyed into the
Treasury Single Account (TSA) of the Federal Government of Nigeria which
required all revenue generated to be first paid into that account. Therefore,
by a Supplemental agreement, parties agreed to treat Intel’s commission
payments as priority and take reasonable steps to ensure prompt payment of
Intels’ invoices.
At about the same period, an
associated company of Intels, Deep Offshore Services Nigeria Limited, had
entered into an agreement with NPA as a contractor to develop One Ports Complex
under the “Phase 4B” Agreement. Deep Offshore invested a sum in excess of two
billion dollars ($2 Billion) in that project. The security for the repayment of
the debt owed Deep Offshore is the amortization from the service Boats
Operations revenues by virtue of the continued role of Intels as the Managing
Agent of the NPA.
Despite several defaults in
paying its invoices raised, NPA went on to advertise in several newspapers a
notice calling for the tender of Intels’ role. Irked by the notice, Intels
wrote several protest letters to NPA (including pre-action notices) and
thereafter commenced arbitration proceedings against the NPA.
While the Arbitral body was
yet to be constituted, Intels and Deep Offshore by an Originating Motion
commenced an action at the Federal High Court, Lagos seeking an interim
injunction restraining the NPA from giving effect to its Public Notice of
tender of Intels’ role and from appointing a new Managing Agent in the areas
being managed by Intels. Its argument before the court was that once NPA has
succeeded in throwing Intels out, there is no longer security for the debt owed
to Deep Offshore because the subject agreements are interdependent.
In NPA’s response at the
trial court, it alleged that the Applicants were unwittingly seeking an
extension of its contract which was contractually agreed to end on 8th August
2020. It further alleged that Intels had no legal right capable of any
protection and as such, the injunction sought ought to be refused in line with
the settled position regarding grant of interlocutory injunctions.
During the hearing of the
matter, Intels’ counsel distinguished this case from the regular matters in
which interlocutory injunctions are sought. In this case, the substantive
matter is before the Arbitration Tribunal, not the Federal High Court. Also, at
the time of these proceedings the arbitral panel had not been constituted, but
there was evidence before the court that arbitration proceedings had indeed
commenced in accordance with the agreement of parties and the law. What was
being sought therefore was an interim order to restrain NPA from taking steps
that will foist a fait accompli on the Arbitral Tribunal.
NPA’s counsel
submitted per contra that Intels was merely trying to extend
its contract through the backdoor using the court and urged the court not to be
a willing tool for such alleged illegality. They also argued that the balance
of convenience was not in favour of the Applicants and that granting the
prayers of the Applicant would translate to the court restraining a statutory
body from a lawful exercise of its duties under the enabling law.
In his decision delivered on
the 24th July 2020, the learned trial Judge first heeded the
warning of both parties not to descend into the arena of the substantive
dispute at the interlocutory level. The Court then held: “Both sides
have warned of the danger of the court getting into the substantive areas of
dispute between the parties, which I have taken note of. In this respect, I
have taken note of the fact that much of the affidavit evidence deals with the
substance of the dispute now before the Arbitral body.”
From the above findings of
the court above, it is crystal clear that the Court is mindful of the fact that
it is not seised with the substantive disputes between the parties. Conversely,
it is only expected to be bound by the affidavit evidence vis–a-vis the relief
being sought to determine whether it was a proper case to exercise its
discretion in favour of the Applicants. Since it is settled law that
injunctions are discretionary in nature and that one case cannot be a good authority
for another when it relates to exercise of discretion,[12] it only comes to reason that in the
peculiar circumstances of this case, the court would formulate issues it
considers to be apposite to the exercise of its discretion and not to be
strictly bound by some established rules.
Following this reasoning,
the learned trial Judge formulated three issues for determination in the
matter, to wit:
a. Is there an arbitration
proceeding pending between the parties?
b. Is the arbitration
proceedings related to the Managing Agent Agreement?
c. Is the arbitration proceedings
likely to be affected by the action of Respondent which is sought to be
restrained?
The court examined all three
questions and answered them in the affirmative. Of particular interest is issue
three (3) on whether the arbitration proceedings will likely be affected by the
actions of NPA sought to be restrained. This is important because the court
found that the issue of interdependency of the agreements is one of the issues
submitted to arbitration. The court thus found that a furtherance of the
actions of the NPA in the manner complained of would substantially adversely
affect the arbitration proceedings.
Upon that premise therefore,
the court found that it was a proper case where an injunction should issue
against the NPA and the prayers of Intels were granted in its entirety.
It is important to note that
the court formulated the issues for determination in a manner that would best
aid its exercise of discretion. It is not unknown in our jurisprudence for a
court to formulate issues different in wordings from that submitted to it by
the parties,[13] where it believes that such issues
formulated by the court would better serve the ends of justice.[14] In this writer’s view, if the court
had allowed itself to be dragged into the murky waters of determining those
factors to be considered in the grant of an interlocutory injunction,[15] the convolution could have led it
to make pronouncements on some of the issues already submitted before the
Arbitral Tribunal.
4.
Conclusion
The law regarding the
factors to be considered in an application to court seeking interim injunction
pending arbitration is still in a somewhat imprecise state in Nigeria today.
The rules and factors formulated by Honourable Justice Oweibo in the Intels case,
in the writer’s view, ought to set the tone for law reform in this regard.
Since the matter is currently on appeal, the appellate courts will have a good
opportunity of either agreeing with the trial Judge’s exercise of discretion in
the light of the peculiar facts of the matter or not.
It is submitted that
whichever line the appellate court decides to tow regarding the appeal before
it will definitely set a new tone for the use of injunctions pending
arbitration in Nigeria. The writer is also of the view that the provisions of
Article 26 (3) of the Arbitration Rules upon which Intels anchored its case
before the court needs revisiting to provide in more precise terms the right to
seek preservatory orders pending the proper constitution of an Arbitral Tribunal.
_______________________________________________________________
For further information on
this article and area of law,
please contact Abdulkabir
Badmos at S. P. A. Ajibade & Co., Lagos by
Telephone (+234.1.270.3009;
+234.1.460.5091) Fax (+234 1 4605092)
Mobile (+234.8150882799,
+234. 08134667233)
Email: abadmos@spaajibade.com
[1] Abdulkabir
Badmos, Associate, Dispute Resolution Department, SPA Ajibade & Co., Lagos,
NIGERIA.
[2]
Unrep. Suit No: FHC/L/CS/785/2020, ruling delivered on 24th July
2020.
[3]
Cap A18, Laws of the Federation of Nigeria, 2004.
[4]
AKPOKU v. ILOMBU (1998) 8 NWLR (Pt.561) 283 at 291 per ACHIKE, JCA (as he then
was).
[5]
First Schedule to the Arbitration and Conciliation Act, Cap A18, L.F.N. 2004.
[6]
M. V. Lupex v. N.O.C. & S Ltd. (2003) 15 NWLR (Pt. 844) 469 SC (pp. 484,
paras D-E; 485, paras G-H).
[7]
(2013) LPELR 22063 (CA).
[8]
(2020) LPELR 49761 (CA) (pp. 90-91, paras. A-D).
[9]
M. V. Lupex v. N.O.C. & S. Ltd (supra) pp. 484-486, paras F-A.
[10]
NV. SCHEEP v. MV. “S. ARAZ” (2000) 15 NWLR (Pt. 691) 622; (2000) LPELR 1866
(SC), M. V. LUPEX v. N.O.C. & S. LTD (2003) 15 NWLR (Pt.844) 469 MARITIME
ACADEMY v. A. Q. S. (2008) ALL FWLR (Pt. 406) 1872 at 1889, PARAS A-F, per
OWOADE JCA and L.A.C. v. A.A.N. LTD (2006) 2 NWLR (Pt. 963) 49.
[11]
Section 17 of the Arbitration and Conciliation Act provides that unless
otherwise agreed by the parties, arbitration is deemed to have commenced on the
date the request for arbitration is received by the other party.
[12]
AMAECHI v. OMEHIA & ORS (2012) LPELR 20603 (SC) per NGWUTA, J.S.C (p. 21,
paras. D-E).
[13]
NYAVO v. ZADING (2018) LPELR 44086 (CA) per HUSSAINI, J.C.A (pp. 14-15, paras.
A-F).
[14]
UNITY BANK PLC v. BILWADAMS CONSTRUCTION CO. (NIG.) LTD & Ors. (2019) LPELR
49290 (CA) per ADEJUMO, JCA p. 29, paras C-D.
[15]
AKAPO v. HAKEEM-KABEEB (1992) 6 NWLR (Pt.247) 266 SC at 289 per KARIBI-WHYTE
JSC.
Source: SPA Ajibade &
Co.