Dec 5, 2020

Revisiting the use of “Injunctions Pending Arbitration” in Nigeria through the Case of Intels v. Nigerian Ports Authority – Abdulkabir Badmos

 


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

www.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.


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