Post by lairezippert on Apr 5, 2020 23:01:11 GMT 4
Anti-Arbitration Injunction in Nigeria
Ordinarily, the principle is that courts are not allowed to intervene in an arbitration matter; this position is enshrined in section 34 Arbitration and Conciliation Act (ACA)4: "a Court shall not intervene in any matter governed by this Act except where so provided in this Act."5 The Court of Appeal (CA) reiterated this in Statoil Nigeria Limited v. NNPC 6 that "...It is very clear from the intendment of the legislature that the Court cannot intervene in arbitral proceedings outside those specifically provided. Where there is no provision for intervention, this should not be done..." This position is settled, having also been stated in several other cases.7
As with all rules, there are exemptions. Thus, instances of when the court can interfere in an arbitral proceeding provided for in the ACA include Section 2 in case of revocation of arbitration agreement by the Court; Section 7(2)(a) in respect of appointment of arbitrator if the two arbitrators appointed by the parties fail to agree on the third arbitrator; Section 23 relating to the power of the Court to order the attendance of witnesses; Section 30 in the case of setting aside of award in case of misconduct by arbitrator; Section 31 and 32 in respect of recognition and enforcement awards.
Subsequent to Statoil, in SPDC & Ors v. Crestar Integrated Natural Resources Limited8 the CA in the circumstances of that case held that the Court can make an order of injunction regarding an international arbitration. In this case, Crestar entered into a sale and purchase agreement (SPA) with Shell wherein it was stipulated that disputes between the parties should be submitted to arbitration and conducted at the ICC Arbitration Centre in London, England. Afterwards, Shell terminated the SPA and Crestar filed an action at the Federal High Court (FHC) Ikoyi, Lagos seeking to enforce the SPA.
Shell challenged the jurisdiction of the FHC, seeking stay of proceedings pending reference of the dispute to arbitration in London, in line with the SPA's arbitration clause. Afterwards, the FHC ruled in favour of Crestar by dismissing the motion challenging its jurisdiction and application to stay proceedings.
Dissatisfied with the ruling, Shell appealed to the CA and also commenced arbitration proceedings against Crestar according to the procedure in the arbitration clause in the SPA. Crestar then filed its Respondent's Brief pleading with the court to affirm the decisions of the FHC and also sought an injunction preventing Shell from continuing with the London arbitration proceedings.
According to the CA in Crestar, the ACA provisions that ousts the jurisdiction of the court to grant injunction on arbitration matters is only limited to instances provided for by section 34 ACA:
"However, pursuant to Section 34 of the Act, the Courts can grant, intervene only 'where so provided in this Act'...The question then is: Is the instant matter governed by the Arbitration and Conciliation Act? ...Therefore, as earlier noted, the provision of the Act is only applicable in respect of arbitration which are 'domestic' in the country..."
In other words, section 34 ACA does not limit the jurisdiction of the courts to make orders of injunction with respect to arbitrations seated outside Nigeria but only those seated in the country. The CA also made reference to Article 5 UNCITRAL Model Law from which section 34 ACA was enacted and noted that according to the UNCITRAL Secretariat: "...the impact of Article 5 is that the above necessity to list all instances of Court involvement in the model law applies only to matters 'governed by this law.'"9
Furthermore, relying on the power conferred on the FHC pursuant to section 13 Federal High Court Act10 and the provisions of section 16 Court of Appeal Act11 the CA ruled that the Court has the power to grant injunction in an international arbitration.
Implications of Grant of Anti-Arbitration Injunctions
Devoid of the reasoning of the CA in the decisions reached in the above stated cases, an analysis of the implication of anti-arbitration injunctions is pertinent.
First, the doctrines of Kompetenz-Kompetenz, separability, and party autonomy which are the bedrocks of arbitration all point to the overarching principle that a decision as to whether an arbitration should continue, ought to primarily be a question for the arbitration tribunal.12 No matter how well put, the mere fact that a national court attempts to make a pronouncement on an arbitral proceeding is a form of disruption in the arbitral proceedings whether temporarily or permanently and contradicts established arbitration principles.
Also, the grant of anti-arbitration injunction can be inconsistent with the laws of arbitration. Article 16(1) UNCITRAL Model Law provides that "The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement..."13 Even in investment arbitration matters, Article 26 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) provides that "Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy."14 All these provisions indicate that what the drafters of the laws intended is an independent arbitration at every point.
In addition, there is the probability to wield political power and sentiments in the use of anti-arbitration injunction especially when a state is involved. Accordingly, it was opined that "In most cases, anti-arbitration injunctions are part of deliberately obstructionist tactics, typically pursued in sympathetic local courts, aimed at disrupting the parties' agreed arbitral mechanism...even if the power to enjoin arbitral proceedings were recognized in principle to exist, that authority should be exercised with the utmost circumspection and only in rare circumstances."15
Looking through the unpleasant history of corruption and abuse of court process, there is the possibility that if national courts are eventually granted the right to make interim injunctions regarding international arbitration matters without a standard guideline, political sentiments could set in and this will be inimical to the growth of arbitration in the country.16
In Salini Construttori S.P.A. v. The Federal Democratic Republic of Ethiopia, the parties entered into a contract for the construction of an emergency raw water sewage reservoir for Addis Ababa, the Ethiopian capital. In the contract, it was agreed that any dispute that arises should be submitted to the rules of the Conciliation and Arbitration of the ICC by one or more arbitrators appointed under the rules. A dispute arose and the Appellant requested for the appointment of arbitrators by the ICC in accordance with the agreement.
The Respondent challenged the jurisdiction of the appointed arbitrators and then applied to the Federal Supreme Court of Ethiopia for an injunction to stay the arbitral proceedings pending the determination of the jurisdiction of the arbitrators, which was subsequently granted. The injunction was dismissed by the arbitral body on the ground, inter alia that the application was improperly made and that a state or state entity cannot resort to its local court to frustrate an international agreement in which it is a party.17
Another effect of giving the court a leeway to interfere in an international arbitration vide injunctive orders is the timing implications. Bearing in mind the delays in the Nigerian judicial system, parties in an arbitration may spend so much time appealing against an injunction that may eventually be reversed by the Supreme Court. It is imperative that the court should avoid a clear case of futility of its processes.
Also, the problem with the grant of anti-arbitration injunction is the feasibility of its enforcement. In Salini's case, the orders of the court were not enforced by the arbitrators hence, it did not serve its purpose. It behoves the court to address the vanity of such orders or reliefs in an international arbitration, before granting them.
Ordinarily, the principle is that courts are not allowed to intervene in an arbitration matter; this position is enshrined in section 34 Arbitration and Conciliation Act (ACA)4: "a Court shall not intervene in any matter governed by this Act except where so provided in this Act."5 The Court of Appeal (CA) reiterated this in Statoil Nigeria Limited v. NNPC 6 that "...It is very clear from the intendment of the legislature that the Court cannot intervene in arbitral proceedings outside those specifically provided. Where there is no provision for intervention, this should not be done..." This position is settled, having also been stated in several other cases.7
As with all rules, there are exemptions. Thus, instances of when the court can interfere in an arbitral proceeding provided for in the ACA include Section 2 in case of revocation of arbitration agreement by the Court; Section 7(2)(a) in respect of appointment of arbitrator if the two arbitrators appointed by the parties fail to agree on the third arbitrator; Section 23 relating to the power of the Court to order the attendance of witnesses; Section 30 in the case of setting aside of award in case of misconduct by arbitrator; Section 31 and 32 in respect of recognition and enforcement awards.
Subsequent to Statoil, in SPDC & Ors v. Crestar Integrated Natural Resources Limited8 the CA in the circumstances of that case held that the Court can make an order of injunction regarding an international arbitration. In this case, Crestar entered into a sale and purchase agreement (SPA) with Shell wherein it was stipulated that disputes between the parties should be submitted to arbitration and conducted at the ICC Arbitration Centre in London, England. Afterwards, Shell terminated the SPA and Crestar filed an action at the Federal High Court (FHC) Ikoyi, Lagos seeking to enforce the SPA.
Shell challenged the jurisdiction of the FHC, seeking stay of proceedings pending reference of the dispute to arbitration in London, in line with the SPA's arbitration clause. Afterwards, the FHC ruled in favour of Crestar by dismissing the motion challenging its jurisdiction and application to stay proceedings.
Dissatisfied with the ruling, Shell appealed to the CA and also commenced arbitration proceedings against Crestar according to the procedure in the arbitration clause in the SPA. Crestar then filed its Respondent's Brief pleading with the court to affirm the decisions of the FHC and also sought an injunction preventing Shell from continuing with the London arbitration proceedings.
According to the CA in Crestar, the ACA provisions that ousts the jurisdiction of the court to grant injunction on arbitration matters is only limited to instances provided for by section 34 ACA:
"However, pursuant to Section 34 of the Act, the Courts can grant, intervene only 'where so provided in this Act'...The question then is: Is the instant matter governed by the Arbitration and Conciliation Act? ...Therefore, as earlier noted, the provision of the Act is only applicable in respect of arbitration which are 'domestic' in the country..."
In other words, section 34 ACA does not limit the jurisdiction of the courts to make orders of injunction with respect to arbitrations seated outside Nigeria but only those seated in the country. The CA also made reference to Article 5 UNCITRAL Model Law from which section 34 ACA was enacted and noted that according to the UNCITRAL Secretariat: "...the impact of Article 5 is that the above necessity to list all instances of Court involvement in the model law applies only to matters 'governed by this law.'"9
Furthermore, relying on the power conferred on the FHC pursuant to section 13 Federal High Court Act10 and the provisions of section 16 Court of Appeal Act11 the CA ruled that the Court has the power to grant injunction in an international arbitration.
Implications of Grant of Anti-Arbitration Injunctions
Devoid of the reasoning of the CA in the decisions reached in the above stated cases, an analysis of the implication of anti-arbitration injunctions is pertinent.
First, the doctrines of Kompetenz-Kompetenz, separability, and party autonomy which are the bedrocks of arbitration all point to the overarching principle that a decision as to whether an arbitration should continue, ought to primarily be a question for the arbitration tribunal.12 No matter how well put, the mere fact that a national court attempts to make a pronouncement on an arbitral proceeding is a form of disruption in the arbitral proceedings whether temporarily or permanently and contradicts established arbitration principles.
Also, the grant of anti-arbitration injunction can be inconsistent with the laws of arbitration. Article 16(1) UNCITRAL Model Law provides that "The arbitral tribunal shall have the power to rule on objections that it has no jurisdiction, including any objections with respect to the existence or validity of the arbitration clause or of the separate arbitration agreement..."13 Even in investment arbitration matters, Article 26 1966 Convention on the Settlement of Investment Disputes between States and Nationals of Other States (ICSID) provides that "Consent of the parties to arbitration under this Convention shall, unless otherwise stated, be deemed consent to such arbitration to the exclusion of any other remedy."14 All these provisions indicate that what the drafters of the laws intended is an independent arbitration at every point.
In addition, there is the probability to wield political power and sentiments in the use of anti-arbitration injunction especially when a state is involved. Accordingly, it was opined that "In most cases, anti-arbitration injunctions are part of deliberately obstructionist tactics, typically pursued in sympathetic local courts, aimed at disrupting the parties' agreed arbitral mechanism...even if the power to enjoin arbitral proceedings were recognized in principle to exist, that authority should be exercised with the utmost circumspection and only in rare circumstances."15
Looking through the unpleasant history of corruption and abuse of court process, there is the possibility that if national courts are eventually granted the right to make interim injunctions regarding international arbitration matters without a standard guideline, political sentiments could set in and this will be inimical to the growth of arbitration in the country.16
In Salini Construttori S.P.A. v. The Federal Democratic Republic of Ethiopia, the parties entered into a contract for the construction of an emergency raw water sewage reservoir for Addis Ababa, the Ethiopian capital. In the contract, it was agreed that any dispute that arises should be submitted to the rules of the Conciliation and Arbitration of the ICC by one or more arbitrators appointed under the rules. A dispute arose and the Appellant requested for the appointment of arbitrators by the ICC in accordance with the agreement.
The Respondent challenged the jurisdiction of the appointed arbitrators and then applied to the Federal Supreme Court of Ethiopia for an injunction to stay the arbitral proceedings pending the determination of the jurisdiction of the arbitrators, which was subsequently granted. The injunction was dismissed by the arbitral body on the ground, inter alia that the application was improperly made and that a state or state entity cannot resort to its local court to frustrate an international agreement in which it is a party.17
Another effect of giving the court a leeway to interfere in an international arbitration vide injunctive orders is the timing implications. Bearing in mind the delays in the Nigerian judicial system, parties in an arbitration may spend so much time appealing against an injunction that may eventually be reversed by the Supreme Court. It is imperative that the court should avoid a clear case of futility of its processes.
Also, the problem with the grant of anti-arbitration injunction is the feasibility of its enforcement. In Salini's case, the orders of the court were not enforced by the arbitrators hence, it did not serve its purpose. It behoves the court to address the vanity of such orders or reliefs in an international arbitration, before granting them.