Continental Transfert Technique Ltd v Nigeria & Ors

Introduction

Following disputes under the agreement an arbitration duly took place between CTTL and the first to third defendants, and the award was made on 14^th August 2008. The sums due from the first to third defendants under that award amounting to NGN29,660,166,207.48 plus interest and costs remain unpaid. The sterling equivalent to that sum as at the date of due payment was approximately £140 million.

The New York Convention applied to the award as the seat of the arbitration was Nigeria, and Nigeria is a party to the Convention. CTTL applied under section 101 of the Arbitration Act 1996 to enforce the award in this jurisdiction and for judgment to be entered in terms of the award by an application dated 9^th December 2008. An interim order granting permission to enforce the award and enter judgment was made on 10^th December 2008 by Walker J, and it provided the defendants with a period of 2 months and 22 days from service to apply to set it aside. The order of Walker J provided that judgment be entered in the terms of the award against the first to fourth defendants (“the defendants”) for the full Nigerian naira amount. It then provided that, pursuant to CPR 62.18(9), CPR 62.14 and section 12(2) of the State Immunity Act 1978, the defendants had the right to make an application to the court within 2 months and 22 days after service of the order to set aside the order and that the award may not be enforced until after the end of that period or any application had been made and disposed of.

Service of the interim order and application by way of service on a foreign state was made through the Foreign and Commercial Commonwealth Office pursuant to CPR 6.44 and section 12(1) of the State Immunity Act 1978 on 13^th March 2009. The period of 2 months and 22 days expired, therefore, on 4^th June 2009.

The defendants made no application to set aside the interim order. CTTL then applied for the order granting permission to enforce the award and enter the judgment to be incorporated in a single final order from the court. Such an order was made by Andrew Smith J dated 24^th June 2009 and judgment was entered on that date for the sums due. That order provided that judgment be entered against the defendants in terms of the award for the full Nigerian naira amount. It also provided:

“This order is absolute and the claimant is entitled to apply for enforcement of this judgment.”

CTTL proceeded to enforce the judgment of the court by way of charging orders over property owned by the Nigerian National Petroleum Corporation (NNPC). By an order of Christopher Clarke J dated 28^th September 2009 NNPC was joined as a fifth defendant to these proceedings and the charging order was granted in favour of CTTL over real property of NNPC. A further order of 28^th September 2009 granted a charge in favour of CTTL over securities held by NNPC in a company called Duke Oil Services Limited incorporated in the jurisdiction. An interim third party debt order dated 28^th October 2009 was granted in favour of CTTL over accounts held by NNPC’s banks in the jurisdiction. On the application of NNPC this order was discharged on 16^th November 2009, although an appeal to the Court of Appeal against that discharge has been permitted and will be pursued by CTTL. Meanwhile it has been ordered that the interim charging orders of 28^th October 2009 are to remain in place and that a hearing to determine the charging orders is to be scheduled. By an application notice dated 23^rd November 2009 the defendants now, somewhat belatedly, apply to the court for an order seeking that the judgments be set aside or stayed.

In addition to seeking to enforce the award in this jurisdiction CTTL also took steps to seek to enforce it in the United States. Their original application was for entry of the judgment in terms of the award. There was no response to that application by the defendants and a default judgment motion was issued. The defendants were then stirred into action and were granted a temporary stay to respond to the application. The original application by CTTL was then superseded when they put forward an amended claim. They claimed that judgment should be entered on two bases: (1) due to an entitlement to enforce

The award was made on 14^th August 2008. On 15^th November 2008 time expired for challenge of the award in the Nigerian courts. On 20^th April 2009 an originating summons was filed out of time by the defendants in the Nigerian courts seeking to challenge the award. The application was made for an injunction to prevent enforcement by CTTL and for an extension of time to apply to challenge the award. On 23^rd April 2009 an ex parte order was granted by the Nigerian courts for the requested injunction and for the requested extension of time. On 19^th May 2009 CTTL applied for an extension of time to contest the ex parte order. On 1^st June 2009 there was a hearing of that application. On 14^th June 2009 CTTL contends that, pursuant to the relevant Nigerian legislation, the ex parte order lapsed. On 16^th June 2009 the court gave a judgment rejecting CTTL’s application for an extension of time to challenge the ex parte order. I am told that that order is itself the subject of an appeal, but there is no evidence before the court as to when either that appeal or when the defendants’ originating summons will be heard.

The first ground relied upon by the defendants is section 103(2)(f) of the Arbitration Act 1996, which provides as follows:

“Recognition or enforcement of the award may be refused if the person against whom it is invoked proves…

(f)

that the award has not yet become binding on the parties, or has been set aside or suspended by a competent authority of the country in which, or under the law of which, it was made.”

Although we are here concerned with a judgment rather than an award, the defendants submitted that, since the award is one which should not be recognised or enforced, it follows that the judgment based on that award should be set aside. I reject the defendants’ argument. It is clear that section 103(2)(f) is inapplicable in this case. It only applies where the award “has been set aside or suspended”. The fact that there is an application to set aside an award does not mean that the award has been set aside. The position where there is an application to set aside is dealt with under section 103(5). If authority is needed to support that conclusion based on the clear wording of section 103, it is to be found in the judgment of Gross J in IPCO v NNPC [2005] 2 Lloyd’s Law Rep 326. In the course of his judgment in that case he said as follows at paragraph 12:

“Secondly, s.103(2)(f) is only applicable when there has been an order or decision suspending the award by the court in the country of origin of the award (‘the country of origin’). S.103(2)(f) is not triggered automatically by a challenge brought before the court in the country of origin. This conclusion flows from the wording of s.103(2)(f) itself, it is supported by leading commentators (Van den Berg, The New York Convention of 1958 (1981), at p.352, Fouchard, Gaillard, Goldman on International Commercial Arbitration (1999), at pp. 980-1) and it is consistent with the provisions of s.103(5) of the Act – which would be otiose, or at least curious, if an application to the court in the country of origin automatically resulted in the award being suspended.”

Then again at paragraph 21:

“…NNPC contended that by virtue of its application to the Federal High Court in Lagos to set aside the award, the award had been ‘suspended’; accordingly, s.103(2)(f) of the Act was applicable and NNPC was entitled on this ground to have the order set aside. For the reasons already set out, this ground is misconceived; s.103(2)(f) is not triggered merely by an application before the court in the country of origin.”

I respectfully agree with those observations.

The second ground relied upon by the defendants was alleged material nondisclosure of the Nigerian proceedings and the US proceedings at the time of the application before Andrew Smith J that led to the order of 23^rd June 2009. In order to put that submission in its context, it is necessary to deal with the procedural background to Andrew Smith J’s order.

In December 2008 CTTL had applied for and obtained leave to enter judgment in the amount of the award. (I have already set out the terms of Walker J’s order.) The effect of that order was that there was, as from 10^th December 2008, a judgment for CTTL in the amount of the award, but that judgment could not be enforced for at least 2 months and 22 days from the date of service. No challenge was made within that prescribed period, which meant that, in accordance with the terms of the December order, there was a judgment which was fully enforceable as from 5^th June 2009. However, because of the conditional nature of the December order, for enforcement purposes CTTL wanted an order that confirmed the position as it now was. Hence, they made an application to the court for a further order formalising the procedural position. That application was made under CPR 3.1 on paper and without notice. The reason for this is that it was essentially seeking an administrative act. It was seeking that the existing position be formalised. It was not making a new substantive application. The application was supported by a witness statement of Mr Dutson, who said nothing about the Nigerian or the US proceedings, and that is the gravamen of the defendants’ complaint. Given that this was essentially an administrative application, CTTL submits, and I accept, that any duty of disclosure would be a limited one and would ordinarily relate to the status of the English proceedings which were being sought to be formalised. If, for example, there had been some issue in relation to service, that would have been a matter which should have been brought to the court’s attention. In my judgment, the duty did not extend to the Nigerian proceedings, still less the US proceedings. The Nigerian proceedings are relevant to the issue of enforcement of the judgment, but not to the claimant’s entitlement to enter judgment. CTTL have that right as long as there is a valid and subsisting award, which there is unless and until it is set aside, which it has not been. I therefore reject the argument that there was any material nondisclosure, or, if there has been, that it should lead to the judgment being set aside.

The first ground relied upon by the defendants was section 13(2) of the State Immunity Act 1978, which provides that:

“Subject to subsections (3) and (4) below…

(b)the property of a State shall not be subject to any process for the enforcement of a judgment or arbitration award or, in an action in rem, for its arrest, detention or sale.”

I turn then to the general discretionary grounds in relation to the application for a stay.

Given that a judgment has already been entered in terms of the award pursuant to section 103(3) of the 1996 Act and CTTL is now seeking to enforce that judgment, the relevant discretion is that which can be invoked to stay enforcement of any judgment of the court, namely that provided by RSC Order 47 Rule 1(1), which is not yet replaced by an equivalent provision in the

In support of their application the defendants rely on section 103(5) of the 1996 Act which provides as follows:

“Where an application for the setting aside or suspension of the award has been made to such a competent authority as is mentioned in subsection (2)(f), the court before which the award is sought to be relied upon may, if it considers it proper, adjourn the decision on the recognition or enforcement of the award.

It may also on the application of the party claiming recognition

or enforcement of the award order the other party to give suitable security.”

The relevant principles under section 103(5) are helpfully set out in the judgment of Gross J in the IPCO case. In that case NNPC was seeking a stay of enforcement in England of a Nigerian award on the basis that challenge to the award had been submitted to the Nigerian courts. A stay was granted by Gross J on terms requiring NNPC to pay the sum that was indisputably due to IPCO, around US$30million, and to provide appropriate security in London for the sum of US450 million. Gross J summarised the relevant principles at paragraphs 11 to 16 of his judgment. So far as relevant to the present application, they are as follows:

In his judgment at paragraph 16 Gross J also observed as follows: “…the fact that the arbitration was domestic in the country of origin must generally be likely to enhance the deference due to the court exercising supervisory jurisdiction in that country. Comity and common sense are likely to require no less; preempting the decision on a challenge to an award before the court exercising supervisory jurisdiction in the country of origin would be a strong thing in a case where all parties were domiciled or incorporated in that country.”

Gross J also quoted and referred to the judgment of the Court of Appeal in the case of Soleh Boneh International Limited v The Government and the Republic of Uganda [1993] 2 Lloyd's Rep 208. He said as follows:

“As it seems to me, the right approach is that of a sliding scale, in any event embodied in the decision of the Court of Appeal in Soleh Boneh v Uganda Govt. [1993] 2 Lloyd's Rep. 208 in the context of the question of security:”

I turn then to consider how the discretionary factors apply in the present case, and I consider, first, whether the application has a real prospect of success.

The court has to consider this issue on the basis of the material before the court. It is up to the applicants, in this case the defendants, to put forward such evidence as it wishes to support its case on the application which involves, in accordance with established principles, putting forward evidence relating to its case as to the invalidity of the award. However, the defendants had not done so. The only evidence relating to the basis of the application is the originating summons itself. That provides that “The following relief is being sought” and there are various grounds set out, and the only ground that sets out a basis for challenging the validity of the award, aside from points relating to the New York Convention (which have not been pressed before me), is under 4: “A declaration that the arbitral tribunal misconducted itself in rendering the Final Award particularly when the tribunal awarded damages for loss of profits to the defendants contrary to the agreement of the parties.”

So the only identified ground to challenge the validity of the award is that the tribunal had no jurisdiction to deal with the claim for lost profits, but no evidence from the defendants has been advanced to support this contention. There is, however, Nigerian law evidence before the court to rebut it. This is set out in the statement of Mr Falkof for CTTL, who relates what he has been told by CTTL’s Nigerian counsel, Mr Adebayo. In summary, the effect of the advice of Mr Adebayo set out in Mr Falkof’s statement is:

The challenge is misconceived because the tribunal did have the power to award loss of profits in accordance with the general terms of the arbitration clause. Further, the defendants raised no objection in the arbitration that the tribunal did not have power to award loss of profits, and any challenge on this basis therefore be waived – see section 33 of the Arbitration and Conciliation Act.

There is no other basis for a valid challenge to the award in Nigeria.

The only parts of the award which are subject to challenge in Nigeria are those parts awarding loss of profit.

Thirdly, the delay caused by any stay and resulting prejudice. There is no evidence before the court as to when the application in Nigeria will be heard. CTTL contend that it may not be for some considerable period of time. They say that, as far as they are aware, there is no immediate prospect of a hearing, and that the hearing of the challenge may be a considerable time away. They point out that, as in many jurisdictions, matters can take some time to come on for hearing in Nigeria. By way of example, they note that by the time the matter came in front of the English court for the second time in the IPCO case (IPCO v NNPC [2008] 2 Lloyd’s Reports 59), the challenge had been before the Nigerian court for three years and the substantive hearing in Nigeria was still many years away.

It appears that there was more evidence before the US court in relation to this matter, and I note the observations made by the US judge in his judgment, where he said this:

“The current status of the proceedings in Nigeria — to the extent that the Court has been able to ascertain it based on the representations of the parties — also weighs against adjournment. As both the plaintiff and defendants have acknowledged, the judge assigned to this case in the Nigerian Federal High Court has retired, and no judge currently presides over Nigeria’s attempt to set aside the arbitration award.

The case in Nigeria thus seems to have stalled, a state of affairs that suggests a resolution of the Nigerian proceedings may be long in coming. Adjournment of these proceedings pending the outcome of those in Nigeria would therefore would contravene the strong federal policy in favor of arbitration and ‘the expeditious resolution of disputes.’”

Before this court there is no evidence as to when the defendants’ application is likely to come on. I was told on instructions by the defendants’ counsel that there is to be a hearing in May to consider directions for their application, but that was disputed by CTTL on instructions from their Nigerian lawyer. I have to consider this issue on the material before the court, and on that material when this case is to be heard by the Nigerian court appears to be completely open-ended, and it is apparent that there is likely to be, potentially at least, substantial delay in the determination of the application.

As to prejudice, given the very large amounts at stake, it is apparent that any delay in being able to obtain the fruits of the judgment is likely to cause significant prejudice. A similar point was made in the IPCO judgment at paragraph 52, where Gross J said as follows:

“Given the size of the award, it may be inferred that any delay in enforcement is likely to prejudice IPCO. Very few commercial entities would not be prejudiced by delay in the availability of US$152 million. It must be right to seek to minimise any such prejudice, so far as it is practicable and appropriate to do so.”

In this case the amounts at stake are comparable if not greater, and the evidence before the court in Mr Falkof’s statement at paragraph 56 is this: “Given the size of the Award, any further delay of enforcement would cause a considerable prejudice on CTTL. The Award became due on 28 August 2008, and over 15 months later the Defendants have not yet paid any amounts owing to CTTL. Only a very few commercial organisations can withstand the continual non-payment of a debt of such a large amount. CTTL is not one of these.”

It follows that all three of the particular considerations identified in the IPCO case point strongly against the grant of the stay. As to other factors, CTTL also relied on the fact that this is a case where not only was there delay in seeking to challenge the award, but there has also been delay in seeking to challenge the English judgment. The time period for challenging the judgment of 10^th December expired on 4^th June 2009, but the present application was only made on 23^rd November 2009, a delay of some 5½ months. Against that, the defendants rely on the Nigerian focus of the parties and of the case and the observations made by Gross J at paragraph 16 of his judgment in IPCO. Some, but no great reliance was also placed on the fact that the order made by the Nigerian court involved an injunction against CTTL. As to that, CTTL point out, on the basis of their Nigerian law evidence , (1) that although an ex parte injunction was granted against CTTL on 23^rd April 2009, it is their case that the injunction lapsed on 14^th June 2009, and that since that time there has been no extant injunction against them; (2) while it existed, the ex parte injunction only had domestic effect and could not operate to restrain proceedings or processes outside Nigeria, including proceedings taken before the English court; and (3) even if a binding worldwide injunction was still in place, that would not per se require the court to give effect to the injunction. Even taking comity into account, it would be open to the court to permit the enforcement proceedings to advance.

Weighing up all the various discretionary factors which I have set out, I have come to the clear conclusion that they come down heavily on the side of CTTL. It seems to me that the alternatives in this case are really either to refuse any stay, or to make a stay subject to conditions, and indeed CTTL do not oppose the imposition of conditions. As to what the conditions might be, CTTL contends that one condition should be payment of the sum which they allege to be indisputably due. However, it is not clear that there is an undisputed part of the award. The defendants certainly dispute that there is and the application they have made is to set aside the award as a whole and not merely part of the award. Although in that application they have identified only one specific ground, which is a ground which would appear to go to only part of the award, they have identified that as being a particular rather than the only ground relied upon.

I therefore do not consider that this is a case where the court can simply split out an undisputed part of the award. That being so, the choice is between refusing the stay or granting a stay but requiring substantial security to be provided. Since CTTL do not oppose a stay on terms of security being provided, and since it will provide the defendants with an opportunity to show that they are serious about their challenge to the award and an incentive to progress that application as expeditiously as possible, in the exercise of my discretion I have concluded that it would be appropriate to grant a stay but only on terms of substantial security being provided in this jurisdiction and it being provided within a limited period of time. I do not consider it would be appropriate to require security for the full amount of the award to be provided, but I do consider that substantial security should be provided, and I consider the appropriate sum to be £100 million to be provided by way of security within 28 days.