Introduction

In its December 21 2015 decision in Shell Petroleum Development Company of Nigeria Limited v Crestar Integrated Natural Resources Limited(1) the Court of Appeal held that it and the Federal High Court have jurisdiction to order anti-arbitration injunctions. Previously, the Arbitration and Conciliation Act had been interpreted as precluding courts from interfering in arbitral proceedings, on the basis that arbitration is an alternative to adjudication before the court and not an extension of court
proceedings.(2)

Facts

The case arose from a dispute between Shell Petroleum Development Company (SPDC), Total E&P Nigeria Limited and Nigerian Agip Oil Company (Agip) on one side and Crestar Integrated Natural Resources Limited on the other, in respect of a share purchase agreement (SPA) between the parties.

Crestar filed suit before the Federal High Court seeking to enforce the terms of the SPA. SPDC, Total and Agip filed an application seeking to stay further proceedings, on the basis of the arbitration clause in the SPA and referral of the dispute to arbitration in London. The Federal High Court refused to stay proceedings in deference to the London arbitration and dismissed the application. SPDC, Total and Agip – dissatisfied with the ruling – appealed the decision, while also commencing arbitration proceedings against Crestar in London pursuant to the arbitration clause in the SPA.

Crestar filed a respondent's notice challenging, among other things, the arbitration clause in the SPA for being illegal and in violation of the Nigerian Oil and Gas Industry Content Development Act, 2010. Crestar also filed an application seeking an injunction to restrain SPDC, Total and Agip from taking further steps in respect of the arbitration pending the appeal, contending that continuation of the arbitration by the respondents would prejudice the court's jurisdiction to effectively adjudicate on the appeal and the respondent's notice.

Decision

In considering the application for injunction, the Court of Appeal considered whether a court can grant an anti-arbitration injunction restraining the continuation of foreign arbitral proceedings.

The court considered Section 34 of the Arbitration and Conciliation Act and its earlier decisions in Statoil Nigeria Limited v Nigerian National Petroleum Corporation(3) and Nigerian Agip Exploration Limited v Nigerian National Petroleum Corporation.(4)

In Statoil the parties had entered into a production sharing agreement which stipulated that arbitration was the preferred means of dispute resolution. When a dispute arose, the appellants commenced arbitration proceedings against the first respondent, the Nigerian National Petroleum Corporation (NNPC). The NNPC objected to the arbitral tribunal's jurisdiction and applied to stay the arbitral proceedings, on the ground that matters relating to taxation are not arbitrable. When the tribunal refused to stay proceedings, the NNPC commenced a court action to seek an interim injunction restraining continuation of the arbitration. The Federal High Court granted the interim injunction. However, on appeal to the Court of Appeal, the interim injunction was discharged, partly based on Section 34 of the Arbitration and Conciliation Act, which provides that "a court shall not intervene in any matter governed by this Act except where so provided in this Act".

The Court of Appeal held that the Arbitration and Conciliation Act is intended to provide for the easy settlement of commercial disputes and, as a general rule, precludes court intervention in proceedings referred by agreement of the parties to the jurisdiction of an arbitral tribunal.(5) The court further held that:

"The provision of section 34 of the Arbitration and Conciliation Act…is mandatory in that the word "shall" is one that does not accommodate a flexible interpretation of the directives being given therein…from all provisions therein, no enactment for the determination prematurely of the proceedings of an arbitral tribunal is provided…In the instant case, the issuance of ex-parte interim injunction does not fall under the exceptions to section 34 of the Act. 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."

In Crestar, however, the court delved much deeper into the purport of Section 34 of the Arbitration and Conciliation Act by considering other relevant sections of the act. The court found that the Arbitration and Conciliation Act provides for the following court intervention in arbitral proceedings:

  • The court can revoke an arbitration agreement (Section 2);
  • When the two arbitrators appointed by the parties fail to agree on the third arbitrator, the court can appoint a third arbitrator (Section 7);
  • The court can order the attendance of witnesses (Section 23);
  • In the case of misconduct by an arbitrator, the court can set aside an arbitral award (Section 30); and
  • The court can rule on recognition and enforcement of arbitral awards (Sections 31 and 32).

The court also considered Sections 57 and 58 of the Arbitration and Conciliation Act. While Section 57 defines 'international arbitration', Section 58 provides for the application of the act throughout Nigeria. The court held that the London arbitration was an international arbitration which was beyond the purview of Section 34 of the act. Section 34 and the Statoil and Agip cases therefore did not affect the court's power to order an injunction with respect to the London arbitration.

The court also considered various interpretations of Article 5 of the UN Commission on International Trade Law Model Law on International Commercial Arbitration, which it held to be in pari materia (ie, on the same subject) to Section 34 of the Arbitration and Conciliation Act and therefore instructive as to the proper interpretation of Section 34. Given that the choice of law in the SPA was English law, the court examined the attitude of English courts regarding the power to order anti-arbitration injunctions in foreign jurisdictions.(6) The examination revealed that English courts are unanimous in their view that they have jurisdiction to grant injunctions restraining arbitrations, even when the seat of arbitration is in a foreign jurisdiction. In adopting that view, the English courts had relied on Section 37 of the Senior Courts Act, 1981.

By parity of reasoning, the Court of Appeal found that Section 37 of the Senior Courts Act is in pari materia to Section 13 of the Federal High Court Act, which provides that the courts may grant an injunction or appoint a receiver by an interlocutory order in all cases in which they consider it just or convenient to do so, and that any such order may be made either unconditionally or on such terms and conditions that the courts think just. Since Section 13 of the Federal High Court Rules empowers the Federal High Court to make anti-arbitration injunction orders, the court held that Section 15 of the Court of Appeal Act may also be construed to empower the Court of Appeal to make such orders, because Section 15 of the act provides that the Court of Appeal:

"may make an interim order or grant any injunction which the court below is authorised to make or grant and may direct any necessary inquiries or accounts to be made or taken and generally shall have full jurisdiction over the whole proceedings as if the proceedings had been instituted in the Court of Appeal as court of first instance."

The Court of Appeal also considered the balance of convenience in granting the anti-arbitration injunction – in particular, the fact that the respondent had pleaded that it could not afford the prohibitive cost of the London arbitration, and that continuation of the arbitration – which it claimed was illegal for being contrary to public policy in the face of the Nigerian Oil and Gas Industry Local Content Act – would amount to a waste of its resources and judicial time in comparison to an instant appeal.

The court, having determined that the case's circumstances warranted the grant of an anti-arbitration injunction, restrained the respondents from taking any further steps with regard to the London arbitration.

Comment

Unless this decision is overturned, the current position on anti-arbitration injunctions appears to be that the Court of Appeal and Federal High Court can intervene in foreign arbitration proceedings by granting injunctions where the facts and circumstances so require. While this may appear to be an undue interference by the courts, since arbitral tribunals are competent to rule on their own jurisdiction, it is also clear that the courts – in deciding whether to grant such injunctions – may be motivated by breaches of public policy in the performance of arbitration agreements.

However, the execution of such injunctive orders remains a separate issue. From a practical standpoint, difficulties may be encountered in the enforcement of Nigerian anti-arbitration injunctions as some jurisdictions may consider them intrusive and their courts may insist on exercising jurisdiction in disregard of the Nigerian order. This is due to the arguably inherent tendency of courts to protect their jurisdiction or ensure that proceedings are commenced or continued in the forum deemed most appropriate for the case. Aside from situations where the addressee party of the injunction has assets in the issuing state which could be attached, an anti-arbitration injunction may be rendered pyrrhic. However, the disregard of an anti-arbitration injunction may negatively affect enforcement of the court decision reached at the end of the foreign court proceedings that were initiated or continued in defiance of the anti-arbitration injunction granted by a Nigerian court.

For further information on this topic please contact Funke Agbor or Kelechukwu Okwujiako at ACAS - LAW by telephone (+234 1 462 2094) or email (fagbor@acas-law.com or kokwujiako@acas-law.com). The ACAS - LAW website can be accessed at www.acas-law.com.

Endnotes

(1) Appeal No CA/L/331M/2015.

(2) Cap A18, 2004.

(3) (2013) 14 NWLR (Pt 1373) 1.

(4) Unreported Appeal No CA/A/628/2011, February 25 2014.

(5) Page 28, paras D-F.

(6) Excalibur Ventures LLC v Texas Keystone Inc (2012) 1 All ER (Comm) 933 at 947; Clayton Engineering Services Limited v TXM Olajes Gazkutato KFT (No 2) (2011) All ER (Comm) 128 at 136.

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