In its recent decision in L R Avionics Technologies Limited v. The Federal Republic of Nigeria & Attorney General of the Federation of Nigeria, the Commercial Court found that that premises owned by Nigeria were not “in use […] for commercial purposes” within the meaning of section 13(4) of the State Immunity Act (SIA) and therefore were not capable of being attached in proceedings for the enforcement of an arbitral award and judgment against the State.
In consequence, although successful in an underlying arbitration, L R Avionics Technologies Ltd (the Claimant) had its attempts to enforce its arbitral award frustrated by the rules of State immunity from enforcement as articulated in the SIA.
The Facts and Judgment of the Court
The matter was brought to the courts by the Claimant, who had obtained an arbitration award in its favour against Nigeria and a judgment of the Nigerian High Court to recognise and enforce the award. The Claimant subsequently sought to enforce the award and judgment in the courts of England and Wales against premises owned by Nigeria. The premises had, however, been leased by the Nigerian High Commission to Online Integrated Services Ltd (OIS), a company contracted by the High Commission to provide passport and visa processing services.
The basic principle articulated in section 13(2)(b) of the SIA is that the property of a State “shall not be subject to any process for the enforcement of a judgment or arbitration award” except as otherwise provided for in the Act. Section 13(4) of the SIA allows for enforcement against State property that “for the time being is in use or is intended for use for commercial purposes”. The parties therefore questioned whether the court ought to consider if the property was in use for commercial purposes from the point of view of OIS or from the point of view of the State. If viewed from OIS’s perspective, the premises were in use by a commercial entity carrying on a business with a view to generating profit. If viewed from the State’s perspective, the premises were in use for consular services. The Commercial Court considered that, to the extent that the question was relevant, it was implicit in the wording of section 13(4) of the SIA that the purposes “must be those of the state against whose property execution is sought”.
The principal issue for the Commercial Court was whether the facts demonstrated that the premises were in use for commercial purposes or not. The Commercial Court followed established jurisprudence that the court “must consider the nature or character of the relevant activity, what is actually being done with (or in this case on) the property in question”. In the present case, the property was being used to process passport and visa applications, which the Commercial Court viewed as a public function “regardless of whether that function is carried out by the defendant state itself or, as in this case, by an agent to whom performance of the function in question has been delegated (or outsourced)”. In consequence, the premises were not “in use […] for commercial purposes” within the meaning of section 13(4) of the SIA, and therefore not capable of attachment by the Claimant in the context of enforcement proceedings.
The decision of the Commercial Court confirms that exceptions to State immunity from enforcement in the SIA are narrow and will be strictly interpreted by the courts.
Steps can, however, be taken to reduce the risk of suffering the same fate as the Claimant. Under the SIA, a State may waive in writing its immunity from enforcement of awards and judgments against its property (section 13(3) of the SIA). Ensuring that a contract with a State contains such a waiver does away with the need to rely on the “commercial use” exception set out in section 13(4) of the SIA, and can accordingly reduce the risk that an arbitration award or judgment of a court against a State will be a pyrrhic victory only.