By Chukwuma Okoli*
Abstract
In Nigeria valid commercial contracts between parties are treated as sacrosanct and binding by Nigerian courts. It is however uncertain (unlike in the European Union) whether a valid foreign choice of court agreement, which is a term of the parties’ contract, will be enforced by Nigerian courts. In this connection, the decisions of Nigerian courts are not consistent. Nigerian courts have applied three approaches to the enforcement of foreign choice of court agreements – ouster clauses, the Brandon test, and the contractual approach. This article analyses the approach of Nigerian appellate courts to the enforcement of foreign choice of court agreements in light of three Court of Appeal decisions delivered in the Year 2020.
Introduction
Many international commercial parties usually provide for a choice of court agreement as a term of their contract. This is done to enhance predictability, certainty and the reduction of costs in the event that a dispute arises between the parties. Since a foreign choice of court agreement is a term of the contract, should a Nigerian court enforce such an agreement like any other contract between commercial parties?[1] On the contrary, should a foreign choice of court agreement be regarded as an ouster clause? This has now become a perennial dilemma among the decisions of Nigerian appellate court (Court of Appeal and Supreme Court) judges.
In the year 2020, the Nigerian Court of Appeal delivered three reported decisions on foreign choice of court agreements.[2] In the first two decisions delivered in the year 2020, the Nigerian Court of Appeal gave full contractual effect to the parties’ choice of court agreement.[3] In other words, the Nigerian Court of Appeal interpreted the parties’ foreign choice of court agreement strictly according to its terms as it would do for a contractual document between commercial parties. Later in November 2020, the Nigerian Court of Appeal delivered a third decision where it declined to enforce a Commonwealth of Virginia (in USA) choice of court agreement.[4]
The confusion or inconsistency in the Nigeria jurisprudence may be due to a lack of proper conceptualisation of what a choice of court agreement is. How should choice of court agreements be conceptualised? Are they ordinary contractual provisions or are they something different?[5] Nigerian judges have not clearly defined what a choice of court agreement is. This may account for why there has been confusion or inconsistency in applying the concept of choice of court agreements. It is submitted that a choice of court agreement is a unique contractual term that a Nigerian court has the discretion to enforce depending on the circumstances of the case.
In the light of the above, the purpose of this comment is to analyse the recent Court of Appeal decisions delivered in the year 2020 on choice of court agreements.
- The Court of Appeal Cases in 2020
This section provides the facts and decisions of the Nigerian Court of Appeal’s decisions on foreign choice of court agreements delivered in the year 2020.
- Kashamu v UBN[6] decided on May 29 2020
In this case, the Banque International Du Benin (“BIDB”), a limited financial institution in Benin Republic, had granted medium term loan facilities, in different sums, to the Société d’ Egrenage Industrial De Cotonu du Benin (“SEIC-B”), a private limited company registered in Benin Republic, for the construction of its Cotton Ginning factory. The facilities were secured by, inter alia, SEIC-B’s goodwill, factory and land. In addition, the defendant/appellant, the alter ego of SEIC-B, personally guaranteed the facilities in a personal guarantee agreement. The loan agreement between BIDB and SEICB provided that the law and courts of Benin Republic should determine their dispute. However, the guarantee agreement between BIDB and the defendant/appellant did not explicitly provide for a choice of court agreement.
SEIC-B defaulted in the repayment of the loans despite repeated demands. As a result, BIDB appointed the plaintiff/respondent, a public limited financial institution in Nigeria, as its attorney to recover the outstanding facility. Further to the donated power of attorney, the plaintiff/respondent claimed the recovery of the debt from the defendant/appellant in the Lagos High Court, Nigeria. The defendant/appellant counter-claimed and also challenged the jurisdiction of the Lagos High Court as being the wrong forum to institute the action. The Lagos High Court held that it had jurisdiction.
The defendant/appellant was dissatisfied with this decision and appealed to the Court of Appeal. The defendant/appellant argued that the proper forum for the action were the Courts in Benin Republic, given that the loan agreement between BIDB and SEICB provided that the law and courts of Benin Republic should determine their dispute. He argued that the choice of court agreement in the loan contract should also be incorporated into the guarantee agreement, so that it was the intention of the parties that the courts of Benin Republic should determine their dispute. He also argued that the execution and performance of the contract were to be in Benin Republic hence the agreement was in the French language.
The plaintiff/respondent argued that the loan agreement and guarantee agreement were distinct. It observed that the parties were bound by the terms in the guarantee agreement. It added that the parties in the guarantee agreement did not agree that the courts in Benin Republic would have exclusive jurisdiction over disputes arising from it. It asserted that the guarantee agreement was not expressly incorporated in the loan agreement. It opined that the defendant/appellant was not privy to the loan agreement and would not take a benefit from or enforce it for want of privity of contract. It claimed that the content of the guarantee agreement was clear and must be given its literal meaning.
The Court of Appeal unanimously dismissed the appeal. In construing the loan and guarantee agreement to determine if the parties had chosen the courts of Benin Republic, it applied the principles of Nigerian contract law to the effect that courts are allowed to read a document holistically so as to reach and garner harmonious results of its content. In construing a document, the court is enjoined or mandated by law to apply the literal rule as a canon of interpretation, that is, to accord the words employed there in their ordinary grammatical meaning without any embellishment.[7] It then held that:
for the document of the parties to a private contract to confer jurisdiction on a court, the words used must be clear and explicit and devoid of woolliness and ambiguity. In the instant case, the guarantee contract did not precisely confer jurisdiction on the courts of Benin Republic.[8]
Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90, 115 (Ogbuinya JCA).
It further held that the loan contract did not in any way allude to the guarantee to benefit from the doctrine of incorporation by reference. The doctrine of incorporation could not be invoked because of the want of any connection between the two documents.[9]
- Damac Star Properties LLC v Profitel Limited[10] – decided on August 25 2020
Damac Star Properties LLC v Profitel Limited (“Damac”)[11] concerned the fallout from an investment introduced to the 1st plaintiff/respondent by the 2nd respondent allegedly on behalf of the defendant/appellant wherein the 1st plaintiff/respondent paid a deposit of 350,000.00 US Dollars for 9 apartments in Dubai and being 20% of the total cost of the apartments. The contract between the 1st plaintiff/respondent and defendant/appellant contained an exclusive choice of court clause in favour of Dubai. There was a dispute between the parties as to some of the terms of the contract. This resulted in the defendant/appellant selling the apartments to another buyer. The 1st plaintiff/respondent requested a refund of the deposit that was paid to the defendant/appellant, but its request was declined. As a result of this, the 1st plaintiff/respondent initiated a suit for summary judgment in the High Court, Federal Capital Territory, Nigeria, against the defendant/appellant and the 2nd respondent, and obtained an order to serve the defendant/appellant through the 2nd respondent, its alleged agent in Nigeria. At this stage, the defendant/appellant did not appear and was unrepresented in proceedings at the High Court. The High Court proceeded to hear the suit and entered judgment against the defendant/appellant with an order to refund the sum of 350,000.00 US Dollars with 10% interest from the date of judgment up until the judgment sum was fully liquidated. The defendant/appellant applied to the High Court to set aside the judgment, but the court dismissed the application.
The defendant/appellant appealed to the Court of Appeal. The Court of Appeal unanimously allowed the appeal. The Court of Appeal held on the basis of the exclusive choice of court agreement in favour of Dubai – which it regarded as valid – that the lower court should not have assumed jurisdiction.
- A.B.U. v VTLS [12] – decided on November 30 2020
In this case, the claimant/respondent commenced an action at the Kaduna High Court with a writ of summons and statement of claim dated 18 December, 2018 wherein it claimed against the defendant/appellant the sum of $18,103.00 (USD) being due and an unpaid software licensing fee owed by them by virtue of the agreement between the parties dated 12 June, 2013.
The defendant/appellant filed a conditional appearance along with a Statement of defence and counter affidavit. Its argument, inter alia, was that by virtue of Article 12 and 13 of their agreement, the Nigerian court had no jurisdiction in this case. The relevant portion of their agreement read as follows:
‘ARTICLE 12
GOVERNING LAW: The Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, USA without regard to the principle of conflicts of any jurisdiction.”
“ARTICLE 13
With the exception of an action or suit for the Licensee’s failure to make any payment required hereunder when there was no suit or action arising under this Agreement may be brought more than one (1) year following the occurrence giving rise thereto. All suits and actions arising under this Agreement shall be brought in the Commonwealth of Virginia, USA and License hereby submits to the jurisdiction of the Courts of the Commonwealth of Virginia and the United States District Courts Sitting in Virginia.’
By a ruling delivered on 11 December, 2019, the trial High Court entered judgment in favour of the claimant/respondent. The defendant/appellant appealed to the Nigerian Court of Appeal.
Although the Court of Appeal (Hussaini JCA) was of the view that the choice of court agreement in favour of the Commonwealth of Virginia (in USA) was clear and unambiguous and did not have any vitiating circumstances surrounding it (such as fraud), it unanimously held that it would not apply the principle of pacta sunt servanda (agreements between parties should be respected) in this case. Hussaini JCA held as follows:
‘By reason of Section 6(1)(2)(6)(b) of the Constitution of FRN, 1999 (as amended) the judicial powers vested in the Courts “extend to all matters between persons or between Government or authority and to any person in Nigeria, and to all actions and proceedings relating thereto, for the determination of any question as to the civil rights and obligations of that person”. Consequently, no person or group of persons by their own private treaty or arrangements can agree to oust the jurisdiction and provisions vested in the Courts by the Constitution. Even where such clauses are put in place in or as a contract with international flavour to rob the Courts of the land of jurisdiction in favour of another foreign forum, the Courts of the land are obliged to apply the blue pencil rule to severe those clauses from the contract or ignore same by virtue of the Constitutional provision which confer on the Court, the jurisdiction and power to entertain those cases.
Talking about the jurisdiction of the Courts, the Court below, by virtue of Section 272 of the Constitution of Federal Republic of Nigeria, 1999 (as amended) has jurisdiction to entertain cases such as recovery of debts, as in the instant case on appeal. It is for this reason that clauses in the likes of Articles 12 and 13 in the Articles of the Agreement should be ignored when determining the rights and liabilities between the parties herein in matters such as this and the trial Court took the right approach when it discountenanced same to reach the conclusion that it did.
In any case, is it for the recovery of the sum of $18,103 (USD) only claimed by the Respondents, that parties herein are required, by that contract or agreement to submit themselves to a foreign forum in Virginia, USA for adjudication of their case, without consideration of the concomitant procedural difficulties attendant thereto, as for instance, of having to return the case to Nigeria, the place where the contract was concluded initially, to register the judgment obtained at that foreign forum, in Virginia, USA, to be enforced in Nigeria? I think the Courts in Nigeria, fully seized of the case, will in the exercise of its discretion refuse the request to refer the case to a foreign forum for adjudication. It is for all the reasons already expressed in this discourse that I hold the firm view that the trial Court was competent or is competent when it entertained and adjudicated over the recovery suit or action filed by the Respondent against the Appellant.’[13]
- Comments
In Nigerian jurisprudence, three approaches can be identified concerning the enforcement of choice of court agreements – ouster clauses, the Brandon test and the contractual approach. These approaches are critically reviewed below in the light of the three decisions delivered by the Nigerian Court of Appeal in the year 2020.
- Ouster Clauses
An ouster clause is used as a means to rob a court of its jurisdiction. Ouster clauses were popular during the Nigerian military regime to deprive the Nigerian court of the existence of its jurisdiction in certain cases where the military government so determined. Many Nigerian judges construed such ouster clauses very narrowly by assuming jurisdiction.[14]
Historically, Nigerian judges were very hostile to the enforcement of choice of foreign court agreements. Such choice of court agreements were regarded as ouster clauses and Nigerian judges assumed jurisdiction in such cases. For example, in the early case of Ventujol v Compagnie Française De L’Afrique Occidentale,[15] Ames J held that in a contract of employment which was entered into in France to be performed in Nigeria, where the defendant also had agents (in Nigeria), the clause for the submission of disputes to a Tribunal de Commerce de Marseilles (a French Court at that time) was an agreement to oust the jurisdiction of the court and was of no effect. Similarly, in Allied Trading Company Ltd v China Ocean Shipping Line,[16] the plaintiff sought to recover damages for the non-delivery of goods. The defendant entered an unconditional appearance, admitted that the goods were lost and denied liability on the grounds, inter alia, that the court had no jurisdiction since the parties had agreed that all disputes arising under or in connection with the bill of lading should be determined in the People’s Republic of China. It was held, inter alia, that this provision purported to oust the jurisdiction of the Nigerian court entirely and was therefore contrary to public policy. In Sonnar (Nig) Ltd v Partenreedri MS Norwind,[17] Oputa JSC opined that as a matter of public policy the Nigerian Courts
‘…should not be too eager to divest themselves of jurisdiction conferred on them by the Constitution and by other laws simply because parties in their private contracts chose a foreign forum … Courts guard rather jealously their jurisdiction and even where there is an ouster clause of that jurisdiction by Statute it should be by clear and unequivocal words. If that is so, as is indeed it is, how much less can parties by their private acts remove the jurisdiction properly and legally vested in our Courts? Our courts should be in charge of their own proceedings. When it is said that parties make their own contracts and that the courts will only give effect to their intention as expressed in and by the contract, that should generally be understood to mean and imply a contract which does not rob the Court of its jurisdiction in favour of another foreign forum.’[18]
(1987) 4 NWLR 520, 544-5. See also LAC v AAN Ltd ( 2006 ) 2 NWLR 49, 81 (Ogunbiyi JCA as she then was).
Recently, Nweze JSC has interpreted the concept of an ouster clause to the effect “that our courts will only interrogate contracts which are designed to rob Nigerian courts of their jurisdiction in favour of foreign fora or where, by their acts, they are minded to remove the jurisdiction, properly and legally, vested in Nigerian courts.”[19]
Is a foreign choice of court agreement without more an ouster clause? My response is generally in the negative. If a foreign choice of court agreement simply designates a foreign court as the chosen forum, then it is not an ouster clause because such a clause recognises the existence of the jurisdiction of the Nigerian court but does not want the Nigerian court to exercise jurisdiction. However, if a foreign choice of court agreement goes as far as to state that the Nigerian forum cannot entertain the matter to determine whether or not it should stay proceedings, then it should be classified as an ouster clause because such a clause does not recognise the existence of the jurisdiction of the Nigerian court.[20]
The classification of a foreign choice of court agreement without more as an ouster clause fundamentally fails to appreciate the distinction between the existence of jurisdiction and the exercise of jurisdiction. A Nigerian court may have jurisdiction as prescribed by the Constitution or enabling statute, but a foreign choice of court agreement gives the court jurisdiction to decide whether or not to stay proceedings in favour of a foreign forum The fact that such proceedings are stayed and not dismissed means that a Nigerian court’s jurisdiction is not ousted.
The position taken by Oputa JSC and Nweze JSC at the Nigerian Supreme Court are obiter dicta as they do not constitute the ratio decidendi of the Supreme Court. In other words, it is not the position of the Nigerian Supreme Court that foreign choice of court agreements are ouster clauses. It should be stressed that Oputa JSC’s obiter dictum is not binding on lower courts according to the Nigerian common law doctrine of stare decisis. In addition, Oputa JSC’s obiter dictum was a concurring judgment. Indeed, the Supreme Court in Sonnar (supra n 16) had unanimously given preference to the enforcement of a foreign jurisdiction clause except where strong cause is advanced to the contrary.[21] The majority of the Supreme Court did not treat it as an ouster clause. It is incongruous to hold, on the one hand, that the Nigerian court would hold parties to their bargain in enforcing a foreign jurisdiction clause except where strong cause is shown to the contrary, and on the other hand, to treat a foreign jurisdiction clause as if it were an ouster clause. In Sonnar, the choice of court agreement was not enforced because strong cause was shown to the contrary – the proceedings would be time-barred in a foreign forum, and the claimant would not have access to justice.
In addition, Tobi JSC – a Nigerian Supreme Court Justice – in analysing the concept of ouster clauses, further (and rightly) held that Section 6 of the 1999 Constitution, which confers jurisdictional competence on various Nigerian courts, should not be interpreted as ousting the jurisdiction of foreign courts in appropriate cases such as the enforcement of jurisdiction clauses.[22]
So it is submitted that the Court of Appeal’s decision in A.B.U. v VTLS [23] was per incuriam for classifying a foreign choice of court agreement as an ouster clause without more. Its decision contradicts the earlier position taken by the Nigerian Supreme Court decisions which held that a foreign choice of court agreement should be enforced except where strong reasons are shown to the contrary.[24] On the other hand, the Court of Appeal’s decision in Kashamu v UBN[25]and Damac Star Properties LLC v Profitel Limited[26] are correct for not classifying a choice of court agreement as an ouster clause without more.
- Brandon Test
The approach applied in the ratio decidendi of the Nigerian Supreme Court in the enforcement of choice of court agreements is the Brandon test.[27] In a nutshell, the Brandon test stipulates that a foreign choice of court agreement should not be enforced only where strong reasons are shown. The Brandon test is an offshoot of the decision of an English judge called Brandon.
Brandon J, in The Eleftheria,[28] delivered a brilliant decision on this subject. The decision provided comprehensive guidelines that the English court should take into account in deciding whether to give effect to a foreign jurisdiction clause. This is often referred to as “the Brandon test” in Nigerian jurisprudence. Nigerian courts have regularly referred to the Brandon test and utilised it with approval in decided cases.[29] The test is stated hereunder as follows (as it has been referred to and applied) in the Nigerian context:
‘1. Where plaintiffs sue in Nigeria in breach of an agreement to refer disputes to a foreign court, and the defendants apply for a stay, the Nigerian court, assuming the claim to be otherwise within the jurisdiction is not bound to grant a stay but has a discretion whether to do so or not. 2. The discretion should be exercised by granting a stay unless strong cause for not doing it is shown. 3. The burden of proving such strong cause is on the plaintiffs. 4. In exercising its discretion the court should take account of all the circumstances of the particular case. 5. In particular, but without prejudice to (4), the following matters where they arise, may be properly regarded: (
a) In what country the evidence on the issues of fact is situated, or more readily available, and the effect of that on the relative convenience and expense of trial as between the Nigerian and foreign courts.
(b) Whether the law of the foreign court applies and, if so, whether it differs from Nigerian law in any material respects.
(c) With what country either party is connected and how closely
(d) Whether the defendants genuinely desire trial in the foreign country, or are only seeking procedural advantages.
(e) Whether the plaintiff s would be prejudiced by having to sue in the foreign country because they would (i) be deprived of security for that claim; (ii) be unable to enforce any judgment obtained; (iii) be faced with a time-bar not applicable in Nigeria; or (iv) for political, racial, religious, or other reasons be unlikely to get a fair trial (v) the grant of a stay would amount to permanently denying the plaintiff any redress.’
The only reported cases where the plaintiffs have successfully relied on the Brandontest is where their claim is statute barred in the forum chosen by the parties.[30] Indeed, the burden is on the plaintiff to show strong cause as to why Nigerian proceedings should be stayed in breach of a choice of court agreement; if not, Nigerian courts will give effect to the choice of court agreement.[31]
As previously stated, this is the approach favoured by the Supreme Court in Nigeria in at least two decided cases.[32] The Brandon test is similar to the common law concept of forum non conveniens that gives the judge discretion in deciding whether or not to exercise jurisdiction in cases of international commercial litigation. The Brandon test is a balanced one. The fact that the burden is on the plaintiff to demonstrate strong cause as to why the choice of court should not be enforced is a triumph for party autonomy.
However, the problem with the Brandon test is that it could be uncertain just like the forum non conveniens principle. International commercial actors are not always sure whether a choice of court agreement will be enforced, and the “strong cause” element in the Brandon test depends on the facts of the case. However, this price of uncertainty is the result of justice in individual causes.
A common feature of all the Court of Appeal decisions during 2020 is that they did not consider or apply the Brandon test that has been adopted by the Supreme Court of Nigerian. In Kashamu v UBN,[33] it was not necessary to consider the Brandon test because the Court of Appeal rightly held that there was no valid foreign choice of court agreement in the case. Assuming the foreign choice of court agreement was valid, the Court of Appeal in principle should have enforced it because the defendant did not demonstrate strong reasons in line with the Brandon test as to why it should not be enforced.In Damac Star Properties LLC v Profitel Limited,[34] the Court of Appeal was right to enforce the choice of court agreement because the plaintiff did not demonstrate strong reasons as to why the choice of court agreement should not be enforced. So even if the Brandon test was considered by the Court of Appeal, the claimant will not have succeeded in principle. On the other hand, in A.B.U. v VTLS[35] the Court of Appeal was wrong to decline to enforce the choice of court agreement because the plaintiff did not demonstrate strong reasons as to why the choice of court agreement should not be enforced.
- Contractual Approach
The contractual approach sees a choice of court agreement simply as a contract and enforces it strictly if the choice of court agreement is valid. This is the approach in the European Union under Article 25 of Brussels I Recast.[36] Of course Article 25 of Brussels I Recast is only subject to two cases: exclusive jurisdiction and the protection of weaker parties such as employees, the insured, and consumers.[37] Article 25 of Brussels I Recast is a triumph for party autonomy in the context of the EU.
In the Nigerian context some Nigerian judges enforce a choice of court agreement as a contract which will be enforced strictly because Nigerian courts usually enforce commercial contracts strictly in the absence of vitiating factors. This is a triumph for party autonomy. Judges who apply the contractual approach limit party autonomy through the contractual approach – the presence of vitiating elements. Thus, if a choice of court agreement was procured by fraud or undue influence, such an agreement will be declared invalid. Unlike in the EU, it is not clear if Nigerian judges will decline to enforce a choice of court agreement on the ground that one of the parties is a weaker party.[38] There are also grounds where a Nigerian court will exercise exclusive jurisdiction irrespective of a forum selection clause.[39]
It is worth quoting judicial statements by Nigerian appellate judges who have applied the contractual approach in order to appreciate the Nigerian approach. The Supreme Court judges will be quoted first and then the Court of Appeal judges.
On the Supreme Court level, Nnamani JSC opined that:
‘I think that in the interest of international commercial relations courts have to be wary about departing from fora chosen by parties in their contract. There ought to be very compelling circumstances to justify such a departure.’[40]
Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, 541.
Tobi JSC held thus:
‘The bill of lading contains the contractual terms [foreign jurisdiction clause] between the parties and therefore binding on the parties. Parties are bound by the conditions and terms in a contract they freely enter into… The meaning to be placed on a contract is that which is the plain, clear and obvious result of the terms used… When construing documents in dispute between two parties, the proper course is to discover the intention or contemplation of the parties and not to import into the contract ideas not potent on the face of the document… Where there is a contract regulating any arrangement between the parties, the main duty of the court is to interpret that contract and to give effect to the wishes of the parties as expressed in the contract document… The question is not what the parties to the documents may have intended to do by entering into that document, but what is the meaning of the word used in the document… While a contract must be strictly construed in accordance with the well-known rules of construction, such strict construction cannot be a ground for departing from the terms which had been agreed by both parties to the contract… It is the law that parties to an agreement retain the commercial freedom to determine their own terms. No other person. Not even the court, can determine the terms of contract between parties thereto. The duty of the court is to strictly interpret the terms of the agreement on its clear wordings… Finally, it is not the function of a court of law either to make agreements for the parties or to change their agreements as made.’[41]
Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509, 542-3.
It is worth noting that Nnamani JSC and Tobi JSC’s judicial statements supporting the contractual approach in the enforcement of choice of court agreements were made in decisions where the Brandon test was applied by the majority of the Supreme Court of Nigeria. In other words, the real approach taken by the Supreme Court in these cases was the Brandon test.
Interestingly, the Supreme Court in a more recent case in Conoil Plc v Vitol SA,[42] applied the contractual approach in the enforcement of a choice of court agreement. Nweze JSC in his leading judgment stated that: ‘In all, the truth remains that if parties, enter into an agreement, they are bound by its terms.’[43] Okoro JSC concurred that:
‘The law is quite settled that parties are bound by the contract they voluntarily enter into and cannot act outside the terms and conditions contained in the said contract. When parties enter into a contract, they should be careful about the terms they incorporate into the contract because the law will hold them bound by those terms. No party will be allowed to read into the contract terms on which there has been no agreement. Any of the parties who does so violates the terms of that contract…. Having agreed that any dispute arising from the contract should be settled at the English court, the appellant was bound by the terms of the contract.’[44]
Eko JSC also concurred that:
‘Where parties, fully cognizant of their rights, voluntarily elect and nominate the forum for the resolution of any dispute arising from their contract, with international flavour as the instant, the courts always respect and defer to their mutual wishes and intention. The courts only need to be satisfied that, in their freedom of contract, the parties negotiated and agreed freely to subject their dispute to the laws and country of their choice.’[45]
(2018) 9 NWLR463, 502.
It is worth noting that Conoil Plc v Vitol SA,[46]was a case that was concerned with the enforcement of foreign judgments – the judicial statements made on choice of court agreements were merely ancillary. However, Conoil Plc v Vitol SA,[47] shows that the Nigerian Supreme Court could exclusively apply the contractual approach if the issue of a choice of court agreement comes before it.
On the Court of Appeal level, there has been a combination of the Brandon test with the contractual approach. In some other cases, only the contractual approach was applied. The fact that the contractual approach feature among some of the decisions of Court of Appeal judges in the enforcement of choice of court agreements demonstrates that party autonomy is taken seriously by these judges.
For example, Owoade JCA held that:
‘…it is pertinent to observe that as a general rule in the relationship between national law and international Agreements, freely negotiated private international agreement, unsullied by fraud, undue influence or overwhelming bargaining power would be given full effect. This means that, where such contract provides for a choice of forum, such clause would be upheld unless upholding it would be contrary to statute or public policy of the forum in which the suit is brought.’[48]
Captain Tony Nso v Seacor Marine (Bahamas) Inc (2008 ) LPELR-8320 (CA) 12-3.
In this case, the Brandon test was applied as well.
The Court of Appeal (Pemu JCA) in another case held that:
‘There is sanctity attached to a Jurisdictional clause which parties have agreed to in their contract. It is indeed inviolate. Any agreement between parties as to Jurisdiction to entertain their suit is sacrosanct… I emphasize and reiterate that choice of forum, where provided or indicated, should be respected, except of course it contravenes any statute or Public Policy.’[49]
In this case only the contractual approach was applied.
In Beaumont Resources Ltd v DWC Drilling Ltd,[50] the Court of Appeal Justices were unanimous on the contractual effect of a choice of court agreement. Otisi JCA held that:
‘…it is settled that, in the absence of fraud, misrepresentation and illegality, parties to an agreement or contract are bound by the terms and conditions of the contract they signed… It is also well established that the Court cannot make contracts for the parties, rewrite the contract or go outside the express terms of the contract to enforce it…’[51]
Sankey JCA concurred that:
‘The Court of law, on the other hand, must always respect the sanctity of the agreement of the parties – the role of the Court is to pronounce on the wishes of the parties and not to make a contract for them or to rewrite the one they have already made for themselves. The judicial attitude or disposition of the Court to terms of agreement freely entered into by parties to contract is that the Court will implement fully the intention of the contracting parties. This is anchored on the reasoning that where the terms of a contract are clear and unambiguous, the duty of the Court is to give effect to them and on no account should it re-write the contract for the parties. In the absence of fraud, duress or misrepresentation, the parties are bound to the contract they freely entered into.’[52]
(2017) LPELR-4281, 449-50.
In this case, the Brandon test was applied as well, but it demonstrates how the contractual approach is taken seriously by Nigerian judges.
Very recently, Ogbuinya JCA made this pronouncement on an alleged choice of court agreement: ‘It is trite, that the parties and courts are bound by the terms of the contracting parties. In other words, the law does not allow either the parties or the courts to add to or subtract from terms of the contract reached by way of consensus ad idem.’[53] In this case only the contractual approach was applied.
Backto the Court of Appeal decisions decided in the year 2020.Kashamu v UBN[54] and Damac Star Properties LLC v Profitel Limited[55] strictly applied the contractual approach without a consideration of the Brandon test. This leaves open the question whether some Nigerian judges are moving towards the approach applied by the EU.
On the other hand, A.B.U. v VTLS [56]completely rejected the contractual approach by applying the concept of an ouster clause. This demonstrates that the concept of the contractual approach favoured in the EU has not been accepted by all judges in Nigeria. Oputa JSC’s statement in Sonnar (Nig) Ltd v Partenreedri MS Norwind,[57] will continue to be an obstacle to the contractual approach in the enforcement of choice of court agreements until it is explicitly overruled by the Supreme Court
Conclusion
The decisions of Nigerian appellate judges on the enforcement of choice of court agreements have not been consistent. This was the case in 2020 in three decisions delivered by the Nigerian Court of Appeal.
Three approaches have been identified in Nigerian jurisprudence concerning the enforcement of choice of court agreements – the ouster clauses, the Brandon test and the contractual approach. In the three Court of Appeal decisions delivered in 2020 only the ouster clause approach and contractual approach were applied. This leaves open the question whether the Brandon test is witnessing a steady decline in Nigerian jurisprudence.
In the years 2018 – 2020, it appears that the contractual approach is the prevailing view among Nigerian judges on the enforcement of choice of court agreements. This is similar to the approach applied by the EU. However, the concept of an ouster clause initially applied by Oputa JSC continues to be an obstacle to the principle of party autonomy in Nigeria.
It is proposed that the contractual approach should be the general rule in Nigeria. However, just like in the EU, exceptions should be made to the contractual approach especially in the interest of the protection of weaker parties such as consumers and employees.
In addition, I generally acknowledge that the principle of pacta sunt servanda in enforcing choice of court agreements are aimed at enhancing the efficacy of business transactions and, legal certainty and predictability in international commercial litigation. However, I must point out that despite the Nigerian Supreme Court decisions on the point that hold that choice of court agreements should be enforced except where there are strong reasons to the contrary, I am generally not in favour of Nigerian courts declining jurisdiction in international commercial litigation. It ultimately damages the Nigerian economy (e.g. less work for Nigerian lawyers), hampers access to Nigerian justice, and does not help Nigerian judges in strengthening our legal system. What is the solution? I suggest that in the future the Nigerian Supreme Court should also apply the test of the ‘interest of justice’ as an exception to the contractual approach in determining whether or not it will enforce a choice of court agreement. The burden of proof should rest on the claimant to manifestly demonstrate that, taking into account all the relevant circumstances of the case, the interest of justice will not be served if the foreign choice of court agreement is enforced. I also suggest that in such cases where a foreign choice of court agreement is enforced in Nigeria, a stay should be granted. In addition, if it is sufficiently demonstrated that the chosen foreign forum later becomes inaccessible or impracticable for the claimant to sue, the Nigerian court in the interest of justice should retain jurisdiction to deal with such claims.
Finally, Nigeria should consider ratifying the Hague Choice of Court Convention, 2005. This Convention will work better in Nigerian courts if litigation is made attractive for international commercial actors, so they can designate Nigerian courts as the chosen forum. Speed, efficiency, legal aid for poor and weaker parties, and the integrity of Nigeria’s judicial system are some of the issues that can be taken into account in enhancing Nigeria’s status as an attractive forum for international commercial litigation.
About the Author
Dr Chukwuma Samuel Adesina Okoli
I am a Postdoctoral researcher in Private International Law at the University of Amsterdam/ T.M.C. Asser Institute, The Hague, Netherlands, one of the editors on conflict of laws.net, and a co-founder of the Nigerian Group on Private International Law. Prior to joining T.M.C Asser Institute, I was inter alia, a Teaching Fellow at the Faculty of Law, University of Luxembourg for about four years, where I taught Comparative Private International law, Comparative English Law of Contract, and Comparative English Law of Tort.I am a qualified Barrister and Solicitor of the Supreme Court of Nigeria since 2008. I practiced law in reputable law firms for about three years in the area of domestic and international commercial transactions. I also hold an LLM in International Commercial Law (with distinction) from the University of Aberdeen.My principal research interest is in all aspects of Private International Law/Conflict of Laws, with a special focus on the European Union, Nigeria, and Africa. I have significant publications on these subjects.
REFERENCES
*Postdoctoral Researcher at the University of Amsterdam/TMC Asser Institute, and Barrister and Solicitor of the Supreme Court of Nigeria.
[1] C.S.A. Okoli and R.F. Oppong, Private International Law in Nigeria (Oxford: Hart, 2020).
[2]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90; Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699(CA); A.B.U. v VTLS (2020) LPELR-52142 (CA).
[3]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90; Damac Star Properties LLC v Profitel Limited (2020) LPELR-50699(CA).
[4]A.B.U. v VTLS (2020) LPELR-52142 (CA).
[5]See Trevor Hartley, Choice-of-court Agreements under the European and International Instruments: The Revised Brussels I Regulation, the Lugano Convention, and the Hague Convention (Oxford: Oxford University Press, 2013) at 4, and A Briggs, Agreements on Jurisdiction and Choice of Law (Oxford: Oxford University Press, 2008) at 195 (“[t]here is no distinction of principle between a contract to sell and a contract to sue.”). Cf. V Black & SGA Pitel, “Forum-Selection Clauses: Beyond the Contracting Parties” (2016) 12 Journal of Private International Law 26, 51. See also M Ahmed, The Nature and Enforcement of Choice of Court Agreement (Oxford: Hart 2017) at Chapter. 4.
[6] (2020) 15 NWLR (Pt. 1746) 90
[7]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90, 114-5 (Ogbuinya JCA).
[8]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90, 115 (Ogbuinya JCA).
[9]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90, 116 (Ogbuinya JCA).
[10] (2020) LPELR-50699(CA).
[11] Ibid.
[12](2020) LPELR-52142 (CA).
[13]A.B.U. v VTLS (2020) LPELR-52142 (CA) 15 – 18.
[14] See generally Abacha v Fawehinmi (2000 ) 6 NWLR (Pt. 660) 228.
[15](1949) 19 NLR 32.
[16](1980) (1) ALR Comm 146.
[17](1987) 4 NWLR 520.
[18](1987) 4 NWLR 520, 544-5. See also LAC v AAN Ltd ( 2006 ) 2 NWLR 49, 81 (Ogunbiyi JCA as she then was).
[19]Conoil Plc v Vitol SA ( 2018 ) 9 NWLR 463, 489
[20]In such a case, the Nigerian court should reserve the right to determine whether or not it will exercise jurisdiction.
[21] Even Oputa JSC held thus: ‘Where a domestic forum is asked to stay proceedings because parties in their contract chose a foreign Court … it should be very clearly understood by our courts that the power to stay proceedings on that score is not mandatory. Rather it is discretionary which in the ordinary way, and in the absence of strong reasons to the contrary will be exercised both judiciously and judicially bearing in mind each parties right to justice ’ – Sonnar (Nig)Ltd v. Partenreedri MS Norwind(1987) 4 NWLR 520at 545.
[22]Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509, 546.
[23] (2020) LPELR-52142 (CA).
[24]Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509.
[25] (2020) 15 NWLR (Pt. 1746) 90
[26] (2020) LPELR-50699(CA).
[27] Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520; Nika Fishing Company Ltd v Lavina Corporation ( 2008 ) 16 NWLR 509.
[28]The Owners of Cargo Lately Laden on Board the Ship or Vessel ‘ Elftheria ’ v ‘ The Elftheria ’ (Owners), ‘ The Elft heria ’ [1969] 1 Lloyd ’ s Rep 237.
[29]See generally GBN Line v Allied Trading Limited ( 1985 ) 2 NWLR (Pt. 5) 74 ; Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520 ; Nika Fishing Company Ltd v Lavina Corporation ( 2008 ) 16 NWLR 509 ; Captain Tony Nso v Seacor Marine ( Bahamas ) Inc ( 2008 ) LPELR-8320 (CA) ; Beaumont Resources Ltd v DWC Drilling Ltd ( 2017 ) LPELR-42814 (CA) .
[30]Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520.
[31]Nika Fishing Company Ltd v Lavina Corporation (2008) 16 NWLR 509.
[32] Sonnar (Nig) Ltd v Norwind (1987) 4 NWLR 520 ; Nika Fishing Company Ltd v Lavina Corporation ( 2008 ) 16 NWLR 509.
[33] (2020) 15 NWLR (Pt. 1746) 90
[34] (2020) LPELR-50699(CA).
[35] (2020) LPELR-52142 (CA).
[36] Council Regulation (EU) No 1215/2012 of the European Parliament and of the Council of 12 December 2012 [2012] OJ L351/1.
[37]See Recital 19 to Brussels I Recast.
[38]In Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, the defendant, in asking the court to stay the proceedings, argued that the parties were bound to respect their bargain in entering into a jurisdiction clause in favour of the German courts. The plaintiff , on the other hand, argued that the transaction between the parties (carrier/shipper and consignee) was an adhesive contract and not an arm’s-length bargain, where the plaintiff (consignee) was a weaker party and was left with no option but to sign the contract, and that the court, on grounds of public policy, should not enforce it. Although the Supreme Court unanimously refused to stay proceedings on the ground that the action would be statute-barred in the German courts, the majority of the Supreme Court rejected the public policy argument. The rationale for the approach taken by the majority of the Supreme Court was that introducing public policy as the basis of deciding whether to enforce jurisdiction agreements would create uncertainty. In addition, Eso JSC considered the parties in this case to be at arm ’s length as the plaintiff was too sophisticated to be an underdog.
[39] See Section 20 of the Admiralty Jurisdiction Act, Cap A6, LFN 2004.
[40]Sonnar (Nig) Ltd v Partenreedri MS Norwind (1987) 4 NWLR 520, 541.
[41] Nika Fishing Company Ltd v Lavina Corporation (2008 ) 16 NWLR 509, 542-3.
[42](2018) 9 NWLR 463, 489.
[43](2018) 9 NWLR463,489.
[44](2018) 9 NWLR463, 500-1.
[45](2018) 9 NWLR463, 502.
[46](2018) 9 NWLR 463, 489.
[47](2018) 9 NWLR 463, 489.
[48]Captain Tony Nso v Seacor Marine (Bahamas) Inc (2008 ) LPELR-8320 (CA) 12-3.
[49]Megatech Engineering Limited v Sky Vision Global Networks Llc (2014) LPELR-22539 (CA) 14.
[50](2017) LPELR-42814.
[51](2017) LPELR-4281, 30.
[52](2017) LPELR-4281, 449-50.
[53]Kashamu v UBN Plc (2020) 15 NWLR (Pt. 1746) 90, 117. In this case, it did not give effect to the choice of court agreement because the terms were not clear and unambiguous.
[54] (2020) 15 NWLR (Pt. 1746) 90
[55] (2020) LPELR-50699(CA).
[56] (2020) LPELR-52142 (CA).
[57](1987) 4 NWLR 520.
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