AIC Ltd v The Federal Airports Authority of Nigeria

Factual and Procedural Background

There are two applications before the Court arising from a Nigerian arbitration award dated 1 June 2010, which awarded the Plaintiff a principal sum of US$48,124,000 plus interest at 18% per annum from the date of the Award until payment. The first application is the Defendant's request to set aside an order granting the Plaintiff permission to enforce the Award and to adjourn the Plaintiff's enforcement application pursuant to section 103(5) of the Arbitration Act 1996. The second application is the Plaintiff's request for an order requiring the Defendant to provide suitable security for the Award if enforcement is adjourned.

The Plaintiff, Company A, is a Nigerian construction and property development company incorporated in 1971 with its principal place of business in Ibadan, Oyo State, Nigeria. The Defendant is Company B, a Nigerian governmental entity responsible for federal airport operations, incorporated by decree in 1976.

Company B leased land at a Nigerian airport to Company A by a Deed of Lease dated 17 February 1998, which included an arbitration agreement. Company A began construction of a hotel and resort complex, but Company B directed Company A to cease work in May 2000, preventing completion. The dispute was referred to arbitration in Nigeria, resulting in the Award in June 2010 awarding Company A damages and interest.

Following the Award, both parties initiated multiple proceedings in Nigerian courts, including an originating motion by Company B to set aside the Award and originating motions by Company A to remit the Award on a point of law and to enforce the monetary judgment. Company A challenged the validity of Company B's originating motion on procedural grounds, which was initially rejected by the Nigerian Federal High Court. However, the Nigerian Court of Appeal later allowed Company A's preliminary objection, invalidating Company B's originating motion and remitting the substantive matters to the Federal High Court. Both parties have since appealed to the Nigerian Supreme Court, with uncertainty as to when the appeals will be heard, causing significant delay.

In England, Company A commenced enforcement proceedings in January 2019, resulting in an order granting permission to enforce the Award. Company B applied to set aside this order and to adjourn enforcement, while Company A sought security from Company B in case of adjournment. Both parties filed extensive witness statements, including expert evidence on Nigerian law, none of which was objected to in terms of admissibility.

Legal Issues Presented

1. Whether the English Court has jurisdiction under section 103(5) of the Arbitration Act 1996 to adjourn enforcement of the Nigerian arbitration Award pending the outcome of the set aside application before the Nigerian courts.
2. Whether the Court should exercise its discretion to adjourn enforcement of the Award under section 103(5) of the Arbitration Act 1996.
3. Whether any adjournment of enforcement should be conditional on the Defendant providing suitable security for the Award.

Arguments of the Parties

Appellant's (Company A) Arguments

• The Court lacks jurisdiction under section 103(5) to adjourn enforcement because no set aside or suspension application is currently pending before the Nigerian courts, as the originating motion by Company B was invalid and has lapsed.
• The Court of Appeal's decision invalidating Company B's originating motion creates an issue estoppel binding on both parties.
• Company B has elected not to pursue the set aside application in the Federal High Court but instead appealed to the Nigerian Supreme Court.
• Company B has no assets within the jurisdiction of the English Court against which enforcement can be made, thus delay in enforcement will not prejudice Company A.
• Ordering security would give Company A a tactical advantage and place it in a better position than if no adjournment had been sought.

Appellee's (Company B) Arguments

• The Court does have jurisdiction because the outcome of the set aside application is still pending before the Nigerian courts, including appeals to the Nigerian Supreme Court.
• The Court of Appeal's jurisdictional ruling is subject to appeal and may be overturned, so the set aside application remains pending.
• Under Nigerian law, appeals are a continuation of proceedings, supporting the view that the application remains pending.
• Company B has assets and revenues within the jurisdiction, including passenger service charges and other fees, which are its own and can be targeted for enforcement.
• Company B has not pursued the Nigerian appeals diligently, causing delay.
• Security should be ordered as a condition of any adjournment to protect Company A from prejudice caused by delay and to encourage Company B to pursue its appeals promptly.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2005] 1 CLC 613	Guidance on the Court's discretion under section 103(5) of the Arbitration Act 1996 regarding adjournment and security.	The Court applied the sliding scale approach from this case to evaluate the merits of the set aside application and the appropriateness of adjournment and security.
Soleh Boneh v Uganda Government [1993] 2 Ll Rep 208	Factors relevant to ordering security and adjournment under section 103(5).	The Court considered the strength of the argument for invalidity and the ease or difficulty of enforcement in deciding whether to adjourn and require security.
IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation [2017] UKSC 16	Interpretation of "pending" in section 103(5) and the scope of the Court's jurisdiction to adjourn enforcement.	The Court relied on Lord Mance's judgment to determine that the outcome of the application being pending suffices for jurisdiction.
Travis Coal Restructured Holdings LLC v Essar Global Fund Limited [2014] EWHC 2510 (Comm)	Adjournment and security orders even where the resisting party has low prospects of success.	The Court noted that adjournment can be granted with security even if the set aside application has little chance of success.
Yukos Oil v Dardana [2002] CLC 1120	Security is not always required when adjournment is granted.	The Court acknowledged that adjournment without security is possible depending on circumstances.
Dowans Holdings v Tanzania Electric Supply Co Ltd [2011] EWHC 1957 (Comm)	Assessment of prejudice and appropriate quantum of security when adjournment is granted.	The Court considered the extent of prejudice and adjusted security accordingly, applying similar principles here.

Court's Reasoning and Analysis

The Court first addressed whether it had jurisdiction to adjourn enforcement under section 103(5) of the Arbitration Act 1996. It rejected the Plaintiff's narrow interpretation that only an application literally "pending" before the foreign court qualifies. Instead, the Court held that the outcome of the set aside application being pending suffices, including pending appeals before the Nigerian Supreme Court. The Court found persuasive evidence that the Nigerian Supreme Court appeal concerning jurisdiction would likely succeed, meaning the set aside application remains unresolved and pending.

The Court then considered whether to exercise its discretion to adjourn enforcement. Applying the principles from IPCO (Nigeria) Ltd and Soleh Boneh, the Court noted its discretion is wide and unfettered. Relevant factors include whether the foreign application is bona fide, has a real prospect of success, the extent of delay, and prejudice to the Plaintiff.

The Court found the set aside application was bona fide and pursued promptly. Although the merits of the set aside application were not strong on the evidence before the Court, the fact remained that the Nigerian Federal High Court had set aside the Award on the merits. The Court also acknowledged the possibility that the Supreme Court's decision could reinstate that order or require rehearing on the merits. Therefore, an adjournment was appropriate to avoid conflicting judgments.

The Court considered the delay likely to ensue from adjournment, noting credible evidence that the Nigerian Supreme Court hearing would not occur before 2023 or 2024, with additional delays possible. This delay would cause prejudice to the Plaintiff, who would be kept out of a substantial sum of money, despite the high interest rate on the Award.

The Court rejected the Defendant's assertion that it had no assets within the jurisdiction, concluding that Company B is a separate legal entity with revenues such as passenger service charges within the jurisdiction, which could be targeted for enforcement.

Balancing these factors, the Court placed the case towards the "manifestly valid" end of the sliding scale but recognized the need to avoid conflicting judgments. Accordingly, the Court found an adjournment appropriate but conditional on the provision of security to protect the Plaintiff from prejudice caused by delay and to encourage diligent pursuit of appeals by the Defendant.

The Court declined the Plaintiff's requested security amount based on the full Award plus interest until 2023, considering it excessive. Instead, it ordered security in the sum of US$24,062,000, representing 50% of the Award, or just under three years' interest, as a reasonable balance.

Holding and Implications

The Court granted the Defendant's application to set aside the order permitting enforcement and adjourned the Plaintiff's enforcement application pursuant to section 103(5) of the Arbitration Act 1996, conditional on the Defendant providing suitable security in the amount of US$24,062,000.

The decision means that enforcement of the Nigerian arbitration Award in England is temporarily suspended pending the resolution of ongoing appeals in the Nigerian courts. The Defendant must provide security to protect the Plaintiff's interests during this period. The ruling recognizes the complexity and delays inherent in the foreign proceedings and seeks to balance the interests of both parties. No new legal precedent was established beyond the application of existing principles to the facts of this case.