By Jude-Ken Ojinnaka
The Court of Appeal, Lagos Division, has dismissed an appeal filed by Pan Ocean Oil Corporation Nigeria Limited (Appellant) challenging the decision of Justice L.A.M. Folami of the Lagos High Court which upheld the Arbitral Award of US$13,487,286.17; and N1, 164,766,574.72, to KCA Deutag Drilling GmbH, and KCA Deutag (Nigeria) Limited (Respondents) in respect of services provided under the Land Drilling Agreement.
Rather, the Appeal Court affirmed the decision of the High Court of Lagos State delivered on the 18″ day of May 2020 by Justice L. A. M. Folami. The appellate court further awarded a cost of N100,000 against the appellant in favour of the respondents.
Dismissing the appeal, the 3-man panel comprising Justice Obande Festus Ogbuinya (Presided), Justice Onyekachi Aja Otisi and Justice Fredrick Oho resolved all the issues against the Appellant and affirmed the ruling of the lower court in favour of the Respondents.
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The Appellant had filed an application challenging the jurisdiction of the lower Court to entertain the suit on the grounds that the Arbitral award dated 3rd of May, 2017 which was upheld by the lower Court was illegal, contending that the order recognizing the illegal award is a nullity.
The appellant argued that the 1st Respondent is a foreign company not incorporated in Nigeria and carrying on business in Nigeria, while the subject matter of the suit before the lower Court relates to oil mining or exploration of oil and that the lower court lacked jurisdiction to entertain the suit. Only the Federal High Court of Nigeria has exclusive jurisdiction to entertain any suit relating to oil well operations.
It submitted that the transaction between the parties was principally for a drilling Agreement dated 14th January 2008 using rig T.76, which is directly connected and related to oil fields and oil mining activities.
In response, the Respondents filed a counter affidavit to the Appellant’s preliminary objection.
The case of the Respondents was that they entered into a Land Drilling Agreement dated 14th January 2008 with the Appellant for the provision and operation of a land drilling rig T-76 and other associated drilling services to the Appellant.
This Agreement also included the provision of other supporting equipment, spare parts, supplies, services, and personnel to drill oil and gas wells on locations designated by the Appellant.
The 1st Respondent did not execute any part of the Contract in Nigeria rather it was the 2nd Respondent who, in accordance with the terms of the Contract, carried out the performance and execution in Nigeria of the Contract.
The Respondents duly issued invoices to the Appellant for services rendered under the Land Drilling Agreement, which invoices were not paid by the Appellant.
Following several unsuccessful demands by the Respondents for the payment of the outstanding invoices and pursuant to the arbitration agreement contained in clause 13 of the Land “Drilling Agreement, the Respondents submitted the dispute regarding the failure and/or refusal of the Appellant to settle the outstanding invoices to arbitration under the Arbitration Rules of the International Chamber of Commerce (“ICC”).
On 11th January 2017 parties advised the Arbitral Tribunal that they had in November 2016 entered into a settlement agreement, which was respectively executed by the parties on 18th and 26th November 2016 otherwise called the “Settlement Agreement” and requested the Arbitral Tribunal to enter an award by consent in terms of the Settlement.
On 3rd May, 2017 the Arbitral Tribunal made a Consent Award based on the Settlement Agreement in favour of the Respondents in the sums totaling, US$13,487,286.17 (Thirteen Million, Four Hundred and Eighty-Seven Thousand, Two Hundred and Eighty-Six United States Dollars and Seventeen Cents); and NGN1,164,766,574.72, (One Billion, One Hundred and Sixty-Four Million, Seven Hundred and Sixty-six Thousand, Five hundred and seventy-four Naira and seventy-two kobo) payable in respect of services provided by the Respondents to the Appellant under the Land Drilling Agreement.
The Appellant thereafter made voluntary payment of part of the award sums and the Respondents also recover some portions of the award sum through garnishee proceedings. However, a significant part of the award debt remains outstanding.
Following the refusal and failure of the Appellant to liquidate the award sum, the respondent applied for an order of the Lagos State High Court that the award be enforced in the same manner as judgement of the court.
The Appellant in an application dated June 14, 2018, prayed the court to stay further execution of the arbitral award. The lower court heard the application and, in a ruling, delivered on 18th March 2020 dismissed same as lacking in merit.
Dissatisfied with the ruling, the Appellant in its Notice of Appeal dated March 19, 2020, asked the court to determine whether the lower court had jurisdiction to adjudicate on the matter.
Resolving the matter, the Appellate Court in its lead judgement delivered by Justice Fredrick Oho held that ‘’The settled position of the law is that the Appellant at this stage is foreclosed from raising the issue of jurisdiction arising from the alleged illegality of the land Drilling Contract, which it ought to, but failed to raise before the arbitral tribunal. So long as the Appellant has characterized the issue of the alleged illegality of the Land Drilling Agreement, they were bound to raise the issue during the arbitration and having not done so, it is too late in the day to raise the issue.
‘’What is even more worrisome for the Appellant is that he formulated no issues from the ground of appeal incorporating a challenge to the lower Court’s finding that the 1st Respondent Nigeria subsidiary, complied with Section 54 of CAMA and the drilling contract was not illegal.
On whether or not the jurisdiction of the Federal High Court vide Section 251(1)(n) of the 1999 Constitution as amended and Section 7(1)(n) of the Federal High Court Act is activated, the court held that the purpose of the contract allegedly breached was not crucial.
‘’What is crucial is the nature of the claim, whether it is contractual or not. This is so because the contract and the activity it relates are two distinct and different objects. There is no aspect of a breach of contract be it simple or complex contract, that the Constitution, in Section 251(1) thereof, confers jurisdiction on the Federal High Court to adjudicate on.
‘’In the final analysis, all issue having been resolved against the Appellant, the Appeal fails, and it is accordingly dismissed. Consequently, the Ruling of the High Court of the Lagos State delivered on the 18″ day of May 2020 Coram: L. A. M. FOLAMI, J is hereby affirmed. There shall be cost of N100, 000.00 against the Appellant in favour of the Respondents’’.