Party Autonomy and Enforcement of Forum Clauses Under UK and Nigerian Law


Buetna’an .M. Bassi and Mardhiyyah Ja’afar

Under the common law and the Brussels 1 Regulation, the principles of party autonomy are encouraged. The importance of parties having the ability to substantiate their interests by jurisdiction agreements is principally for the protection of the parties, and to ensure party autonomy. The Courts in Nigeria will also seek to give effect to the intention of parties in their agreements where applicable.

Commercial Significance of Party Autonomy
The benefits of jurisdiction agreements are evident as they ensure the growth of cross border business transactions and increase the attractiveness of the European Union (EU) market. This is also in consonance with the principles of the EU to ensure certainty and predictability in commercial transactions, uniformity in the courts judgments and member states’ application of the relevant rules.

Where parties are certain that their jurisdiction agreements will be protected and enforced, this also leads to a reduction of costs and expenses in pursuing parallel proceedings or determination of the proper jurisdiction. Uniformity in the application of rules will ensure easy circulation of judicial decisions. All the above will translate to greater commercial activities as parties agree on the legal forum to govern any disputes that may arise in their transactions to the exclusion of all other jurisdictions, thereby ensuring certainty and creating a more favorable condition for commercial transactions to thrive under.

parties take many factors into consideration when choosing a jurisdiction and some considerations include language of the court, sophistication and capability of the courts to deal with the disputes. Courts that clearly demonstrate these capabilities are chosen and ensuring certainty in all member states will see the uniform application of such rules and ensure that the decisions in all member states are uniform. Unification of the rules of jurisdiction will avoid multiple basis of jurisdiction. The parties also consider enforcement of a courts judgment in choosing the relevant jurisdiction.

Position Under the Common Law
Under the common law, jurisdiction agreements have been upheld to give effect to the agreement of parties on the forum to institute proceedings. The common law regime will apply to Defendants not domiciled in the EU. The courts will apply general contractual rules to ascertain the true meaning and effect of such clauses; this can ascertain the scope of the jurisdiction clause also.

If contracting parties agree to a particular court’s exclusive jurisdiction, and a claim is taken to another forum, the court will ordinarily exercise its discretion to secure compliance with the contractual bargain unless there are strong reasons for suing in that forum. In the Donohue v Armco Inc [2001] UKHL 64, [2002] 1 ALL ER 749. case, the court was wary of dividing the litigation between different courts and stated that it would be better for all the issues to be determined in a single composite trial. The validity of a jurisdiction clause is a matter to be determined by the governing law of the contract which it forms part of.

The English courts have held that there are serious considerations that reinforce the strength of the exclusive jurisdiction clause between parties and the fact that parties choose a forum to which none of them have any obvious connection such as England and Wales is a strong factor. It must be assumed therefore that the parties have deliberately chosen a neutral forum for the determination of their disputes. The courts have held that the standard considerations given to arguments about forum non conveniens should be given little weight otherwise the exclusive jurisdiction clause would be deprived of its intended effect.

The procedure under the common law has always been to either stay its proceedings where there is an exclusive jurisdiction clause in favour of another jurisdiction, or to issue an anti suit injunction against the other part where the exclusive jurisdiction clause is in favour of the English courts. This can be viewed as the English courts holding one of their parties to the promise they made not to sue elsewhere. The common law approach is however discretionary but the courts have always adopted a robust defence of English jurisdiction clauses unless there are strong reasons not to.

In OT Africa line Ltd v Magic sportswear Corp, Otal was an English company with offices in Toronto, they carried goods on their vessel to Monrovia and issued a bill of lading where the freight was payable. The bill of lading named magic sportswear Corp (a Delaware Company) as the shipper and blue banana – a Liberian Company as the intended Receiver. Allegations arose that the goods were short delivered. Magic and banana commenced proceedings in Toronto.

The bill of lading contained an English law and English jurisdiction clause. They sought to invoke the Canadian courts jurisdiction on the basis of the Canadian Marine Liability Act. The court of appeal held that the conflict between the provisions of the Canadian legislation and the jurisdiction of the English courts was to be resolved by the rules of the English Court. Anti suit injunctions were issued to restrain the defendants from pursuing the Canadian proceedings.

Position Under Brussels Regulation
Parties are allowed to choose the jurisdictions that will govern their contractual relationship under Article 23 of Brussels 1 Regulation, provided that at least one of the parties is domiciled in the EU. Important to note here that the Recast Article 25 removes the condition that one of the parties must be domiciled in the EU and further widens the scope of jurisdiction agreements.

The provisions of Article 23 have been seen to conflict Article 27, which seeks to preclude member states from giving inconsistent judgments arising out of parallel proceedings. Its provisions are to the effect that if the same cause of action with the same parties is brought before two contracting states, the court second seised must stay proceedings until the first court determines its jurisdiction. The decision of the court in cases such as Erich Gasser and Turner v Grovit are instructive in this regard.

In the case of Erich Gasser, the court held that though proceedings were instituted in a court other that the agreed court, it was better to ensure legal certainty and allow the court first seised to determine and pronounce upon its jurisdiction. This had the effect of severely weakening the effect of jurisdiction agreements. The Recast seeks to cure such lapses and give fuller effect to jurisdiction agreements by providing under Article 31(2) that where a Court has been conferred with exclusive jurisdiction under Article 25, any other court must stay its proceedings until such a court makes a declaration as to its jurisdiction. It also provides in Recital 22 that the parties designated court is granted priority to make this determination as to jurisdiction irrespective of whether it is first or second seised.

The conditions for jurisdiction agreements are comprehensive but the courts should be allowed to determine some questions that may arise which were not foreseen by the interpretation of the provisions of Article 23.

Position Under the Nigerian Law
Under the law in Nigeria, forum selection clauses are seen as contractual safeguards to reduce international litigation risks. Parties to a contract require a stable governing law and forum, which would respect party autonomy and only give effect to overriding mandatory rules and considerations of public policy in exceptional circumstances. A forum selection clause may be a jurisdictional clause or an arbitration clause. Whatever the form, the core purpose is to reduce forum-shopping, disputes on jurisdiction and to ensure predictability to a large extent.

Enforceability of an exclusive jurisdiction agreement has its origin under the common law, while enforceability of an arbitration clause is derived from statute. This is akin to the situation under the United Kingdom (UK) legal system, where the common law and Brussels Regulation both apply.

The guiding principles in Nigeria as adopted under the Brandon test formulated in The Eleftheria (1969) 1 Lloyds L.R 237 and followed in Sonner (Nig) Ltd V Nordrund (1987) 4 NWLR Pt.66, 520 recognize that;
1. Nigerian courts are not bound to grant a stay in jurisdictional agreements but have the discretion in this regard.
2. Discretion should usually be exercised to grant a stay unless strong cause is shown for not doing so.
3. The burden of proving “strong case” for not granting a stay lies on the Plaintiff.
4. The court ought to take into account all the circumstances of the case such as:

a. In what Country the evidence on issues of fact is situated or more readily available
b. Relative convenience and expense of trial between Nigeria and the foreign court.
c. Where the law of Nigeria and the foreign court differ in material aspects
d. Whether there is a genuine desire for a trial in the foreign country or the party only seeks to gain procedural advantage.

It has been argued however that neutrality and advantages of a chosen court are valid reasons for an exclusive jurisdiction agreement. Speedy dispensation of the trial ought to be considered in such cases as well as other factors such as expertise in the subject matter and facilities available in the chosen court.

The position of party autonomy and enforcement of forum clauses at common law includes the application of discretion by the courts after consideration of all the relevant issues. Under the Brussels Regulation and Recast however, there is a stricter interpretation of the rules and the courts must stay proceedings in favour of an exclusive jurisdiction agreement. The Recast ensures that efficacy is given to exclusive jurisdiction agreements entered into within the legal framework of the EU. The objectives of the EU on unification of the rules on jurisdiction can be achieved to a large extent with the conditions for jurisdiction agreements and the proper application of the rules.

Enforcement of forum jurisdiction clauses in Nigeria may be done by stay of further proceedings, which is a defensive option granted under the inherent powers of the court, or by an anti-suit injunction which is a remedy that can be obtained from the agreed foreign forum restraining the party that filed the proceedings in the Nigerian court, in violation of the forum agreement clause.

This will serve to further enhance the effectiveness of jurisdiction agreements and increase the willingness of businesses and other parties to engage in commercial transactions.
-Buetna’an .M. Bassi and Mardhiyyah Ja’afar are Research Fellows, National Judicial Institute, Abuja.