Court dismisses appeal against arbitral award to firm

Pan Ocean Oil Corporation Nigeria Limited filed an appeal with the Court of Appeal, Lagos Division, challenging Justice L. A. M. Folami’s decision of the Lagos State High Court regarding an arbitral award of $13,487,286.17 and N1,164,766,574.72 in favor of KCA Deutag Drilling GmbH and KCA Deutag (Nigeria) Limited in relation to services rendered under the Land Drilling Agreement.

Justice Obande Ogbuinya, Justice Onyekachi Otisi, and Justice Fredrick Oho, who made up the three-person panel, decided the issues against the appellant and upheld the lower court’s decision while dismissing the appeal on May 25, 2023.

The appellant had submitted a request opposing the lower court’s authority to hear the case on the grounds that the arbitral award from May 3, 2017 that the lower court had recognized was invalid and that the decision recognizing the invalid award was void.

The first respondent was a foreign firm not formed in Nigeria that was conducting business there, according to the appellant, and the lower court lacked jurisdiction to hear the case since it involved oil mining or exploration. It was highlighted that any lawsuit involving oil well operations had to be heard by the Federal High Court alone.

In addition, the appellant claimed that the parties’ business was a drilling agreement for rig T.76, dated January 14, 2008, that was directly associated with oil fields and oil mining operations. In response to the appellant’s preliminary objection, the respondents submitted a rebuttal affidavit.

The 2nd respondent carried out the performance and execution of the contract in line with its terms; the 1st respondent did not carry out any portion of the contract’s execution in Nigeria.

The respondents duly sent the appellant invoices for services done under the Land Drilling Agreement, but the appellant failed to pay the charges.

According to the arbitration clause in clause 13 of the Land Drilling Agreement, the respondents submitted the dispute regarding the appellant’s failure and/or refusal to pay the outstanding invoices to arbitration in accordance with the Arbitration Rules of the International Chamber of Commerce after making several unsuccessful demands for payment of the unpaid invoices.

On January 11, 2017, the parties informed the arbitral tribunal that they had signed a settlement agreement (the “Settlement Agreement”) in November 2016, and asked the arbitral tribunal to enter an award by consent in accordance with the Settlement.

On May 3, 2017, the Arbitral Tribunal issued a consent award (based on the Settlement Agreement) in the respondents’ favor for services rendered to the appellant under the Land Drilling Agreement, totaling $13,487,286.17 and N1,164,766,574.72.

The respondents additionally obtained various portions of the award money through garnishee proceedings, and the appellant subsequently made a voluntary payment of a portion of the award sums. But a sizable portion of the award debt was still unpaid.

The respondent requested an order from the Lagos State High Court that the award be enforced in the same way as the court verdict after the appellant refused and failed to pay the award sum.

The appellant asked the court to halt further execution of the arbitral judgement in an application dated June 14, 2018. Following hearing of the application, the lower court dismissed it as having no merit in a decision on March 18, 2020.

However, unsatisfied with the decision, the appellant sought the court to decide whether the lower court had jurisdiction to make a decision in its notice of appeal dated March 19, 2020.