July 15, 2016

Arbitration - L R Avionics v Federal Republic of Nigeria (High Court)

State immunity and enforcing an award which has been converted into a judgment

The claimant obtained an arbitration award in its favour against the Federal Republic of Nigeria. It also subsequently obtained a judgment from the Nigerian Federal High Court ordering the Federal Republic to pay the sums awarded in the arbitration. When the Federal Republic did not comply with the Nigerian judgment, the claimant sought to enforce both the award and the judgment in England.

Section 9 of the State Immunity Act 1978 provides that "where a state has agreed in writing to submit a dispute….to arbitration, the state is not immune as respects proceedings in the courts of the UK which relate to the arbitration".

The Supreme Court in NML Capital v Republic of Argentina confirmed that proceedings to enforce an award under section 101 of the Arbitration Act 1996 are "proceedings which relate to the arbitration" and so do not attract immunity. Accordingly, the claimant was entitled to register the award for recognition and enforcement. However, enforcement of the Nigerian judgment was a different matter and was of importance because it is the judgment, and not the award, which carries interest. The judgment could not be recognised and enforced under section 101 because it is a judgment and not an award. However, the English court has a discretion to enforce the judgment under section 9 of the Administration of Justice Act 1920.

Males J held that the defendant was not immune and the judgment should be enforced under the 1920 Act. That was because just as an application to enforce an arbitration award is a proceeding which relates to the arbitration, so too is an application to enforce a judgment which is in effect an award which has been converted into a judgment (under a foreign statutory provision equivalent to section 66 of the Arbitration Act 1996). Accordingly, this is all part of the process of enforcement of an award, and so the reasoning in NML is equally applicable to enforcement of such a judgment.

However, on the facts, the claimant was unable to prove that the relevant property against which enforcement was sought was in use for commercial purposes.