Abuja International Hotels Ltd v Meridien Sas
| Jurisdiction | England & Wales |
| Judge | Mr Justice Hamblen |
| Judgment Date | 26 January 2012 |
| Neutral Citation | [2012] EWHC 87 (Comm) |
| Docket Number | Case No: 2011-469 |
| Court | Queen's Bench Division (Commercial Court) |
| Date | 26 January 2012 |
[2012] EWHC 87 (Comm)
Mr Justice Hamblen
Case No: 2011-469
IN THE HIGH COURT OF JUSTICE
QUEEN'S BENCH DIVISION
COMMERCIAL COURT
Royal Courts of Justice
Rolls Building, Fetter Lane, London, EC4A 1NL
Adedamola Aderemi & Amina Rawlings (instructed by Samuel & Co) for the Claimant
Vernon Flynn QC & David Pope (instructed by SNR Denton) for the Defendant
Hearing dates: 20 January 2012
In these proceedings, the Claimant ("Abuja") challenges an ICC arbitration award dated 18 March 2011 ("the Award") made following a three-day hearing in December 2010 before a tribunal comprising Stephen Males QC as chairman, the Honourable Justice Kayode-Eso (a former Justice of the Supreme Court of Nigeria) and Dr Tunde Ogowewo (an English and Nigerian barrister who teaches at King's College London) ("the Tribunal").
In the Award, the Tribunal upheld Meridien's claim that Abuja had breached a hotel management agreement dated 24 September 2003 ("the Management Agreement"). The Tribunal ordered Abuja to pay Meridien around US$7.2 million plus interest and costs.
Abuja challenges the Award under ss.67 and 68 of the Arbitration Act 1996 ("the Act"). It also issued an application for permission to appeal under s.69 but this was abandoned at the hearing.
Factual background
The background facts are set out in the Award. Meridien is a French company. It is part of the "Le Méridien" group, which operates an international chain of hotels. Since November 2005, Meridien's parent company has been Starwood Hotels & Resorts Worldwide, Inc. ("Starwood").
Abuja is a Nigerian company. It owns an hotel in Abuja, Nigeria that was formerly known as "Le Meridien Abuja", but is now known as the "Nicon Luxury" ("the Hotel"). Abuja was originally owned by the Nigerian Government. In November 2006, 90% of its shares were sold for US$50 million to a Nigerian private company, Hotels Acquisition Limited ("HAL"), as part of a Government privatisation programme.
Under the terms of the Management Agreement, Meridien was to market and manage the Hotel in return for certain fees. The Management Agreement was to run for an initial term of 10 years.
The Hotel opened in 2004. Meridien managed it without major incident until late 2006, when HAL took control of Abuja. HAL was dissatisfied with the Management Agreement and wanted the Hotel to be run by Nigerians rather than foreigners like Meridien. From about early 2007, Abuja unilaterally took over the management of the Hotel. It revoked the authority of the Hotel's general manager over the bank account, it starved the Hotel of funds so that staff and suppliers could not be paid, and it sacked several employees. These actions – and others – were found to be in breach of the Management Agreement, as the Tribunal found at paragraphs 122 to 124 of the Award. This aspect of the Award is not subject to challenge.
In March 2007, notices of default were served on Abuja under the Management Agreement. When Abuja failed to remedy the defaults identified in those notices, Meridien sent a letter, dated 8 June 2007, in which it purported to terminate the Management Agreement with effect from 30 June 2007.
Pursuant to the arbitration agreement contained in clause 9.6.1 of the Management Agreement, Meridien began an ICC arbitration against Abuja in November 2009. Abuja challenged the validity of the arbitration agreement and, without prejudice to that contention, defended Meridien's claim and advanced its own counterclaim.
The arbitration
The Management Agreement contained the following clause dealing with the settlement of disputes and applicable law:
"Section 9.6 – Settlement of disputes and applicable law
9.6.1 In the event of a dispute resulting from the interpretation, the performance or notice of termination of this Agreement, the Owner and Le Meridien shall use their best efforts to settle it amicably. In the event that one or both of the Parties to this Agreement decide to refer the dispute to arbitration, said arbitration proceedings shall take place in London before the International Chamber of Commerce, by one or more arbitrators appointed in accordance with its rules. Such proceedings shall be conducted in the English language. It is agreed between the Parties that during any controversy, claim, disagreement or dispute "Le Meridien" shall remain in possession of the Hotel and both Parties shall continue to fulfil their obligations under this Agreement until the dispute is finally settled (within the limits of the Initial Term or the Extended Term as provided under Sections 8.1 and 8.2).
9.6.2 This Agreement shall be construed, interpreted and applied in accordance with the laws of Nigeria."
In accordance with Article 18 of the ICC Rules the Tribunal drew up Terms of Reference which were signed by the parties. This included the following:
"1 The arbitration will be conducted in accordance with the Rules of Arbitration of the International Chamber of Commerce in force as from 1 January 1988 ("the Rules").
2 The curial law applicable to the arbitration is English law and the mandatory provisions of Part I of the United Kingdom Arbitration Act 1996 ("the Act") will apply.
3 In respect of any matter not provided for by the Rules or by the mandatory provisions of the Act, the arbitration will be conducted in accordance with such directions as may be given by the Tribunal in its discretion.
…..
6 The governing law of the Management Agreement is the law of Nigeria."
The final hearing of the arbitration took place from 14 to 16 December 2010. The Tribunal allowed the parties to make further written submissions thereafter. The Award was published on 18 March 2011. In it, the Tribunal rejected Abuja's jurisdictional challenge, upheld Meridien's claim and dismissed Abuja's counterclaim.
The Issues
Section 67
Abuja challenged the substantive jurisdiction of the Tribunal on the grounds that:
(a) The Constitution of the Federal Republic of Nigeria 1999 invalidates the commercial arbitration agreement between the parties because such an arbitration agreement is unconstitutional, null and void as it is contrary to s. 36(1) & (3) of the 1999 Nigerian Constitution.
(b) The failure of Meridien to comply with Section 54(1) of the Companies and Allied Matters Act and incorporate its business in Nigeria invalidated the entire Management Agreement including the arbitration agreement contained in it and thus deprived the Tribunal of substantive jurisdiction.
(c) The arbitration agreement was agreed with constraint and is contrary to public interest.
(d) The arbitration agreement was invalid on the basis of force majeure and privatisation which affected the totality of the Management Agreement.
Section 68
Abuja challenged the Award for serious irregularity on the grounds that:
(a) the Tribunal exceeded its powers (otherwise than by exceeding its substantive jurisdiction) by making an award when Meridien had failed to incorporate in Nigeria as required under Nigerian law. Alternatively the Tribunal failed to deal with all the issues that were put to it with reference to s. 68(2)(d).
(b) the Tribunal exceeded its powers (otherwise than by exceeding its substantive jurisdiction) because the proper party had not terminated the agreement.
(c) the Tribunal failed to comply with its general duty pursuant to s.33 of the Arbitration Act 1996 alternatively exceeded its jurisdiction (otherwise than by exceeding its substantive jurisdiction) in awarding the sum of US$6,000,000 as damages for future loss.
(d) the Tribunal failed to comply with its general duty pursuant to s.33 of the Arbitration Act 1996 alternatively exceeded its jurisdiction (otherwise than by exceeding its substantive jurisdiction) in awarding damages for future loss on the basis of a 577 room hotel.
(e) the Tribunal exceeded its powers (otherwise than by exceeding its substantive jurisdiction) by making an award in respect of marketing contribution. Alternatively the Tribunal failed to deal with all the issues that were put to it with reference to s. 68(2)(d).
(f) the Tribunal failed to comply with its general duty pursuant to s.33 of the Arbitration Act 1996 by making an award of the sum of US$1,246752.15 as accrued debt and US$220,000 in respect of technical services.
(1) Section 67
General legal issues
There are various general legal considerations which are of relevance to the arguments raised by the Abuja.
First, s.67 is concerned with challenges to the "substantive jurisdiction" of the arbitral tribunal. Pursuant to s.82 of the Act "substantive jurisdiction" refers "to the matters specified in section 30(1)(a) to (c)", namely:
"(a) whether there is a valid arbitration agreement,
(b) whether the tribunal is properly constituted, and
(c) what matters have been submitted to arbitration in accordance with the arbitration agreement."
In the present case the relevant issue of substantive jurisdiction is whether there is a valid arbitration agreement.
Secondly, that issue falls to be considered in accordance with English law, being the law governing the arbitration agreement, as the Tribunal held and as is not challenged. The proper law of the main agreement is irrelevant. As stated by Cooke J in Tamil Nadu Electricity Board v ST-CMS Electric Company Private Ltd [2008] 1 Lloyd's Rep. 93 at paragraph 35: "The parties have agreed to arbitration in accordance with English law and it is by that law alone that [the validity of the arbitration agreement] can be determined….To delve into the proper law of the [main agreement] to seek for any provision mandatorily applicable by that law to the issue of jurisdiction is impermissible".
(a) Whether the arbitration agreement is unconstitutional, null and void...
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