Zhongshan Fucheng Investment Company Ltd v The Federal Republic of Nigeria
| Jurisdiction | England & Wales |
| Judge | Sir Julian Flaux C,Lord Justice Underhill |
| Judgment Date | 20 July 2023 |
| Neutral Citation | [2023] EWCA Civ 867 |
| Court | Court of Appeal (Civil Division) |
| Docket Number | Case No: CA-2022-002477 |
[2023] EWCA Civ 867
Sir Julian Flaux, CHANCELLOR OF THE HIGH COURT
and
Lord Justice Underhill, VICE-PRESIDENT OF THE COURT OF APPEAL, CIVIL DIVISION
Case No: CA-2022-002477
IN THE COURT OF APPEAL (CIVIL DIVISION)
ON APPEAL FROM THE HIGH COURT OF JUSTICE
BUSINESS AND PROPERTY COURTS OF ENGLAND AND WALES
COMMERCIAL COURT (KBD)
MRS JUSTICE COCKERILL
[2022] EWHC 3286 (Comm)
Royal Courts of Justice
Strand, London, WC2A 2LL
Riaz Hussain KC and Omar Eljadi (instructed by Squire Patton Boggs (UK) LLP) for the Applicant
Christopher Harris KC and Mark Wassouf (instructed by Withers LLP) for the Respondent
Hearing date: 28 June 2023
Approved Judgment
This judgment was handed down remotely at 10:30am on Thursday 20 July 2023 by circulation to the parties or their representatives by email and by release to The National Archives.
Introduction
Pursuant to the Order of Underhill LJ dated 6 April 2023, the Court held an oral hearing of the application by the Federal Republic of Nigeria (to which I will refer as “Nigeria”) to re-open pursuant to CPR 52.30 the refusal by Males LJ on 30 January 2023 of permission to appeal against the judgment of Cockerill J dated 2 December 2022. By that judgment, the judge dismissed Nigeria's application to vary the Order she had made on 21 December 2021 on an ex parte basis in favour of the claimant, respondent to the present application (to which I will refer as “Zhongshan”), for enforcement of an arbitration award dated 21 March 2021 against Nigeria.
Factual and procedural background and the judgment below
The claimant's case in the arbitration was that it made certain investments in Ogun State in Nigeria, which Nigeria disputed. The arbitration took place pursuant to Article 9 of the Agreement between Nigeria and the Government of the People's Republic of China for the Reciprocal Promotion and Protection of Investments (“the BIT”). In the arbitration, Nigeria raised a number of challenges to the jurisdiction of the tribunal. By its award, the tribunal (chaired by Lord Neuberger) dealt with these challenges in detail and rejected them all. The tribunal found that Nigeria was in breach of various provisions of the BIT, including the prohibition against expropriation and awarded Zhongshan US$55.6 million compensation for the expropriation of its investment.
Nigeria, which has not honoured any of the award, filed an arbitration claim under section 67 of the Arbitration Act 1996, contending that the tribunal lacked jurisdiction. It contended for the first time that the arbitration agreement in the BIT was invalid but otherwise ran again arguments it had run in the arbitration which the tribunal had rejected: that Zhongshan had failed to make a qualifying investment within the meaning of the BIT and that proceedings in Nigeria deprived the tribunal of jurisdiction under article 9(3) of the BIT (the so-called “fork in the road” provision). Zhongshan responded to that challenge and filed an application for security for costs and security for award under sections 70(6) and 70(7) of the Arbitration Act. Days before that application was due to be heard, Nigeria filed a notice to discontinue its section 67 challenge.
Zhongshan then issued an application under section 66 of the Arbitration Act to enforce the award as a judgment. That application was supported by a witness statement of its solicitor, Dr Kovacs. In accordance with the procedure laid down in CPR 62.18, that application was made without notice to Nigeria and, in order to provide full and frank disclosure, Dr Kovacs set out the history of challenges to the jurisdiction of the arbitration tribunal which Nigeria had made. He also drew the Court's attention to the possibility that Nigeria might argue that it was immune from the Court's jurisdiction under section 1 of the State Immunity Act 1978 (“the 1978 Act”) but stated that argument would lack merit because of the exception to immunity under section 9 of the 1978 Act where the Court proceedings are in relation to an arbitration in respect of which the state agreed in writing (here the BIT). Dr Kovacs set out the various arguments which Nigeria might raise as to why section 9 did not apply, including its previous grounds of challenge to the tribunal's jurisdiction. He repeated that he did not consider those arguments would succeed for the reasons he had already given. In addition, he said that, Nigeria having run those arguments in the context of the section 67 challenge and then withdrawn them, the Court might consider it abuse of process for Nigeria to seek to argue them afresh.
As the notes in the White Book at 2E-39 record the procedure under CPR 62.18 is intended to be a summary one, although the Court has a discretion as to whether to make an order or not and where disputed issues of fact arise the Court can give appropriate directions under CPR 62.7. Where the Court does make an order, sub-rules (9) and (1) of CPR 62.18 make clear that the respondent has a right to make an application to set the order aside and the award cannot be enforced in the meantime.
Applications to enforce arbitration awards are normally dealt with on paper by the judge, although if the judge considers that the respondent may have arguable grounds for resisting enforcement, an order may be made for the respondent to be served and for a hearing to take place. However, where the judge does not consider that on the material before the court there are any arguable grounds for resisting enforcement, the usual practice is to grant the order ex parte, leaving the respondent to make an application to set aside the order if so advised.
The application to enforce the award came before Cockerill J on paper and on 21 December 2021 she made the order ex parte in accordance with that usual practice, as she explained in [4] of the judgment which Nigeria seeks to appeal:
“The basis of the challenge which the Federal Republic wishes to bring is State Immunity. I should note in passing that the possibility of such an argument being raised was noted in the ex parte application and duly reflected in the order which I made, which provided for a further period for other issues to be raised by way of challenge. I nonetheless granted the ex parte order despite the indication that there might be a state immunity challenge because of what was said there about the arguments which were in play, including their potential merits. That is a not unusual way of proceeding in relation to enforcement applications against state parties, though sometimes the decision is taken that the questions raised are such that there should be no ex parte order but that the application should first be served on the state and the matter brought on for argument.”
The enforcement order which the judge made provided, inter alia, as follows:
“4. This Order having been made without notice to the Defendant, the Defendant has the right to apply to set aside or vary this Order, if so advised, within two months and 14 days of the date on which this Order is served on the Defendant.
5. Should the Defendant make an application to set aside this Order on the grounds that it is immune from the Court's jurisdiction, then it shall have a further period of 14 days from the date on which that application is determined within which it may apply to set aside this Order on any other ground.”
Nigeria was served with the enforcement order on 30 May 2022. The deadline in [4] of the Order expired on 16 August 2022, Mr Balogun of Nigeria's solicitors having received the order, as the judge found at [15] of her judgment, on 11 August 2022. On 15 September 2022, Nigeria filed an application, supported by a witness statement from Mr Balogun which sought relief from sanctions in respect of the delay in making the application and sought an extension of 28 days of the period under [4] of the order for making an application to set aside or vary the order. Neither the application nor the witness statement mentioned state immunity.
Zhongshan filed evidence in response on 30 September 2022 stating that Nigeria's failure to comply with the deadline in [4] of the Order was significant and it had not identified any proper reason for its failure so that it did not satisfy the test for relief from sanctions in Denton v White [2014] EWCA Civ 906; [2014] 1 WLR 3926. Nigeria then missed the 7 day deadline of 10 October 2022 for evidence in response and on 29 November 2022 (three days before the hearing before Cockerill J) served a further extension of time application in respect of that missed deadline. It was only in the second witness statement of Mr Balogun in support of that further application that Nigeria first indicated that it might wish to raise state immunity.
The judge heard the two applications for extensions of time on 2 December 2022 and dismissed them, giving an ex tempore judgment. After describing the practice of the Commercial Court in relation to enforcement of awards at [4] which I quoted above, the judge summarised the parties' arguments before her at [5] and [6], then at [7] set out the summary of the principles of Denton v White in the judgment of Richards LJ in Michael Wilson & Partners v Sinclair [2015] EWCA Civ 774.
At [8] to [10] the judge dealt with the application for late reply evidence noting that no attempt was made to bring the application for an extension of time in time and that the delay until 29 November was a serious and deliberate breach in the context of the seven day time period for service of reply evidence and that there was no good reason for the breach. She had read the evidence de bene esse and it was not so significant that it would justify departing from the presumption against...
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