Ahmadu Bello University v. VTLS Inc. [2021] 10 NWLR (Pt. 1783) 33

Nigerian Judiciary is generally plagued by delay in justice delivery. But all hands are on deck to salvage the situation in order to restore and sustain efficient administration of justice.

Surprisingly, a Federal university in Nigeria, Ahmadu Bello University, Zaria, Kaduna State, (ABU Zaria) established by law, recently entered into a contract, purporting to oust the jurisdiction of Nigerian courts in favour of a court in Virginia, USA.

It happened that ABU Zaria entered into a software maintenance service agreement (VTLS Inc. Software Maintenance and Enhancement Management Support) with a company known as VTLS Inc. In Articles 12 and 13 of the Agreement, parties agreed that the contract shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia, USA without regard to the principle of conflicts of any jurisdiction, and that all suits and actions arising under the Agreement shall be brought in the Commonwealth of Virginia, USA and that the parties submit to the jurisdiction of the courts of the Commonwealth of Virginia and the United States District Courts sitting in Virginia.

The agreement contains provision for automatic renewal of the contract. Dispute arose regarding this. VTLS Inc. filed an action in 2018 at the High Court of Kaduna State against ABU Zaria claiming payment for the fee due based on the automatic renewal. The action was by way of Summary Judgment Procedure. The Court granted the claims on 11 December 2019.

ABU Zaria appealed to the Court of Appeal. One of the issues it raised was that the High Court of Kaduna State lacked jurisdiction to entertain the suit since it is the laws of the Commonwealth of Virginia, USA that is applicable to the transaction while any action arising under the Agreement must be instituted in the court sitting in Virginia, USA. In other words, that parties had by agreement agreed to exclude the laws and courts of Nigeria.

The Court of Appeal felt that was an abomination, holding (on 30 November 2020) that the High Court of Kaduna State had the requisite jurisdiction to entertain the case. Husaini, JCA explained, relying on Section 6 of the 1999 Constitution (as amended) and decided cases (at pages 48 to 49 of the report):

Consequently, no person or group of persons by their own private treaty or arrangements can agree to oust the jurisdiction and provisions vested in the courts by the Constitution. Even where such clauses are put in place in or as a contract with international flavour to rob the courts of the land of jurisdiction in favour of another foreign forum, the courts of the land are obliged to apply the blue pencil rule to severe those clauses from the contract or ignore same by virtue of the constitutional provision which confer on the court, the jurisdiction and power to entertain those cases.

It is understandable that having been faced with a court action, ABU Zaria opted to throw every form of defence to the suit. However, the challenge of jurisdiction on the ground that Nigerian courts were excluded by contract was highly misplaced. One would have expected that ABU Zaria would be the one eager to have a Nigerian court decide the dispute and not VTLS Inc. who at the time was a global company with headquarters in Virginia, USA. Interestingly, it is reasonably presumed that the clause ousting Nigerian courts in favour of US courts must have been slotted in by VTLS Inc. As it turned out, VTLS Inc. was the one who approached Nigerian court instead.

What about Arbitration?

Sometimes, parties include arbitration clauses in their agreements. In doing this, they might opt for foreign law as the governing law and also choose a foreign land as the seat of the arbitration. Parties can do so. The courts are not involved. Arbitrators preside over arbitration and Judges preside over proceedings in court.

However, the point of intersection might be where a party ignores an arbitration clause and runs to court, contrary to the provisions of the arbitration clause. Even at that, the law is that such a suit can still be entertained but not necessarily determined. If the other party objects, but without taking any step (as defined by law), the court will decline to determine the suit. However, the court will not throw the case out. It will command parties to proceed to arbitration and return with a feedback on the outcome, especially for purposes of enforcement of the arbitral award (judgment or decision of the arbitrator).

Thus, it is obvious that the courts generally frown at any agreement by parties to oust the jurisdiction of the courts. Courts guard their jurisdiction jealously. (Oputa, JSC in Sonnar Ltd. v. Nordwind [1987] 4 NWLR (Pt. 66) 520 at 576).

It is acknowledged that parties have the liberty to enter into contracts and agree on the terms which the courts will eagerly give effect to. But this doesn’t include terms which purports to rob the courts of jurisdiction. Be guided.