The English commercial court grants anti-suit injunction to restrain Nigerian proceedings commenced in breach of arbitration clause: Shell v Sunlink

In December 2023, the English Commercial Court granted a final anti-suit injunction to Shell Petroleum Development Company of Nigeria Ltd (Shell), requiring Sunlink Energies and Resources Ltd (Sunlink) to withdraw Nigerian court proceedings it had commenced in breach of an arbitration agreement. In doing so, the court followed the Supreme Court’s pro-arbitration approach in Enka v Chubb,¹ holding that the law governing the arbitration agreement was the same as the governing law of the underlying contract (Nigerian law), despite the arbitration agreement providing for London-seated arbitration. The decision reflects the primacy given to arbitration agreements under English law and confirms the court’s willingness to issue anti-suit injunctions where a party attempts to circumvent an arbitration clause providing for arbitration seated in London.

 

Executive summary

In Shell v Sunlink², Shell claimed that Sunlink had commenced proceedings in the Nigerian courts in breach of the arbitration agreement in the (Nigerian law governed) contract, which provided for London-seated arbitration. Sunlink argued that the arbitration agreement was ineffective or inoperable as (i) it referred to non-extant ICC arbitration rules; (ii) was incapable of being performed; and (iii) was contrary to Nigerian public policy. Having heard expert evidence on Nigerian law, the court rejected Sunlink’s arguments, finding all of them to be without arguable merit. In its decision, the court confirmed Nigerian law as governing the arbitration agreement, granted an anti-suit injunction restraining Sunlink from pursuing Nigerian court proceedings it had commenced in breach of the arbitration clause, and required Sunlink to take active steps to discontinue or withdraw those proceedings.

 

Background to the case

The underlying dispute arose out of a Nigerian law Joint Operating Agreement (JOA) relating to an oil prospecting license and a subsequent oil mining lease off the Nigerian coast. The arbitration agreement in the JOA required that “any dispute arising out of or in connection with” the JOA be “finally resolved by arbitration under the Rules of Conciliation and Arbitration of the International Chamber of Commerce effective at the time [that] notice of arbitration is served” and specified London as the seat of arbitration. It also provided for a panel of three arbitrators, to be “retired judicial figures of standing, or Queen’s counsel practising at the commercial Bar, or similar qualified Solicitors” (the arbitration agreement).

Sunlink commenced proceedings against Shell in the High Court of the Federal Capital Territory in Abuja, Nigeria in September 2023, alleging that Shell had breached the JOA and claiming over USD1 billion in damages. In so doing, Sunlink asserted that the arbitration agreement was ineffective or inoperable as (i) it referred to a set of ICC arbitration rules that did not exist; (ii) the characteristics required of the tribunal members were highly unlikely to be satisfied by Nigerian lawyers; and (iii) the matters in dispute were inarbitrable under Nigerian law.

On 20 September 2023, the English court granted Shell an interim anti-suit injunction. Shell subsequently applied to the Nigerian court requesting that the Nigerian proceedings be stayed in favour of arbitration in London. Shell’s application was granted and the Nigerian court stayed the proceedings. Meanwhile, Sunlink had made a CPR Part 11 application disputing the English court's jurisdiction. At a return date hearing on 5 December 2023 (which Sunlink did not attend), the court granted a final anti-suit injunction against Sunlink on the basis that: (i) the arbitration agreement was governed by Nigerian law; and (ii) Sunlink had breached the arbitration agreement by commencing court proceedings in Nigeria.

 

Analysis

The issue of the governing law of the arbitration agreement where the law of the contract differs from the designated seat of arbitration was resolved by the Supreme Court in Enka.

Applying Enka, the court held that although the arbitration agreement provided for London-seated arbitration, the JOA was governed by Nigerian law and, as such, Nigerian law governed the arbitration agreement.³ The court also accepted the expert evidence that, under Nigerian law, the arbitration agreement should be interpreted as specifying London as the seat of arbitration.⁴

Having determined the governing law of the arbitration agreement and the seat of the arbitration, the Judge went on to consider the grounds upon which Sunlink asserted that the agreement was “ineffective and inoperative”:⁵

1. The Judge rejected Sunlink’s argument that the reference to a historic iteration of the relevant ICC rules in the arbitration agreement avoided the obligation to arbitrate. Baker J held it to be irrelevant that the ICC arbitration rules had a different name to those referred to in the arbitration agreement, especially in circumstances where the arbitration agreement expressly contemplated the use of the ICC rules “effective at the time [that] notice of arbitration is served”.⁶
2. The court also dismissed Sunlink’s suggestion in relation to the requirements for the constitution of the tribunal as without “any arguable merit”. That the clause provided for the arbitrators be retired English judges or practising silks or solicitors did not render it incapable of performance or void as asserted, since the clause did not require the arbitrators to be or have been practising Nigerian lawyers.⁷
3. Sunlink’s contention that the subject matter of the claim pertained to fundamental matters of Nigerian public and economic policy that are inarbitrable under Nigerian law was also rejected by Baker J on the grounds that: (i) no evidence to substantiate it had been adduced;(ii) the claim appeared to be a straightforward high value commercial dispute; and (iii) the Nigerian court had already stayed the Nigerian proceedings on the basis that there was a valid and effective arbitration agreement requiring the parties to arbitrate disputes.⁸

The court therefore granted final injunctive relief in Shell’s favour and, applying RSM Production Corporation v Gaz du Cameroun SA,⁹ required that Sunlink take necessary steps to discontinue or withdraw the Nigerian proceedings promptly.¹⁰ In his judgment, Baker J condemned Sunlink’s conduct as breaching its obligation to arbitrate “without colourable excuse or justification” and found that the injunction was justified on the basis that Sunlink “plainly, and, indeed, in this case, explicitly, threatens and intends to continue, unless restrained, to pursue” Shell through the Nigerian litigation.¹¹ In light of Sunlink’s conduct, the court ordered Sunlink to pay Shell’s costs on an indemnity basis.

 

Key takeaways

The ruling illustrates the English courts’ pro-arbitration stance and should serve as a reminder that:

• Attempts by parties to circumvent arbitration agreements in favour of litigation will be met with short shrift. Parties must abide by the terms that they have agreed.
• The English courts will continue to apply the guidance set out in Enka v Chubb. If parties have not specified the governing law of the arbitration agreement, it will be the same as the main contract; and if that has not been chosen, it is likely to be the law of the seat of arbitration.
• Where enforceable arbitration agreements are breached, anti-suit injunctive relief will be an available and effective remedy. Anti-suit injunctions may be granted on an interim and then final basis in relatively short timescales and may be expressed in prohibitory and mandatory terms.

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¹[2020] UKSC 38.
²[2023] EWHC 3135 (Comm).
³At [10].
⁴At [11]. See also section 32 of the Nigerian Arbitration and Mediation Act 2023.
⁵At [13].
⁶Id. at [14].
⁷Id. at [16].
⁸Id. at [17].
⁹[2023] EWHC 2820 (Comm).
¹⁰At [22].
¹¹At [20].