Introduction
The principle of sovereign immunity has its roots in the common law adage that the king can do no wrong. Traditionally, this meant that the sovereign- once embodied by the king- could not be sued or impleaded in his own courts, nor could he be sued in foreign courts without his consent. In Nigeria, this principle is embedded in our legal and judicial system. For example, the constitutional protection against civil and criminal proceedings granted to the heads and deputy heads of the executive branches at both federal and state levels is based on the doctrine of sovereign immunity.
As nation-states have become more involved in international commerce and trade, engaging in transactions with private entities, the scope of sovereign immunity, its application, and significance have come under scrutiny. Moreover, the rise of commercial contracts that include arbitration agreements poses questions about whether these clauses are enforceable against the government and its agencies when they are parties to these contracts. This article aims to explore and clarify the governing principles of sovereign immunity in Nigeria, especially in the context of initiation of arbitration proceedings and the enforcement of arbitral decisions.
Foundational Theories of Sovereign Immunity
The doctrine of sovereign immunity historically rested on three key ideas: the absolute authority traditionally held by a sovereign ruler, the concept of state equality which suggests that no state should be subjected to the jurisdiction of another without consent, and the practical difficulty of enforcing foreign court orders against a sovereign state, which could potentially lead to war. However, the evolution from monarchies to constitutional republics, alongside the advent of globalization and a rule-based international system, has significantly diluted the traditional bases of sovereign immunity.
Current Theories of Sovereign Immunity
Today, the doctrine is primarily divided into two theories: absolute and restrictive immunity.
- Absolute Sovereign Immunity: Under the theory of absolute sovereign immunity, also known as the structuralist or ratione personae approach, a State or its entities are completely immune from foreign jurisdiction in all cases regardless of the circumstances. This theory does not consider the nature of the act but rather focuses solely on the entity's sovereign status. Jurisdictions adhering to absolute immunity grant state entities a blanket protection from lawsuits and arbitration, irrespective of the actions in question1.
- Restrictive Sovereign Immunity: The increasing involvement of States in commercial activities necessitated a paradigm but gradual shift from the absolute immunity approach to the restrictive immunity approach. The restrictive theory of sovereign immunity, or the functionalist or ratione materiae approach, differentiates based on the nature of the activity. This theory outlines that immunity should apply only to acts conducted in the sovereign capacity. Commercial or private acts, even those undertaken by state entities, do not qualify for sovereign immunity under this doctrine. This approach recognizes the need for states to engage on equal footing in the global marketplace, where commercial dealings are frequent. As things stand, most foreign jurisdictions including the United States (US), United Kingdom (UK), Australia and Nigeria etc. have gradually developed exceptions to the absolute immunity approach to accommodate the restrictive immunity approach.2
Sovereign Immunity and Initiation of Arbitration under Nigerian Law
Jurisdictional Principles and Sovereign Immunity
The principle of sovereign immunity in Nigerian law initially drew heavily from the Petition of Rights Act 1860 of England3 which was directly integrated into Nigeria's legal framework as a statute of general application. This barred any lawsuits or judgment enforcement against the Federal Government of Nigeria (FGN) without the prior approval of the Attorney General. This stance was revised with the introduction of the 1979 Constitution, a provision which continues under section 6(6)(b) of the 1999 Constitution as amended. This amendment empowers the judiciary by vesting judicial powers in the superior courts, removing legal barriers against initiating actions against the state and its entities.4 While it is not explicitly stated, it can be inferred that these actions extend to judicial oversight in arbitration involving the state, including the enforcement of arbitral awards and the interpretation of waivers of sovereign immunity.
Limitation of Arbitral Tribunals
It is important to note, however, that the judicial powers granted by Section 6(6)(b) of the 1999 Constitution are limited to the "superior courts of record" designated in the constitution itself. Since arbitral tribunals do not fall under the category of superior courts of record, they do not possess the constitutional authority to override the sovereign immunity that protects the state and its agencies.
Waiver of Sovereign Immunity Through Arbitration Agreements
Once the Federal Government of Nigeria (FGN) or its agencies enter into a valid arbitration agreement, they are precluded from invoking sovereign immunity to escape arbitration. This adherence is mandated by the principle of pacta sunt servanda, which is a fundamental principle in international law requiring parties to honor their contractual commitments. In the landmark case of Ariori v Elemo5, the Supreme Court, per Eso JSC, elucidated on the possibility of waiving statutory rights. The court held that if a right is conferred for the individual's benefit, then that individual is fully competent to waive such a right. Thus, when the FGN, state governments or its entities agree to an arbitration clause within a contract, they effectively waive their right to claim immunity in relation to those specific contractual obligations.6
Implications for Enforcing Arbitration
Consequently, if the Nigerian government or any of its agencies fails to adhere to an arbitration agreement, the opposing party has the right to seek specific performance, compelling the government to submit to arbitration. This marks a significant shift in how sovereign immunity is interpreted and applied in contexts involving arbitration, aligning Nigeria's legal framework with international practices and the realities of modern state engagement in commercial activities.
Enforcement Principles in Arbitration Against the State
Garnishee Orders and Sovereign Immunity
The enforcement of arbitral awards against the state through garnishee orders, as influenced by sovereign immunity, is primarily regulated under Section 84 of the Sheriff's and Civil Processes Act (SCPA). Garnishee orders are a judicial mechanism for enforcing a judgment, where a third party (typically a bank) holding funds of the judgment debtor (the party who owes the debt) is directed to pay part of these funds directly to the judgment creditor (the party to whom the debt is owed). According to Section 84, such orders require the prior consent of the Attorney General- applicable at both the federal and state levels—before they can be issued against the state or its agencies.
Exceptions to the Consent Requirement
However, an exception to this requirement was established by the Supreme Court in the case of CBN v. Insterstella Communications Ltd.7 The court held that the need for the Attorney General's consent is waived when the Attorney General is actively involved in the dispute, rather than as a neutral entity. The rationale was that requiring consent from an Attorney General who is a party to the proceedings would violate principles of natural justice by potentially allowing the Attorney General to obstruct the enforcement of an award against the state entity they represent.
Practical Application for Arbitral Awards
Therefore, when a monetary arbitral award is issued against the Nigerian state or its agencies, and garnishee proceedings are initiated to enforce the award after its registration,8 the standard protocol requires obtaining the consent of the relevant Attorney General before such a garnishee order can be executed by the courts. This ensures a layer of governmental oversight in the enforcement process against state entities. However, if the Attorney General was an active participant in the arbitration process that led to the award, the consent requirement is automatically waived. This represents a balanced approach that respects state sovereignty while ensuring the fair enforcement of arbitral awards. This nuanced method streamlines the enforcement process where state agencies are involved, aligning legal practices with principles of fairness and justice in arbitral proceedings.
Sovereign Immunity in International Arbitration Against the Nigerian State and Its Agencies
Jurisdictional Principles
When the Nigerian state or its agencies are involved in foreign arbitral proceedings, the defense of sovereign immunity is governed by several factors: the law applicable to the arbitration, the procedural rules of the arbitration forum, and principles of public international law.
Notably, Article 10 of the United Nations Convention on Jurisdictional Immunities (UNCSI)9, limits a state's ability to invoke immunity in cases arising from commercial transactions in international arbitration. Similarly, Article 17 of the UNCSI states that by agreeing to submit a dispute to arbitration, a state implicitly waives its right to claim jurisdictional immunity. Based on these provisions, it is unlikely that the Nigerian state or its agencies can successfully claim sovereign immunity as a defense in an international arbitration setting.
Enforcement Principles
Despite the jurisdictional aspects, sovereign immunity remains a robust defense against the enforcement of arbitral awards in foreign courts, especially in cases involving the seizure of overseas assets.10 This form of immunity is often seen as "the last fortress, the last bastion of State immunity."11
However, there are recognized exceptions where a state may be vulnerable to asset attachment:
- If the state has explicitly consented to the attachment of its assets.
- If the state has designated specific assets for the satisfaction of a claim.
- If the assets in question are used solely for commercial purposes.12
Assets typically immune from execution include those intended for diplomatic missions, military functions, and properties of central banks, as well as cultural heritage sites.13 Therefore, any objection by the Nigerian state or its agencies against the enforcement of an arbitral award on grounds of sovereign immunity is likely to succeed unless the case falls within these recognized exceptions.
Conclusion
The doctrine of sovereign immunity, often regarded as an outdated concept14 in modern international legal practice, continues to evolve. The United Kingdom, where this doctrine originated, has significantly narrowed its scope through legislative measures such as the Crown Proceedings Act 1947 and the State Immunity Act 1978. In Nigeria, while the doctrine still holds, it has been adapted through specific modifications discussed in this article. In contexts involving contractual agreements with the Nigerian government or its agencies, it is beneficial for all parties to consider and clearly articulate the terms relating to sovereign immunity. This ensures that the clauses address both jurisdictional and enforcement aspects effectively, aligning with the evolving nature of international law and the specific legal framework in Nigeria. Such careful consideration helps to clarify expectations and responsibilities, facilitating smoother legal and commercial interactions with the Nigerian state.
Footnotes
1. The English cases of Porto Alexandre [1920] 1 A.D, p. 146; Cristina case [1938] A.C 485; Krajina v. Tass Agency [1949] 2 All ER 274; and Baccus SRL v. Servicio Nacional del Trigo [1957] 1 QB 438 demonstrate classical instances where the English courts have adopted the absolute immunity approach.
2. In Thai-Europe Tapioca Service Ltd., Lord Denning MR held that a foreign sovereign waives immunity when engaging in commercial transactions within the UK. If a foreign state or its entity trades in the London market or charters ships, it submits to the rules of the marketplace and cannot claim sovereign immunity. See also: Trendtex Trading Corporation Ltd. v. CBN [1976]3 All ER 437; Hispano Americana Mercantil SA v. CBN [1979] 2LL.R 277 and Alcom Ltd v. Republic of Columbia [1984] 2 All ER 6.
3. (as amended in 1964)
4. See the case of Ransome-Kuti v. Attorney General of the Federation (1985) LPELR-2940 (SC) per Kayode Eso JSC at pg. 48 (para. d)
5. (1983)1 SCNLR
6. See also Section 169 of the Evidence Act 2011 (as amended) on the principle of waiver
7. (2017) LPELR-42940 (SC)
8. The Arbitration and Mediation 2023 provides for the registration of arbitral awards at the high court (federal or states as they case may be) as a precondition for enforcement of the awards.
9. The UNCSI is generally considered as a source of public international law
10. See Article 18-21 of the UNCSI
11. International Law Commission, Commentaries to the Articles on the Responsibility of States for Internationally Wrongful Acts, art. 18 ¶ 1 (2001), https://legal.un.org/ilc/texts/instruments/english/commentaries/9_6_2001.pdf.
12. See Article 19 of the UNCSI
13. Article 21 of the UNCSI
14. See the dictum of Kayode Eso JSC in Ransome-Kuti v. Attorney General of the Federation supra at pg. 48 para d
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