Abuja International Hotels Ltd. v Meridien Sas

Validity of an arbitration agreement is determined by its applicable law, separately from the law governing the underlying contract. Where the arbitration is seated in England, the arbitration agreement will ordinarily have its closest and most real connection with England. Under the principle of separability, a challenge to the underlying contract does not necessarily impeach the arbitration agreement.

A challenge under section 68 of the Arbitration Act 1996 requires a serious irregularity falling within the statutory categories and causing substantial injustice. Section 68 is a long-stop remedy concerned with due process, not the correctness of the tribunal’s decision. An erroneous exercise of a power the tribunal possesses is not an excess of power.

Abuja challenged an ICC arbitration award under sections 67 and 68 of the Arbitration Act 1996. The award found that Abuja had breached a hotel management agreement and ordered payment of approximately US$7.2 million, interest and costs.

Abuja argued that the arbitration agreement was invalid under the Nigerian Constitution and the Companies and Allied Matters Act 1990, that privatisation and alleged constraint affected its validity, and that the tribunal had committed serious irregularities concerning jurisdiction, termination, damages, marketing contributions, accrued debt and technical services.

The central issues were whether the arbitration agreement was governed by Nigerian or English law, whether the separability principle protected it from challenges to the management agreement, and whether the tribunal’s alleged errors or omissions met the high threshold under section 68.

1. Section 67. The challenge to substantive jurisdiction concerned whether there was a valid arbitration agreement. The arbitration agreement was governed by English law. Although the management agreement was governed by Nigerian law, the arbitration agreement was separable and distinct under section 7 of the Arbitration Act 1996. Its closest and most real connection was with England because London was the seat. Nigerian constitutional and company-law provisions therefore did not determine its validity. This conclusion was supported by Tamil Nadu Electricity Board v ST-CMS Electric Company Private Ltd [2008] 1 Lloyd's Rep. 93, C v D [2008] 1 Lloyd's Rep. 239 and Fiona Trust & Holding Corporation v Privalov [2007] UKHL 40; [2008] 1 Lloyd's Rep. 254.
2. The Ralli Brothers v Compañia Naviera Sota y Aznar [1920] 2 KB 287 principle did not apply. The arbitration agreement required arbitration in London and contained no element of compulsory performance in Nigeria.
3. Even if privatisation or a breach of Nigerian company law affected obligations under the management agreement, those matters did not invalidate or impair the separable arbitration agreement. No ground under section 67 was established.
4. Section 68. The applicant had to establish a serious irregularity within section 68(2) which caused or would cause substantial injustice. The provision was a high-threshold, long-stop remedy concerned with due process rather than the correctness of the award. An erroneous exercise of an existing power was not an excess of power. The tribunal was not required to address every argument, provided it dealt with the fundamental issue. The principles in Lesotho Highlands Development Authority v Impregilo SpA [2006] 1 AC 221, The Petro Ranger [2001] 2 Lloyd’s Rep. 348, Fidelity Management SA v Myriad International Holdings BV [2005] 2 Lloyd's Rep. 508 and Hussman Europe) Ltd v Al Ameen Development & Trade Co [2000] 2 Lloyd’s Rep 83 were applied or followed.
5. The complaints about termination notices, future-loss damages, the assumed number of hotel rooms, marketing contributions, accrued debt and technical services challenged the tribunal’s factual or legal conclusions, or matters on which Abuja had had a fair opportunity to present its case. They did not establish a serious irregularity or substantial injustice.
6. Both the section 67 and section 68 applications were dismissed.