AIC Ltd v The Federal Airports Authority of Nigeria

Under section 103(5) of the Arbitration Act 1996, enforcement of a New York Convention award may be adjourned while the outcome of foreign setting-aside proceedings remains pending. The inquiry concerns the outcome, not merely whether the original application is presently active in its original form. The discretion is wide and fact-sensitive. Relevant considerations include bona fides, realistic prospects of success, delay, prejudice, enforcement risk and the strength of the challenge on a sliding scale between manifest invalidity and manifest validity. An adjournment may be ordered without security, but where the award appears manifestly valid and delay creates material prejudice, security is appropriate. The security need not equal the whole award or accrued interest.

AIC sought enforcement in England of a Nigerian arbitration award for US$48,124,000 plus interest. The award arose from a dispute concerning a hotel development lease at Lagos airport. FAAN had challenged the award in Nigeria. Although the Nigerian Court of Appeal had set aside procedural aspects of FAAN’s challenge and remitted the matters, appeals remained pending before the Nigerian Supreme Court. AIC obtained an order permitting enforcement and FAAN applied to set it aside and to adjourn enforcement under section 103(5) of the Arbitration Act 1996. AIC sought security as a condition of any adjournment. The issues were whether the English court had jurisdiction to adjourn enforcement and, if so, whether adjournment and security were appropriate.

1. Jurisdiction. The court had jurisdiction under section 103(5) of the Arbitration Act 1996. The relevant question was whether the outcome of the Nigerian setting-aside application remained pending, not whether the application itself remained pending in the narrow procedural form advanced by AIC. The Nigerian Court of Appeal’s decision was under appeal and the setting-aside proceedings had been remitted for rehearing. The outcome was therefore unresolved.
2. Applicable discretion. The discretion to adjourn was wide and unfettered. Relevant matters ordinarily included whether the foreign application was bona fide, whether it had a realistic prospect of success, the likely delay, prejudice caused by delay and the ease or difficulty of enforcement. The court should undertake a brief merits review and place the case on a sliding scale between manifestly invalid and manifestly valid awards. The factors were not exhaustive.
3. Application. FAAN’s challenge was bona fide, but the grounds relied on by the Nigerian first-instance judge were considered weak. The award therefore lay towards the manifestly valid end of the scale. Nevertheless, the award had previously been set aside on its merits by the Nigerian court, and the court considered it important to avoid conflicting judgments. An adjournment was accordingly appropriate.
4. Security. Delay was likely to be substantial and AIC would suffer prejudice from being kept out of a large award, notwithstanding the contractual interest rate. There was also a realistic possibility of enforcement against Nigerian airline debtors within the jurisdiction. The adjournment was therefore made conditional on security. A sum of US$24,062,000, representing 50 per cent of the principal award, was reasonable in the circumstances. The application for security of US$161,978,132 was refused.

Not stated in the judgment.