A non-signatory to an arbitration agreement may be bound by an arbitral award arising from the proceedings

A non-signatory to an arbitration agreement may be bound by an arbitral award arising from the proceedings

(GARBA; ABUBAKAR; TSAMMANI; ABIRU; TUKUR: JJ.SC)

Afdin Ventures Limited and Dirbia Nigeria Limited (the 1st and 2nd Respondents) commenced an action before the Federal High Court, Abuja Division, for the refund of the sums of USD 13,300,910 and USD 30,030,040, from Emerging Markets Telecommunications Services Limited popularly known as 9 Mobile (the Appellant) amongst others, which they alleged were paid during the business transaction involving the parties. In the course of the proceedings, and pursuant to an arbitration clause contained in the governing agreements, the parties, with the concurrence of the Federal High Court, referred the matter to arbitration. A sole arbitrator was duly appointed, and arbitral proceedings ensued.

On 2 September 2021, the Arbitral Tribunal delivered a partial award on jurisdiction, wherein it affirmed its competence to entertain the dispute. Thereafter, the Tribunal proceeded to hear the substantive dispute and ultimately rendered a final arbitral award, in which it ordered the Appellant, along with some other Respondents, to refund the sums claimed by the 1st and 2nd Respondents, jointly and severally.

Dissatisfied with the outcome, the Appellant approached the Federal High Court, Lagos Division, seeking an order setting aside the arbitral award. Concurrently, the 1st and 2nd Respondents filed an application before the Federal High Court, Abuja Division, seeking recognition and enforcement of the award. The trial court struck out the Appellant’s processes and proceeded to grant the application of the 1st and 2nd Respondents, thereby recognising and enforcing the arbitral award.

Aggrieved by that decision, the Appellant appealed to the Court of Appeal, which, after consideration of the submissions of the parties, dismissed the appeal and affirmed the decision of the trial court. Still dissatisfied, the Appellant further appealed to the Supreme Court, challenging, in substance, the jurisdiction of the Arbitral Tribunal and the propriety of the recognition and enforcement of the arbitral award.

One of the issues for determination was: Whether the lower Court was right in affirming the decision of the trial Court recognising the Arbitral Award against the Appellant when the entire Arbitral proceedings was a nullity for want of jurisdiction.

Learned senior counsel for the Appellant argued that the award was said to be a nullity, and the trial Court equally lacked jurisdiction to recognise and enforce what was void ab initio because the arbitral proceedings, culminating in the award, were conducted without jurisdiction insofar as they purported to bind the Appellant, who was not a party to the arbitration agreement. Senior counsel submitted that the Appellant was not a signatory to either the Offer of Terms or the Custodial Agreement containing the arbitration clause and that although the Tribunal expressly found that the Appellant was not a signatory to the relevant agreements, it nevertheless assumed jurisdiction on the basis that the Appellant was inextricably intertwined with the transaction. He argued that the reasoning of the tribunal is legally untenable and contrary to the settled doctrine of privity of contract.

Senior counsel submitted that privity remains firmly entrenched, such that a third party who is not privy to a contract cannot ordinarily be bound by its arbitration clause. He further argued that the Private Placement Memorandum expressly excluded the Appellant from the offer and disclaimed any responsibility on its part. He finally argued that the tribunal exceeded its jurisdiction when it found that the Appellant, who neither executed nor benefitted from the contract is also liable and urged the court to hold so.

Responding to the arguments, learned senior counsel for the 1st and 2nd Respondent argued that, in the circumstances of this case, the Appellant, though a non-signatory, was so intimately connected with the transaction as to qualify as a necessary party bound by the arbitral proceedings. He submitted that modern arbitration jurisprudence recognises that non-signatories may be bound where their conduct demonstrates an assumption of obligations, receipt of benefits, or where the transaction forms part of a composite structure evincing a common intention.

Learned senior counsel submitted that the Appellant’s reliance on privity of contract amounts to an impermissible invitation to this Court to re-evaluate evidence and disturb factual findings conclusively settled by the Arbitral Tribunal. Counsel further argued that the Tribunal rightly applied recognised exceptions to the doctrine of privity of contract, including incorporation by reference, agency, alter ego, estoppel, and the “group of companies” doctrine. Learned senior counsel argued that under the law governing arbitration, the term “party” extends to “any person claiming through or under” a party to the arbitration agreement and submitted further that the sums awarded were not in the nature of damages but constituted monies had and received by the Appellant under circumstances warranting restitution. He argued that this equitable doctrine is not dependent on privity of contract.

For the 3rd and 4th Respondent, learned Counsel argued that the Appellant’s contention which is premised on its non-participation in the Offer Terms and Custodial Agreements containing the arbitration clause, rests on an unduly restrictive understanding of the doctrine of privity of contract. He submitted that while privity remains a foundational principle of the law of contract, it is not absolute and admits of well-established exceptions, particularly within the context of arbitration

In resolving the issue, the Supreme Court held that:

An arbitration agreement may bind persons who, though not signatories in the strict sense, derive benefits under, assume obligations arising from, or are otherwise intimately connected with the contract containing the arbitration clause. The Supreme Court explained that the reach of an arbitration agreement is not confined to the literal signatory but may extend to persons whose rights and obligations are derivative, assumed, or functionally inseparable from the contractual matrix. In this regard, arbitration law—both domestically and internationally—has evolved beyond rigid formalism, recognising that consent is not limited to the mere act of signature.