Arbitration clause: Court strikes out suit by Aiteo’s surveillance contractors

Nathan Tamarapreye

A Bayelsa State High Court on Thursday struck out 12 suits on alleged breach of contract filed by surveillance contractors engaged at the Nembe Creek oilfields in Bayelsa by Aiteo Eastern Exploration Limited.

The surveillance contractors, who are members of the oil firm’s host communities at Opu-Nembe had dragged the Aiteo to Nembe High Court presided over by Justice L.M. Boufini for an alleged breach of conditions in the contract.

According to court records, the 12 suits were separately assigned suit numbers NHC/1/2020 to NHC/12/2020 in a serial order.

The claimants, Mr Nicholas Ebiye and Johnson Theophilus and 10 others filed the suit to seek legal redress over perceived injustice and malicious punishment meted out against the Opu-Nembe Surveillance Contractors by Aiteo.

In a ruling on the motion seeking to strike out the case for lack of jurisdiction due to an arbitration clause in the lapsed 2015 contract, Boufini agreed that arbitration should be the primary mechanism for resolving any dispute from the contract.

The judge held that the arbitration clause in the contract does not oust the jurisdiction of the court, noting that since both parties had agreed to adopt arbitration, he cannot entertain the case at the first instance until the arbitration option is exhausted.

“I have listened carefully to submissions by learnt counsels for both parties and what is before me is to determine whether the arbitration clause in the contract entered by both parties can oust the jurisdiction of this court to entertain this suit.

“To resolve this issue, let me start by stating what an Arbitration Clause means. It is a clear and express provision in a contract that defers any dispute first to arbitration before any litigation is commenced.

“It is a principle of law that parties cannot by contract oust the court, but any person can covenant that no right of action shall accrue till a third person has decided on any difference that may arise between himself and the other party to the covenant.

“The wording of this clause is key such that if the covenant is framed such that there will be no cause of action until after an arbitration, then the parties must arbitrate before seeking remedy in court.

“In the instant case article 12.1 of the contract states that any dispute arising from this contract that cannot be amicably resolved shall be referred to and finally be resolved by arbitration,” Boufinini said.

He said that in the circumstance arbitration is a condition precedent to any court action and subsequently struck out the case.

Aiteo, an indigenous firm, acquired the OML 29, from Shell Petroleum Development Company in 2015.

The divestment by Shell transferred its equity and interest in OML 29 and transferred its interest including the 97 kilometer Nembe Creek Trunk Line that transports crude Bonny Export terminal for 1.7 billion dollars to Aiteo.