Introduction
As Nigeria continues to attract foreign investment and expand its presence in the global economy, international business transactions have become increasingly common. However, engaging in cross-border business deals presents unique challenges and complexities that require careful attention to legal considerations. This article examines the key legal aspects of international business transactions, focusing on contracts, dispute resolution, and arbitration, from the Nigerian perspective.
Contracts for International Transactions
Contracts are the foundation of any business venture, and this is especially true in international transactions. In contracts with foreign parties, organizations and individuals must be aware of the potential issues that may arise, in order to prepare well drafted and enforceable agreements.
Some major legal considerations to be had in the preparation of an international business transaction agreement are:
Choice of Law
Choice of law to govern contracts is a crucial consideration in international transactions, wherein parties expressly state the governing law in the contract. This is done to avoid potential conflicts and uncertainties in case of disputes. Parties can agree to be governed by the law of any country of their choice.
However, in countries such as Nigeria, that apply Common Law principles, the courts have the discretion of whether or not to be bound by the jurisdiction/applicable law agreed on by the parties to the agreement by taking into consideration the Brandon test[1]. The Brandon test considers the following conditions:
- In what country is the evidence on the issues of fact situated, or more readily available, and what is the effect of that on the relative convenience and expense of trial as between the Nigerian and foreign Courts
- Whether the law of the foreign Court applies and, if so, whether it differs from Nigerian laws in any material Respect
- What country(ies) are parties connected to, and how closely?
- Whether the Parties genuinely desire trial in the foreign country, or are only seeking procedural advantages
- Whether the Claimants would be prejudiced by having to sue in the foreign Court because they would be deprived of security for that claim? Be unable to enforce any judgment obtained? Be faced with a time-bar not applicable in Nigeria? or for political, racial, religious or other reasons be unlikely to get a fair trial?
This test was applied in the Supreme Court case of Sonnar (Nig.) Ltd & Anor. V. Partenreedri M. S. Nordwind Owners of the Ship M. V. Nordwind & Anor.[2] where a matter that was statute barred in Germany was referred to a German court. The court held that the Plaintiffs’ claim would be defeated by referring a matter to a German court or having it governed by German law (as agreed by the parties) while the claim was already barred by German statute of limitations. The Court further declared that it was “capricious and unreasonable” to choose German law under the circumstances.
In circumstances where there is no express choice of law in the contract, the courts must determine the parties’ intentions while taking into account the entirety of the contract, the parties’ behavior, and the circumstances of the case[3].
Language
Clear and unambiguous language is essential in international contracts, especially when parties may have different native languages. It is advisable to have the contract written in multiple languages, with a provision stating which version will prevail in case of discrepancies. This is obviously necessary in transactions with multi lingual colourations.
Cross-Border Currency Issues
Beyond the fact of a common currency of trade, many international contracts involve multiple currencies, leading to exchange rate fluctuations and potential currency risks. Parties should address these concerns through clauses that specify the currency for payments and how exchange rate fluctuations will be handled.
Compliance with Local Laws
Foreign businesses operating in Nigeria must adhere to Nigerian laws and regulations. Contracts should consider relevant legal requirements, permits, licenses, and tax obligations, to ensure compliance with local rules. Some contracts are subject to restrictions, such as a contract to commit crime, sexual immorality or a contract contrary to the safety of the public, and such contracts will be termed invalid and void ab initio.
In agreements that affect public policies, the Court of Appeal held in the case of Beaumont Resources Ltd & Anor v. Dwc Drilling Ltd[4] that as a matter of public policy our Courts should not be too eager to divest themselves of jurisdiction conferred on them by the Constitution and by other laws simply because the parties in their private contracts chose a foreign forum and a foreign law.
DISPUTES AND ARBITRATION IN INTERNATIONAL BUSINESS TRANSACTIONS
Disputes are unavoidable in business dealings, and when they arise in an international context, resolution can become more complex. Understanding the avenues available for dispute resolution in Nigeria is essential for businesses engaged in cross-border transactions. The avenues for dispute resolution in international business transactions are:
Alternate Dispute Resolution
Initially, parties should attempt to resolve disputes amicably through negotiation and mediation. Mediation is a favored approach in international business as it promotes a win-win, allows parties to maintain control over the outcome, and preserve their business relationships. In spite of that, Arbitration has gained significant popularity as the preferred method of resolving international business disputes due to its efficiency, neutrality, and enforceability of awards under international treaties such as the New York Convention, to which Nigeria is a signatory.
To ensure that disputes are resolved through arbitration, it is important that parties include a well-detailed arbitration clause in their contracts. This clause should specify the seat of arbitration, the governing law of the arbitration, the number of arbitrators, and the language of the proceedings. Parties engaging in international business transactions should be aware that Nigerian courts generally enforce arbitration awards made in accordance with the New York Convention, providing parties with a more straightforward and predictable process for enforcing arbitral awards.
If negotiations and mediation prove unsuccessful, parties may resort to litigation in the court wth jurisdiction as agreed in their contract or otherwise. However, litigating international disputes can be time-consuming and expensive. Additionally, the court process might be unfamiliar to foreign businesses, making it essential to seek expert legal counsel. For international transactions, it therefore behoves the parties to use litigation strictly for disputes in which the conventional courts are the most appropriate mechanism for resolution of dispute.
CONCLUSION
Engaging in international business transactions requires meticulous attention to legal considerations, especially in a jurisdiction like Nigeria. Properly drafted contracts, awareness of dispute resolution options, and strategic use of arbitration can significantly mitigate risks and ensure successful cross-border business operations. Seeking professional legal advice from experts familiar with both Nigerian laws and international practices is crucial for businesses to navigate the complexities of international transactions in Nigeria.[1]
[1] The Eleftheria (1969) 2 All ER 641
[2] (1987) LLJR-SC
[3] Dr. F.V. Nanka-Bruce v The Commonwealth Trust (Gold Coast Colony) (1926) AC 77
[4] (2017) LPELR-42814(CA)
