THE POWER OF A NIGERIAN COURT TO SET ASIDE A FOREIGN ARBITRAL AWARD: AN ANALYSIS OF THE CASE OF LIMAK V. SAHELIAN ENERGY

Contributor: Chibueze James

Introduction

International arbitration has been a platform that provides parties with an efficient and neutral means of resolving disputes across various jurisdictions. The finality and binding nature of arbitral awards, especially those issued by international arbitration panels or foreign-seated tribunals, is typically upheld under the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (the New York Convention) and the United Nations Commission on International Trade Law on International Commercial Arbitration 1966 (UNCITRAL Model Law).^[1] As a general rule, only the courts at the seat of arbitration may annul such awards. Nigerian courts have traditionally followed this principle, thereby promoting this principle and reinforcing the reputation of the country as a welcoming venue for international arbitration.

However, the court deviated from this approach in the recent case of Limak Yatirim Enerji Uretim Isletme Hizmetleri ve Insaat A. S. & ORS v. Sahelian Energy & Integrated Services Ltd (Limak v. Sahelian Energy).^[2] In that case, the Court of Appeal upheld a decision that has raised serious legal concerns among scholars. The judgment raised profound questions about the scope of judicial power in matters of international arbitration in Nigeria, as it marked a departure from established norms by authorizing domestic courts to set aside foreign-seated awards based solely on local policy considerations.

Thus, this work examines the implications of the Limak case and evaluates whether Nigerian courts should indeed exercise the power to set aside foreign arbitral awards when enforcement occurs within Nigeria. By analyzing this case and its relation with the Arbitration and Conciliation Act 2004, and the Arbitration and Mediation Act 2023, this work seeks to clarify whether the decision aligns with international arbitration norms or signals a reassertion of domestic constitutional interests over the autonomy of arbitration.

Overview of Relevant Provisions on the Recognition and Enforcement of Arbitral Awards

The NYC 1958 was adopted by the United Nations diplomatic conference in June 10, 1958, and entered into force on June 7, 1959.^[3] It requires courts of contracting states to give effect to private agreements to arbitrate and to recognize and enforce arbitration awards made in other contracting states.

This Convention applies when an arbitral award is issued in one state, and enforcement or recognition is being sought in another, in other words, when the award originates outside the enforcing state.^[4] It covers disputes between both natural persons and legal entities. The Convention also explicitly includes awards that are not domestic in nature in the country where enforcement is sought, thereby ensuring these ‘foreign’ awards are subject to the provisions of the Convention.^[5]

The provision provides for grounds upon which the recognition of an arbitral award may be refused by a court in the state where the foreign award is sought to be enforced. One of the provisions, which is particular to this article, is to the effect that such recognition or enforcement may be refused on grounds that ‘the award has not yet become binding on the parties or has been set aside or suspended by a competent authority of the country in which, or under the law of which, that award was made.’^[6]

In furtherance, the UNCITRAL Model Law 1966 establishes that any award, regardless of the country in which it was issued, must be recognized as binding and can be enforced by the competent court, subject to the grounds listed in Article 36.^[7] The UNCITRAL Model Law also made a similar provision to the NYC 1958,^[8] the drafters of the former having drawn inspiration from the provisions of the latter.^[9]

In the Nigerian context, a similar provision of the above conventions was made in the now-repealed Arbitration and Conciliation Act 2004,^[10] and in the extant Arbitration and Mediation Act 2023.^[11] These provisions embody Nigeria’s implementation of the principles enshrined in the New York Convention and UNCITRAL Model Law. It emphasizes that only the court at the seat of arbitration (or, more precisely, the jurisdiction under whose law the award was made) can annul or suspend an award.

Flowing from the discussions above, the purport of this is that the courts in Nigeria are only vested with the jurisdiction to recognize or refuse the recognition of a foreign award, and have no jurisdiction to annul such award, as annulment can only be made by a competent court in the seat of arbitration, or the jurisdiction under whose law the award was made.

Background of the Proceedings in the Limak Case^[12]

Sahelian Energy & Integrated Services Ltd, a Nigerian company, sought a foreign technical partner with an electricity distribution licence in order to participate in the Federal Government of Nigeria’s privatisation process for Kaduna Electricity Distribution Company (Kaduna DISCO). Consequently, it entered into a Cooperation Framework Agreement (CFA) with Limak, a Turkish company. Under the CFA, Sahelian Energy undertook to pay Limak USD 17.5 million over five years in annual instalments of USD 3.5 million.

Limak attempted to register the CFA with the National Office for Technology Acquisition and Promotion (NOTAP), but the application was refused on the grounds that the agreement contravened the NOTAP Act and its Regulations. Despite this, Sahelian Energy emerged as the core investor in Kaduna DISCO in December 2014. In February 2015, Limak demanded payment of the first annual instalment, which Sahelian Energy rejected on the basis that the CFA was unenforceable under Nigerian law for lack of registration with NOTAP.

Where settlement attempts proved unsuccessful, Limak commenced arbitration^[13] under the ICC Rules, seeking a declaration of the CFA’s validity and an order for payment. On 28 June 2018, the arbitral tribunal delivered its award in favour of Limak, upholding the CFA and Sahelian Energy’s payment obligations.

Following the arbitral award in favour of Limak, the company applied to the High Court of the Federal Capital Territory for its recognition and enforcement, and conversely, Sahelian Energy filed an application before the same court seeking to set aside the award on the grounds that it was contrary to Nigerian public policy and contained errors on its face, thus, leading to two consolidated suits.^[14] The High Court, presided over by Justice Halilu, delivered a consolidated ruling on 17 July 2020, granting Sahelian’s application by setting aside the award and consequently dismissing Limak’s enforcement request. Dissatisfied with this decision, Limak appealed to the Court of Appeal, Abuja, seeking a reversal of the High Court’s ruling, but the Court of Appeal upheld the decision of the lower court.

Analysis of the Decision Vis-à-vis the Laws on the Recognition and Enforcement of Arbitral Awards

In view of the foregoing, it is correct to state that the High Court of the Federal Capital Territory and the Court of Appeal were right in refusing to recognize the arbitral award delivered in the Limak’s case on ground that it was contrary to public policy. However, the pertinent question that arises is: in light of the foregoing Conventions and domestic laws on the enforcement and recognition of arbitral awards, do Nigerian courts have the power to annul an award rendered by a foreign-seated tribunal (in Switzerland as in this case)?

Where a court refuses to recognize an award, the effect is that such an award remains binding and can be enforced in any other contracting state of the NYC. However, where such an award is set aside or annulled, it ceases to be binding and therefore incapable of recognition or enforcement anywhere else. It is against this backdrop that the power to set aside an award is not exercised lightly, as it is a prerogative reserved exclusively for the national courts of the country where the award was rendered or under whose laws it was made.

Thus, the decision of the Court of Appeal in the Limak’s case appears to be erroneous, because it is unusual that Sahelian Energy approached the FCT High Court in Nigeria seeking to set aside an award issued by an arbitral tribunal seated in Geneva, Switzerland, and both the FCT High Court and the Court of Appeal granted the application. It appears the courts failed to properly distinguish the two concepts: refusing to enforce or recognize an award, and setting aside an award. While the former is governed by the law of the place where recognition and enforcement are sought, that is, any of the 172 Contracting States to the New York Convention. The latter is governed by the law of the seat of the arbitration or the law of the country under whose law the award was made.^[15]

Accordingly, Nigerian courts lack the jurisdiction to annul an arbitral award rendered in a foreign seat. The authority to set aside such an award rests exclusively with the courts of the seat of arbitration or the jurisdiction under whose law the award was made.

Implications of the Decision in Limak’s Case

1. This decision introduces a complex layer of legal uncertainty by opening the door to conflicting rulings among Nigerian courts, and between the courts in Nigeria and the courts of the arbitral seat.^[16] It revives the debate between the seat theory and delocalization in arbitration practice, and appears to tilt more in favour of the delocalization theory. This indicates that Nigerian courts may assert authority over foreign-seated arbitrations. This also challenges the traditional seat theory, which reserves exclusive supervisory control to the courts of the seat of arbitration.
2. The ruling may prompt a reassessment of the relationship between the seat of arbitration and the jurisdiction of enforcement, potentially reshaping how parties strategize when selecting arbitration seats and drafting agreements.^[17] In light of this, parties may begin to give equal importance to the legal frameworks and judicial outlook of enforcement jurisdictions alongside those of the chosen seat. Such a shift could result in a more intricate, yet more sophisticated and globally informed, approach to international arbitration.

Conclusion
The Limak v. Sahelian Energy decision marks a troubling deviation from internationally recognized arbitration norms, thereby undermining the principle that only the courts of the seat of arbitration or the jurisdiction under whose law the award was made have authority to annul an award. By setting aside a foreign-seated award, the Nigerian courts exceeded their jurisdiction and risked creating legal uncertainty. This has a strong tendencyto deter investor confidence. The proper course of action should have been to refuse recognition of the award (if contrary to public policy), rather than annulling it. This approach would align with the New York Convention, and uphold Nigeria’s stance on arbitration.

Reference

1. Ogalagu, H, and Ezekwem, N, ‘Enforcement of Foreign Arbitral Awards Annulled at the Seat’, < https://www.mondaq.com/nigeria/arbitration-dispute-resolution/1593032/enforcement-of-foreign-arbitral-awards-annulled-at-the-seat> 18^th August, 2025. ↑
2. CA/A/CV/795/2020, CA/A/CV/796/2020. ↑
3. Wikipedia, ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards’, <https://en.wikipedia.org/wiki/Convention_on_the_Recognition_and_Enforcement_of_Foreign_Arbitral_Awards> accessed 18^th August, 2025. ↑
4. NYC, art I. ↑
5. Ibid. ↑
6. Ibid, art V(1)(e). ↑
7. UNCITRAL Model Law, art 35. ↑
8. Ibid, art 36(1)(a)(v). ↑
9. Aceris Law LLC, ‘Annulment of Arbitral Awards Under the UNCITRAL Model Law’, <https://www.acerislaw.com/annulment-of-arbitral-awards-under-the-uncitral-model-law/> accessed 18^th August, 2025. ↑
10. ACA 2004, s 52(2)(viii). ↑
11. AMA 2023, s 58(2)(viii). ↑
12. Supra. ↑
13. Case No. 21617/ZF/AYZ. ↑
14. Suit No: CV/481/18 and CV/2443/18. ↑
15. Blackaby, N and Partasides, C, with Redfern, A and Hunter, M, Redfern and Hunter on International Arbitration, 6th edn (Oxford: Oxford University Press, 2015) p.570 ↑
16. BBaC, ‘How Limak v Sahelian Reshapes Nigeria’s Arbitration Terrain’, <https://broderickbozimo.com/limak-v-sahelian-nigeria-arbitration/> accessed 18^th August, 2025. ↑
17. Ibid. ↑