Foreign currency contract does not mean foreign exchange matter

The mere fact that a contract is in foreign currency does not make a dispute arising a foreign exchange matter.


U.B.A. Plc v. BTL Ind. Ltd. [2006] 19 NWLR (Pt. 1013) 61 at 104, paras. B-C, per Onu, JSC:

“As the claim has nothing to do with monetary or fiscal policy of the Federal Government of Nigeria in the pleadings and evidence before the court, the mere fact that the unit of account is foreign currency for which the respondent paid the Naira equivalent does not make it a foreign exchange matter.”

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Blogger’s Note:

The facts of the above case would enable us digest the above quoted statement of law by the Supreme Court.  The Respondent, a Nigerian company, was involved in the business of importation and distribution of building materials, industrial chemicals, and raw materials. The Respondent imports items on credit from its overseas suppliers and the items were usually sent with bills of exchange, or bills for collection or by letter of credit denoted in various foreign currencies. The Respondent maintained a current account with the Appellant. The role of the Appellant in relation to the Respondent’s transactions with its overseas suppliers was that, based on agreement and for the settlement of these bills, the Appellant appropriated the relevant sums by debiting the current account of the Respondent (with the Naira equivalent) and was expected to apply to the Central Bank of Nigeria (CBN) for approval and foreign exchange allocation for onward remittance of the foreign currencies to the Respondent’s overseas suppliers, being payment for the goods supplied. It however turned out that the Respondent cleared the goods supplied but the Appellant was unable to effect payment on behalf of the Respondent to its foreign suppliers/creditors. The reason was that although the Appellant duly transferred the money (Naira equivalent) it drew from the Respondent’s account to CBN to procure foreign exchange, the application was unsuccessful. Consequently, CBN returned the money to the Appellant.  However, the Appellant failed to disclose this fact and also failed to return the money to the Respondent but kept making empty and deceitful assurances to the Respondent that the money would be transmitted. The Respondent, upon discovering through a circular that CBN had returned the money to the Appellant, sued the Appellant principally for the refund of the money it paid to the Appellant for remittance to its overseas suppliers. The trial Court (Lagos High Court) delivered judgment in favour of the Respondent and same was affirmed by the Court of Appeal.

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The Appellant appealed to the Supreme Court. One of the issues canvassed at the Supreme Court was whether the trial Court had jurisdiction to try the suit. The Appellant’s arguments here were basically predicated on two grounds:  (1) that the Lagos High Court had no jurisdiction to entertain the suit since the case was about the procurement of foreign exchange for payment of goods imported into Nigeria by sea through the Appellant by letters of credit with banking facilities and that the documentary evidence showed the intricate link with CBN. Also, that the matter involves and concerns the revenue as well as the monetary and fiscal policy of the Federal Government, thus, the proper court was the Federal High Court by virtue of section 251(1)(d), 1999 Constitution; (2) that by section 1(i)(h) of the Admiralty Jurisdiction Act, the Federal High Court has jurisdiction over “any banking or letter of credit transaction involving the importation of goods to Nigeria in a ship. Whether the importation is carried out or not and notwithstanding that the transaction is between a bank and its customers.”

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The Supreme Court was unmoved by the Appellant’s arguments. The apex Court held that the Lagos High Court had jurisdiction to entertain the matter. The learned Justices of the Supreme Court unanimously reasoned (after considering a host of authorities on the point) that the case of the Respondent as contained in its Statement of Claim was clearly for a return of money unjustifiably withheld by the Appellant; and also an action founded on negligence and breach of contract. The apex Court rightly refused to be persuaded by the technical arguments that sought to bring the matter within the Admiralty Jurisdiction and exclusive jurisdiction of the Federal High Court. The Court clearly observed that the matter is simply a case between a customer and its bank and which by the proviso to section 251(1)(d) of the 1999 Constitution (as amended) is not within the exclusive jurisdiction of the Federal High Court. The Court was of the firm view that the fact that the Respondent contracted with its foreign suppliers in foreign currency and that the Appellant was to ensure remittance of the said foreign currency was immaterial.

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A careful reading of the provisions of section 1(i)(h) of the Admiralty Jurisdiction Act would reveal that the said provisions appear to run contrary to the Constitution. Therefore, it is submitted that the Supreme Court was right in its decision. The apex Court is also highly commended for being able to identify the narrow point which forms the crux of the case, i.e., return of money unjustifiably and unreasonably withheld by the Appellant.

Read the full Judgment.

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