'V. The law applicable to the merits of the case

A. The law chosen by the parties

125. Both Art.187 (1) PILS and Art. 17(1) ICC Rules state that the Arbitral Tribunal shall decide the case according to the rules of law chosen by the parties.

126. In the instant case, the parties chose to subject the Agreement to Swiss substantive law (cf. Section 19.1):

This Agreement is solely governed by and construed in accordance with Swiss substantive law to the exclusion of the United Nations Convention on Contracts for the International Sale of Goods and the principles of international private law.

127. For the issues to be determined in this Award, Swiss law with the exception of the CISG shall thus be applied.

B. "Foreign" mandatory rules

128. It may be inferred from certain documents in the evidentiary record that Respondent appears to rely on the assumption that certain aspects or parts of the Agreement were subject to mandatory Nigerian law (in particular provisions pertaining to trade and import restrictions as well as contract registrations under and in connection with the NOTAP Act).

129. It is broadly accepted that an arbitral tribunal with its seat in Switzerland may not refuse to apply "foreign" mandatory rules (lois d'application immédiate, drittstaatliche Eingriffsnormen) simply by referring to a choice of law made by the parties.1 The principles from which an arbitral tribunal should seek guidance in such a case are a matter of dispute.2 Some authors argue that the arbitral tribunal should apply Art. 19 PILS by analogy.3 Others consider that "foreign" mandatory rules should be respected when the country, under the law of which they were established, has a legitimate and overriding interest that such rules be applied whatever the law applicable to the contract, provided that the dispute has a close connection to the law of that country.4 Another opinion advocates that "foreign mandatory rules shall always be applied if the case has the closest connection with them".5

130. Be this as it may, it is accepted that effect may be given to "foreign" mandatory rules with which the case has a close connection only if those rules are of such fundamental importance that they must also be observed by an arbitral tribunal with its seat in Switzerland. In this context, it is equally accepted that an arbitral tribunal does not need to apply "foreign" mandatory rules which merely serve to enforce national economic or political interests,6 however close the connection of the case to that country may be.

131. In the instant case, Respondent repeatedly referred to the provisions of the NOTAP Act. In the Expert Report which [the expert] has submitted on behalf of Claimant, the following descriptions of the purpose and function of the NOTAP Act can be found:

19. NOTAP was therefore established as one of the main instruments to carry out the national policy on technology development. Part of this policy stipulates the encouragement of the flow of technology into the country in order to strengthen industrial development and encourage domestic enterprises to acquire foreign technologies that are suitable to the local environment.

[…]

30. The NOTAP (and NOTAP Act) has specific functions spelt out in the NOTAP Act, namely:

• the encouragement of a more efficient process for the identification and selection of foreign technology;

• the development of the negotiation skills of Nigerians with a view to ensuring the acquirement of the best contractual terms and conditions by Nigerian parties entering into any contract or agreement for the transfer of foreign technology;

• the provision of a more efficient process for the adaptation of imported technology;

• the registration of all contracts or agreements having effect in Nigeria on the date of the coming into force of this Act, and of all contracts and agreements hereafter entered into, for the transfer of foreign technology to Nigerian parties.

[…]

52. From what was stated earlier (supra par. 19), the purpose of the NOTAP Act was primarily to ensure a more efficient process of regulating transfer of technology into Nigeria.

132. It appears from these descriptions that the NOTAP Act merely serves to implement and enforce Nigerian economic (and/or political) interests. In view of the considerations in para. 129-130 supra, the provisions of the NOTAP Act cannot therefore interfere with the law of the Agreement chosen by the parties (i.e. Swiss law) in the dispute pending before this Arbitral Tribunal. In other words, they do not represent "foreign" mandatory rules that call for immediate application whatever the law applicable to the contract.

133. But even assuming - arguendo - that the provisions of the NOTAP Act had to be considered by this Arbitral Tribunal, it appears that they would not have any impact on the outcome of the case. In this regard, the Arbitral Tribunal has found the Expert Report of [the expert] particularly helpful. In his Report, [the expert] opines the following which the Arbitral Tribunal finds apposite and adopts:

40. NOTAP Act provides that the only ostensible sanction for non-registration with NOTAP is that, without registration, Nigerian banks will not facilitate remitting foreign-currency payments for royalty or fees due to a licensor.

[…]

42. […] NOTAP's determinations have no legal consequence on the existence and validity of an agreement; more particularly, registration with NOTAP is merely to help the licensee with the transfer of foreign exchange and not to affect the performance/execution of a contract (…).

[…]

53. The penalty for non-registration as provided for under Section 7 is that the foreign entity would not be able to receive payment to its credit outside Nigeria by or through any of the statutorily recognized Government agencies. Certainly, non-registration does not render the contract void, the obligation and rights of the parties remain enforceable.

54. To stress this point, we refer to the case of Beecham Group Limited v. Esdee Food Products Nigeria Limited, which is an appellate court decision. One of the issues that came up for consideration was whether non-registration or a contract registrable under Section 4(d) of the National Office of lndustrial Property Decree No. 70 of 1979 (which is impari material with Section 4(d) of NOTAP Act) renders such contract invalid or unenforceable. The Court of Appeal in very unequivocal terms unanimously held that non-registration of a contract under the Law does not make the contract invalid or unenforceable. The penalty for non-registration of such contract is that foreign exchange will not be released in respect of such contract.

55. But there are other windows/means of transferring money abroad from Nigeria apart from using licensed banks in Nigeria. In Nigeria, there are licensed private forex operators (Bureau de change) engaged in the business of transfer of funds from Nigeria abroad.

[…]

87. Non-registration of a contract pursuant to NOTAP Act will not render the contract void, null, invalid and/or unenforceable.

88. Rather, it will merely frustrates the transfer of fees or payment due to be paid to the account of the alien outside Nigeria through the Federal Ministry of Finance, the Central Bank of Nigeria or any licensed bank in Nigeria. In other words, the foreign party will not have the benefit of being able to transfer funds through the Federal Ministry of Finance, the Central Bank of Nigeria or any licensed bank in Nigeria.

[…]

92. Going by the above decision [i.e. Beecham Group Limited v. Esdee Food Products Nigeria Limited, (1985) 3 NWLR (112)] and provision of the NOTAP Act [i.e. Section 7(1)], the existence or validity of an agreement as a result of the non-registration of the agreement with NOTAP cannot be questioned.

134. It thus follows that the provisions of the NOTAP Act, even if they had to be considered by this Arbitral Tribunal (which is not the case), would have no bearing on the instant dispute, in particular on the determination of the validity or breach of the Agreement, the termination of the Agreement, and the compensation for damages incurred in connection with the performance of the Agreement and its termination.

C. Conclusion

135. In view of the foregoing, the Arbitral Tribunal concludes that the merits of the case shall be exclusively decided in accordance with the law chosen by the parties, i.e. Swiss substantive law with the exception of the CISG.

136. In addition, the Arbitral Tribunal shall "take account of the provisions of the contract and the relevant trade usages" (see Art. 17(2) ICC Rules7).'

1
Hochstrasser, "Choice of Law and 'Foreign' Mandatory Rules in International Arbitration", Jnl. Int. Arb. 1994, 57-86, 83 and passim.

2
For a detailed overview see Karrer, in: Basler Kommentar: Internationales Privatrecht, edited by Honsell et al. 2nd ed. Basel 2007, Art. 187 PILS N 259-283.

3
Knoepfler, "L'article 19 LDIP est-il adapté à l'arbitrage international?" in: Etudes de droit international en l'honneur de Pierre Lalive, edited by Dominicé et al. Basel 1993, 531-541, 536-541; Kaufmann-Kohler and Rigozzi, Arbitrage international: droit et pratique à la lumière de la LDIP, 2ème ed. Berne 2010, N 661-663. In similar terms Wenger, Die Internationale Schiedsgerichtsbarkeit, BJM 1989, 337-358, 353-354.

4
Heini, in: Zürcher Kommentar zum IPRG: Kommentar zum Bundesgesetz über das Internationale Privatrecht (IPRG) vom 18. Dezember 1987, edited by Daniel Girsberger et al. 2nd ed. Zürich 2004, Art.187 PILS N 20-20a.

5
Karrer, op. cit., Art.187 PILS N 284.

6
Heini, op. cit., Art.187 PILS N 20. Also see Decision 4P.263/1989 of 17 April 1990 E. 3d: prohibition against brokerage agreements under the law of the Republic of Algeria.

7
Editor's note: The reference is to the 1998 ICC Rules of Arbitration.