International trade and transactions including the supply of goods and services across international borders between parties residing or doing business in different countries often lead to commercial disputes. Due to increasing participation in international trade activities and transactions, it is not unusual for claims relating to breach of contract, failure to pay for goods or services supplied by international partners or creditors, etc. to be initiated against persons or corporate entities resident and doing business in Nigeria. It is therefore important for international creditors which may be suppliers of building and roofing materials, construction equipment, consulting and professional services, technological services, software and products, agricultural products, etc. intending to recover debts in Nigeria to understand the peculiarity of debt recovery proceedings in Nigerian courts to ensure legal claims are properly instituted.
Debt Recovery Considerations for International Creditors in Nigeria
For a successful debt recovery action to be initiated and concluded in Nigeria, international creditors must consider the following:
- Creditors must ensure that there are no binding agreements between them and the debtors that require the resolution of disputes between the parties through alternative dispute resolution (ADR) mechanisms such as arbitration. This is so because the agreements are binding on the parties and the Nigerian courts would usually issue an order to stay proceedings and direct the parties to resort to arbitration. However, in certain circumstances, the Nigerian courts have decided that debt recovery claims may not be subject to arbitration and parties must resort to the courts for the recovery of the debt sum. It is therefore important to carefully review the language of the agreements with expert debt recovery lawyers in Nigeria to determine the appropriate option (i.e. arbitration or court action) for recovering the debt in Nigeria.
- Debt recovery actions are subject to limitation period in Nigeria and must be instituted within the statutorily provided period of 6 years. Failure to institute the action within 6 years makes the action to become statute-barred, that is, the claim cannot be instituted before any court in Nigeria. It is therefore important for international creditors to be proactive in initiating debt recovery actions in Nigeria to ensure that their debt recovery claims do not become statute-barred.
- It is not unusual for the supply of goods and services to be made on credit to parties in Nigeria in which case the invoices, bills of lading, evidence of service delivery, correspondences between the parties, etc. must be provided by the creditor as evidence of the transaction between the parties in court. Courts rely on cogent and credible evidence to determine the debt recovery action instituted before it. Without vital evidence presented to the court, the debt recovery action may fail even before it begins. Therefore, creditors must gather all relevant documents and arrange for person(s) who have knowledge of the transactions to testify on its behalf.
Initiating Debt Recovery Actions in Court
Having considered that the debt recovery claim is not subject to a binding agreement for parties to resort to arbitration, the action is not statute-barred and that there is sufficient evidence to prove the debt to the satisfactory of the court, the next step would be to commence the process of initiating debt recovery action at the appropriate court for the recovery of the debt sum. The process of initiating debt recovery action would usually begin with the issuance of a letter of demand and which usually serves as a pre-action notice requiring the debtor to pay the debt sum within a stipulated period provided in the letter, failing which legal action for debt recovery would be commenced. In our experience, most of the debt recovery claims proceed to court as debtors would usually not comply with the letter of demand.
The debt recovery action could be commenced through summary judgment procedure, undefended list or through writ of summons depending on a number of factors including the possibility of no credible defense on the part of the debtor, local jurisdiction and the duration for concluding the action, etc. In the event that the creditor, upon assessment by an expert debt recovery lawyer, believes that the debtor does not have a good defense for not paying the debt, the summary judgement procedure (in jurisdictions such as Lagos) or the undefended list procedure (in jurisdictions such as Abuja) could be adopted for the recovery of the debt. The major advantage of both the summary judgement and undefended list is that they afford creditors the opportunity of having their debt recovery matters decided without going through the rigour of full trial and therefore, the debt recovery actions can be decided and judgement obtained quickly. However, where the debt recovery action could become very contentious requiring a full trial to be conducted, the debt recovery action would be commenced through writ of summons. Notwithstanding the option adopted for the debt recovery, the court would assess all the evidence presented before it and deliver its judgement.
Upon the delivery of the judgement of the court provided that it is in the creditor’s favour, the next step would be for the court’s judgement to be enforced against the judgement debtor. In some cases, the judgement debtor would abide by the judgement of the court by paying the judgement sum to the creditor without any further action being taken by the judgement creditor. However, were the judgement debtor does not satisfy the judgement of the creditor on its own volition, the court’s judgement being a judgement for a monetary sum would have to be enforced either by a writ of fieri facias, garnishee proceedings or judgement summons. In practice, the garnishee proceedings present the best enforcement option especially where the judgement debtor has monies in bank accounts which can be attached by the order of the court to satisfy the judgement sum.
Conclusion
International trade has led to increased cross-border transactions between persons or entities resident and/or doing business in Nigeria and a counterpart in another country. These transactions often lead to situations where monies are owed to the foreign counterpart by the Nigerian party necessitating the recovery of the debt through court action in Nigeria. It is important for international creditors to consider the dispute resolution mechanism stated in any agreement with the Nigerian counterpart, ensure that the debt recovery claim occurred within a period no more than 6 years and that it has credible evidence to support debt recovery action being initiated through summary judgement or undefended list procedure or the writ of summons depending on a number of factors.
Upon the creditor obtaining a favourable judgement, the court judgement would be enforced through either a writ of fieri facias, garnishee proceedings, or judgement summons where the judgement debtor does not pay the judgement sum to the judgement creditor out of its own volition. The cost of enforcing the court’s judgement by initiating enforcement action is a recoverable cost from the judgement debtor.
