Trendtex Trading v Bank of Nigeria

Trendtex Trading v Bank of Nigeria [1977] 1 QB 529

FINANCE – SOVEREIGN IMMUNITY – STATE OWNED BANK – ORDINARY COMMERCIAL TRANSACTIONS

Facts

The Central Bank of issued an irrevocable letter of credit to pay for quantities of cement ordered by the Nigerian Ministry of Defence. The credit was, properly, transferred to the plaintiffs who shipped the cement to Nigeria. Because of complications at port caused by substantial over-ordering of cement, the plaintiffs' vessels were delayed prior to discharge; the Bank refused to make payments under the letter of credit upon the plaintiffs applying for the same in respect of demurrage. Upon the plaintiffs issuing proceedings for breach and repudiation of the letter of credit, the Bank contended successfully before Donaldson J. that it was entitled to sovereign immunity.

Issue

The Court of Appeal were required to consider whether the Bank enjoyed governmental status, as an arm of the government of Nigeria, and if so whether the fact that the transactions in question were of an ordinary commercial nature precluded the Bank from pleading sovereign immunity from the suit of the plaintiffs.

Held

The Court of Appeal, in allowing the plaintiffs' appeal, held that the Bank was not entitled to governmental status, as it could not be described as an “alter ego” of the state; Moreover, and in line with contemporary trends in international law, sovereign immunity should not extend to commercial transactions, and in that context no distinction could be drawn between commercial and “governmental” transactions until the law was altered by act of Parliament or by decision of the House of Lords.