Cross-border Lending: Court Upholds AFREXIM’s Right to Recover $25m Facility from Patnasonic

In a significant judgment for cross-border lending in Nigeria, the Court of Appeal in Lagos has affirmed the African Export-Import Bank's (AFREXIM) right to demand repayment of a $25 million facility from Patnasonic Industries Limited. The appellate court's decision overturns a Lagos State High Court ruling that had favored Patnasonic.

The dispute centered on a receivables-backed dollar facility granted in 2012, with Sterling Bank Plc acting as the local administrative agent. AFREXIM sought repayment in U.S. dollars, while Patnasonic Industries Limited and its Chairman, Chief Patrick Chidolue, argued for repayment in naira equivalent. The High Court had initially ruled in favor of Patnasonic, dismissing AFREXIM's preliminary objections.

However, the Court of Appeal resolved all six issues in AFREXIM's favor. It held that the parties were bound by their agreement conferring jurisdiction on English courts and that AFREXIM, as an international financial institution, possessed diplomatic immunity. Crucially, the court determined that Patnasonic's initial lawsuit was statute-barred. Furthermore, the appellate court confirmed that the loan remained a U.S. dollar obligation, repayable in dollars at the exchange rate applicable on the repayment date, and that AFREXIM's demand was a legitimate exercise of its contractual rights under English law, which the parties had chosen.

The Court of Appeal also addressed a related appeal by Sterling Bank, finding that action statute-barred and faulting the trial court's assessment of illegality. The overall decision validates the enforceability of the Facility Agreement and awards costs against Patnasonic and Chief Chidolue.