Nigeria: Enforcement Of Arbitral Award In Nigeria – The Time Factor

Last Updated: 22 August 2018
Article by Ibifubara Berenibara

Introduction

A satisfactorily concluded dispute resolution mechanism, at least to an award creditor, is the successful enforcement of the decision of the arbitral tribunal. Where a judgment or arbitral award is made and the successful party cannot enforce the award, the creditor has only succeeded in obtaining a pyrrhic judgment or award and can only be tagged a "judgment creditor" or "award creditor" but without the much-needed value of the award or judgment.

Unfortunately, award debtors routinely employ every conceivable strategy and argument to circumvent the enforcement of the award against them. One strategy being an argument that the time within which to enforce the award or judgment has lapsed and the award unenforceable.

The issue of limitation of time for enforcement of arbitral awards has long plagued award creditors and there is indeed a need to critically evaluate the statutory provisions and judicial decisions to ascertain ways to avoid the unsavoury outcome of the statutes of limitation.

Time limit on recognition and enforcement of arbitral awards

There are two types of time limitation in enforcement proceedings in Nigeria - contractual time limitation and statutory time limitation.

Contractual time limits are usually those set by the parties in their arbitration agreement stating the time limit for commencing arbitral proceedings or enforcing arbitral awards (where a party does not voluntarily comply). Such contractual arrangements are however subject to statutory provisions on time limitations.

Statutory time limitation operates by virtue of statutory provisions limiting the time for the enforcement of arbitral awards. A number of statutes define the limitation period applicable to the enforcement of arbitral awards. These include –

  • Reciprocal Enforcement of Judgments Act, Chapter 175 Laws of the Federation of Nigeria 1958 (REJA) which provides that a judgment creditor is to apply to the High Court within twelve months after the date of the judgment, or such longer period as may be allowed by the High Court to have the judgment registered.1
  • The Foreign Judgments (Reciprocal Enforcement) Act2 (FJREA) applies to foreign arbitral awards which have to be registered in order to be enforceable. The limitation period under the FJREA for the registration is "six years" after the date of the judgment or where the judgment is appealed against, 6 years after the date of the last judgment on appeal.3 
  • The Limitation Law of Lagos State4 provides in section 8(1)(d) thereof, that an application for enforcement of arbitral awards must be filed within six years from the date the cause of action accrued so far as the arbitration agreement is not under seal or the arbitration is under an enactment other than the Arbitration and Conciliation Act.
  • Lagos State Arbitration Law provides in section 35(5) that, for the purpose of limitation, the time between the commencement of the arbitration and the date of the award are not to be reckoned, and thus, time freezes while the proceedings are pending.

When then does time begin to run for the purpose of enforcing an arbitral award? When does the award creditor lose his right to enforce an arbitral award in view of the various statutory provisions on limitation?

The Supreme Court in a reconvened full panel of seven justices5 in the leading judgment read by Ogundare JSC in City Engineering Nig. Ltd v. Federal Housing Authority6, began the judgment with the following words:

"The principal question that calls for determination in this appeal is: When does the statutory period of limitation start to run for the purpose of the enforcement of an arbitration award; is it at the date of the accrual of the original cause to action or is it at the date of the arbitral award?" 

In construing the six year period provided by the Limitation Law of Lagos State, the honourable Justice of the Supreme Court ended with:

"The statutory period of limitation of six years began to run from 12/12/807 and appellant's application to enforce the award was statute-barred when it was brought in 1988. The appellant has itself to blame for the catastrophe that has befallen it. Notwithstanding that there was some delay in the arbitration proceedings arising from various applications made by both sides, the arbitrator gave his award in November 1985,8 a date still within the statutory period of limitation. For unexplained reasons, the appellant waited another three years before applying to enforce the award in its favour, by which time limitation period had set in."

The decision of the Supreme Court in the City Engineering case appears not to be arbitration friendly and is a long distance away from the English position which commences the calculation of time from the date of the award.9 This is because delays occasioned as a result of lengthy arbitral proceedings and subsequent appeals against a refusal of the court to set aside an award may deny the successful party the ability to enforce the award. The appeal process in Nigeria, from the court of first instance to the Supreme Court, (except for some political, constitutional or designated fast track cases) takes an average of 8-12 years. Going by the unanimous decision of the full panel of the Supreme Court in the City Engineering case, what hope then is available to an award creditor who obtains a successful award after six years of the accrual of the cause of action?

Solutions to the 6-year time limit to enforce

The true position in the Limitation Laws

It appears that the decision in the City Engineering case refers to "arbitration" generally, and not necessarily arbitration under the Arbitration and Conciliation Act. This is so, going by the way the issue in the appeal was framed for determination by the Supreme Court.

In the course of the judgment, the court was however conscious of the conditions placed by section 8(1)(d) of the Limitation Law of Lagos State, which excludes arbitration agreements made under seal and arbitral agreement governed by the Arbitration and Conciliation Act.

To avoid the limitation scenario in the City Engineering case, parties are expected to meet any of the following conditions as provided under the Limitation Law of Lagos State:

  1. Ensure that their arbitration agreements are made under seal. When this is done, the six-year limitation period from the accrual of cause of action shall not apply.
  1. Agree that the law applicable to their arbitration is the Arbitration and Conciliation Act.

On (a) above, where the agreement is under seal, the applicable limitation period shall be twelve years from the date of the accrual of the cause of action by virtue of section 12(1)(b) of the Limitation Law. Under the FJREA, the limitation time for registration of foreign arbitral awards in Nigeria would have been six years after the publication of the award. However, due to the fact that the Minister of Justice has not made a proclamation extending Part 1 of the Act to relevant foreign countries, the time is limited to 12 months,10 just as is applicable to arbitral awards obtained in England, Northern Ireland or Scotland under the REJA.11

On (b) above, it is not clear what limitation period would apply to an arbitration governed by the Arbitration and Conciliation Act, as the Limitation Law of Lagos State is silent on this. However, it can be argued that "judgment" used in section 12(2) of the Limitation Law12 includes an arbitral award made under the Arbitration and Conciliation Act.13 In which case, the limitation period for arbitral awards made under the ACA are enforceable within 12 years from the date on which the award becomes enforceable.

Frozen time – Lagos State Arbitration Law

Noting that under section 8(1)(d) of the Limitation Law of Lagos State, arbitral awards made pursuant to "arbitration under other enactments other than the ACA" are susceptible to the 6 year period of limitation from the accrual of the action, the Lagos State Arbitration Law provides that the period between the commencement of the arbitration and the date of the award shall be excluded in computing the limitation period for enforcement of arbitral awards.14 The limitation period as stipulated in the Lagos State Arbitration Law is applicable to all arbitration within Lagos State except where the parties have agreed to be governed by another arbitration law.15

The fact that arbitration under the Lagos State Arbitration Law is not one that is under the Arbitration and Conciliation Act, does not make the Lagos State Arbitration Law to be in conflict with section 8 of the Limitation Law. This is because by section 4(a) of the Limitation Law, the limitation period in the Limitation Law will not apply to an action for which a period of limitation for enforcement is fixed by any other enactment. This means that where an arbitration is governed by any statute that stipulates the limitation period for enforcement of an award, the period of limitation in the Limitation Law will not apply.

Argument of frozen time

There is now a semblance of hope and a movement away from the stringent position taken by the Supreme Court in City Engineering v. FHA.

In Sifax Nigeria Limited v. Migfo Nig. Ltd,16 the Court of Appeal stated categorically that "computation of time during the pendency of an action shall remain frozen from the filing of the action until it is determined or abates." In effect, the period between the commencement of the arbitration and the date of the award shall be excluded in determining the 6 year limitation period under section 8(1)(d) of the Limitation Law.

Though the decision of the Court of Appeal was appealed to the Supreme Court, the apex court17 on 16 February 2018, aligned itself with the decision of the Court of Appeal and is indeed in tune with the reason proffered by Oseji JCA of the Court of Appeal who said:

"...contention that time should not run during the pendency of an action in court for the purpose of Limitation Law would, in my modest opinion, unwittingly permit the Legislature, to take over control of the time-table of litigation indirectly or by subtle means, to wrongly/technically dictate the pace cases are heard in court under the cloak of limitation enactment. This will create the alarming scenario in which pending cases caught by the effluxion of time and objection to their determination on the merit on account of lapse of time so upheld would meet undeserved grief. Or it may create the dangerous repercussion of stampeding the court to operate on full throttle to grapple with time in the course of which justice may be sacrificed on the altar of neck-breaking speed or indecent haste which will drain the adjudication of the dispute of the patience, fairness, diligence, or balanced/even handed justice which it is wont to have, which will be a sad day for the administration of justice."

 

The decision in Sifax v. Migfo subtly gives credence to Section 35(5) of the Lagos State Arbitration Law. It means inevitably, that had the decision in Sifax Nigeria Limited v. Migfo been in existence and had the Supreme Court sanctioned it before determining the appeal in City Engineering v. FHA, the court might have held that the appellant was within time to enforce the arbitral award.18 This is particularly so, as the cause of action arose in 1980, the same year the action was instituted. Time would have been frozen between 1980 and 1985 when the arbitration was concluded, and time would only have been reactivated after 1985.

With the decision of the Supreme Court in Sifax v. Migfo, it appears that the decision of the apex court in City Engineering v. FHA may cease to be the law. However, it is anticipated that when an issue of limitation of action for the enforcement of arbitral award comes before the Supreme Court, it will seize the opportunity to make formal pronouncement to deviate from its earlier decision in the City Engineering case.

Instituting a preservative action

Where the arbitration is not under seal, not under the Arbitration and Conciliation Act, not under the Lagos State Arbitration Law, and there is no assurance that the Sifax v. Migfo scenario can come in aid in arbitration (in the absence of a formal deviation by the Supreme Court from its decision in City Engineering decision), the claimant may file an action in court in defiance of the arbitration agreement. The claimant may then seek an order to stay proceedings pending arbitration, thus preserving his right of action.

There is a possibility that this strategy may be opposed on the grounds that it is an abuse of process, particularly where the defendant does not request for the stay of proceedings pending arbitration. However, the Arbitration and Conciliation Act does not stipulate that the party who may apply for stay of proceedings pending arbitration must be the defendant. It rather states in section 5 that "any party to the arbitration agreement may...apply to the court to stay the proceedings"19

Commencing enforcement within 12 months after award

Where a foreign arbitral award is not under seal, the award may be registered as a domestic judgment under the Foreign Judgment (Reciprocal Enforcement) Act (FJREA) 1990 or the Reciprocal Enforcement Of Judgments Ordinance, Cap 175 Laws Of The Federation Of Nigeria And Lagos, 1958 (REJA) within 12 months after the publication of the award. Judgments from commonwealth countries are enforceable in Nigeria pursuant to the provisions of REJA. There is no need for reciprocal agreement between Nigeria and the commonwealth country where the award sought to be enforced comes from.20

For non-commonwealth countries, the FJREA will apply, as the FJREA was enacted to "make provision for the enforcement in Nigeria of judgments given in foreign countries which accord reciprocal treatment to judgment(s) given in Nigeria, for facilitating the enforcement in foreign countries of judgments given in Nigeria..." The period for registration of final, conclusive and enforceable award21 is also twelve months as in REJA.22

Applying for recognition first in another jurisdiction

The focus of the various enabling laws on enforcement of foreign awards or judgments are the awards or judgments of a foreign court or foreign arbitral tribunal. It is therefore arguable that where a judgment creditor perceives that the limitation period for registration of the award has lapsed in Nigeria, he could take the award for recognition in another jurisdiction where the action is not statute barred (e.g. England) and obtain the judgment of that court. He could then apply to a Nigerian court with the judgment from the foreign court for registration in Nigeria. It is unlikely that this approach will not be met with stiff opposition that will require a definite position of the court on whether an award can be subjected to recognition in more than one jurisdiction. It could also raise the question of the nebulous public policy.

Once a foreign arbitral award is recognized and enforced by the court, the award is treated as a judgment of the registering court and enforced in a similar manner. Arguably, the limitation period for the enforcement of the judgment now recognised for enforcement is twelve years from the day the judgment of the registering court becomes enforceable.23

Conclusion

Enforcement of arbitral award can sometimes be like a nightmare to award creditors. Hopefully, employing any of the strategies proposed above in the right context will serve as succour to award creditors; and award debtors will not have the confidence of stultifying hearing or delaying proceedings with the belief that time will be a grave factor from date of accrual of action.

It is also hoped that where it becomes clear that time is no longer a grave factor, award creditors will look toward settling the award, particularly where interest accrues continually with the attendant delayed post-award proceedings.

Footnotes

LLM; MCIArb; ACTI; Senior Associate at AELEX

1 Section 3 of REJA. This is applicable to judgment and arbitral awards obtained from England, Ireland or Scotland

2 February 1961

3 Section 4 of the FJREA. This is what the statutes says. But what the court says about this provision shall be considered below.

4 Similar to Section 7(1)(d) of the Limitation Act, Cap 522, L.F.N. (Abuja) 1990

5 The Supreme Court of five Justices had earlier heard the appeal. But when it realised that it had given two conflicting decisions on limitation, it abolished the hearing and reconvened with seven Justices to unify its decision. In Murmansk State Steamship Line v. Kano Oil Millers (1874) 12 SC 1; (1974) NSCC590, the Supreme Court  had held that the statutory period of limitation should run from the date of the breach of the charter party in 1964, when the cause of arose and not from the date when the award was made in 1966. Also in Obembe v. Wemabod Estates Ltd (1977) 5 SC 115. But in Kano State Urban Development board v. Fanz Construction Co Ltd (1990) 4 NWLR (Pt. 142)1, the Supreme Court held that an award by an arbitrator constitutes an independent cause of action.  

6 (1997) 9 NWLR (Part 520) 224

7 That is when the cause of action accrued.

8 Arbitration proceedings began in 1980, the same year the cause of action accrued and concluded with its award in 1985.

9 In Turner v Midland Rly Co (1911)1KB 832 it was held that the six year period of time limitation for enforcement of the arbitral award commences from the date of the award and not when the claim arose because the award itself gives rise to another cause of action. Same also in Agromet Moto import Ltd v.  Maulden Engineering  Co (Beds ) Ltd (1985)2 All ER 436.

10   Marine and General Assurance v. Overseas Union & 7 Ors. (2006) 4 NWLR (Pt. 971) 641, where the Supreme Court said "However, section 3(1) of this Act had subjected the coming into force of the provisions of Part 1 of the Act which contains section 4(1) of the Act extending the period of registration to six years, to an Order to be made by the Minister of Justice directing the extension of Part 1 of the Act to relevant foreign countries. Section 9 of the new 1990 Act had also unequivocally preserved the effect of the 1958 Reciprocal Enforcement of Judgments Ordinance pending the promulgation of the Order envisaged under section 3(1) of the 1990 Act by the Minister of Justice."

11 Macaulay v. R.Z.B. of Austria (2003) 18 NWLR (Pt.852) 282 at 297-298; Marine and General Assurance v. Overseas Union & 7 Ors. (supra)

12 Similar to section 11(2) of the Limitation Act of Abuja

13 This argument could be deduced from the judgment of the Supreme Court in the City Engineering v. FHA case, particularly with reference to section 8(1)(d) of the Limitation Law on pages 234-235 of the report. Ogundare JSC may have mixed up the intent of section 8(1)(d) when he said on page 235 "it is generally accepted for the purpose of these proceedings that the arbitration agreement of 17/12/74 was not under seal nor was it under any enactment other than the Arbitration Law." The underlined would have read "and was under an enactment other than the Arbitration Law."

14 Section 35 (5) of the Lagos State Arbitration Law, 2009.

15 ibid. section 2

16 (2015) LPELR 24655 (CA)

17  Sifax v. Migfo SC.471/2005

18 This is assuming that the arbitrator had the requisite jurisdiction to entertain the action beyond the 3 month agreed period for the arbitration.

19 Article 8(1) UNCITRAL Model Law of International Arbitration provides that "...if a party so requests..."

20 Marine and General Assurance v. Overseas Union & 7 Ors. (supra)

21  Section 2 of FJREA defines "judgments" to include awards in arbitration and authorizes Nigerian courts (with jurisdiction to hear the dispute) the power to register and enforce foreign judgments of countries which accord reciprocal treatment to Nigerian judgements.

22 Ibid.

23 Section 12(2) of the Limitation Law of Lagos State

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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