It is apt to say that of the mechanisms open to parties seeking to resolve their commercial disputes swiftly and efficiently, arbitration is perhaps the most effective. It continues to form a major part of every commercial agreement used especially in developing economies (and developed ones too), offering an increasing promise that those countries yet to embrace the resolution model, are no more than one missed investment opportunity away from doing so.
In the context of Nigeria, grouped among the world's Emerging Markets, the arbitration option has long been embraced, offering an exciting and viable alternative to the litigation/courtroom battles that have hitherto dominated its landscape. From the adoption by the Federal Government in 1988 of the United Nations Commission on International Trade Law [UNCITRAL] Model Law (which formed the basis of the country's Arbitration Law1), this dispute resolution process has without doubt now successfully secured its foundations2. Government policy objectives at the time of enacting the law being to increase foreign investment in key sectors of the economy, especially as regards infrastructure development, it was imperative to inspire investor confidence that it was a viable destination for investment capital and, furthermore, that Nigeria was committed to a resolution of disputes using internationally accepted methods of doing so. Arbitration was that model. And although strictly speaking its principles were not altogether new to the country3, its formalization was the Arbitration and Conciliation Act Cap. A.18, LFN 2004. Investment has thrived as a result, and with development continuing apace.
The above said however, the country's more recent experience is suggestive of an arbitral process is under threat, facing challenges from a number of directions; not only in relation to the concerns being expressed by would-be investors as to the efficacy of the country's legal and regulatory regime(especially as regards contract enforceability),but more particularly, there are questions as to whether the courts, which ordinarily retain supervisory functions over Tribunals, are able to manage the delicate line between supporting arbitral references and what might be described as outright intervention in them.
It is with the foregoing in mind that I want to look at the state of affairs within Nigeria i.e., using its arbitral processes to resolve disputes; there are concerns and my fervent hope is that Nigeria will come to attain a position where investors regain the confidence levels that saw the investment boosts of much of the last few decades, that it becomes a country identified as an acceptable destination for their capital, and where they retain an assurance that their contracts will be regulated in line with the terms that bind them (to their counterparts).
I thank the International Chamber of Commerce (ICC) as well as the Firm of Clyde &Co for putting this conference Arbitration in Emerging Markets: Current Challenges together; in my view it could not have come at a more auspicious time. The world economic order is shifting and investment opportunities are opening up all the time. Emerging Market Economies (EMEs), including Nigeria must position themselves to take full advantage.
In delivering a paper on what I consider to be the challenges of arbitration in Nigeria, I consider it apt to highlight some key features of the Arbitration and Conciliation Act4 as well as milestones achieved in promoting the process and then the challenges proper.
2. MAJOR HIGHLIGHTS OF THE ARBITRATION ACT.
a.) The Arbitration Clause: The Arbitration and Conciliation Act ("ACA") mandates that all arbitration agreements must be in writing and signed by the parties, in an exchange of letters or point of claim or defence. In Nigeria, arbitration clauses are irrevocable except by the leave of court or mutual agreement of parties. Even where parties had no prior agreement, with a submission agreement, parties may still submit to arbitration;
b.) Subject-matter Arbitrability: The "ACA" does not stipulate any particular subject matter that may not be referred to arbitration. The question of whether or not a dispute is arbitrable has therefore been left at the discretion of the Courts. In Arab Republic v. Ogunwale(2002) 9 NWLR (Part 771) 127,the Court of Appeal held that the test for determining whether a dispute is arbitrable or not is that the dispute or difference must necessarily arise from the clause contained in the agreement. However not all disputes are necessarily arbitrable
c.) Binding Nature: The "ACA5" provides that every arbitration award in Nigeria shall be binding on the parties. This is to preclude a recalcitrant party from preventing a successful party from enjoying the fruits of his judgment.
d.) Number of Arbitrators: In Nigeria, the number of arbitrators is either one or three. The parties to an arbitration agreement may determine their preferred numbers of arbitrators to be appointed under the agreement, but where no such determination is made, the number of arbitrators shall be deemed to be three.
e.) Challenge of an arbitrator: Parties may determine the procedure to be followed in challenging an arbitrator. Where no such procedure is determined a party who intends to challenge an arbitrator shall, within fifteen days of becoming aware of the constitution of the arbitral Tribunal or becoming aware of any of the grounds, send to the arbitral Tribunal a written statement of the reasons for the challenge.
f.) Preservative Orders: The provisions of the ACA6cloths the members of a Tribunal with the requisite powers to grant preservative orders during an arbitration reference. These orders however do not include granting injunctions etc. The Act provides that in such circumstance, the Tribunal can remit that portion of the reference to a proper court for the grant of such injunctive relief.
g.) Language to be used in Arbitral proceedings: In Nigeria, the parties may, by agreement determine the language or languages to be used in the arbitral proceedings. But where they do not do so, the arbitral Tribunal shall determine the language to be used bearing in mind the relevant circumstances of the case.
h.) Legal Representation: In Nigeria, the parties to an arbitral proceeding may appear for themselves or be represented or assisted by a legal practitioner of their choice7.
i.) The Award: In Nigeria, an Award may be interim, interlocutory, or final. Any award made in Nigeria must adhere to the following:
- It must be in writing;
- It must be signed by all the arbitrators (if they are more than one);
- It must be delivered with a reason (except where parties agree otherwise);
- The place where the Award was made must be stated on the award.
j.) The enforcement of an Award: In Nigeria, an arbitral award shall, irrespective of the country in which it is made, be recognised as binding on the parties. This is made possible by the Foreign Judgments (Reciprocal Enforcements) Act, Cap 152, Laws of the Federation of Nigeria 2004, which makes foreign arbitral awards registerable in Nigerian Courts if at the date of registration it could be enforced by execution in Nigeria.
With the above legislative framework for arbitration in Nigeria and to do justice to the theme of this conference, it is apposite to examine the veracity of the processes and the role of the courts and generally the overarching question as to the challenges facing arbitration in the Nigerian jurisdiction.
3. CHALLENGES OF THE NIGERIAN ARBITRAL LANDSCAPE
Nigeria is a signatory to certain International Conventions and Treaties. One such Convention is the New York Convention (on the Recognition and Enforcement of Foreign Arbitral Awards (1958))a pivotal aim of which is the promotion of international commercial arbitration.
While arbitration still remains the preferred dispute resolution mechanism for those wanting to invest in Nigeria, s recent years has seen something of an erosion of its tenets. This may be as a result of inadequate training of both lawyers and judges (who act as arbitrators and counsel).When appearing as Counsel, some lawyers tend to forget that the overriding objective of the reference is a swift and efficient resolution of differences so that parties may continue with their respective transactions. An aspect of these concerns were indeed expressed by one of the experts called before the English courts in the case of IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation (2005))8, that the"...mill of justice can grind very slowly in Nigeria. In particular, Nigeria is not yet geared towards arbitration in the manner which meets the international standards it agreed to when adopting the New York Convention".
While the enthusiasm to invest tin Nigeria may have been blighted by recent events9 etc., I must say that this notwithstanding, Nigeria continues to encourage alternative dispute resolution (ADR) mechanisms, especially arbitration10. It is with this in mind that this paper will now examine some of the challenges faced in the use of arbitration as a dispute resolution model in Nigeria:
i.) The sanctity of arbitration agreements; the sine qua non to all successful dispute resolution processes the world over. In other words, every investor or a commercial player must ensure ( or perhaps wants to ensure) that in the event of a dispute in the course of the commercial transaction, such dispute will not only be fairly dealt with, but the provisions of the arbitration agreement shall be faithfully carried out by the respective parties.
In Nigeria this expectation has been given effect to by Section 2 of the Arbitration and Conciliation Act Cap. A18which provides: that unless a contrary intention is expressed by the parties, an arbitration agreement shall be irrevocable. Thus, in simple parlance, a party cannot unilaterally revoke an arbitration agreement.
An emerging economy such as Nigeria must ensure that to attract investment to attain the desired level of infrastructural development, an effective dispute resolution framework must be put in place such that investors will be sufficiently comfortable to invest in the country with the knowledge that in the event of a dispute, these will be 'fairly' resolved according to their agreements.
To achieve this, the courts have a major role to play to ensure that parties who have committed to certain obligation under the contract (and indeed the arbitration clause) do not turn around and use the machinery of the courts to the annoyance of the other party. This unfortunately however is something I find quite common in Nigeria.
In other words, notwithstanding express agreements to resolve disputes by arbitration, some parties will approach the court for all sorts of 'preservative orders'. The ACA 11 has also been widely abused by recalcitrant parties. The provisions available under section 4 of the Act have been particularly abused, taken by parties as a liberty to approach the court in defiance of express agreement to resolve disputes by arbitration. I am not suggesting that where a party feels that there is strong likelihood of justice where it submits to the jurisdiction of a Tribunal, it should not approach the courts for help. It is the freedom to do so that should not be abused as we currently experience in arbitrations conducted in Nigeria.
ii.) The potency of the powers of an arbitrator: A myth or reality: The question continues to remain unanswered by many arbitration practitioners in Nigeria. This is because the powers donated to an arbitrator by an arbitration agreement no matter how well intended, expressed or captured in an arbitration agreement are increasingly being challenged. This ranges from the power to the arbitrator to determine the place of arbitration (where none has been determined by the parties), to determining jurisdiction (the kompetenz-kompetenz rule) and even to the delivery of an award (whether interim, interlocutory or final).
The collateral effect of this attitude by the parties is that the ability to enjoy the fruits of an award is strongly dependent on the willingness of the parties to cooperate; cooperation which is usually never obtained, the same must necessarily be brought before the Tribunal itself. In Nigeria, allowing the Tribunal to determine its jurisdiction has proven in recent times to be a herculean task. This is because, not only do Tribunal's usually exceed their jurisdiction, in some case where the exercise of jurisdiction is appropriately exercised, a party may nonetheless and for frivolous reasons seek to challenge it.12
Where this is the case, such arbitral references may technically be said to have abated because of the number of years it takes to determine cases in Nigerian courts.
iii.) Nigeria as 'place' of arbitration: Challenges of Insecurity: One of the principles of party autonomy in arbitration is the parties right to determine the place of arbitration. Similarly, the Act also provides for an alternative in the event that parties are unable to agree. This alternative confers powers on the arbitral Tribunal to determine or decide the place of arbitration13. It is not in doubt therefore that except parties agree otherwise, the place of arbitration shall be as agreed by the parties.
However, in Nigeria, the unfortunate incidences of insecurity have continued to foist a fait accompli to this autonomy. The security of the members of the Tribunal, parties and others connected to a reference has continued to make arbitrators remove the place of arbitration from Nigeria; the agreed choice.
For instance, in one or two instances, as Counsel to a party in an arbitration, we have had to concede to relocating the place of arbitration from Nigeria despite assurances at the highest levels of adequate security. The truth is that security issues exist the world over, Nigeria is no exception. Whilst this is a challenge being faced by Nigerian parties, the insistence of foreign arbitrators to relocate the place against the wish of the parties has not helped and parties are sometimes without option but to waive their rights in this regard.
iv.) The Kompetenz-Kompetenz Rule: How competent are Arbitrators: Although discussion on this sub-head commenced in the immediate preceding above, its importance necessitates additional comments. An arbitrator is entitled to determine whether or not he has jurisdiction to entertain a matter. By the provisions of Section 12 of the Arbitration and Conciliation Act which provides as follows:
"An arbitral tribunal shall be competent to rule on questions pertaining to its own jurisdiction and on any objections with respect to the existence or validity of an arbitration agreement"
A challenge of the arbitrator's jurisdiction is often raised as a preliminary objection and is usually determined either by bifurcating the proceedings or taken as a preliminary point in the Award. Whichever procedure is adopted by the Tribunal, such a decision is final and binding14. However, in Nigeria, this may not be so. The Nigerian Federal High Court has powers to make prerogative orders such as Certiorarior Prohibitionor in some other cases, on the application of one party, set aside such an award. Although, these are prerogative powers to curb the excesses of the exercise of powers by the Tribunal, in Nigeria, this legal window has been extensively abused such that upon a determination by a Tribunal of its jurisdiction, an unsuccessful party will most likely invoke the supervisory jurisdiction of the Federal High Court, either to quash the decision of the Tribunal or in seeking to prohibit it from continuing with the reference.
In a recent arbitration in which I was involved, the Respondent having raised a number of unsuccessful objections before the Tribunal, then approached the court for the following reliefs to wit:
- An objection challenging the Presiding Arbitrator for having being nominated by the Federal Attorney General (albeit erroneously) as the Claimant's arbitrator. (2009);
- An objection challenging the jurisdiction of the Presiding arbitrator for having acted for the Claimant in some other unrelated matter;
- An objection challenging its own appointed arbitrator for having made certain comments which allege bias against it, the Respondent;
- An objection against the Presiding Arbitrator for having acted against the Respondent in an unrelated matter at the High Court
It was clear that the party and his Counsel were not prepared to continue with the reference. The party was not only challenging the presiding arbitrator, it also challenged its own appointed arbitrator. This is a clear case of an unwillingness of a party to proceed in the arbitration despite its contractual agreement to do so. It suffices to say that a Judicial Review application pursuant to the same is still in court well over a year later, while the arbitration, commenced over four years ago is stalled.
v.) Precedence rights of Lawyers in Arbitration: It is gradually becoming a norm in Nigeria that Lawyers, rather than any other class of professional, are engaged as representatives of parties in arbitration proceedings. Consequently, the precedent right of appearance (of a legal practitioner), as applicable in courtroom proceedings is gradually creeping into arbitrations.
In other words, lawyers are now invoking the provisions of the Legal Practitioner's Act15 which ensures the right of a senior lawyer to lead a junior one. The effect of this being that parties may now raise objections against a Senior Counsel being, in effect, led by a junior Section 8(4) which states as follows:
"Legal practitioners appearing before any court, tribunal or a person exercising jurisdiction conferred by law to hear and determine any matter (including an arbitrator) shall take precedence among themselves according to the table of precedence set out in the First Schedule to this Act".
Whilst it is conceded that this is the correct position of the Nigerian law as regards appearance by lawyers, its application to arbitration references must in my view be circumscribed and ultimately discouraged. This is because, to apply this Law as now been suggested by lawyers will rob parties in arbitration proceedings of their autonomous rights to appoint representatives of their choice. This exposes the paradox in encouraging arbitration as a party-autonomous dispute resolution mechanism in Nigeria. This in itself contradicts the provisions of Article 4 of the 1stSchedule to the ACA which speaks of 'parties...represented...by legal practitioners of their choice...'
Therefore, this introduction must be condemned in strong terms as both domestic and foreign investors must be given the right to appoint a representative of their choice (whether a senior or junior lawyer).
In concluding this paper and notwithstanding the challenges discussed above, arbitration continues to gain prominence in Nigeria. Similarly, the Nigerian court is also positioned to encourage the process of alternative dispute resolution (including arbitration) by the establishment of pre-litigation mechanisms such as the Lagos Multi-Door Courthouse of the Lagos State High Court. This interestingly is a private initiative in collaboration with the Lagos State High Court to attempt to resolve cases which may be resolved by the many doors it has made available16. This has proved very successful in Lagos State (the commercial nerve of Nigeria) and is presently being introduced to other parts of the country.
Originally published October 8th, 2012.
1 Arbitration and Conciliation Act Cap. A.18, LFN 2004; The Act also domesticated Nigeria's treaty obligations arising under the New York Convention on the Recognition and Enforcement of Foreign Arbitral awards 1958.
2 In many respects litigation still dominates the dispute resolution process. That said however, arbitration references are continually increasing. In fact it would be most unusual today to see a commercial contract without such a clause.
3 Historically, Nigeriahad long adopted this form of resolving disputes, albeit mainly in relation to local/customary differencesas indeed was affirmed in Ohiaeri vs. Akabeze3(1992) 2N.W.L.R (Pt 221) pg 1. See also Okpuruwu v Okpokam (1988) 4 N.W.L.R (pt 90) 554 at 572.
4 Cap A.18, Laws of the Federation of Nigeria,2004.
5 Article 32 of the 1st Schedule to the Arbitration and Conciliation Act Cap A.18, LFN 2004.
6 Section 13
7 Article 4, Section 11 of the Rules to the ACA
8 (2 IPCO (Nigeria) Ltd v Nigerian National Petroleum Corporation (2005)005) EWHC 726
9 The Nigerian Court's attitude to incessant intervention in arbitration proceedings etc.
10 As well as invest in training Judges on the importance of ADR. In fact, in Lagos State, some Judges have been specially trained as 'ADR Judges'.
11 Per its Section 4
12 It must be said that this is not a problem peculiar to Nigerian jurisdiction, however, its incidence is becoming on the increase in Nigeria.
13 Lutin v. NNPC ( Supra)
14 This is of course subject to legislative compliance with the delivery of such an award e.g, Reasoned Award, signed Award etc.
15 Section 8 (4) thereof.
16 E.g. Mediation, Conciliation etc.
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.