Introduction
The mutual agreement of parties to resolve disputes through arbitration is usually captured in an arbitration agreement, where they waive their right to have disputes settled by national courts or other public forums. In doing so, parties typically define the issues subject to arbitration by stating that- "any dispute arising out of or in connection with this contract, including its existence, validity, or termination." International arbitration law acknowledges that "disputes" refer only to matters that can be settled through arbitration. Put differently, not all disputes are arbitrable, as arbitration has its limitations. This article therefore examines the concept of arbitrability, the types of disputes that can and cannot be taken to arbitration, and explores the regulatory framework and relevant case law in Nigeria governing this subject.
The Concept of Arbitrability
Arbitrability is a fundamental concept in arbitration law that indicates whether a dispute is capable of being settled by arbitration. It relates to the jurisdiction of an Arbitral Tribunal to act upon a matter. Arbitrability in arbitration involves two main aspects: subjective and objective. Subjective arbitrability, or "arbitrability ratione personae," refers to whether the parties involved have the capacity to arbitrate. For instance, state governments or local authorities may not be able to bring disputes to arbitration due to their particular functions or legal status. Objective arbitrability, or "arbitrability ratione materiae," assesses whether the subject matter of the dispute is suitable for arbitration.1
The determination of arbitrability in Nigeria is governed by statutory enactments and case law. Section 1 (5) of the Arbitration and Mediation Act 2023 (AMA) provides that arbitration provisions apply only to disputes that are commercial in nature. Section 91 of the AMA, broadly defines the term "commercial" to include:
"matters arising from all relationships of a commercial nature whether commercial or not, such as any trade transaction for the supply or exchange of goods or services, distribution agreement, commercial representation or agency, factoring, leasing, construction works, consulting, engineering, licensing, investment, financing, banking, insurance, exploitation agreement or concession, joint venture and other forms of industrial or business co-operation, carriage of goods or passengers by air, sea, rail or road;
By implication, disputes concerning contracts, corporate governance, employment (excluding statutory employment), intellectual property, real estate, banking, and insurance are typically arbitrable
In Kano State Urban Development Board v. Fanz Construction Co.2, the Supreme Court of Nigeria held that disputes must be civilly justiciable to qualify for arbitration. The Court emphasized that an issue must potentially be resolvable through mutual agreement, highlighting that criminal indictments and other non-negotiable issues are not suitable for arbitration.3 The Supreme Court outlined categories of disputes that are not subject to arbitration in Nigeria including:
- Indictment for an offence of a public nature
- Disputes arising out of an illegal contract
- Disputes related to void agreements due to gambling or wagering,
- Disputes that involve changing someone's legal status such as divorce proceedings
- Any case where an arbitrator's decision would impact third-party rights (judgments in rem).
The rationale for the above decision is based on the principle that an arbitral tribunal, as a contractual entity, does not possess the comprehensive and constitutionally sanctioned powers of the traditional courts. Hence, traditional courts are deemed more suitable for addressing complex disputes and providing a broader range of remedies to the parties involved.
Decoding Arbitrability: A Deep Dive into Selected Disputes in Nigeria
(a) Data Privacy Disputes
Neither the Arbitration and Mediation Act (AMA)4 nor case law principles specifically classify data privacy disputes as arbitrable. However, for breach of data privacy disputes to be considered arbitrable, it is necessary to establish whether they fall under the scope of commercial activities. Commercial activities are typically defined as transactions aimed at profit-making. Since data is a valuable asset that is traded for profit, data privacy issues can be considered part of commercial transactions. This categorization potentially places data privacy disputes within the scope of issues arbitrable under the AMA.
(b) Labour & Employment Disputes in Nigeria
In contrast to other areas where the arbitrability of disputes might be unclear, Nigeria has a well-defined legal structure for resolving employment disputes with the National Industrial Court (NIC) playing a crucial role. This framework includes mechanisms such as arbitration, mediation, and adjudication through the National Industrial Court as detailed in the Nigerian Constitution (Third Alteration) Act, 2010 ("Act"), enacted into law on March 4, 2011. Specifically section 254C (3) of the Act allows the NIC to create an Alternative Dispute Resolution Centre specifically for labour and employment disputes, while Section 254C(4) of the Act grants the NIC jurisdiction over the enforcement of arbitral awards relating to such disputes.
An ADR Centre within the NIC facilitates the arbitration and mediation of disputes officially brought before the court. This approach is designed to offer a resolution method that is less costly, quicker, and more efficient than traditional litigation. The types of disputes handled include conflicts between employers and employees, as well as issues concerning workplace health, safety, and employee welfare.5 Based on these provisions, it is clear that labour disputes in Nigeria are indeed arbitrable.
(c) Tax Disputes
The Nigerian Court of Appeal has affirmed the non-arbitrability of tax disputes in Nigeria as evidenced by its decisions in Esso Petroleum and Production Nigeria Ltd & SNEPCO vs. NNPC6 and Shell (Nig.) Exploration and Production Ltd & 3 others vs. Federal Inland Revenue Service.7
In the Esso case, a dispute arose between the appellants ("the contractors") and the Nigerian National Petroleum Corporation (NNPC) regarding a Production Sharing Contract (PSC). The contractors alleged that NNPC unilaterally lifted more crude oil than allowed and independently altered Petroleum Profit Tax (PPT) returns meant to be filed by the contractors. Although an arbitration tribunal initially ruled in favor of the contractors, NNPC appealed, arguing that tax disputes fall outside the scope of arbitration under Nigerian law. This led the Federal High Court to nullify the arbitration award in 2012, a decision later upheld by the Court of Appeal. The court recognized the matter as a tax dispute, inherently non-arbitrable, and severed non-tax related claims while affirming the core issue concerning PPT returns as primarily a tax dispute.
In the Shell case, the contractors argued that NNPC exceeded its crude oil lifting quota under a PSC and mismanaged tax returns, thereby inflating the contractors' tax liabilities. The contractors sought arbitration based on their rights under the PSC to manage Tax Oil returns as previously agreed. However, the Federal Inland Revenue Service (FIRS), not originally part of the arbitration, intervened, asserting that such arbitration usurped its statutory role in tax matters. This led to the Federal High Court declaring the arbitration unconstitutional and void, as tax matters fall under its exclusive jurisdiction per Section 251(1) of the 1999 Constitution of Nigeria (as amended). The Court of Appeal dismissed the contractors' appeal, reaffirming that the dispute was tax-related and, consequently, non-arbitrable.
These decisions highlight the courts' stance that tax disputes, by virtue of public policy considerations and their impact on government revenue, are non-arbitrable in Nigeria and exclusively fall within the purview of the Federal High Court. However, some scholars argue that not all tax disputes should be treated equally. They suggest that tax disputes involving contractual elements might not infringe on public policy or the exclusive jurisdiction of the Federal High Court, thus potentially opening a door for arbitration in specific contexts.8
(d) Intellectual Property Disputes
Intellectual property (IP) disputes in Nigeria are primarily under the jurisdiction of the Federal High Court, as stipulated by Section 251(1)(f) of the 1999 Constitution, as amended. This exclusive jurisdiction covers a broad range of IP-related issues. However, the absence of explicit legislation on the arbitrability of IP disputes does not necessarily preclude their resolution through arbitration, especially under certain circumstances:9
- Contractual ADR Provisions: Alternative Dispute Resolution (ADR) provisions are frequently included in contracts involving intellectual property, such as franchising, licensing, or sponsorship agreements. These contracts often stipulate arbitration or other forms of ADR as the preferred method for resolving disputes. For example, in situations where a trademark, patent, or another IP right is licensed to another party for exclusive use in a specific territory, disputes arising from such agreements are typically suitable for arbitration. This approach allows the parties to resolve disputes efficiently and privately, which can be crucial in maintaining ongoing business relationships and confidentiality.
- Regulator empowered by the statute to refer parties to explore ADR: Additionally, statutory provisions support the use of ADR in IP disputes. Section 13(3) of the Trademarks Act 1965,10 recognizes the potential for resolving IP disputes outside traditional court settings. Specifically, it provides that:
-
- "Where separate applications are made by different persons to be registered in respect of the same goods or description of goods as proprietors respectively of trademarks that are identical or nearly resemble each other, the Registrar may refuse to register any of them until their rights have been determined by the court or have been settled by agreement in a manner approved – by the Registrar; or by the court on an appeal from the Registrar."
This provision implicitly supports the use of ADR by allowing the Registrar to approve settlements reached through arbitration or other ADR methods.
Ensuring Effective Arbitration in Nigeria
The question of whether a dispute is arbitrable in Nigeria hinges on well-defined legal criteria and contextual specifics. This landscape is shaped by the interplay of case law and statutory guidelines, which carve out clear boundaries for what types of disputes can be effectively resolved through arbitration. It is critical to understand these boundaries because disregarding the established principles of arbitrability can result in the non-enforcement of arbitral awards, rendering the arbitration process ineffective.11
Adherence to these guidelines is not just advisable; it is essential for the enforceability of decisions and the smooth conduct of arbitration.
Footnotes
1. Jus Mundi, "Arbitrability" https://jusmundi.com/en/document/publication/en-arbitrability accessed May 22nd 2024
2. (1990) 4 NWLR (Pt. 142)
3. Paul Obo Idornigie, 'The Principle of Arbitrability in Nigeria Revisited', (2004), 21, Journal of International Arbitration, Issue 3, pp. 279-288, https://kluwerlawonline.com/journalarticle/Journal+of+International+Arbitration/21.3/JOIA2004013 accessed 24th May 2024
4. Arbitration and Mediation Act 2023
5. Nigerian Constitution (Third Alteration) Act, 2010
6. No. CA/A/507/2012
7. No. CA/A/208/2012
8. Lawrence Ochulor, "The Dialectics of the Court of Appeal Pronouncements on Non-Arbitrability of Tax Disputes In Nigeria: Drawing a Distinction Between Tax and Contractual Disputes in Nigeria" https://www.lca.org.ng/wp-content/uploads/2018/01/Arbitrability-of-Tax-Disputes-in-Nigeria-LCA-YAN-BLOG.pdf accessed 30th May2024
9. The Constitution of the Federal Republic of Nigeria (CFRN 1999, as amended) https://www.mondaq.com/nigeria/privacy-protection/1279236/exploring-the-arbitrability-of-data-privacy-disputes-in-nigeria accessed 28th May 2024
10. Trademarks Act 1965
11l. Section 58(2b) of the Arbitration and Mediation Act
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.
