Introduction
In arbitration, it is not unusual for parties to feel dissatisfied with either the behaviour of the arbitrators or the outcomes of arbitral awards. Moreover, most jurisdictions limit the ability of arbitration parties to appeal these awards. Consequently, some parties, recognizing the difficulty in challenging an arbitral award directly, may opt to initiate legal actions against the arbitrators themselves. To protect arbitrators from potential liability—especially from parties that may be litigious or acting in bad faith—and to ensure they can perform their duties impartially and without fear, many jurisdictions, including Nigeria, provide arbitrators with certain immunities.1 This article explores the protection afforded to arbitrators through these immunities and discusses the rules that govern both the liability and immunity of arbitrators in Nigeria.
Theories on Immunity of Arbitrators: Contract vs. Status Theories
Arbitrator immunity can be understood through two main theories: the contract theory and the status theory.
a) Contract Theory: The contract theory emphasizes that arbitration is fundamentally a contractual arrangement. It suggests that arbitrators derive their adjudicative powers from the arbitration agreement between the disputing parties. According to this perspective, the role of arbitrators is like that of any contractor or service provider, bound to perform their duties as specified in the arbitration agreement. Therefore, if arbitrators fail to meet these contractual obligations, they may be held liable, just like any other professional who breaches a contract.
b) Status Theory: In contrast, the status theory views arbitrators as performing a quasi-judicial function, akin to that of judges in regular courts. This theory argues that, because of the judicial-like role arbitrators play, they should enjoy the same immunity as judges. This protection is deemed essential for public policy, ensuring that arbitrators can make decisions impartially and fearlessly, without concern for potential lawsuits from dissatisfied parties. This immunity supports the principle that those entrusted with judicial responsibilities should operate without the constant threat of litigation influencing their decisions.
Scope and Principles of Immunity under the Nigeria Arbitration and Mediation Act, 2023
The Arbitration and Mediation Act 2023 (the "Act" or "AMA") adopts a hybrid approach combining both the contract and the status theories on arbitrators' immunity. Section 13(1) of the AMA codifies a key principle of immunity for arbitrators, which is articulated as follows:
An arbitrator, appointing authority or an arbitral institution is not liable for anything done or omitted in the discharge or purported discharge of their functions as provided in this Act, unless their action or omission is shown to have been in bad faith.2
This provision established a legal principle of limited liability and immunity for arbitrators, appointing authorities, and arbitral institutions in the discharge of their duties. The provision mirrors the immunity granted to judicial officers,3 ensuring that arbitrators can perform their duties without the fear of subsequent litigation, as long as their conduct does not involve bad faith. As stated in the case of Cahn v. International Ladies' Garment Union,4 in the absence of any immunity, the probability of arbitrators working under constant fear of reprisals from dissatisfied parties are very high. This would also have a very negative impact on the arbitration process. Also, it is expected that guaranteeing immunity would attract more arbitrators since they would not be "caught up in the struggle between the litigants and saddled with the burdens of defending a lawsuit.5 Immunity will also contribute towards the finality of the award.
Additionally, the AMA further supports this principle through its Rules, which presume that parties have waived the right to sue arbitrators (except in cases of intentional wrongdoing by the arbitrators).6 This pre-emptive waiver reinforces the environment of trust and legal security essential for effective arbitration.
The AMA also allows parties to define the consequences of an arbitrator's withdrawal from their position, including any liabilities that might arise from such a withdrawal.7 This aspect emphasizes the contract theory's influence, where specific terms agreed upon by the parties can dictate the conditions of an arbitrator's engagement and cessation.
Understanding Statutory Exceptions to Immunity under the AMA
According to the AMA, Nigeria endorses a qualified or limited form of immunity for arbitrators. While arbitrators are generally protected, certain circumstances detailed below can lead to their liability.
a) Bad Faith
The Act specifies that the immunity of arbitrators does not cover actions taken in bad faith.8 Interestingly, the Act itself neither defines "bad faith" nor specify which acts or decisions might constitute such. This ambiguity necessitates reliance on judicial interpretations for clarity and guidance. For instance, in the case of Lagos City Counsel v. Ogunbiyi (1969) 1 All N.L.R. p.297 at 299, the Supreme Court explained that mere overzealousness, errors in judgment, or honest excess in responsibility do not amount to bad faith or abuse of office. It further described abuse of office as the use of power for purposes other than those intended, such as personal gain, showing undue favour, or seeking revenge.
Also, in the case of Candide-Johnson v Edigin (1990) LPELR-20108 (CA), the Court of Appeal addressed a scenario where a magistrate's questioning and subsequent detention of a counsel for contempt—based on the counsel's non-response to a personal question about his year of qualification—was deemed an act done in bad faith because it was extrajudicial.
While the cases of Lagos City Counsel v. Ogunbiyi and Candide-Johnson v. Edigin are not specifically about arbitration, they shed light on actions classified as bad faith, which include personal gain, corruption, abuse of power, biased behaviour, and undue favouritism. These principles are highly relevant in the arbitration context. The AMA grants arbitrators' immunity from many liabilities to ensure they can judge cases without fear of retribution. However, this immunity does not extend to actions taken in bad faith. This is particularly important when arbitrators' actions resemble those identified in judicial cases as abusing the powers of judicial officers. Such actions in arbitration could lead to significant liabilities, including civil repercussions like monetary damages, criminal sanctions such as fines or imprisonment, and professional consequences ranging from disciplinary actions to temporary or even permanent disbarment. These precedents are crucial for interpreting what constitutes bad faith in arbitration, helping to ensure that arbitrators remain neutral and operate strictly within the boundaries of their official duties.
b) Breach of the Terms of Appointment
The Act provides that arbitrators are bound by specific conditions when they accept an appointment to an arbitral tribunal.9 The Act mandates that arbitrators adhere to the terms of the arbitration agreement or clause, along with any arbitration rules incorporated by reference that govern the procedural conduct of the arbitration. Additionally, the Act stipulates that arbitrators agree to face the consequences if they withdraw from their position, as determined by prior agreements with the parties.
Consequently, any deviation from these agreed terms can be considered an intentional wrongdoing, which, according to the rules established under the Act, could lead to the arbitrator's liability.10
Conclusion: The Balancing Act of Arbitrator Immunity
There is no doubt that arbitration plays an integral role in the dispute resolution landscape of any legal framework. Given this significance, granting arbitrators immunity supports their ability to perform their responsibilities without undue fear, thereby promoting the finality and integrity of the arbitral process. However, it is important to note that under Nigeria's current legal framework, such immunity is qualified rather than absolute. The nuanced balance between providing immunity and ensuring accountability for arbitrators under the Arbitration and Mediation Act, 2023 showcases the evolving nature of legal frameworks in response to the complexities of modern disputes.
Footnotes
1 For the definition of Immunity generally, see Black's Law Dictionary 12th edition (2024)
2 Section 13(1) of the Arbitration and Mediation Act, 2023
3 Judicial immunity dates back at least to two early seventeenth century English cases, Floyd v. Barker 77 Eng. Rep. 1305 (1607) and The Marshalsea, 77 Eng. Rep. 1027 (1612) in which Lord Coke announced the rule of judicial immunity, stated its purposes, and specified its limitations.
4 311 F.2d 113, 114-15 (3rd Cir. 1962)
5 Tamari v Conrad, 552 F 2d 778 (7th Cir, 1977)
6 Article 16 of the Arbitration Rules (First Schedule) made pursuant to the AMA which is similarly worded as Section 63 of the Federal High Court Act and Section 108(1) of the FCT High Court Act
7 See Sections 12(1) & 13(3) of the Arbitration and Mediation Act, 2023.
8 See 13(1) of the Act.
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