Arbitration has over the years, evolved to become one of the most preferred methods of dispute resolution amongst national and multi-national undertakings. This is largely because arbitration is party centered, and disputes can be resolved by arbitrators of choice within agreed timelines unlike litigation where the parties have no control over the process. Businesses therefore tend to lean towards the use of arbitration for the resolution of their commercial or investment disputes. It is pertinent to note that the privacy and confidentiality in arbitral proceedings is also a major consideration for users of arbitration. Despite the advantages of arbitration, several concerns have consistently been expressed by users of the process. One of such concerns is the alarming rate at which the losing parties in arbitral proceedings apply to set aside arbitral awards therefore delaying the winning party from reaping the fruits of the award and negating the consideration of time effectiveness which led parties to explore arbitration in the first place.
The aim of this discourse is to examine the law and procedure for setting aside arbitral awards in Nigeria and germane issues that stem from it. We will commence by explaining the nature of an arbitral award, then discuss the procedure for setting aside an arbitral award under Nigerian law, do a comparative analysis with other jurisdictions and finally make a reasoned case for the retention of the regime of setting aside an arbitral award.
Nature of an arbitral award
An arbitral award can be described as "a decision of the arbitral tribunal on the substance of the dispute and includes any final, interim or partial award and any award on costs or interest but does not include interlocutory orders"1. Article 53 of the International Centre for Settlement of Investment Disputes (ICSID) Convention provides that, "parties are bound by the award and that it shall not be subject to appeal or to any other remedy except those provided for in the Convention"2. Further to this, Article 54 provides that, "subject to any stay of enforcement...., in accordance with the provisions of the Convention, the parties are obliged to abide by and comply with the award and every contracting state to recognize the award as binding and to enforce the pecuniary obligations imposed by the award as if it were a final decision of a domestic court"3.
The United Nations Commission on International Trade Law (UNCITRAL) also provides necessary guidance for the treatment and operation of arbitral awards, through its model law on International Commercial Arbitration 1985 (with amendments as adopted in 2006). Article 35 of the Model Law, provides that, "An arbitral award, irrespective of the country in which it was made, shall be recognized as binding and, upon application in writing to the competent court, shall be enforced subject to the provisions of this article and of article 36".4 There is no doubt as to the enforceability of arbitral awards in Nigeria, as Nigeria is a bona fide member state of the United Nations, and one of the contracting countries to the ICSID Convention. Therefore, both the ICSID Convention and the UNCITRAL Model Law apply to Nigeria.
Setting aside an arbitral award under Nigerian law
The principal legislation that governs arbitration in Nigeria is the Arbitration and Conciliation Act 1988 Cap A18, Laws of the Federation of Nigeria 2004 (ACA). The ACA was modelled after the UNCITRAL model law.
Section 31 of the ACA makes provision for the recognition and enforcement of arbitral awards.
To set aside an arbitral award, is to invalidate the award. A dissatisfied party can actively seek a declaration that the award is set aside under certain limited circumstances. An arbitral award cannot be appealed in Nigeria. The purport of this is that the substantive issues which the arbitral panel determined will not be subject of review by the courts because arbitration, by its nature is final.
The Supreme Court in K.S.U.D.B V. Fanz Limited (1990) 4 NWLR (Part 142) 1 at 43 on the power of the court to set aside an award held thus:
"Parties take their arbitrator for better or worse both as to decision of fact and decision of law. However, by virtue of the provisions of section 12 (2) of the Arbitration Law, where an arbitrator or umpire has misconducted himself or an arbitration or award has been improperly procured, the court has the power to set aside the award"
Sections 29, 30 and 48 of the ACA states the instances where a party can apply to set aside an arbitral award. Section 30 (1) of the Arbitration and Conciliation Act Cap A19 LFN 1990 (ACA) empowers any party to Arbitration to challenge an Arbitral award to be set aside on grounds of misconduct on the part of the Arbitrator or where the arbitral proceedings, or award, has been improperly procured but the ACA does not define the meaning of 'misconduct'. Nigerian Courts have consequently given their various interpretation of what amounts to misconduct of an arbitrator over time because of this lacuna. Section 48 also contains a list of grounds for an application to set aside an arbitral award. It is also important to note that an application to set aside an arbitral award in Nigeria is time bound, section 29 of the ACA provides that an aggrieved party may bring an application within three months from the date of the award.
Approach of other jurisdictions
The United States of America has a similar approach in setting aside arbitral awards. US federal law does not permit the appeal of an arbitral award, but it allows for the setting aside of an award. The setting aside of an arbitral award is premised on the limited grounds laid down by the Federal Arbitration Act (FAA)5.6 Any petition to set aside an arbitral award must be served within three months of receiving the award7. Section 10 of the FAA states that a court may set aside/vacate an arbitral award only if it finds that one of the following grounds applies:
- the award is a result of corruption or fraud;
- evident partiality or corruption of an arbitrator;
- arbitrator misconduct, such as refusing to hear pertinent and material evidence; or
- the arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final and definite award was not made8.
In France9, for domestic arbitration, the arbitral award cannot be appealed unless the parties have agreed otherwise. The arbitral award can however be set aside unless the parties agreed to allow the appeal of the arbitral award10. For international arbitrations, no appeal is allowed but an application to set aside the award can be made. Appeal and setting aside procedures are initiated before the Court of Appeal of the seat of arbitration within one month as of the notification of the arbitral award but can be extended by two months when the party is located abroad. The filing of the appeal or the setting aside procedure suspends the enforcement of the decision in domestic arbitrations but doesn't suspend enforcement for international arbitration.
The grounds and procedure for setting aside a domestic arbitral award are:
- Arbitral tribunal declared itself wrongly competent or incompetent.
- Arbitral tribunal was irregularly constituted.
- Arbitral tribunal has ruled on the matter contrary to the given assignment.
- Adversarial principle has not been respected.
- Arbitral award is contrary to public policy.
- Arbitral award is not grounded or does not state the date on which it has been rendered or the name of the arbitrator(s) or does not include the required signature(s) or was not rendered by a majority vote.
In international arbitration, the same grounds stated above apply to set aside the award except the sixth ground. What is interesting about the procedure in France is the fact that unlike Nigeria where applications to set aside an award begins from the High Court all the way up to the Supreme Court, in France, the application is filed in the Court of Appeal whilst an appeal against the decision of the Court of Appeal may lie to the Cour de cassation (French Supreme Court).10 Both the law and French case law are pro-arbitration and as a result it is very rear for an award to be successfully challenged in France.11
The case against setting aside an arbitral award
When closely assessed, setting aside of arbitral awards can create different issues. For example, it may create double control by having a party rely on two measures when in disagreement with an arbitral award; or the potential of conflicting decisions regarding the same ground between enforcement proceedings and setting aside proceedings12. "Double control" in this instance is when a party relies on the same grounds for setting aside an arbitral award and refusal of enforcement of the award. One of the reasons why this is a possibility is because the UNCITRAL Model Law has very similar grounds for setting aside and the grounds for refusal of enforcement in Article V (1) of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention). The issue of double control can be resolved by statutory provisions like that of Section 1060 of the German Code of Civil Procedure which states that "Grounds for setting aside shall not be taken into account, if at the time when the application for a declaration of enforceability is served, an application for setting aside based on such grounds has been finally rejected"13.
The second issue is the potential of conflicting decisions regarding the same ground between enforcement proceedings and setting aside proceedings. It is possible for conflicting decisions to occur when the court enforcing the award abroad decides differently to the court setting aside the award in the country of origin. IN SPP v Egypt, a Decision by the President of the District Court of Amsterdam granted enforcement of the Award made in Paris and rejected Egypt's assertion that a valid arbitration agreement was lacking. Two hours after the same judgment was given, the Court of Appeal in Paris annulled the award for lack of a valid arbitration agreement14.
A third issue is the alarming rate at which the losing parties in arbitral proceedings apply to set aside arbitral awards therefore delaying the winning party from reaping the fruits of the award and negating the consideration of time effectiveness which led parties to explore arbitration in the first place. Arbitration which ought to be final in such cases may end up being challenged at the High Court and appeals to such decisions refusing to set aside the award may be made to the Court of Appeal and then to the Supreme Court of Nigeria. This generates concerns in the minds of users of arbitration as to whether the right of an aggrieved party to apply to set aside an arbitral award should not be removed since in the long run it would amount to delay in realising the fruits of the award.
Conclusion and recommendations
Notwithstanding the identified setbacks, we opine that the setting aside of arbitral awards remains important as it gives the unsuccessful party an avenue for redress when an erroneous award is given. We contend that the advantages of the remedy of setting aside an award outweigh the drawbacks in the sense that if no review is made to arbitral awards, arbitrators may abuse this privilege and publish outlandish awards and basic fairness principles would be violated.
We recommend that parties select Arbitrators who are experts in the area of dispute and also knowledgeable on the rules and laws binding the arbitral proceeding and follow same to ensure sound Arbitral awards are delivered that will be virtually impossible to challenge or set aside. Where the Arbitrator is a non-lawyer, he/she should be guided by a lawyer where necessary to ensure rules and laws are adhered to in the award delivered.
We commend the recent efforts for the amendment of the ACA which is presently before the Nigerian National Assembly as the Arbitration and Mediation Bill.15 It streamlines the instances where a party can apply for the setting aside of an arbitral award to just the grounds stated therein as opposed to the extant position where a party may apply to set aside an award on the basis that there is an error on the face of the award or the wider ground of 'misconduct' which gives an endless list of what could amount to misconduct of the arbitrator or Tribunal. We are hopeful that the Bill would scale through and be enacted into law in Nigeria.
Betty Biayeibo contributed to this article.
1. Dr Wong Fook Kong, The Arbitration Award (Myiem.org.my, 2020), Retrieved from (http://www.myiem.org.my/assets/download/PMTD_Talk_TheArbitrationAward_121206.pdf) accessed 10 April 2020.
2. International Centre for Settlement of Investment Disputes, 'ICSID Convention, Rules And Regulations' (International Centre for Settlement of Investment Disputes 2006); Retrieved from (https://icsid.worldbank.org/en/Documents/resources/2006%20CRR_English-final.pdf); Accessed on April 10, 2020
4. UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW, 'UNCITRAL Model Law On International Commercial Arbitration 1985 With Amendments As Adopted In 2006' (United Nations 2008). Pg 20, Retrieved from (https://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf); Accessed on April 25, 2020 at 8:24pm.
5. Hall Street Associates v Mattel, 552 US 576 (2008)
6. 'GAR Know How: Challenging and Enforcing Arbitration Awards 2019: United States' (Globalarbitrationreview.com, 2020) https://globalarbitrationreview.com/jurisdiction/1005969/united-states#answer3 accessed 11 April 2020.
8. Federal Arbitration Act, Chapter 1 Section 10
9. Alexandre Bailly and Xavier Haranger, Morgan Lewis, "Arbitration procedures and practice in France: overview", Thomson Reuters Practical Law, Retrieved from https://uk.practicallaw.thomsonreuters.com/7-501-9500?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1; Accessed May 26, 2020 10 Article 1491, French Code of Civil Procedure (CCP)
10. Laurence Franc-Menget and Peter Archer for Herbert Smith Freehills LLP, "Cour de Cassation upholds decision to set aside an award following an arbitrator's non-disclosure", Lexology, Retrieved from https://www.lexology.com/library/detail.aspx?g=506c081e-7edc-452d-8b85-de0d13eddcf2, Accessed May 26, 2020
11. Christophe Duge, "Global Legal Insights, International Aritration 2020- France", Retrieved from https://www.globallegalinsights.com/practice-areas/international-arbitration-laws-and-regulations/france, Accessed May 26, 2020
12. Albert Jan van den Berg, "Should The Setting Aside Of The Arbitral Award Be Abolished?" (2014) http://www.hvdb.com/wp-content/uploads/2014-AJvdB-Should-the-Setting-Aside-of-the-Award-be-Abolished.pdf
13. Section 1060 of the German Code of Civil Procedure
14. Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3
15. HB 91- A Bill for an Act to repeal the ACA and enact the Arbitration and Mediation Act to provide a Unified Legal Framework for the Fair and Efficient Settlement of Commercial disputes by Arbitration and Mediation, make the New York Convention applicable as well as the Singapore Convention and for related matters.
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