Introduction
The principal legislation governing arbitration in Nigeria is the Arbitration and Mediation Act ("AMA"). AMA was enacted in 2023 to replace the erstwhile Arbitration and Conciliation Act 19881 ("ACA"). Nigerian courts have been inconsistent in their interpretations of arbitration clauses in contracts. In some cases, the courts have liberally interpreted arbitration clauses and granted stays of court proceedings in aid of arbitration. In other cases, the courts have not been so liberal. For instance, in Mekwunye v. Imoukhuede,2 the Supreme Court liberally upheld an arbitration clause contained in the parties' agreement, while in the case of Frontier Oil Limited v. Mai Epo Manu Oil Nigeria Limited3 the Court of Appeal refused to give effect to the arbitration clause in the agreement.
Talking about arbitration clauses in maritime agreements, the decisions of Nigerian courts have been influenced by the provisions of section 20 of the Admiralty Jurisdiction Act, 1991 ("AJA")4 . Section 20 of the AJA provides that "[a]ny agreement by any person or party to any cause, matter or action which seeks to oust the jurisdiction of the Court shall be null and void, if it relates to any admiralty matter falling under [the AJA]" and satisfies any of the conditions listed under section 20.
The above provisions of section 20 of the AJA conflict with the provisions of section 5 of the AMA (formerly section 4 of the ACA) which is also federal legislation. Section 5 of the AMA provides that "[n]otwithstanding the provisions of any other law, a court before which an action is brought in a matter, which is the subject of an arbitration agreement shall, if any of the parties request, not later than when submitting their first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is void, inoperative or incapable of being performed" (Emphasis supplied). Hence, whereas section 5 of the AMA validates an arbitration clause in an agreement, section 20 of the AJA appears to treat an arbitration clause in maritime agreements as an ouster clause.
This article examines the different views of the Nigerian courts on this issue, particularly the Court of Appeal's decision in Fugro Sub Sea LLC v. Petrolog Limited.5 The article concludes that an arbitration clause does not, in fact, oust the admiralty jurisdiction of the Federal High Court but rather suspends its exercise until the parties have been allowed to explore the dispute resolution channel mutually agreed upon by them.
The Pro-Arbitration Cases
It is trite law that where parties mutually agree in their agreement to resort to arbitration, the courts are bound to give effect to such voluntary agreement by referring the parties to arbitration.6 There have been various pronouncements on this issue by Nigerian courts. For instance, the Supreme Court in M.V. Lupex v. Nigerian Overseas Chartering and Shipping Ltd7 appeared to have laid the matter to rest when it held that it was an abuse of the court process for the respondent in that case to institute a fresh suit in Nigeria against the appellant for the same dispute during the pendency of the arbitration proceedings in London.
The appellant in that case requested the Federal High Court to stay proceedings in the action filed by the respondent in view of clause 7 of the agreement entered into between the two parties which stipulates arbitration in London as the dispute resolution mechanism. The Federal High Court, however, refused to stay proceedings and that decision was affirmed by the Court of Appeal. On further appeal to the Supreme Court, the apex Court allowed the appeal and ordered a stay of proceedings. Iguh, JSC, while giving his judgment on the need for courts to enforce arbitration clause held thus:
"The law is settled that...[s]o long as an arbitration clause is retained in a contract that is valid and the dispute is within the contemplation of the clause, the court ought to give due regard to the voluntary contract of the parties by enforcing the arbitration clause as agreed by them"8.
A similar approach was adopted in Onward Enterprises Ltd. v. MV Matrix9 , where the Court of Appeal held that the courts should stay proceedings pending foreign arbitration based on the duty of the courtsto enforce arbitration agreements. In this case, the Court of Appeal stayed proceedings pending the reference of the dispute to arbitration in London. The Court held inter alia as follows:
"Once an arbitration clause is retained in a contract which is valid and the dispute is within the contemplation of the clause, the court should give regard to the contract by enforcing the arbitration clause... It is therefore the general policy of the court to hold parties to the bargain into which they had entered unless there is a strong, compelling, and justifiable reason to hold otherwise or interfere. In the instant case... [t]here is nothing to show that the arbitration agreement was imposed on the appellant. Since both parties entered into the agreement, same should therefore be binding on them."
Interestingly, both cases cited above were pure admiralty matters. The MV Lupex case related to a claim for damages for loss suffered by the plaintiff who was a charterer to the defendant under a charterparty agreement. Similarly, the Onward Enterprises case related to a dispute with respect to the carriage of goods by sea from Bangkok, Thailand to Lagos and Port Harcourt in Nigeria.
The Case Law against Arbitration
One had thought that the MV Lupex case and the Onward Enterprises case had laid the issue to rest until another decision of the Court of Appeal surfaced in 2021 titled Fugro Sub Sea LLC v. Petrolog Limited (supra).10 In that case, the Court of Appeal unanimously held that despite the arbitration clauses contained in the memorandum of agreement and charterparty agreement between the parties, the agreements were admiralty contracts and that the arbitration clauses relied on by the appellant were null and void on the ground that they purport to oust the jurisdiction of the Federal High Court, in the face of unambiguous constitutional and statutory provisions.11 Onyekachi Aja Otisi, JCA who delivered the lead judgement stated thus:
"The Respondent's claims arose from a Charter Party Agreement between the Respondent as owners of the Vessel and the Appellant as charterers/hirers of the Vessel. As rightly found by the lower Court, the facts of the case position the contract within the confines of the admiralty jurisdiction of the lower Court. I therefore find no reason to disturb the conclusion of the learned trial Judge that the agreement between the parties came within the contemplation of provision of Section 20 of the Admiralty Jurisdiction Act, 1991, which rendered the arbitration clauses null and void. The decision of the lower Court delivered on 4/5/2018 dismissing the Appellant's motion on notice, is therefore, hereby affirmed."
The import of the above decision of the Court of Appeal is that an arbitration clause in a maritime agreement is null and void ab initio in that such clause purports to oust the jurisdiction of the court in the face of constitutional and statutory provisions. Put differently, it also means that parties to a maritime agreement are no longer at liberty to determine the forum for the resolution of their disputes. With respect, this decision constitutes a dangerous precedent in Nigeria's legal jurisprudence. Surprisingly, the Court of Appeal in the Fugro case did not consider the Supreme Court's decision in the MV Lupex case. Perhaps, the decision would have been overturned and restated had it proceeded to the apex Court.
One question that should come to bear when considering the issue of stay of proceedings pending arbitration vis-à-vis section 20 of the AJA is - does an arbitration clause really oust the jurisdiction of the court? We answer in the negative. An arbitration clause does not and really cannot oust the jurisdiction of the court as contemplated by section 20 of the AJA. In any event, where a dispute is unable to resolve through arbitration, parties are at liberty to resort to litigation.
The Correct Legal Position
In our view, we think the interpretation of section 20 of the AJA has been unnecessarily overstretched. Although not elegantly drafted12, we do not think that the intention of the draftsman would be to render an arbitration clause in a maritime contract completely useless. To think otherwise would be ridiculous, particularly in the context of maritime law, a branch of private international law which deals with cross-border relationships between private citizens of different countries. To eliminate arbitration from maritime disputes, as section 20 of the AJA purports to do, would imply that parties must resort to the national court system for the resolution of their maritime disputes. We do not think this will work. It is not practicable to insist that a foreign shipowner who has hired their vessel to, or entered a contract of affreightment with, a Nigerian charterer must come before a Nigerian court where a dispute arises from such contract. This would spell doom for Nigeria's maritime sector, and, by extension, Nigeria's economy as most foreign businesspeople will no longer trade with Nigerians.
Our position is further reinforced by the introductory statement of section 5 of the AMA which states that: "[n]otwithstanding the provisions of any other law". This, in our view, implies that the draftsman was, perhaps, aware of the controversy relating to section 20 of the AJA and sections 4 and 5 of the ACA and decided to include the introductory statement in section 5 of the AMA to establish the supremacy of the provisions of section 5 of the AMA. Also, if, contrary to agreement to refer a matter to arbitration, one party resorts to legal proceedings in respect of that matter, the court has jurisdiction to hear the dispute regardless. The appropriate course is for the other party to apply for a stay of the legal proceedings13. Hence, a stay to refer a dispute to arbitration is an affirmation of the court's jurisdiction rather than a denial of it.
By and large, our position remains that the decision of the Court of Appeal in the Fugro case cannot, with respect, represent the correct interpretation of section 20 of the AJA. Any interpretation that tends to downplay the use of arbitration in maritime disputes in Nigeria is not only dangerous to maritime business but also capable of stalling Nigeria's economic progress and prosperity. Hence, there is an urgent need for the apex Court to decide this matter ones and for all.
Conclusion
In conclusion, section 20 of the AJA is not a sword but a shield. Hence, it should not be used as a weapon to obliterate arbitration. Rather, it should be seen as a protective mechanism put in place to preserve the integrity of our courts against unnecessary and unwarranted attempts at robbing them of their highly cherished admiralty jurisdiction.
Footnotes
1 CAP C18 Laws of the Federation of Nigeria ("LFN") 2004.
2 (2019) 13 NWLR (Pt. 60) at 459.
3 (2005) 2 CLRN 148.
4 CAP A5 LFN 2004.
5 (2021) LPELR-53133 (CA).
6 See s.5 AMA and Frontier Oil Limited v. Mai Epo Manu Oil Nigeria Limited (supra).
7 (2003) 15 NWLR (Part 844) 469
8 See Niger Progress Ltd. v. N.E.I. Corp (1989) 3 NWLR (Part 107) 68.
9 (2010) NWLR (Part 1179) 350.
10 Taiye A., Somtochukwu A., and Justice. U., "Are Forum Selection Clauses in Maritime Contracts Valid?" (2023), Nigerian Bar Association Section on Legal Practice Journal (SLP L.J. Vol. 9 2023).
11 Specifically, section 251(1)(g) of the Constitution of the Federal Republic of Nigeria, 1999 (as amended) and Sections 1 and 20 of the AJA
12 As the Supreme Court in the MV Lupex case described it.
13 See Chitty on Contract (2015), 32nd Ed. Volume 2 Special Contracts, Sweet and Maxwe
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