International Arbitration 2019

Last Updated August 08, 2019

Nigeria

Law and Practice

Authors



Uche Nwokedi & Co is a leading law firm with a high degree of specialisation in energy and natural resources law. UNC was established in 1990, primarily to render legal services to the oil industry, and to support the several joint venture companies then in operation as oil industry service companies, but has evolved into a full-service law firm with a team of dedicated lawyers and a full complement of highly qualified administrative personnel. UNC has been actively involved in mediation and international commercial arbitration, both locally and internationally, and in this respect has acted either as in-country counsel or rendered legal advice in arbitration proceedings and the enforcement or otherwise of arbitral awards under both the rules of the International Chamber of Commerce or the London Court of International Arbitration. The firm has appeared as lead firm and/or co-counsel and has been involved in preparation of processes and analysis in respect of arbitration in the UK and the USA involving Nigerian companies or individuals and other matters in so far as they relate to Nigerian law or the conduct of business in Nigeria in general. UNC has been involved in many precedent-setting cases in Nigeria’s legal system up to the apex court with a very high rate of success.

Arbitration is the reference of a dispute or difference between not less than two parties for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction. It is an adjudicatory process in the administration of justice aimed at resolving disputes between parties. It serves as an alternative to the court system. It is a means of determination of disputes by a person or persons other than the regular court. The person(s) before whom the dispute is referred are called arbitrator(s). Arbitration is legally effective and the decisions of the arbitrators are recognised and enforceable. The parties agree on the number of arbitrators and choice of arbitrators. The decision arrived at, at the end of the arbitral process is called an award. In Nigeria, arbitration is prevalent both at the domestic and international levels. The prevalence of international arbitration as a method of resolving disputes is increasing by the day as the business communities increasingly prefer the confidentiality and the liberty to choose arbitrators which arbitration offers. Due to increase in foreign direct investment, and as Nigeria continues to open up its economy to foreign investors, international arbitration has continued to increase along with the increased flow of investment.

In Nigeria, parties who choose to subject their disputes to arbitration usually do so by means of an arbitration clause embedded in the contractual agreement. Thus, in the arbitration clause parties would agree on the number of arbitrators, the choice of law and the seat of arbitration. Where there is no arbitration clause in the contract between the parties, the contracting parties, more often than not, resort to litigation to resolve their disputes. For an arbitration to be classified as an international arbitration, it must fall within the category listed in Section 57 (2) & (3) of the Arbitration and Conciliation Act of Nigeria, as follows:

"(a) the parties to an arbitration agreement have, at the time of the conclusion of the agreement, their places of business in different countries; or

(b) one of the following places is situated outside the country in which the parties have their places of business –

(i) the place of arbitration if such place is determined in, or pursuant to the arbitration agreement;

(ii) any place where a substantial part of the obligation of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected; or

(c) the parties have expressly agreed that the subject-matter of the arbitration agreement relates to more than one country; or

(d) the parties, despite the nature of the contract, expressly agree that any dispute arising from the commercial transaction shall be treated as an international arbitration.

(3) For the purposes of subsection (2) of this section –

(a) if a party has more than one place of business, the place of business shall be that which has the closest relationship to the arbitration agreement;

(b) if a party does not have a place of business, reference shall be made to his habitual residence.”

One of the issues affecting arbitration in Nigeria is the issue of legal representation. Under Nigerian law, a foreign counsel is prohibited from appearing as counsel for a party in a domestic arbitration. The position is different with respect to international arbitration.

Another issue affecting arbitration in Nigeria is the right a party has to challenge an arbitral award made in a domestic arbitration in the Nigerian courts. Although the criteria is limited for a domestic award to be challenged in Nigeria, parties find a way to smuggle in any basis, however frivolous, as falling under the criteria stipulated by law. However, with regard to international arbitration, the Nigerian courts are merely limited to recognition and enforcement; courts lack the powers to set aside an international or foreign award.

Some particular sectors of the Nigerian economy are experiencing significant international arbitration activity. Such sectors include the oil and gas, maritime, telecommunication and offshore construction. These sectors are experiencing more significant international arbitration activity than others because of the higher inflow of foreign direct investment and foreign business activity in those areas.

In Nigeria, two of the arbitral institutions most often used for international arbitration are the London Court of International Arbitration (LCIA) and the International Chamber of Commerce (ICC). These institutions are chiefly used because English is the most common language of legal communication, because the rules of these institutions are well-established and globally recognised, and because of ease of travel between England and Nigeria (in terms of visas, etc).

The major legislation that governs arbitration in Nigeria is the Arbitration and Conciliation Act CAP A18, Laws of the Federation of Nigeria 2004 (ACA or the Act). This piece of legislation is closely modelled to the UNCITRAL Model Law. Section 53 of the ACA incorporates the UNCITRAL Arbitration Rules.

There is no significant divergence between Nigerian legislation and the UNCITRAL Model Law.

There has been no significant changes to the Arbitration and Conciliation Act of Nigeria in the past year, nor is there any pending legislation that may change the arbitration landscape.

Section 1(1) of the Act requires that all arbitration agreements be put in writing and signed by the parties to the agreement. In other words, the arbitration agreement must have been consented to by the parties.

The following matters may not be referred to arbitration in Nigeria: tax matters, criminal matters, title to land matters and matters which touch upon or affect government revenue

Nigerian courts will almost always decline jurisdiction where the parties’ agreement specifies arbitration as the medium for resolving any disputes between them. As such courts usually limit their involvement in arbitral proceedings to enforcing or setting aside arbitral awards. As a matter of law, Nigerian courts do not intervene in any arbitral proceedings brought pursuant to the ACA except in instances provided by the Act. Such instances include, in respect of revocation of an arbitration agreement by the court, appointment of an arbitrator if the two arbitrators appointed by the parties fail to agree on the third arbitrator and in relation to the power of the court to order the attendance of witnesses, etc.

It is the position of Nigerian law that the arbitration clause in the contract is separate and independent from the main contract. Article 21 (2) of the Arbitration Rules which is made pursuant to the Arbitration and Conciliation Act provides that the arbitral tribunal shall have power to determine the existence or the validity of the contract of which an arbitration clause forms a part. For the purposes of this article, an arbitration clause which forms part of a contract and which provides for arbitration under these Rules shall be treated as an agreement independent of the other terms of the contract. A decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the invalidity of the arbitration clause.

An arbitration agreement generally exists as a clause in a contract agreement and is usually treated separately regardless of what the contract is all about. It is a special clause not affected by the main contract although it is part of the contract agreement. An arbitration clause usually names its applicable law – this is one of the attractions of arbitration in commercial transactions. It is all about the right to make a choice. Parties are at liberty to choose applicable law.

The Arbitration and Conciliation Act of Nigeria (ACA) does not impose any limits on parties’ autonomy to select arbitrators. Section 7 (1) of the Act grants arbitrating parties the power to specify in their agreement the procedure to be followed when appointing arbitrators and it can be inferred that this provision covers who is selected as arbitrator. However, Section 8 (1) of the Act requires individuals who are appointed as arbitrators to disclose to the parties any circumstances that may raise doubts as to their impartiality or independence while acting in their capacity as arbitrator; this duty to disclose subsists throughout the arbitral proceedings (Section 8 (2)).

Section 7 (2) of the ACA provides for a default procedure when any of the following applies: (i) the parties cannot agree on an arbitrator, in the case of a one-man arbitration; (ii) a party fails to appoint an arbitrator within 30 days, in the case of a three-man arbitral tribunal; or (iii) the parties’ appointed arbitrators in a three-man tribunal are unable to agree on who to appoint as the third arbitrator. In the various instances, a Nigerian Court is empowered to make the appointment, provided that a party to the arbitration requests that it does so.

The selection of arbitrators is usually left to the parties to an arbitration agreement (and their appointee’s appointee, in the case of a three-man arbitral tribunal). Where a party does not agree with the appointment of an arbitrator, it has the option of challenging the appointment by sending a written statement containing reasons for the challenge to the arbitral tribunal. Said procedure is provided for in the ACA. As mentioned earlier, a Nigerian Court will only become involved when the parties have difficulty in choosing arbitrators, subject to an application from either party.

Section 7 (5) of the ACA imposes a restriction on a court’s discretion with regard to choosing an arbitrator for parties in that courts are required to pay close attention to any qualifications, if any, that the arbitration agreement demands an arbitrator to have.

Section 9 (1) of the ACA grants arbitrating parties the power to specify the procedure to be followed where either of them seeks to challenge an arbitrator’s appointment. If the parties do not specify such a procedure in their agreement, a party that seeks to challenge an arbitrator’s appointment is required to send to the arbitral tribunal a written statement containing the reasons for the challenge within 15 days (Section 9 (2)). Under Article 11 (3) of the First Schedule to the Act, an arbitrator whose appointment has been challenged is at liberty to withdraw from office.

Section 10 (1) of the Act outlines circumstances under which an arbitrator’s appointment may be terminated and these circumstances include (i) if he/she withdraws from office, (ii) if the parties agree to terminate his/her appointment where the arbitrator is unable to perform his/her functions or (iii) for any other reason where the arbitrator fails to act without undue delay.

The grounds upon which an arbitrator’s appointment can be challenged are stated under Section 8 (3) of the Act and include (i) where there are circumstances that raise justifiable doubts as to the arbitrator’s impartiality or independence, and (ii) where the arbitrator does not possess the qualifications agreed by the parties.

The grounds upon which an arbitrator’s appointment may be terminated are outlined under Section 10 (1) of the Act, as stated above.

Section 8 (1) of the Act requires individuals who are appointed as arbitrators to disclose to the parties any circumstances that may raise doubts as to their impartiality or independence while acting in their capacity as arbitrator and this duty to disclose subsists throughout the arbitral proceedings (Section 8 (2)).

Matters that are contrary to public policy, criminal matters, title to land matters, tax matters and matters affecting the revenue of the government may not be referred to arbitration under Nigerian law.

By virtue of Section 12 (1) of the ACA, an arbitral tribunal is empowered to determine questions pertaining to its own jurisdiction.

Nigerian Courts will be reluctant to address issues of jurisdiction of an arbitral tribunal where the parties agree in writing to settle their dispute through arbitration. Further, as Section 12 (1) of the ACA empowers an arbitral tribunal to determine questions pertaining to its own jurisdiction, Nigerian Courts will leave the determination of such issues to the arbitral tribunal. Specifically, Section 34 of the Act provides that a court shall not intervene in any matter governed by the Act except where so provided by the Act.

In Nigeria, by the provisions of sections 8 and 9 of the Arbitration and Conciliation Act, where no procedure to be followed in challenging an arbitrator is determined by the parties, a party who intends to challenge an arbitrator on grounds of impartiality or independence, shall do so within 15 days of becoming aware of the constitution of the arbitral tribunal or becoming aware of any circumstances affecting the arbitrator’s impartiality or independence.

Under the ACA, an arbitrator or an arbitral tribunal has the power and discretion to decide as regard to where it holds its meetings, conducts hearings, takes evidence, etc. Such place as decided by the arbitrator or arbitral tribunal may be different from the seat of the arbitration except the parties expressly agree to the contrary in their arbitration agreement.

Section 5 (1) of the ACA stipulates the procedure to be followed where a party commences court proceedings in breach of an arbitration agreement. It provides that any party to the agreement may apply to the court to stay the proceedings. The party applying for a stay of proceedings must do so before delivering any pleadings or taking any other steps in the proceedings. As a result of this provision, Nigerian courts would normally grant stay of proceedings pending arbitration.

Under Nigerian law, the courts have consistently maintained that the mere fact that a dispute is of a nature eminently suitable for trial in a court is not a sufficient ground for refusing to give effect to what the parties have, by contract, expressly agreed to. So 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 arbitration clause as agreed to by them. Where an agreement made and signed by the parties stipulates that any dispute arising therefrom must first be referred to a referee or arbitration, it would amount to ‘jumping the queue’ or ‘putting the cart before the horse’ for any of the parties to resolve to go to the court first before the dispute is referred to arbitration or a referee as provided in the agreement to which the parties are mutually bound.

According to sections 29 and 57 of the ACA, 'party' to an arbitration means a party to the arbitration agreement or any person claiming through or under him. In other words, the ACA recognises that a person who is not a party to the arbitration agreement can be a party to the arbitration if the person can show that he/she is claiming through or under a party to the agreement. It is immaterial whether such a party is foreign or domestic.

Section 13 of the ACA empowers arbitrators to order interim reliefs, provided that the parties agree that the arbitrators should possess such power. Where the parties’ agreement grants the arbitrator such power, the arbitrator is at liberty to exercise the same at the request of a party, either before or during the arbitral proceedings.

The Nigerian courts grant pro-arbitration injunctions – for instance, injunctions to protect the subject matter of the arbitration before the constitution of the arbitral tribunal.

The ACA does not recognise the use of emergency arbitrators – however, if the rules of the arbitral institution chosen by the parties allow it, the court will give effect to it.

The rules of court such as the Federal High Court (Civil Procedure) Rules, 2019 allow the Nigerian courts to order for security for costs. Under Article 38 of the First Schedule to the ACA, the arbitral tribunal shall fix the costs of arbitration in its award.

The Arbitration Rules made pursuant to the ACA govern the arbitration procedure.

Some of the procedural steps required are issuance of a notice of arbitration, appointment of arbitrators, submission of points of claim by the claimant, submission of points of defence by the defendant, and publication of the award. All other procedural steps are subject to the agreement of the parties or at the arbitrator's discretion.

Under the ACA, an arbitrator or an arbitral tribunal has the power and discretion to decide where it holds its meetings, conducts hearings, takes evidence, etc. Such place as decided by the arbitrator or arbitral tribunal may be different from the seat of the arbitration unless the parties expressly agree to the contrary in their arbitration agreement. The arbitral tribunal also has the power to evaluate the admissibility, relevance and weight of any evidence placed before it, and to make the final award and order as to costs. Arbitrators also have a duty to disclose any possible conflict of interest, together with a duty to accord each party equal treatment and opportunity during the arbitral proceedings.

Under Nigerian law, a foreign counsel is prohibited from appearing as counsel for a party in a domestic arbitration. The position is different with respect to international arbitration.

Under the ACA, an arbitrator or an arbitral tribunal has the power and discretion to decide where it holds its meetings, conducts hearings and takes evidence unless the parties expressly agree to the contrary in their arbitration agreement.

The Nigerian Evidence Act does not apply to arbitral proceedings. Under the ACA, an arbitrator or an arbitral tribunal has the power and discretion to decide as regard to the taking of evidence unless the parties expressly agree to the contrary in their arbitration agreement.

By virtue of Section 23 of the ACA, the court or the judge can order the issuance of the writ of subpoena ad testificandum or of subpoena duces tecum to compel the attendance before any arbitral tribunal of a witness wherever he/she may be within Nigeria.

Arbitration proceedings are confidential in nature except in cases where a party seeks to set aside the arbitral award and intends to furnish the court with salient or relevant facts of matters that occurred during the arbitration. Information in an arbitral proceeding can be disclosed in a subsequent proceeding if the subsequent arbitral proceeding is between the same parties and parties are ad idem as to the disclosure of the said information.

According to Section 26 of the ACA, an arbitral award shall be in writing and signed by the arbitrators. Where the arbitral tribunal comprises of more than one arbitrator, the signatures of a majority of all the members of the arbitral tribunal shall suffice, if the reason for the absence of any signature is stated. The arbitral tribunal shall state on the award the reasons upon which it is based, unless the parties have agreed that no reasons are to be given or the award is an award on agreed terms. The arbitral tribunal shall state the date the award was made and the place of the arbitration.

There are no time limits on delivery of the award.

Under the ACA, there are no limits to the remedies that an arbitral tribunal may award.

Under the ACA, the arbitral tribunal is not precluded from awarding interest. Under Article 38 of the First Schedule to the ACA, the arbitral tribunal shall fix the costs of arbitration in its award.

Under the ACA, there is no provision allowing an appeal against an arbitral award. The Act only allows a party to seek to set aside the award and in such situations, the court is not sitting on an appeal over the award.

Every arbitration agreement is deemed to contain a provision that the award is to be final and binding on the parties and any person claiming through them, respectively. The general statement of the law in Nigeria is that where parties choose to have their disputes settled by arbitration, then subject to certain limited exceptions, the parties should take the arbitration for better or worse. Thus, where the award is prima facie valid, they cannot object to the award either upon the law or fact.

A combined reading of sections 29, 30 and 32 of the ACA makes it clear that the court may set aside an award when it contains decisions on matters which were beyond the scope of the submission to arbitration or when the arbitrator has misconducted himself or when the award has been improperly procured. Although the categories are not closed, Nigerian courts have espoused the grounds upon which an arbitral award could be set aside to include:

  • where the award contains decisions on matters which are beyond the scope of the submission to arbitration;
  • where there is an error of law in the award;
  • where the arbitrator acquires an interest in the subject matter of the reference, or is otherwise an interested party;
  • where the arbitrator has breached the rules of natural justice;
  • where the award is inconsistent, or is ambiguous or there is some factual mistake which must be either admitted or at least clear beyond any reasonable doubt;
  • where the arbitrator failed to act fairly towards both parties;
  • where the arbitrator decided the case on a point not put by the parties; and
  • where the award deals with a dispute not contemplated by, or not falling within the terms of, the submission to arbitration.

In terms of the arbitrator, the word 'misconduct' has a wide import, and any of the following may amount to a misconduct:

  • where the arbitrator fails to comply with the terms, express or implied of the arbitration agreement;
  • where even if the arbitrator complies with the terms of the arbitration agreement, the arbitrator makes an award which on grounds of public policy ought not to be enforced;
  • where the arbitrator has been bribed or corrupted;
  • technical misconduct such as where the arbitrator makes a mistake as to the scope of the authority conferred by the agreement under reference;
  • where the arbitrator fails to decide all the matters which were referred to him/her;
  • if by his award the arbitrator or umpire purports to decide matters which have not in fact been included in the agreement of reference, example where the arbitrator gave a direction which affects the interest of third parties, or where he decides as to parties rights not under the contract upon which the arbitration proceeded but under a different contract.
  • if the award is inconsistent or is uncertain or ambiguous or that there is some mistake of fact which is either admitted by the arbitrator or is clear beyond any reasonable doubt.
  • if the arbitrator refuses to state a special case himself or allow an opportunity of applying to the court for an order directing the statement of a special case.
  • if the arbitrator delegates any part of his/her authority, whether to a stranger or to one of the parties or even to a co-arbitrator.
  • if the arbitrator accepts the hospitality of one of the parties being hospitality offered with the intention of influencing his decision.
  • if the arbitrator acquires an interest in the subject matter of the reference or is otherwise an interested party;
  • where the arbitrator takes a bribe from either party;
  • where the arbitrator has breached the rules of natural justice;
  • where there has been irregularity in the proceedings, for example:
    1. where the arbitrators failed to give parties notice of the time and place of meeting,
    2. where the agreement required the evidence to be taken orally and the arbitrator received affidavits,
    3. where the arbitrator refused to hear the evidence of a material witness,
    4. where the examination of witnesses was taken out of the parties' hands,
    5. where the arbitrator failed to have foreign documents translated,
    6. where the reference being to two or more arbitrators, they did not act together, 
    7. where the arbitrator, after hearing evidence from both arbitrators, received further evidence from one without informing or hearing the other,
    8. where the arbitrator attended the deliberations of the appeal board reviewing his award;
  • if the arbitrator fails to act fairly to both parties, for example:
    1. by hearing one party and refusing to hear the other,
    2. by deciding in default of defence without clear warning,
    3. by taking instructions from or talking with one party in the absence of the other, 
    4. by taking evidence in the absence of one party or both parties,
    5. by failing to give a party the opportunity of considering the other party’s evidence,
    6. by using knowledge he/she has acquired in a different capacity in such a way as to influence his/her decision or the course of the proceedings,
    7. by making his/her award without hearing witnesses whom he/she had promised to hear,
    8. by deciding the case on a point not put to the parties.

In Nigeria, parties cannot agree to exclude or expand the scope of appeal.

Under Nigerian law, the court’s jurisdiction to interfere with the award of an arbitrator is limited to setting aside an award or remitting a matter to the arbitrator for reconsideration. In considering an application to set aside an award, the court cannot sit as an appellate court over the award of the arbitrators. The court is required to place itself in the position of the arbitrators, not above them, and then determine on that hypothesis whether the arbitrators followed the law as they understood and expressed it. Also, on the principle of de minimis non curat lex, a court of law will always refuse an application to set aside an award where the matter in dispute is trivial as compared with the whole matter adjudicated upon. An award will not be set aside if a specific question of law is submitted to an arbitrator for his decision; once the decision has been made, the fact that the decision is erroneous in law will not be sufficient to set aside the award as prima facie invalid.

The New York Convention was incorporated into the ACA by virtue of Section 54. Also, the long title to the ACA specifically stated that the Act is to make applicable the Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) to any award made in Nigeria or in any contracting state arising out of international commercial arbitration.

An award that has been set aside by the courts in the seat of arbitration cannot be enforced in Nigeria.

In as much as what gave rise to the arbitration are contractual or commercial matters, the defence of sovereign immunity is unavailable to the state or state entity.

The standards by which domestic courts refuse to enforce foreign arbitral awards are not clearly stated in the law. The court has the discretion to construe what constitutes public policy However, according to Section 35 of the ACA, if a law precludes a subject matter from arbitration, then the ACA will not apply.

The ACA does not provide for class-action or group arbitration. According to sections 29 and 57 of the ACA, a 'party' to an arbitration means a party to the arbitration agreement or any person claiming through or under him/her. In other words, the ACA recognises that a person that is not a party to the arbitration agreement can be a party to the arbitration if the person can show that he/she is claiming through or under a party to the agreement.

Under Nigerian law, a foreign counsel is prohibited from appearing as counsel for a party in a domestic arbitration. The position is different with respect to international arbitration. On the other hand, arbitrators are required to disclose any conflict of interest and arbitrators are required to maintain their independence and impartiality throughout the arbitration.

There are no rules prohibiting or restricting third-party funders in Nigerian arbitration practice.

An arbitral tribunal with its seat in Nigeria can consolidate separate arbitral proceedings if all the parties agree and if the separate arbitrations arose from the same contract.

Third parties are not bound by an arbitration agreement or award unless they were joined as parties to the arbitration.

Uche Nwokedi & Co

“Five Ways”
2 Adeniyi Olanrewaju Street
Off Ogbunike Street
Lekki Phase 1
Lagos
Nigeria

+244 0 9033 804 0000

+234 0 817 333 4441

info@unc-legal.com www.unc-legal.com
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Law and Practice

Authors



Uche Nwokedi & Co is a leading law firm with a high degree of specialisation in energy and natural resources law. UNC was established in 1990, primarily to render legal services to the oil industry, and to support the several joint venture companies then in operation as oil industry service companies, but has evolved into a full-service law firm with a team of dedicated lawyers and a full complement of highly qualified administrative personnel. UNC has been actively involved in mediation and international commercial arbitration, both locally and internationally, and in this respect has acted either as in-country counsel or rendered legal advice in arbitration proceedings and the enforcement or otherwise of arbitral awards under both the rules of the International Chamber of Commerce or the London Court of International Arbitration. The firm has appeared as lead firm and/or co-counsel and has been involved in preparation of processes and analysis in respect of arbitration in the UK and the USA involving Nigerian companies or individuals and other matters in so far as they relate to Nigerian law or the conduct of business in Nigeria in general. UNC has been involved in many precedent-setting cases in Nigeria’s legal system up to the apex court with a very high rate of success.

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