STATUTES GOVERNING ARBITRATION IN NIGERIA

Things you should know about statutes governing arbitration in Nigeria.

CHAMAN LAW FIRM

2/5/2022 8 min read

STATUTES GOVERNING ARBITRATION IN NIGERIA

Arbitration has become the quintessential vehicle for the resolution of commercial disputes over traditional litigation in the Law courts. Its efficiency, simplicity, flexibility, party autonomy and cost effectiveness are among the many reasons why Arbitration is the preferred method of settling disputes all over the world especially among commercial businessmen.

Initially the Nigerian judiciary was quite reluctant to enforce arbitration agreements. It seemed that they considered it to be trespassing on their authority.

The Nigerian Arbitration law is derived mainly from statutes both international as well as local. The international statutes include:

  1. The UNCITRAL Model Law; 

  2. The UNCITRAL Arbitration Rules; and

  3. The New York Convention.

While the local statutes are:

  1. The Arbitration ACT 1914; and

  2. The Arbitration and Conciliation Decree 1988.

Nigeria is a contracting state party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Nigeria endorsed the Convention on 17 March 1970, and it went into power on 15 June 1970.

As for the Article I of the Convention, the pertinent Nigerian law gives that any international or foreign decree dependent on the Convention might be perceived and upheld in Nigeria if the contracting state party where the decree was issued has equal enactment perceiving the authorization of arbitral decrees made in Nigeria as per the arrangements of the Convention. That law also confines the applicability of the Convention to only conflicts emerging out of a lawful relationship that is legally binding.

The essential legal requirement, as contained in section 1(1) of the ACA is that every arbitration agreement shall be in writing or must be contained in a written document signed by both the parties. Section 1(2) provides that: 'Any reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if such contract is in writing and the reference is such as to make that clause part of the contract.'

The above requirements will be satisfied provided the agreement is contained in:

  1. a document by both parties;

  2. an exchange of letters, correspondences, telegrams or other means of communication that provides a record of the arbitration agreement; or

  3. exchange of certain points of claim and defence.

Section 2 of the ACA is unequivocal on the non-enforceability of an arbitration agreement. It gives that, except if a contrary intention is mentioned in the agreement, an arbitration agreement shall be unavoidable except by agreement of the parties or by leave of the judge or a court. It must also be noted that there is no provision on joinder of any third parties in the ACA. Although, the LSAL, which is applicable only within the state of Lagos, provides that a party can, by application in writing and with the consent of the parties, be joined to arbitral proceedings.

The Arbitration and Conciliation Act ("ACA") does not explicitly list conflicts that are not arbitrable. The test is whether the conflict can be settled legitimately by method for accord and fulfilment (United World Ltd Inc v MTS (1998) 10 NWLR 106). The accumulative opinion of the legal scholars is that any such matters that affect the legal status of any individual are not arbitrable. A recent court decision mentions that such commercial conflicts resulted out of the fiscal clauses of contracts are not arbitrable, as the debate impacts on the government's duty of tax collection.

Some examples as to arbitrable and non-arbitrable matters are as follows:

 

 Disputes that can be settled by arbitration include:

  1. Breach of contract

  2. Matrimonial causes

  3. Tort

  4. Compensation for acquisition of land.

Arbitration cannot be used in settlement of the following matters:

  1. Disputes involving crime

  2. Disputes involving the interpretation of the constitution or other statutes.

The proceeding of arbitration is much the same as to that of usual trial where parties to the dispute go through the procedure of examination of witnesses. 

This is but subject to any contradicting agreement by the parties as to whether the arbitral tribunal shall decide whether the arbitral proceedings shall be conducted (Section 20 Arbitration and Conciliation Act).

An arbitration proceeding is provided for under section 15 of the Arbitration and Conciliation Act.

Section 15 provides thus:

  1. The arbitral proceedings shall be by the procedure contained in the Arbitration Rules set out in the First Schedule to this Act.

  2. Where the rules referred to in subsection (1) of this section contain no provision in respect of any matter related to or connected with a particular arbitral proceedings, the arbitral tribunal may, subject to this Act, conduct the arbitral proceedings in such a manner as it considers appropriate to ensure a fair hearing.

  3.  The power conferred on the arbitral tribunal under subsection (2) of this section shall include the power to determine the admissibility, relevance, materiality and weight of any evidence placed before it.

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In arbitral proceedings, where the tribunal for arbitration determines on its own procedural rules, it is totally on its discretion to derive them from national law or formulate its own rules. It is imperative for the arbitral tribunal to observe the requisite rules of national law applicable to international arbitration in the national jurisdiction where the arbitration takes place to make sure that the decree to be made by it will be enforceable at law Arbitration being a matter of procedure as opposed to a matter of substantive law is governed by the lex fori (the law of the country in which an action is brought)

As per section 14 of the Act, parties will be qualified for equal treatment, and they ought to be offered a chance to introduce their cases. The venue of arbitration will be decided by the tribunal with due respects to the issue and the convenience of the parties. The tribunal likewise can appoint and expected to provide details regarding the issue before it while it could also order the presence of a witness.

The detailed procedure under ACA and its practice, certain procedural stages are required to be followed, especially for the institution to be valid or commencement of arbitral proceedings.

These include:

  1. Issuance of communication of the notice of arbitration by the claimant to the respondent in the format prescribed. As per Article 3 of the Arbitration rules, 30 days' notice is mandatory.

  2. Constitution of the tribunal.

  3. Meetings (preliminary meetings, pre-hearing meetings, pre-hearing review, an inspection of documents or subject-matter, etc.).

  4. Hearing and determining preliminary issues if any.

  5. Parties' presentation of cases, documents and evidences.

  6. Hearing (if oral evidence is to be considered).

  7. Re-hearing in the event of replacement of an arbitrator. Note that the re-hearing is mandatory in the event of replacement of the sole or preceding arbitrator, but in the event of replacement of any other arbitrator, re-hearing is at the discretion of the tribunal.

  8. Final submissions (oral or written).

  9. Publication of the final decree of the tribunal to the parties.

  10. Apart from the above, there are other procedural steps under ACA, such as the procedure for the default of parties in appearance and presentation of a case and pleadings, the procedure for the challenge of arbitrators, the procedure for enforcement of an award or challenge of enforcements, etc.

Under ACA, parties have the autonomy in appointing arbitrators of their choice. This autonomy is although limited to the extent that the arbitrators appointed shall be independent and not partial and shall also give a declaration or disclose any such instances that may affect the independence or their impartial nature. The so chosen arbitrators shall possess the required experience and professional qualifications contained in the arbitration agreement to have a legitimately constructed tribunal and, consequently, a valid decree pronounced by it.

Where the parties do not agree upon the method of appointment of the arbitrators, or where the method so chosen by them fails, the arbitrators will be appointed by the court.

An arbitral award is perceived as binding and upon application recorded in writing to the court, be enforced by the court. The party relying on the decree or applying for its implementation will supply-(a) the appropriately authenticated original award or properly certified duplicate thereof; (b) the original arbitration agreement or a duly certified copy thereof. As per section 31 of the Arbitration and Conciliation Act, It ought to be noted that any of the parties to the agreement may ask for the court to reject acknowledgement or enforcement of the decree/award.

Although the arbitration process is considered for several of its benefits ranging from speed and informality of the process, cost-effective, parties have the control over selection of the arbitrators, the processes are private and do not form the part of public records, it cannot be overlooked for its drawbacks as compared to a court proceedings. Like the absence of formal evidence process, lack of formal appeals process, mandatory arbitration clauses, arbitrators may not be unbiased, and the very fact that arbitration proceedings are not public may put one side at a disadvantage.

Such an alternate dispute resolution process when putting to use minus the disadvantages can be beneficial in unloading the court's pressure of handling disputes.

HOW TO ENFORCE AWARD UNDER THE ACT

  1. Enforcement through an action upon the award under common law: Under this option the successful party must establish that there was an arbitration agreement, that the arbitration was properly conducted, and that the award was validly obtained. This mode of enforcement is cumbersome as the substantive issues determined by the arbitral tribunal may be reopened during the course of the action and it could take years to conclude.

  1. Enforcement through the Foreign Judgment Registration and Enforcement Statutes: Whilst an arbitral award is recognized as a ‘judgment’ enforceable under the two statutes, a condition precedent to the use of this enforcement mechanism is that the award must have become enforceable in pursuance of the law in force in the place it was made, in the same manner as a judgment given by a court in that place. In addition, in order to qualify for registration, the foreign award must be a money award for a sum certain i.e. can be ascertained by a simple arithmetical process. These conditions and the Ordinance’s limitation of scope means that enforcement under this mechanism may not be straightforward where the unsuccessful party decides to mount a challenge.

  1. Enforcement under the International Centre for Settlement of Investment Disputes Convention (Enforcement of Awards) Act: ICSID has a special and autonomous mechanism for the recognition and enforcement of their award and this explains why ICSID award is said to be a special form of award. Each of the Contracting States to the Convention has only one duty to perform with respect to the award and that is, to recognize and enforce the award as if it is a final judgment of the court within their State. The applicant for the recognition or enforcement is only required to furnish the court with a certified true copy of the award certified by the Secretary General. In Nigeria, the appropriate authority or court for the registration, recognition and enforcement of ICSID award is the Supreme Court of Nigeria which is the highest court of the land.

 

  1. Enforcement through the Arbitration and Conciliation Act (ACA) Cap. A18, LFN 2004: Nigeria is a signatory to the New York Convention on Recognition and Enforcement of Arbitral Awards 1958 and the treaty is domesticated in the Arbitration and Conciliation Act.

By virtue of Article III of the Convention, there shall not be imposed substantially onerous conditions or higher fees or charges on the recognition or enforcement of arbitral awards to which the Convention applies than are imposed by on the recognition or enforcement of domestic arbitral award.  However, in Ebokam v. Ekwenibe & Sons Trading Company, (2001) NWLR 2 (Pt. 696),32, the Nigerian Court of Appeal listed additional requirements needed for a party seeking recognition and enforcement under the New York Convention. The requirements are as follows;

  1. The arbitration agreement

  2. That the dispute arose within the terms of the submission;

iii.                That arbitrators were appointed in accordance with the clause which contains the submission;

  1. The making of the award; and

  2. That the amount awarded has not been paid.

The provisions of the ACA, because of their simplicity remain the most appropriate method of enforcing foreign arbitral awards.

In Nigeria, awards will usually be enforced unless there are valid grounds for the setting aside of the award.

WRITTEN BY: CHAMAN LAW FIRM TEAM

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