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ArbitrationInEmergingMarkets:CurrentChallengesLitigation,Mediation&ArbitrationNigeria

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Nigeria: Arbitration In Emerging Markets: Current


Challenges
LastUpdated:16April2013
ArticlebyTolulopeAderemi
Perchstone&Graeys
0

1.INTRODUCTION
Itisapttosaythatofthemechanismsopentopartiesseekingtoresolvetheircommercialdisputesswiftlyandefficiently,
arbitrationisperhapsthemosteffective.Itcontinuestoformamajorpartofeverycommercialagreementusedespeciallyin
developingeconomies(anddevelopedonestoo),offeringanincreasingpromisethatthosecountriesyettoembracethe
resolutionmodel,arenomorethanonemissedinvestmentopportunityawayfromdoingso.
InthecontextofNigeria,groupedamongtheworld'sEmergingMarkets,thearbitrationoptionhaslongbeenembraced,
offeringanexcitingandviablealternativetothelitigation/courtroombattlesthathavehithertodominateditslandscape.From
theadoptionbytheFederalGovernmentin1988oftheUnitedNationsCommissiononInternationalTradeLaw[UNCITRAL]
ModelLaw(whichformedthebasisofthecountry'sArbitrationLaw1),thisdisputeresolutionprocesshaswithoutdoubtnow
successfullysecureditsfoundations2.Governmentpolicyobjectivesatthetimeofenactingthelawbeingtoincreaseforeign
investmentinkeysectorsoftheeconomy,especiallyasregardsinfrastructuredevelopment,itwasimperativetoinspire
investorconfidencethatitwasaviabledestinationforinvestmentcapitaland,furthermore,thatNigeriawascommittedtoa
resolutionofdisputesusinginternationallyacceptedmethodsofdoingso.Arbitrationwasthatmodel.Andalthoughstrictly
speakingitsprincipleswerenotaltogethernewtothecountry3,itsformalizationwastheArbitrationandConciliationActCap.
A.18,LFN2004.Investmenthasthrivedasaresult,andwithdevelopmentcontinuingapace.
Theabovesaidhowever,thecountry'smorerecentexperienceissuggestiveofanarbitralprocessisunderthreat,facing
challengesfromanumberofdirectionsnotonlyinrelationtotheconcernsbeingexpressedbywouldbeinvestorsastothe
efficacyofthecountry'slegalandregulatoryregime(especiallyasregardscontractenforceability),butmoreparticularly,there
arequestionsastowhetherthecourts,whichordinarilyretainsupervisoryfunctionsoverTribunals,areabletomanagethe
delicatelinebetweensupportingarbitralreferencesandwhatmightbedescribedasoutrightinterventioninthem.
ItiswiththeforegoinginmindthatIwanttolookatthestateofaffairswithinNigeriai.e.,usingitsarbitralprocessestoresolve
disputesthereareconcernsandmyferventhopeisthatNigeriawillcometoattainapositionwhereinvestorsregainthe
confidencelevelsthatsawtheinvestmentboostsofmuchofthelastfewdecades,thatitbecomesacountryidentifiedasan
acceptabledestinationfortheircapital,andwheretheyretainanassurancethattheircontractswillberegulatedinlinewiththe
termsthatbindthem(totheircounterparts).
IthanktheInternationalChamberofCommerce(ICC)aswellastheFirmofClyde&CoforputtingthisconferenceArbitrationin
EmergingMarkets:CurrentChallengestogetherinmyviewitcouldnothavecomeatamoreauspicioustime.Theworld
economicorderisshiftingandinvestmentopportunitiesareopeningupallthetime.EmergingMarketEconomies(EMEs),
includingNigeriamustpositionthemselvestotakefulladvantage.
IndeliveringapaperonwhatIconsidertobethechallengesofarbitrationinNigeria,Iconsideritapttohighlightsomekey
featuresoftheArbitrationandConciliationAct4aswellasmilestonesachievedinpromotingtheprocessandthenthe
challengesproper.

2.MAJORHIGHLIGHTSOFTHEARBITRATIONACT.
a.)TheArbitrationClause:TheArbitrationandConciliationAct("ACA")mandatesthatallarbitrationagreementsmustbein
writingandsignedbytheparties,inanexchangeoflettersorpointofclaimordefence.InNigeria,arbitrationclausesare
irrevocableexceptbytheleaveofcourtormutualagreementofparties.Evenwherepartieshadnoprioragreement,witha
submissionagreement,partiesmaystillsubmittoarbitration
b.)SubjectmatterArbitrability:The"ACA"doesnotstipulateanyparticularsubjectmatterthatmaynotbereferredto
arbitration.ThequestionofwhetherornotadisputeisarbitrablehasthereforebeenleftatthediscretionoftheCourts.InArab
Republicv.Ogunwale(2002)9NWLR(Part771)127,theCourtofAppealheldthatthetestfordeterminingwhetheradisputeis
arbitrableornotisthatthedisputeordifferencemustnecessarilyarisefromtheclausecontainedintheagreement.However
notalldisputesarenecessarilyarbitrable

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c.)BindingNature:The"ACA5"providesthateveryarbitrationawardinNigeriashallbebindingontheparties.Thisisto
precludearecalcitrantpartyfrompreventingasuccessfulpartyfromenjoyingthefruitsofhisjudgment.
d.)NumberofArbitrators:InNigeria,thenumberofarbitratorsiseitheroneorthree.Thepartiestoanarbitrationagreement
maydeterminetheirpreferrednumbersofarbitratorstobeappointedundertheagreement,butwherenosuchdeterminationis
made,thenumberofarbitratorsshallbedeemedtobethree.
e.)Challengeofanarbitrator:Partiesmaydeterminetheproceduretobefollowedinchallenginganarbitrator.Wherenosuch
procedureisdeterminedapartywhointendstochallengeanarbitratorshall,withinfifteendaysofbecomingawareofthe
constitutionofthearbitralTribunalorbecomingawareofanyofthegrounds,sendtothearbitralTribunalawrittenstatementof
thereasonsforthechallenge.
f.)PreservativeOrders:TheprovisionsoftheACA6clothsthemembersofaTribunalwiththerequisitepowerstogrant
preservativeordersduringanarbitrationreference.Theseordershoweverdonotincludegrantinginjunctionsetc.TheAct
providesthatinsuchcircumstance,theTribunalcanremitthatportionofthereferencetoapropercourtforthegrantofsuch
injunctiverelief.
g.)LanguagetobeusedinArbitralproceedings:InNigeria,thepartiesmay,byagreementdeterminethelanguageor
languagestobeusedinthearbitralproceedings.Butwheretheydonotdoso,thearbitralTribunalshalldeterminethe
languagetobeusedbearinginmindtherelevantcircumstancesofthecase.
h.)LegalRepresentation:InNigeria,thepartiestoanarbitralproceedingmayappearforthemselvesorberepresentedor
assistedbyalegalpractitioneroftheirchoice7.
i.)TheAward:InNigeria,anAwardmaybeinterim,interlocutory,orfinal.AnyawardmadeinNigeriamustadheretothe
following:
Itmustbeinwriting
Itmustbesignedbyallthearbitrators(iftheyaremorethanone)
Itmustbedeliveredwithareason(exceptwherepartiesagreeotherwise)
TheplacewheretheAwardwasmademustbestatedontheaward.
j.)TheenforcementofanAward:InNigeria,anarbitralawardshall,irrespectiveofthecountryinwhichitismade,be
recognisedasbindingontheparties.ThisismadepossiblebytheForeignJudgments(ReciprocalEnforcements)Act,Cap
152,LawsoftheFederationofNigeria2004,whichmakesforeignarbitralawardsregisterableinNigerianCourtsifatthedate
ofregistrationitcouldbeenforcedbyexecutioninNigeria.
WiththeabovelegislativeframeworkforarbitrationinNigeriaandtodojusticetothethemeofthisconference,itisappositeto
examinetheveracityoftheprocessesandtheroleofthecourtsandgenerallytheoverarchingquestionastothechallenges
facingarbitrationintheNigerianjurisdiction.

3.CHALLENGESOFTHENIGERIANARBITRALLANDSCAPE
NigeriaisasignatorytocertainInternationalConventionsandTreaties.OnesuchConventionistheNewYorkConvention(on
theRecognitionandEnforcementofForeignArbitralAwards(1958))apivotalaimofwhichisthepromotionofinternational
commercialarbitration.
WhilearbitrationstillremainsthepreferreddisputeresolutionmechanismforthosewantingtoinvestinNigeria,srecentyears
hasseensomethingofanerosionofitstenets.Thismaybeasaresultofinadequatetrainingofbothlawyersandjudges(who
actasarbitratorsandcounsel).WhenappearingasCounsel,somelawyerstendtoforgetthattheoverridingobjectiveofthe
referenceisaswiftandefficientresolutionofdifferencessothatpartiesmaycontinuewiththeirrespectivetransactions.An
aspectoftheseconcernswereindeedexpressedbyoneoftheexpertscalledbeforetheEnglishcourtsinthecaseofIPCO
(Nigeria)LtdvNigerianNationalPetroleumCorporation(2005))8,thatthe"...millofjusticecangrindveryslowlyinNigeria.
Inparticular,Nigeriaisnotyetgearedtowardsarbitrationinthemannerwhichmeetstheinternationalstandardsitagreedto
whenadoptingtheNewYorkConvention".
WhiletheenthusiasmtoinvesttinNigeriamayhavebeenblightedbyrecentevents9etc.,Imustsaythatthisnotwithstanding,
Nigeriacontinuestoencouragealternativedisputeresolution(ADR)mechanisms,especiallyarbitration10.Itiswiththisinmind
thatthispaperwillnowexaminesomeofthechallengesfacedintheuseofarbitrationasadisputeresolutionmodelinNigeria:
i.)Thesanctityofarbitrationagreementsthesinequanontoallsuccessfuldisputeresolutionprocessestheworldover.In
otherwords,everyinvestororacommercialplayermustensure(orperhapswantstoensure)thatintheeventofadisputein
thecourseofthecommercialtransaction,suchdisputewillnotonlybefairlydealtwith,buttheprovisionsofthearbitration
agreementshallbefaithfullycarriedoutbytherespectiveparties.
InNigeriathisexpectationhasbeengiveneffecttobySection2oftheArbitrationandConciliationActCap.A18which
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provides:thatunlessacontraryintentionisexpressedbytheparties,anarbitrationagreementshallbeirrevocable.Thus,in
simpleparlance,apartycannotunilaterallyrevokeanarbitrationagreement.
AnemergingeconomysuchasNigeriamustensurethattoattractinvestmenttoattainthedesiredlevelofinfrastructural
development,aneffectivedisputeresolutionframeworkmustbeputinplacesuchthatinvestorswillbesufficientlycomfortable
toinvestinthecountrywiththeknowledgethatintheeventofadispute,thesewillbe'fairly'resolvedaccordingtotheir
agreements.
Toachievethis,thecourtshaveamajorroletoplaytoensurethatpartieswhohavecommittedtocertainobligationunderthe
contract(andindeedthearbitrationclause)donotturnaroundandusethemachineryofthecourtstotheannoyanceofthe
otherparty.ThisunfortunatelyhoweverissomethingIfindquitecommoninNigeria.
Inotherwords,notwithstandingexpressagreementstoresolvedisputesbyarbitration,somepartieswillapproachthecourtfor
allsortsof'preservativeorders'.TheACA11hasalsobeenwidelyabusedbyrecalcitrantparties.Theprovisionsavailable
undersection4oftheActhavebeenparticularlyabused,takenbypartiesasalibertytoapproachthecourtindefianceof
expressagreementtoresolvedisputesbyarbitration.Iamnotsuggestingthatwhereapartyfeelsthatthereisstronglikelihood
ofjusticewhereitsubmitstothejurisdictionofaTribunal,itshouldnotapproachthecourtsforhelp.Itisthefreedomtodoso
thatshouldnotbeabusedaswecurrentlyexperienceinarbitrationsconductedinNigeria.
ii.)Thepotencyofthepowersofanarbitrator:Amythorreality:Thequestioncontinuestoremainunansweredbymany
arbitrationpractitionersinNigeria.Thisisbecausethepowersdonatedtoanarbitratorbyanarbitrationagreementnomatter
howwellintended,expressedorcapturedinanarbitrationagreementareincreasinglybeingchallenged.Thisrangesfromthe
powertothearbitratortodeterminetheplaceofarbitration(wherenonehasbeendeterminedbytheparties),todetermining
jurisdiction(thekompetenzkompetenzrule)andeventothedeliveryofanaward(whetherinterim,interlocutoryorfinal).
Thecollateraleffectofthisattitudebythepartiesisthattheabilitytoenjoythefruitsofanawardisstronglydependentonthe
willingnessofthepartiestocooperatecooperationwhichisusuallyneverobtained,thesamemustnecessarilybebrought
beforetheTribunalitself.InNigeria,allowingtheTribunaltodetermineitsjurisdictionhasproveninrecenttimestobea
herculeantask.Thisisbecause,notonlydoTribunal'susuallyexceedtheirjurisdiction,insomecasewheretheexerciseof
jurisdictionisappropriatelyexercised,apartymaynonethelessandforfrivolousreasonsseektochallengeit.12
Wherethisisthecase,sucharbitralreferencesmaytechnicallybesaidtohaveabatedbecauseofthenumberofyearsittakes
todeterminecasesinNigeriancourts.
iii.)Nigeriaas'place'ofarbitration:ChallengesofInsecurity:Oneoftheprinciplesofpartyautonomyinarbitrationistheparties
righttodeterminetheplaceofarbitration.Similarly,theActalsoprovidesforanalternativeintheeventthatpartiesareunable
toagree.ThisalternativeconferspowersonthearbitralTribunaltodetermineordecidetheplaceofarbitration13.Itisnotin
doubtthereforethatexceptpartiesagreeotherwise,theplaceofarbitrationshallbeasagreedbytheparties.
However,inNigeria,theunfortunateincidencesofinsecurityhavecontinuedtofoistafaitaccomplitothisautonomy.The
securityofthemembersoftheTribunal,partiesandothersconnectedtoareferencehascontinuedtomakearbitratorsremove
theplaceofarbitrationfromNigeriatheagreedchoice.
Forinstance,inoneortwoinstances,asCounseltoapartyinanarbitration,wehavehadtoconcedetorelocatingtheplaceof
arbitrationfromNigeriadespiteassurancesatthehighestlevelsofadequatesecurity.Thetruthisthatsecurityissuesexistthe
worldover,Nigeriaisnoexception.WhilstthisisachallengebeingfacedbyNigerianparties,theinsistenceofforeign
arbitratorstorelocatetheplaceagainstthewishofthepartieshasnothelpedandpartiesaresometimeswithoutoptionbutto
waivetheirrightsinthisregard.
iv.)TheKompetenzKompetenzRule:HowcompetentareArbitrators:Althoughdiscussiononthissubheadcommencedinthe
immediateprecedingabove,itsimportancenecessitatesadditionalcomments.Anarbitratorisentitledtodeterminewhetheror
nothehasjurisdictiontoentertainamatter.BytheprovisionsofSection12oftheArbitrationandConciliationActwhich
providesasfollows:
"Anarbitraltribunalshallbecompetenttoruleonquestionspertainingtoitsownjurisdictionandonanyobjectionswithrespect
totheexistenceorvalidityofanarbitrationagreement"
Achallengeofthearbitrator'sjurisdictionisoftenraisedasapreliminaryobjectionandisusuallydeterminedeitherby
bifurcatingtheproceedingsortakenasapreliminarypointintheAward.WhicheverprocedureisadoptedbytheTribunal,such
adecisionisfinalandbinding14.However,inNigeria,thismaynotbeso.TheNigerianFederalHighCourthaspowerstomake
prerogativeorderssuchasCertiorariorProhibitionorinsomeothercases,ontheapplicationofoneparty,setasidesuchan
award.Although,theseareprerogativepowerstocurbtheexcessesoftheexerciseofpowersbytheTribunal,inNigeria,this
legalwindowhasbeenextensivelyabusedsuchthatuponadeterminationbyaTribunalofitsjurisdiction,anunsuccessful
partywillmostlikelyinvokethesupervisoryjurisdictionoftheFederalHighCourt,eithertoquashthedecisionoftheTribunalor
inseekingtoprohibititfromcontinuingwiththereference.
InarecentarbitrationinwhichIwasinvolved,theRespondenthavingraisedanumberofunsuccessfulobjectionsbeforethe
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Tribunal,thenapproachedthecourtforthefollowingreliefstowit:
AnobjectionchallengingthePresidingArbitratorforhavingbeingnominatedbytheFederalAttorneyGeneral(albeit
erroneously)astheClaimant'sarbitrator.(2009)
AnobjectionchallengingthejurisdictionofthePresidingarbitratorforhavingactedfortheClaimantinsomeother
unrelatedmatter
Anobjectionchallengingitsownappointedarbitratorforhavingmadecertaincommentswhichallegebiasagainstit,the
Respondent
AnobjectionagainstthePresidingArbitratorforhavingactedagainsttheRespondentinanunrelatedmatterattheHigh
Court
ItwasclearthatthepartyandhisCounselwerenotpreparedtocontinuewiththereference.Thepartywasnotonly
challengingthepresidingarbitrator,italsochallengeditsownappointedarbitrator.Thisisaclearcaseofanunwillingnessofa
partytoproceedinthearbitrationdespiteitscontractualagreementtodoso.ItsufficestosaythataJudicialReview
applicationpursuanttothesameisstillincourtwelloverayearlater,whilethearbitration,commencedoverfouryearsagois
stalled.
v.)PrecedencerightsofLawyersinArbitration:ItisgraduallybecominganorminNigeriathatLawyers,ratherthananyother
classofprofessional,areengagedasrepresentativesofpartiesinarbitrationproceedings.Consequently,theprecedentright
ofappearance(ofalegalpractitioner),asapplicableincourtroomproceedingsisgraduallycreepingintoarbitrations.
Inotherwords,lawyersarenowinvokingtheprovisionsoftheLegalPractitioner'sAct15whichensurestherightofasenior
lawyertoleadajuniorone.TheeffectofthisbeingthatpartiesmaynowraiseobjectionsagainstaSeniorCounselbeing,in
effect,ledbyajuniorSection8(4)whichstatesasfollows:
"Legalpractitionersappearingbeforeanycourt,tribunalorapersonexercisingjurisdictionconferredbylawtohearand
determineanymatter(includinganarbitrator)shalltakeprecedenceamongthemselvesaccordingtothetableofprecedence
setoutintheFirstScheduletothisAct".
WhilstitisconcededthatthisisthecorrectpositionoftheNigerianlawasregardsappearancebylawyers,itsapplicationto
arbitrationreferencesmustinmyviewbecircumscribedandultimatelydiscouraged.Thisisbecause,toapplythisLawasnow
beensuggestedbylawyerswillrobpartiesinarbitrationproceedingsoftheirautonomousrightstoappointrepresentativesof
theirchoice.Thisexposestheparadoxinencouragingarbitrationasapartyautonomousdisputeresolutionmechanismin
Nigeria.ThisinitselfcontradictstheprovisionsofArticle4ofthe1stScheduletotheACAwhichspeaksof
'parties...represented...bylegalpractitionersoftheirchoice...'
Therefore,thisintroductionmustbecondemnedinstrongtermsasbothdomesticandforeigninvestorsmustbegiventheright
toappointarepresentativeoftheirchoice(whetheraseniororjuniorlawyer).

vi.)Conclusion
Inconcludingthispaperandnotwithstandingthechallengesdiscussedabove,arbitrationcontinuestogainprominencein
Nigeria.Similarly,theNigeriancourtisalsopositionedtoencouragetheprocessofalternativedisputeresolution(including
arbitration)bytheestablishmentofprelitigationmechanismssuchastheLagosMultiDoorCourthouseoftheLagosState
HighCourt.ThisinterestinglyisaprivateinitiativeincollaborationwiththeLagosStateHighCourttoattempttoresolvecases
whichmayberesolvedbythemanydoorsithasmadeavailable16.ThishasprovedverysuccessfulinLagosState(the
commercialnerveofNigeria)andispresentlybeingintroducedtootherpartsofthecountry.
OriginallypublishedOctober8th,2012.
Footnotes
1ArbitrationandConciliationActCap.A.18,LFN2004TheActalsodomesticatedNigeria'streatyobligationsarisingundertheNewYorkConventionon
theRecognitionandEnforcementofForeignArbitralawards1958.
2Inmanyrespectslitigationstilldominatesthedisputeresolutionprocess.Thatsaidhowever,arbitrationreferencesarecontinuallyincreasing.Infactit
wouldbemostunusualtodaytoseeacommercialcontractwithoutsuchaclause.
3Historically,Nigeriahadlongadoptedthisformofresolvingdisputes,albeitmainlyinrelationtolocal/customarydifferencesasindeedwasaffirmedin
Ohiaerivs.Akabeze3(1992)2N.W.L.R(Pt221)pg1.SeealsoOkpuruwuvOkpokam(1988)4N.W.L.R(pt90)554at572.
4CapA.18,LawsoftheFederationofNigeria,2004.
5Article32ofthe1stScheduletotheArbitrationandConciliationActCapA.18,LFN2004.
6Section13
7Article4,Section11oftheRulestotheACA
8(2IPCO(Nigeria)LtdvNigerianNationalPetroleumCorporation(2005)005)EWHC726

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9TheNigerianCourt'sattitudetoincessantinterventioninarbitrationproceedingsetc.
10AswellasinvestintrainingJudgesontheimportanceofADR.Infact,inLagosState,someJudgeshavebeenspeciallytrainedas'ADRJudges'.
11PeritsSection4
12ItmustbesaidthatthisisnotaproblempeculiartoNigerianjurisdiction,however,itsincidenceisbecomingontheincreaseinNigeria.
13Lutinv.NNPC(Supra)
14Thisisofcoursesubjecttolegislativecompliancewiththedeliveryofsuchanawarde.g,ReasonedAward,signedAwardetc.
15Section8(4)thereof.
16E.g.Mediation,Conciliationetc.

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