A Brief Overview Of History And Challenges Of Arbitration In Nigeria

By Ummusalmah Adam Ahmad and Mustapha Babalola Toheeb

Before the advent of the British in Nigeria, our laws fitted into the definition of E.S. Hartland who in his book regards ‘Law’ in the so-called primitive societies as “not the act of a sovereign, whether an individual or a body of men; it is the traditional rule of the community, and it is enforced, not by a sanction prescribed ad hoc by the sovereign, but one that is involved in the beliefs and practices of the community”. With the complete colonization of the Northern and Southern parts of the country by the British and the amalgamation of the two halves in 1914, the country became a beneficiary of the British legal system. Our ‘law’ metamorphosed into “a rule laid down for the guidance of an intelligent being by an intelligent being having power over him”.

HISTORY OF ARBITRATION IN NIGERIA.

With the amalgamation, the first formal statute on arbitration was promulgated for the entire country on the 31st of December 1914, that is, the Arbitration Ordinance 1914 based on the English Arbitration Act 1889. It was subsequently reenacted as the Arbitration Ordinance (Act), Cap 13, Laws of the Federation of Nigeria and Lagos 1958. The contents of certain Legal Notices on arbitration issued in 1947, 1954 and 1955 were included. By paragraph (2) of section 1, the 1958 Act was made applicable “to the Northern, Western and Eastern Regions and to Lagos and the Southern Cameroons as if they were each a Region”. Each of the Regions formally adopted it in its own Laws. For instance, it was enacted by the Western Region as the Arbitration Law Cap 8 Laws of the Western Region of Nigeria 1959.

The 1958 Act which consisted of 19 sections provided only for domestic arbitration. It is to be noted that by some coincidence, earlier that year, that is, on 10th June 1958, the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, otherwise known as the New York Convention came into force. Nigeria being a colony of the British at the material time and not having enacted any law relating to international commercial arbitration, could not subscribe or accede to the Convention. It is not known whether the British, on behalf of Nigeria, subscribed to it pursuant to Article X of the Convention which provides that “any State may, at the time of signature, ratification or accession, declare that this Convention shall extend to all or any of the territories for the international relations of which it is responsible”.

Nigeria has however adopted the Convention by section 54(1) of the Arbitration and Conciliation Decree 1988 which came into force on 14th March 1988. It is also relevant to state that even though the Convention was not adopted before 1988 and the country enacted no law relating to international commercial arbitration, a foreign arbitral award in an international commercial arbitration made outside the country could be enforced in Nigeria by the combined effect of sections 2(1)and 4(2) of the Foreign Judgment (Reciprocal Enforcement) Act, Laws of the Federation of Nigeria No 31 of 1960, provided, amongst other things, it was registered in the High Court in this country.

Although Nigeria gained its independence as far back as October 1st 1960, it did not embrace international commercial arbitration formally by way of the statute until the enactment of the Arbitration and Conciliation Decree 1988. Before then, however, a number of Nigerian Companies and prominent legal practitioners had been well-steeped in international commercial arbitration outside the country. The Decree is embodied in the Laws of the country as the Arbitration and Conciliation Act, Cap 19, Laws of the Federation of Nigeria, 1990.

CHALLENGES FACING ARBITRATION IN NIGERIA

1. LITIGATION: In contrast to commercial litigation, where parties must appear in court for many years before a judge may decide their case, an arbitration proceeding is quick and adaptable. The method for resolving the disagreement has been agreed upon by the parties. An arbitral award cannot be appealed, and arbitration processes are private. Despite the benefits of arbitration over litigation, there are still several difficulties with using arbitration to settle commercial issues in Nigeria.

Whether on purpose or by accident, litigation rapidly replaced other methods of settling business issues in Nigeria. While some lawyers choose to litigate a case that is subject to arbitration, others businesses insist on settling complex commercial issues through court proceedings. Some judges are still hesitant to refer cases to arbitration because they worry that arbitration may progressively usurp their functions and the powers of the Courts, despite the fact that judges get ongoing training on the role of arbitration in conflict settlement. A significant obstacle to the development of arbitration in Nigeria is this deeply rooted culture of litigation

2. POOR ARBITRATION LAWS:

Again, an unclear or poorly written arbitration or submission agreement may cause misunderstandings. An arbitration or submission agreement that does not specify the number and procedure for choosing the arbitrators, the arbitration’s scope, location, seat, language, rules, and applicable law may cause delays or even defeat the parties’ intention to resolve their commercial dispute through arbitration.

3. ATTITUDE OF PARTIES:

Even though an arbitral award is final and binding, the losing party may seek leave of Court to set aside the award on the grounds of misconduct of the Arbitrator. For commercial disputes with huge financial implications, the losing party may even appeal to the Court of Appeal and then the Supreme Court if the application to set aside the award is dismissed. In such a circumstance, the winning party may be exposed to the same troubles faced by a litigant in conventional Courts.

RECOMMENDATIONS

In order to address the challenges facing arbitration in Nigeria, the following issues should be addressed.

1. Arbitrability and public policy

Sections 48((b)(i) and (ii) of the Arbitration and Conciliation Act provide that the court may set aside an award if it finds that:

• the subject matter of the dispute is not capable of settlement by arbitration under the laws of Nigeria; or
• the award is against the public policy of Nigeria.

Like Sections 48(b)(i) and (ii) of the Arbitration and Conciliation Act, Sections 52(2)(b)(i) and (ii) of the act and Articles V(2)(a) and (b) of the New York Convention confirm that arbitrability and public policy are enforcement issues, and not issues in respect of which a court would intervene to stop ongoing arbitration proceedings.

Under the Arbitration and Conciliation Act, the issues of arbitrability and public policy clearly constitute grounds to set aside an arbitral award or to refuse recognition and enforcement of an award. Ongoing arbitrations have recently been halted on the grounds that the subject matter of the disputes was not arbitrable under Nigerian law or was against the public policy of Nigeria.

However, this is contrary to Section 34 of the Arbitration and Conciliation Act, which expressly prohibits the court’s intervention on any matter governed by the act, except where it is so provided.

1. Anti-arbitration injunctions

The Nigerian courts have also recently granted anti-arbitration injunctions on the grounds that the subject matter of the disputes was not arbitrable under Nigerian law.

As regards anti-arbitration injunctions, the Singapore High Court held in Mitsui Engineering and Shipbuilding Co Ltd v Easton Graham Rush⁽⁹⁾ that it had no power to grant an anti-arbitration injunction restraining an arbitrator from proceeding with the arbitration but made clear that it could set aside the award if the circumstances so warranted.

The Nigerian courts should take a leaf from the book of the Singapore High Court in this regard – in particular, since undue court intervention can significantly undermine the security of contracts.

3. Judges in Nigeria must receive training in arbitration law and procedure. They must back arbitration, uphold arbitration agreements, and uphold and uphold arbitration decisions.
4. When dealing with the enforcement of arbitration agreements and awards, the judiciary must take an enforcement-friendly posture.
5. Arbitrators must be knowledgeable individuals with proven integrity.

CONCLUSION

The time to act is now. The independence, neutrality, and diversity of these institutions, with the active support and assistance of the judiciary, will be the true test of Nigeria’s preparedness to be an attractive seat for international arbitration as new arbitration institutions are established in Nigeria to compete with existing institutions.

The people of Nigeria—its arbitrators, judiciary, lawyers, secretaries, registrars, and ambitious young arbitrators—are its greatest advantages in establishing itself as a desirable location for international arbitration. Everyone should pledge to work toward the objective of making the nation, and even the continent of Africa, a favoured location for international arbitration.

SOURCES

1. Ephraim Akpata, THE NIGERIAN ARBITRATION LAW IN FOCUS (West African Book Publishers Limited 1997).
2. Dorothy Ufot, “The Challenges of Arbitrating in Africa: The Nigerian Experience – Commentary – Lexology” (Lexology, December 6, 2012) <https://www.lexology.com/commentary/arbitration-adr/nigeria/dorothy-ufot-co/the-challenges-of-arbitrating-in-africa-the-nigerian-experience> accessed October 21, 2022.
3. Emmanuel Ekpeyong, “The Problems Militating Against The Growth Of Arbitration In Nigeria – Arbitration & Dispute Resolution – Nigeria” (The Problems Militating Against The Growth Of Arbitration In Nigeria – Arbitration & Dispute Resolution – Nigeria, June 25, 2014) <https://www.mondaq.com/nigeria/arbitration-dispute-resolution/322946/the-problems-militating-against-the-growth-of-arbitration-in-nigeria> accessed October 21, 2022.

ABOUT THE AUTHOR

Ummu-salmah Adam Ahmad is a final year law student of Bayero University Kano and a Legal Intern at Dikko and Mahmoud.

Mustapha Babalola Toheeb is a penultimate year law student at Bayero University Kano and a Legal Intern at Dikko and Mahmoud.

Source: TheNigerialawyer