Enforcement of Foreign Arbitral Awards and the Challenge of Time in Nigeria

By Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

INTRODUCTION

Arbitration has evolved over the years and has come to be acknowledged as a suitable alternative dispute resolution mechanism to litigation, offering a viable means of resolving disputes without resorting to traditional courts. Arbitration is mostly used in the settlement of contractual and commercial disputes. Commercial arbitration has become a major draw in international transactions due to its speed and effectiveness in resolving commercial disputes. Having obtained the award in international arbitration, the successful party would have to enforce the foreign award against his adversary.

An award is the final decision of an arbitral panel. Such award must be in writing and signed by the arbitrators. Where the tribunal comprises more than one arbitrator, the majority’s signatures will suffice if the reason for the absence of any signature is stated. For the purpose of this article, we shall consider foreign arbitral awards. 

Foreign arbitral awards have been defined by conventions like the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards as awards made in the territory of a State other than the State where the recognition and enforcement of such awards are sought, and arising out of differences between persons, whether physical or legal.

This work examines the concept of foreign arbitral awards, how the challenge of time has posed a limitation to the enforcement of foreign arbitral awards in Nigeria and whether there has been any effort made to solve this challenge. 

Concept of Arbitration and Foreign Awards

Arbitration is a private dispute resolution mechanism established for the settlement of disputes by a neutral third party called the arbitrator. It means commercial arbitration, whether or not administered by a permanent arbitral institution. Generally, arbitration does not apply in criminal cases, election petition matters or cases on the interpretation of the law or statute, as these are within the jurisdiction of the Nigerian Courts duly established by the Constitution of the Federal Republic of Nigeria (CFRN) 1999, as amended. Arbitration is mostly resorted to for the settlement of commercial disputes, as noted in the introduction of this work. Arbitration has such advantages as confidentiality of proceedings, selection of experts as arbitrators and time-saving.

At the end of an arbitration proceeding, the arbitral panel gives an award, which is tantamount to the judgement of a Court in a Judicial proceeding. The award is binding on the parties who subjected themselves to the arbitration. Where an award which is obtained in another jurisdiction is sought to be enforced in Nigeria, such an award is said to be a foreign award.

Legal Framework for Enforcement of Foreign Arbitral Awards

It is required of parties to abide by the award given by the arbitrator(s) in good faith. However, the party against whom the award is given may trigger certain factors which would require the enforcement of the award. In BCC Tropical Nigerian Limited v. The Government of Yobe State & Anor, the Court held that the disputing parties are normally required to give effect to the arbitral award, as a result of their participation in the arbitration proceedings in good faith. There are, however, instances where the party against whom the arbitral award was given would attempt to renege from abiding by the award.

When such situation arises, the party in favour of whom the award was given can take steps to ensure the enforcement of the award.

The comprehensive legislation in Nigeria providing for the recognition and enforcement of foreign arbitral awards is the Arbitration and Mediation Act 2023. This legislation was enacted to establish a cohesive legal framework for the fair and efficient resolution of commercial disputes through arbitration and mediation and to render applicable the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, commonly referred to as the New York Convention, to any award rendered in Nigeria.

The Arbitration and Mediation Act provides that “An Arbitral Award shall, irrespective of the country or state in which it was made, be recognized as binding and, on application in writing to the Court, be enforced by the Court subject to the provisions of this section and section 58 of this Act.” In addition to this, the party seeking to enforce the award shall supply the original award or a certified copy of it, the original arbitration agreement or a certified copy of it, and where the agreement or award is not made in the English language, a certified translation of it into the English language. This will enable the court to proceed in granting the application for recognition and enforcement.

In addition, a foreign arbitral award may be enforced directly pursuant to the New York Convention. Thus, the Act provides that, without prejudice to Sections 57 and 58 of the Act, where the recognition and enforcement of any award made in arbitration in a country other than Nigeria is sought, the New York Convention on the Recognition and Enforcement of Foreign Awards, set out in the second schedule to the Act, applies to an award, provided the country is part of the New York Convention and the differences arise out of a legal relationship, whether contractual or not, considered commercial under the laws of Nigeria.  This was also held in Tulip Nigeria Ltd v Noleggioe Transport Maritime. 

Grounds for Refusal of Application for Recognition and Enforcement of Arbitral Awards

Notwithstanding the above provision, it is noteworthy that where a party applies to the court for enforcement of an arbitral award, it is not absolute that the court shall grant the application. There are several grounds which can make a court refuse the application for recognition and enforcement of foreign awards. 

The Act provides that irrespective of the country in which the award was made, the Court may only refuse recognition and enforcement of an award at the request of the party against whom the award was invoked where the party furnishes the court that:

1. a party to the arbitration agreement was under some form of incapacity;
2. the arbitral award is invalid under the law of the country in which it was made;
3. the party against whom it was made was not given due notice on the appointment of arbitrators;
4. the award contains decisions on matters which are beyond the scope of the submission to arbitration;
5. the composition of the arbitral tribunal or the arbitral proceedings is not in accordance with the agreement of the parties;
6. the award was suspended or was set aside by the court of the country in which it was made.

In addition to this, where the court finds that the subject matter of arbitration is not capable of settlement by arbitration in Nigeria, and the award sought to be enforced is against public policy in Nigeria, the court can refuse the enforcement of that award.

Applications for the recognition or enforcement of an arbitral award in Nigeria must be made to the Court, which is defined by the Arbitration and Mediation Act 2023 as the High Court of a State, the Federal High Court, or the High Court of the Federal Capital Territory, Abuja. The judgment creditor needs to consider the CFRN 1999 in order to determine the court’s original jurisdiction over the subject matter of the dispute. In Futa v BMA Ventures (Nig.) Ltd., the Court of Appeal held that the heart of the relief of the suit is for recovery of debt, which emanated from a simple contract for which the Federal High lacked jurisdiction to entertain and grant the application for the recognition and enforcement of an arbitral award. Consequently, it was held that the order recognizing the award was null and void.

Challenge of Time in Enforcement of Foreign Awards in Nigeria 

To provide a comprehensive understanding of the enforcement of a foreign arbitral award in Nigeria, it is vital to examine the issue of limitation of time in the enforcement of arbitral awards before the enactment of the AMA 2023, as well as the current provisions of the Act. The readiness of Nigerian Courts to recognize and enforce an arbitral award, the ease or difficulty of doing so and the likely timescale of the process of recognition and enforcement are issues of enormous concern to any person wishing to enforce an arbitral award in Nigeria. 

The time limitation for the recognition and enforcement of an arbitral award in Nigeria is governed by statutes. Prior to the repeal of the Arbitration and Conciliation Act, the legal position was that whereas a court judgment is enforceable within time limits ranging from six years from the date of its delivery, the time frame for enforcing an arbitral award commences from when the cause of action arose, rather than when the award was made, and expires six years thereafter. This was the position of the Court in the cases of Murmansk State Steamship Line v The Kano Oil Millers Limited and City Engineering Nig. Ltd. v Federal Housing Authority . 

In City Engineering’s case, the Supreme Court decided that the limitation period for the enforcement of an arbitral award is six years, and that time starts to run from the date of the accrual of the cause of action in the arbitration agreement and not from the date of making the arbitration award, except where the arbitration is one under the Scott v. Avery provision, in which case the right of action is suspended until after the making of an award and in which time shall run from the making of an award.

There have been diverse arguments over the decisions of the Supreme Court on this issue. Some have argued to the effect that an arbitration agreement has two main undertakings, the first being an undertaking to submit to arbitration when the dispute occurs, and the second being an undertaking to comply with the arbitral award when made. These two undertakings constitute two distinct contracts. Thus, it follows that the time limitation for reference to arbitration runs from the date of the breach giving rise to arbitration, whereas the second limitation period for enforcement starts to run from the date the defendant refused to comply with the terms of the award. 

However, the Arbitration and Mediation Act, of 2023 made a novel provision with respect to the limitation period for the enforcement of awards. It provides, thus:

“An applicable statute of limitation shall apply to arbitral proceedings as they apply to judicial proceedings.”

This provision means that the same time limits (statutes of limitation) that apply to judicial proceedings (lawsuits in court) will also apply to arbitral proceedings (arbitration). By extension, it means that the former position, which is that time starts running from the period the cause of action arose in an arbitration proceeding, as against when the award was delivered, is no longer applicable. As such, the time for the enforcement of the award, as in judicial proceedings, starts running after the award has been made.

Hence, this provision has lifted the conundrum posed by the time challenge factor in the recognition and enforcement of arbitral awards.

CONCLUSION

Nigeria’s recognition and enforcement of foreign arbitral awards demonstrates its dedication to creating a favourable environment for international arbitration, thereby reinforcing its commitment to upholding the rule of law and promoting reliability in the country’s dispute resolution mechanisms. While formerly, the position of the Supreme Court in Nigeria on the limitation of time with respect to the enforcement of foreign awards in Nigeria was that time starts counting from when the cause of action arose, the Arbitration and Mediation Act 2023 brought a novel provision that the applicable time limit on arbitral proceedings shall be as it applies to judicial proceedings. This is a laudable provision as it will aid a party seeking enforcement of a foreign award to bring an action conveniently, where the party against whom the award was made breaches the implied duty to abide by the award.

KEYWORDS: arbitration and mediation act 2023; grounds for refusal of grant of application for recognition and enforcement of arbitral awards; legal framework for enforcement of foreign arbitral awards.

SNIPPET: Notwithstanding the above provision, it is noteworthy that where a party applies to the court for enforcement of an arbitral award, it is not absolute that the court shall grant the application.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN FCIArb. (U.K)

Mr. Oyetola Muyiwa Atoyebi, SAN is the Managing Partner of O. M. Atoyebi, S.A.N & Partners (OMAPLEX Law Firm).

Mr. Atoyebi has expertise in and vast knowledge of Alternative Dispute Resolution, and this has seen him advise and represent his vast clientele in a myriad of high-level transactions.  He holds the honour of being the youngest lawyer in Nigeria’s history to be conferred with the rank of Senior Advocate of Nigeria.

He can be reached at atoyebi@omaplex.com.ng   

CONTRIBUTOR: Ofediora Obiora C. 

Obiora is a member of the Dispute Resolution Department at OMAPLEX Law Firm. He also holds commendable legal expertise in Alternative Dispute Resolution.

He can be reached at ofediora.obiora@omaplex.com.ng