Overview Of Investment Arbitration In Nigeria Including Protection For Foreign Investors

By Oyetola Muyiwa Atoyebi, SAN

States enter into treaties to allow their citizens to invest in those of other states for the advancement and profit of their respective economies. Despite these treaties, disagreements can arise because of human nature and the intricacy of commerce. In Nigeria, particular Statutes like the Arbitration and Conciliation Act of 1988 (ACA) and arbitration under the Nigerian Investment Promotion Commission (NIPC) make provisions for arbitration in the amicable settlement of investment disputes. These statutes cover the recognition and enforcement of arbitral agreements, arbitration agreements, substantive issues, and laws governing the recognition and enforcement of awards.

Investment Arbitration in Nigeria

Nigeria, Africa’s most populous nation, has an estimated population of over 168 million. The country offers investors abundant natural resources, a low-cost labour pool, and potentially the largest domestic market in sub-Saharan Africa. Much of that market potential remains unrealized because of a long list of impediments to investment. These include unreliable dispute resolution mechanisms…[1]

Investment arbitration in Nigeria can be said to be a form of international arbitration that involves disputes arising from foreign investments in Nigeria. It is a legal mechanism used to resolve disputes between investors and the government of Nigeria or other parties in relation to investment agreements, contracts, and other investment-related disputes. Investment arbitration in Nigeria is governed by the Investment and Securities Act 2007 (ISA), which provides for the establishment of the Investment and Securities Tribunal (IST) as the primary forum for resolving investment disputes. The ISA also recognizes the jurisdiction of international arbitral tribunals to resolve investment disputes.[2]

Investment arbitration in Nigeria can be initiated by either the investor or the government. The dispute can arise from various issues, including breach of contract, expropriation of investment, violation of investor rights, and other related matters. The arbitration process in Nigeria is typically conducted in accordance with the Arbitration and Conciliation Act 1988, which governs domestic arbitration. However, in the case of investment arbitration, international arbitration rules may also apply. The resolution of investment disputes through arbitration provides several benefits, including the ability to resolve disputes quickly and efficiently, confidentiality, and the ability to select an arbitrator who has expertise in the specific area of the dispute.[3]

Currently, Nigeria has a lot of investment potential and would require creating an environment that is friendly for foreign investors and foreign investment. This will be useful in promoting economic development and effective utilization of the abundant resources in the country. Investment arbitration is supposed to lead to a de-politicization of investment disputes. For instance, ICSID Convention expressly prohibits the exercise of diplomatic protection while a claim is pending before an investment tribunal.[4]

This provision was inserted in order to reduce the possibility of economic and political pressure from the powerful home States of foreign investors. Indeed, for many host States, the availability of a neutral, quasi-judicial forum to decide investment disputes with private parties will be preferable to the exposure to external pressure from heavy-handed home States. It is on record that the United States, which is the World’s strongest power, has the largest percentage of foreign investment in Nigeria.[5] Investment arbitration is desirable in Nigeria to avoid any sort of pressure from such world powers.

Investment arbitration further protects states from defending cases that may in fact be indefensible. By subscribing to investment arbitration, states also get shielded from other dispute settlement systems, which sometimes may be mandatory in nature. One typical example is the World Trade Organization (WTO)’s Dispute Settlement system.[6] Thus, investment arbitration is an exceptional mechanism for states like Nigeria to avoid any other forms of international or domestic litigation and political pressure which ordinarily are probable consequences for the breach of any investment agreement. Nigeria needs to have a tranquil investment environment with less exposure to the risk of foreign litigation.[7]

Protection of Foreign Investors

Foreign investors are individuals or companies that invest in a foreign country other than their own. In investment arbitration, foreign investors are often involved in disputes with host states over issues related to their investments, such as breaches of contract, expropriation, discrimination, or other actions that may harm their investments.[8]

Nigeria is a signatory to the Convention on the Settlement of Investment Disputes between States and Nationals of Other States (commonly known as the ICSID Convention). This means that foreign investors who have invested in Nigeria may submit disputes arising from their investments to the International Centre for Settlement of Investment Disputes (ICSID) for resolution through arbitration.[9]

Additionally, Nigeria has also entered into several bilateral investment treaties (BITs) with other countries, which contain provisions for the protection of foreign investors. These BITs typically include provisions on the protection and promotion of investments, non-discrimination, fair and equitable treatment, protection against expropriation, and the right to repatriate profits and other investment returns.[10]

Furthermore, Nigeria has enacted the Nigerian Investment Promotion Commission (NIPC) Act, which provides for the promotion, protection, and regulation of investments in Nigeria. The NIPC Act also establishes the Nigerian Investment Promotion Commission, which is responsible for facilitating and promoting investments in Nigeria.[11]

In the event of a dispute between a foreign investor and the Nigerian government, the investor may seek redress through international arbitration under the ICSID Convention or other arbitration mechanisms provided for in the BITs. In such cases, the arbitral tribunal will apply relevant provisions of the BITs, the NIPC Act, and Nigerian law.[12]

Lastly, while Nigeria has taken steps to protect foreign investors through its membership in the ICSID Convention, BITs, and the NIPC Act, there have been concerns about the effectiveness of the legal and regulatory framework for foreign investment protection in Nigeria. Therefore, foreign investors should conduct thorough due diligence before investing in Nigeria and ensure they have appropriate legal counsel to advise on investment protection measures.[13]

In terms of protection for foreign investors in investment arbitration in Nigeria, there are several steps that the government can take to ensure that foreign investors are protected.[14] These include:

• Ratifying international investment agreements: Nigeria can ratify international investment agreements such as the International Centre for Settlement of Investment Disputes (ICSID) Convention and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. This would provide foreign investors with access to international arbitration mechanisms to resolve disputes with the Nigerian government.
• Enacting investment-friendly laws: The Nigerian government can enact investment-friendly laws that provide adequate protection for foreign investors and ensure that their investments are treated fairly.
• Strengthening the judicial system: The Nigerian government can strengthen the judicial system and improve the capacity of judges to adjudicate investment disputes fairly and efficiently.

In conclusion, Nigeria has made progress in creating a more favourable investment climate and attracting foreign investment. However, there is still much to be done to address the challenges facing foreign investors in investment arbitration. By enacting investment-friendly laws, ratifying international investment agreements, strengthening the judicial system, and providing alternative dispute resolution mechanisms, Nigeria can ensure that foreign investors are protected and that their investments are treated fairly.

SNIPPET:

Investment Arbitration in Nigeria is a legal mechanism used to resolve disputes between investors and the government of Nigeria or other parties in relation to investment agreements, contracts, and other investment-related disputes.

Keywords

Foreign Investors, Investment arbitration, arbitration in Nigeria.

AUTHOR: Oyetola Muyiwa Atoyebi, SAN

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 Banking Law Practice 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: Obiora Ifediora

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

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

[1]United States Bureau of Economic and Business Affairs, the 2012 Investment Climate Statement Report June 2012, http:/\   /www.state.gov/e/eb/othr/ics/2012/19211.htm accessed 21 April, 2023.

[2]Opeyemi O, ‘Understanding Investment Treaty Arbitration in Nigeria’ https://www.mondaq.com/nigeria/arbitration–dispute-resolution/1091594/understanding-investment-treaty-arbitration-in-nigeria accessed 22 April, 2023.

[3]Bello A, ‘Arbitration: A Panacea for Investment Disputes’ Arabian Journal of Business and Management Review (OMAN Chapter) [2014] 9 (4).

[4]Art 27 of ICSID Convention

[5]Burns W.J, ‘A rising Partnership’ http://nigeria.usembassy.gov/article06042013.html.accessed 20 May, 2023.

[6]Reinisch A, ‘The Future of Investment Arbitration’ http://www.oxfordscholarship.com/view/10.1093/acprof:oso/ accessed 22 April, 2023.

[7] Ibid

[8]OECD, ‘The impact of investment treaties on companies’ https://www.oecd.org/daf/inv/investment-policy/BFO-2016-Ch8-Investment-Treaties.pdf accessed 23 April, 2023.

[9]Chaman Law Firm, ‘Legal Protection of Foreign Investment in Nigeria’ https://www.chamanlawfirm.com/legal-protection-of-foreign-investment-in-nigeria accessed 23 April, 2023.

[10]Atake A, ‘Investment Treaty Arbitration: Nigeria’ Arbitration Journal [2018] 12 (3).

[11]Igbokwe V, ‘Developing Countries and the Laws Applicable to International Arbitration of oil Investment Disputes’ [1997] 14 (2).

[12] Ibid

[13]Ibid

[14] Mark B, ‘ways of protecting a foreign investors’ https://www.preshyyy.com accessed 22 April, 2023.