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Arbitration in Africa: Babatunde Fagbohunlu, SAN, Nigeria, part 2 of 2

Our Arbitration in Africa series continues with Babatunde Fagbohunlu, SAN, Partner at Aluko & Oyebode in Nigeria.

In Part 1, Babatunde discussed his personal and professional background, including his current role. He also considered arbitral institutions and centres in Nigeria, as well as arbitral procedure. In Part 2, he examines the courts’ support for arbitration in Nigeria, recognition and enforcement of awards, and investment treaty arbitration. He also considers the challenges facing arbitration practitioners and arbitrators in Nigeria, and offers advice to those hoping to pursue an arbitration career in Nigeria.

Court support for arbitration

Courts’ approach to arbitration

The local courts take a pro-arbitration approach.

At the 2017 annual arbitration conference of the Nigerian Institute of Chartered Arbitrators, the Chief Justice of Nigeria, Walter Samuel Nkanu Onnoghen, called on all judges in the various high courts to always resist the temptation of assuming jurisdiction over commercial disputes where parties have an arbitration clause in the contract. He further stated that it is a breach of contract for any party to take a commercial dispute to court, where there is an agreement in the contract that stipulates that any dispute will be resolved through arbitration.

This directive represents a significant development in the arbitration practice and demonstrates the courts’ commitment to encouraging and enforcing arbitration in Nigeria.

Likewise, the Nigerian Court of Appeal (the second highest court in Nigeria) held that Nigerian courts have no jurisdiction to issue injunction orders to restrain or otherwise intervene in arbitral proceedings, except as provided in Nigeria’s ACA (Statoil (Nigeria) Ltd & another v Nigerian National Petroleum Corporation others).

Section 4 of the ACA also indicates the Nigerian government’s intention to support arbitration. Section 4 of the ACA provides that a court before which the subject of an arbitration agreement is brought shall, at the request of any party, order a stay of proceedings and refer the parties to arbitration. In this regard, the courts are obliged to obey parties’ arbitration agreements.

Court intervention

The courts should intervene only in specific instances permitted under the ACA, such as to grant a stay of proceedings, set aside an award, remove an arbitrator for misconduct and recognise and enforce an award (Section 4, 29 and 30 of the ACA). However, instances are known where courts have intervened outside these permitted situations.

Challenges to awards

Under Section 29 and 30 of the ACA, a party may apply to set aside an arbitral award on the grounds that:

  • The matter was beyond scope of the arbitrator’s jurisdiction.
  • Misconduct on the part of the arbitrator.

There have been successful challenges brought under Section 29 and 30 of the ACA.

Recognition and enforcement of awards

Enforcement of domestic awards by local courts

The local courts usually enforce domestic awards unless there is a public policy reason why the awards should not be enforced, or there is an application seeking an order of the court setting aside the award.

New York Convention

Nigeria acceded to the New York Convention on 17 March 1970, adopting the reciprocal and commercial reservations. The convention has direct application in Nigeria by virtue of Section 54 of the ACA. It is incorporated into the act in Schedule II.

Enforcement of foreign awards by local courts

The local courts do enforce foreign awards.

In Tulip Nigeria Ltd v Noleggioe Maritime SAS, the Court of Appeal held that:

“… a foreign arbitration award is now enforceable in Nigeria directly pursuant to the New York Convention to which Nigeria is a signatory.”

The court further held that, under section 51(1) of the ACA, foreign arbitral awards shall be recognised and enforced irrespective of their country of origin.

In addition, a foreign award can also be enforced under the Reciprocal Enforcement of Judgment Ordinance, 1957 and the Foreign Judgments Reciprocal Enforcement Act, 1960.

Investment treaty arbitration

Nigeria is a party to the Convention on the International Centre for the Settlement of Investment Disputes (ICSID). Article 54 (1) of the ICSID Convention requires each ICSID member state to:

  • Recognise an award rendered pursuant to the Convention as binding.
  • Enforce the pecuniary obligations imposed by that award within its territories as if it were a final judgment of a court in that state.

Pursuant to these provisions, the Federal Government of Nigeria passed the International Centre for Settlement of Investments Disputes (Enforcement of Awards) Act Cap I20 Laws of the Federation of Nigeria 2004, designating the Supreme Court for the purpose of enforcing ICSID awards.

Where for any reason it is necessary or expedient to enforce an award in Nigeria made by ICSID, a copy of the award duly certified by the Secretary-General of the ICSID, if filed in the Supreme Court by the party seeking its enforcement in Nigeria, shall for all purposes have effect as if it were an award contained in a final judgment of the Supreme Court. The award shall be enforceable accordingly.

No publicly available award has been rendered against Nigeria under its investment treaties.

Nigeria has over the past decade entered into a significant number of bilateral investment treaties (BITs) with arbitration stated as the preferred mode of resolving disputes.

Challenges faced by arbitration practitioners and arbitrators in Nigeria

Difficulty in establishing Nigeria or Africa as a preferred seat for international arbitration. There has been a significant increase in the number of African-related disputes resolved via arbitration, which is generally as a result of investments in Africa. In 2016, the London Court of International Arbitration (LCIA) recorded that out of 253 cases referred to under the LCIA Rules, 7.9 % of respondents said that cases involved African parties. However, only three arbitrations (1.19%) were seated in African jurisdictions.

The location of an arbitral seat is fundamental to defining the legal framework for international arbitral proceedings and can have profound legal and practical consequences in international arbitration. The courts of seat play a dominant role in terms of supervision of the arbitral process. This challenge has resulted in African parties spending huge sums of money to resolve disputes that occur in Africa (owing, for example, to the constant travelling of lawyers, witnesses and clients to the seat of arbitration).

For these reasons, it is pertinent that Nigeria, and Africa as a whole, obtains a place as one of the foremost arbitral friendly jurisdictions, so as to reduce the practical and legal consequences that may occur when African-related disputes are not seated in Africa.

Inadequate or outdated legislation. The current ACA captures the basics of arbitration and provides the procedure for a smooth arbitration process. However, the act fails to provide adequate answers to contemporary issues of great importance in the field of international arbitration.

Due to this inadequacy, the National Assembly Business Environment Roundtable (NASSBER), invited members of the arbitral community to work on reforming the ACA. A bill has been promulgated, which is currently at the third reading stage at the National Assembly.

Key highlights of the bill are:

  • Modification of the forms of an arbitration agreement.
  • Introduction of concurrent proceedings in court and arbitration.
  • Introduction of an award review tribunal.
  • Reduction of undue judicial intervention in arbitration.

It is hoped that the bill will be passed and enacted soon.

The Nigerian judiciary. Most judges in Nigeria have litigation backgrounds. As a result, the significant differences and nuances in litigation and arbitration may not be known to them. This has resulted in a significant amount of arbitration cases not being handled fairly.

This can be resolved by training judges on how to deal with complex issues involving arbitration to enable them to understand the specific nuances that are present in arbitration.

Advice to someone who wishes to start a career in arbitration in Nigeria/Africa

New practitioners or arbitrators in Nigeria may find it difficult securing opportunities to participate in arbitration, mostly because the arbitral community is fairly closed and populated with middle-aged or fairly elderly legal practitioners. However, I would advise that individuals wishing to start a career in arbitration in Nigeria/Africa should adopt the following techniques:

  • Read extensively on arbitration and register for courses that will provide the requisite knowledge needed to thrive in arbitration.
  • Attend arbitral conferences, training and seminars to help develop arbitral skills. In addition, this will also present opportunities to network with professionals in the arbitration space.
  • Seek appointments as an arbitral secretary or registrar.
Aluko & Oyebode Babatunde Fagbohunlu, SAN

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