REUTERS | Ilya Naymushin

The proposed amendment of Nigeria’s Federal Arbitration Law could see the arbitration landscape in Nigeria improve significantly

The past decade witnessed remarkable developments in the law and practice of arbitration in Africa (jurisdictions like Ghana and South Africa enacted new arbitration laws in 2010 and 2017 respectively; courts across the African continent have increasingly shown willingness to enforce validly made arbitration agreements and awards; various arbitration initiatives have sprung up and have been designed to encourage the growth and practice of arbitration on the continent, including the Africa Arbitration Academy, Africa Arbitration and the African Arbitration Association). In view of current happenings across the continent, there are already indications that this new decade will not be any different, with a number of African countries, including Tanzania and Nigeria already in the process of enacting new arbitration laws. (The Tanzanian government submitted the proposed law to the Tanzanian Parliament on 28 January 2020. The new bill will replace the existing arbitration law, which was enacted in 1931. On 1 February 2018, the Nigerian Senate passed the 2017 Amendment Bill to the Nigerian Arbitration and Conciliation Act. The existing Act, which was based on the UNCITRAL Model Law 1985, was introduced by the Nigerian Federal Military Government in March 1988. The Bill still awaits the ratification of the Federal House of Representatives and the subsequent assent of the President of Nigeria.)

The bill amending the Nigerian Arbitration and Conciliation Act (the Bill) is particularly welcome and long overdue, especially in view of Nigeria’s continued role and tremendous potential, both in the continent and in global business. Recent reports and statistics released by leading institutions like the LCIA and ICC show an increase in the number of international arbitrations involving Nigerian parties. These reports also show that there has been an increase in the number of parties from Africa, with Nigerian parties taking the lead (for example, in the LCIA 2018 Annual Casework Report, not only did Nigeria account for the highest number of African parties, casework data show statistical rises in the number of parties from Nigeria, from 1.3% in 2017 to 2.8% in 2018). Moreover, there have been a number of innovations in the international arbitration sphere since the enactment of the existing Nigerian Arbitration and Conciliation Act (the Act) in March 1988.

In view of recent developments across the globe and the signing of the African Continental Free Trade Agreement (the Africa Continental Free Trade Area is part of the African Union’s initiative for closer economic integration in Africa; the agreement was signed by 44 countries in March 2018 at an African Union summit in Rwanda), it has been projected that there will be a further increase in investment activities in Africa, which will further contribute to an increase in the settlement of disputes by arbitration across the continent. The Bill could therefore not have come at a better time.

Key provisions in the proposed Nigerian Arbitration Bill

The Bill is largely based on the UNCITRAL Model Law 2006. Accordingly, this blog will only highlight and discuss key provisions in the proposed law.

Limitation period

Under the existing limitation law in Nigeria, an action to enforce an arbitration award has a six year limitation period, calculated from the date the cause of action accrued. While many jurisdictions calculate the limitation period from the date of the breach of the arbitration agreement (failure to honour the resulting award), the Nigerian Supreme Court in City Engineering Nigeria Ltd v Federal Housing Authority held that the limitation period is calculated from the date that the cause of action accrued (date of the event that necessitated the arbitration proceedings). The implication of this decision is that with respect to arbitration proceedings conducted under the Act, the limitation period runs even during the period of the arbitration proceedings (however, the Arbitration Law of Lagos State 2009 provides that for the purpose of computing the time within which an enforcement application must be brought, the limitation period begins to run from the date of the award and not before). The effect of this is that where there are lengthy arbitration proceedings coupled with lengthy periods where the losing party pursues annulment proceedings or seeks to set aside the arbitral award, a successful party may lose its right to enforce the award in Nigeria.

Fortunately, the Bill seeks to clarify the position in City Engineering Nigeria Ltd v Federal Housing Authority by providing that in computing the time for the commencement of proceedings to enforce an arbitral award, the period between the commencement of the arbitration and the date of the award shall be excluded.

Award review tribunal

The Bill establishes a second tier tribunal, known as the award review tribunal, to deal with any application by an aggrieved party to review an arbitral award on any of the new grounds highlighted below. However, this is an opt-in provision.

Unless parties to an arbitration proceeding agree otherwise, the Bill proposes that the award review tribunal will consist of the same number of arbitrators as the arbitral tribunal that determined the dispute at first instance. The Bill allows parties to agree on the procedure to be followed by the award review tribunal, failing which the award review tribunal conducts its proceedings as appropriate, and will be expected to render its decision in the form of an award within 60 days from the date on which it is constituted, thus creating certainty for parties.

Where the award review tribunal has set aside the award in whole or in part, a party has the right to apply to the court to review the decision of the award review tribunal. Where the award review tribunal has affirmed an award in whole or in part, an application to the court to set aside the award of the first instance tribunal, or the award review tribunal as the case may be, may only be made on the grounds of public policy or arbitrability, which are somewhat limited grounds.

By opting for this provision, parties insulate their dispute from systemic problems, including the congestion and delays in the administration of cases at the Nigerian courts.

Third party funding

Historically, the concepts of champerty and maintenance prevented the use of third party funding (TPF). However, there appears to be a growing, global trend towards permitting the use of TPF in arbitration proceedings. The Act makes no reference to TPF. As such, it has been generally argued that TPF is presently not permitted in a Nigerian seated arbitration.

Following the trend in other common law countries like Hong Kong and Singapore, the Bill incorporates a TPF provision potentially heralding a new dawn in the practice of arbitration in Nigeria. When the Bill is eventually passed into law, the torts of maintenance and champerty will no longer apply in relation to TPF of arbitration in Nigeria.

While TPF will definitely benefit Nigerian parties, especially small and medium scale businesses, it potentially gives rise to a host of complex procedural and ethical issues. These include confidentiality, conflicts of interest, legal privilege, disclosure and the attorney-client relationship, for which proper regulation is required.

Emergency arbitrator

The Bill introduces an emergency arbitrator, providing a party requiring urgent reliefs to submit an application for the appointment of an emergency arbitrator to any arbitral institution designated by the parties, or failing such designation, to the court. This should be done at the time of filing a request for arbitration, or after filing the request for arbitration but prior to the constitution of the arbitral tribunal.

If the relevant arbitral institution or court determines that it should accept the application for the appointment of an emergency arbitrator, it is expected (unless the parties otherwise agree) to appoint an emergency arbitrator within two business days after the date the application is received. Any decision of the emergency arbitrator is to take the form of an order. It must be made within 14 days from the date on which the file is received by the emergency arbitrator. The Bill also allows parties to conduct emergency proceedings through a meeting in person, by video conference, telephone, or similar means of communication.

By stipulating such short timings and allowing teleconferencing hearings, the Bill will improve the accessibility of practical interim relief in time sensitive circumstances. This is particularly applicable in construction related disputes, which are often plagued with delay.

Grounds for setting aside an award

Under the existing Act, a party may apply to set aside an award where there has been misconduct on the arbitrator’s part, or where the arbitral proceedings, or award, have been improperly procured.

Unfortunately, the Act does not provide guidance on what amounts to misconduct or improper procurement, thus leaving the courts with wide discretion.

The Bill replaces the current grounds for setting aside awards with the clearer grounds contained in the UNCITRAL Model Law 2006. By virtue of this provision, recourse to a court against an arbitral award may be made only by an application for setting aside under any of the following grounds:

  • Legal incapacity.
  • Invalid arbitration agreement.
  • Lack of due process.
  • Exceeding the scope of the submission.
  • Procedural irregularity.
  • Arbitrability.
  • Public policy.

This amendment will be a breath of fresh air to arbitration users long frustrated by the never-ending debate as to what constitutes “misconduct” and “improper procurement”.

Interim measures

Unless otherwise agreed by the parties, the Bill empowers an arbitral tribunal to grant interim measures at the request of a party. The exercise of this power is subject to conditions, which the party requesting the interim measure is expected to satisfy. The Bill also provides that a party may, without notice to any other party, make a request to the arbitral tribunal for an interim measure, together with an application for a preliminary order directing a party not to frustrate the purpose of the interim measure requested.

The Bill also empowers the arbitral tribunal to modify, suspend or terminate an interim measure or a preliminary order that it has granted upon application of any party or, in exceptional circumstances and upon notice to the parties, on the arbitral tribunal’s own initiative in certain circumstances. This includes where important facts were concealed from the arbitral tribunal, the measure or order was fraudulently obtained, or facts come to the knowledge of the arbitral tribunal, which if known at the material time, would have led to the tribunal refusing to grant the measure or order.

Conclusion

Overall, aside from the operative changes, many of the amendments broadly seek to modernise the Act with language and tools now widely prevalent in modern day international arbitration proceedings. The Bill, if successfully enacted and implemented in Nigeria, will bring the arbitration law and practice in Nigeria in line with the global arbitration landscape of today. Indeed, it will contribute to ongoing efforts to make Nigeria a more attractive and viable arbitration seat.

 

Thank you to Eniola Asaolu, trainee solicitor in the International Arbitration Team at Hogan Lovells International LLP, London, for his contribution to this blog.

Leave a Reply

Your email address will not be published. Required fields are marked *

Share this post on: