Introductions
Differences will usually always arise in commercial contracts. When business people sit down to negotiate, an inevitable question is "what will happen in the event of a dispute between us?'' In other words, it is expected something will go wrong. It is a risk of contracting; important in an investor's decision to proceed with an investment or not.
In context, an equally fundamental pre-occupation for investors is a country's framework to achieve a swift disposal of disputes when they arise; through its courts or some other instituted process. In other words, preferring one country over another as a place to commit capital and resources on account of its dispute resolution infrastructure.
It adds little to the discussion to say that Alternative Dispute Resolution (ADR), specifically, Arbitration, has become the dispute resolution method of choice in commercial contracts. It serves as an alternative to the court system1; an exercise by parties of their private law rights2. Whether its growth is a consequence of an increased number of investment treaties between nation states and consequently, more investor-state arbitrations, or simply a confirmation of commercial people that ADR is better suited to their relationships, the fact is that arbitration is firmly grounded both in domestic and international transactions.
However, the growth of arbitration has brought into focus questions as to the limit of the 'supervisory' role of the court in relation to its processes. It is a line that has become quite fraught in recent times; raising discussions under a number of headings. For instance, arbitrability; kompetenz-kompetenz; judicial review, and others.
Supervising an Arbitration
The philosophy underpinning the supervisory jurisdiction of courts in arbitrations is incontestable. One twentieth century Judge stated thus:
"Among commercial men, what are commonly called commercial arbitrations are deservedly popular. That they will continue their popularity I entertain no doubt, so long as the law retains sufficient hold over them to prevent and redress any injustice on the part of the arbitrator and to secure that the law that is administered by an arbitrator is in substance the law of the land and not some home-made law of the particular arbitrator...To release real and effective control over commercial arbitrations is to allow the arbitrator, or the Arbitration Tribunal, to be a law unto himself...to give him or them a free hand to decide according to law or not according to law as he or they may think fit, in other words to be outside the law."3
It is trite saying each country has its own legal provisions to support arbitrations. Provisions to decide matters such as arbitrabilty; actions commenced in breach of agreements to arbitrate (anti-suit injunctions); applications for interim relief; arbitrator misconduct; etc. Recognition and enforcement is another issue. In other words, notwithstanding that a party has obtained a favourable award, there may be factors relevant to the proceedings or in the award necessitating a court's intervention. "Getting a favourable award in arbitration is sometimes the easy part of the dispute resolution process, are the words of one author".4
Theme
Summarised, the theme of today's discussion is the extent to which courts support or disrupt arbitration. I must say I find the word 'disruptive' used in that sentence interesting. In fact, a question I ask is whether the word is in anyway accurate to describe the supervisory functions performed by a Nigerian court? That question is the tilt of this paper.
It is against the above background that I again thank the International Chamber of Commerce (ICC) for convening this event. In my view it could not have come at a more auspicious time. It is a topic of paramount importance. Notwithstanding the many challenges Nigeria has faced recently, including its consistent low ranking in key indexes of countries attractive to do business'5, Nigeria nonetheless retains its attraction as an investment destination; albeit the allure may have dimmed a little in more recent months.
Related Issues
The related issues are numerous. In this paper I highlight some of them. I take a look at some key provisions of Nigeria's Arbitration and Conciliation Act (ACA)6 and the discourse touches on (i) a court's power to intervene in an arbitration, (ii) recourse against an award and (iii) recognition and enforcement. I aim to proffer a counter view to the one seemingly now dominant in international circles; to wit: Nigeria does not represent an attractive seat for international arbitrations.
While some cases may appear to lend credence to the above view7, a more balanced and robust assessment of our arbitral jurisprudence suggests that the arguments against Nigeria serving as seat for international commercial disputes have little, if anything, to do with its jurisprudence. It is simplistic in my view to discuss Nigeria's case in general terms. Each dispute/award that ends up before the country's courts must be considered on its facts. Only then can a more accurate assessment of the judiciary vis-à-vis its arbitral stance be made.
Taking this point further. I am certain that most, if not all practitioners local to Nigeria will agree much has been done to improve the nation's arbitration framework8. The increased number of reputable centres bears testimony to this;9 as do additional laws passed in the period since the ACA10. These are all important developments. And in response to the investor question posed earlier, "what happens in the event of a dispute between us?'', I submit that Nigeria has the arbitral apparatus to achieve a swift resolution of any contractual issue; a foreign-seated arbitration or domestic11. The jurisprudence of the judiciary is supportive of arbitrations; not disruptive12.
Not some home-made law of the particular arbitrator
It is almost 100 years since Banks LJ's comment: 'commercial arbitrations are popular and will continue to be popular'. He was right. The caveat however is that the law (a court) must retain '...sufficient hold over them to prevent and redress any injustice on the part of the arbitrator'. The question is how does Nigerian jurisprudence measure up? Looking at standards internationally, it is a question that requires analysis from a number of different perspectives.
i) Arbitrability
The importance of independently determining the validity of an agreement and, by extension, the arbitrability of a dispute, is an established legal position in a number of jurisdictions'; in England for instance where, in Dallah Real Estate and Tourism Company v Ministry of Religious Affairs, Government of Pakistan13, the UKSC citing Christopher Brown v Gennossenschaft Osterrichisscher14 (arbitrability and competence of a tribunal to determine its jurisdiction), the UKSC said:
"An arbitral tribunal's decision as to the existence of its own jurisdiction cannot therefore bind a party who has not submitted the question of arbitrability to the tribunal. This leaves for consideration the nature of the exercise which a court should undertake where there has been no such submission and the court is asked to enforce an award. Domestically, there is no doubt that, whether or not a party's challenge to the jurisdiction has been raised...a party who has not submitted to the arbitrator's jurisdiction is entitled to a full judicial determination on evidence of an issue of jurisdiction...."
Nigeria law is established in the same sense. The philosophy as expressed in the above decision, coincides with that of our courts.15 It is trite that an arbitral tribunal can only decide matters submitted to it; and which may 'lawfully' be submitted16. In other words, a tribunal must possess jurisdictional competence to determine the subject matter. Where this is in issue, it is a matter for a court to give full judicial determination; upon an application by a parties. Nigerian courts adopt a similar approach17. Consequently, to describe the intervention by a Nigerian court in such an instance would be wrong.
I said earlier that 'it is important to examine the facts and circumstances of each case'. Recent controversies in connection with Nigeria's tax laws, where the courts have intervened, will perhaps put the issue in a clearer perspective.
ii) Jurisdiction to intervene
Section 34 ACA provides that "A court shall not intervene in any matter governed by this Act, except where provided in this Act". While there is no controversy among practitioners that the court has power to intervene in an arbitration (for example, to stay court proceedings in favour of arbitration (anti-suit injunction), or to appoint an arbitrator where one of the parties fails to make an appointment18), the controversy is in stating the limit of that power. In other words, in respect of matters not specifically provide for in the ACA. One of the arguments is that section 34 precludes intervention in matters not specifically provided for in the Act. In that wise, provided an award is good on its face (on the issues submitted), a court lacks jurisdiction to interfere with the same.
The difficulty with this argument however is that it fails to have regard for other sections of the Act; section 35 (or section 48 where the arbitration is international). Section 35 removes from the scope of an arbitration matters which by any other law may not be submitted to arbitration19. A tax issue is within this category; being a matter the Constitution of the Federal Republic of Nigeria 1999 (as amended) places within the purview of the Federal High Court20. A court intervening in in such circumstances, i.e., to give a full judicial determination and state the law, deepens our arbitral jurisprudence; not undermine it.
A case in point: Federal Inland Revenue Service v Nigerian National Petroleum Corporation & 4 others (FIRS's case).21
iii) Nigerian laws – tax is not arbitrable
Under Nigerian law a tax dispute is not arbitrable. This issue was put beyond doubt in the FIRS case above. The court in its ruling held thus: "...it is therefore not intended by the Federal Republic of Nigeria that issues of taxation or tax matters should go to arbitration".
Briefly, the facts were that FIRS instituted an action against parties who were in arbitration22. FIRS's contention was that the dispute was a tax matter and therefore not arbitrable. FIRS contended that issues touching on tax accruing to the Federal Government were preserved to the Federal High Court; not an arbitral tribunal. Having taken the arguments of the parties, the court gave its ruling; as above.
It is apt to say that prior to the FIRS case, there was some controversy in this area of Nigerian law. That issue however is now resolved; tax disputes are not arbitrable.23 And, given this established legal position, an arbitral tribunal approached to determine a dispute with a tax component is under a duty to apply the law as it is (by declining the reference); not as an arbitrator considers it ought to be. Issues such as this are critical to today's theme. In other words, questions of validity and arbitrabilty as they relate to tax have been judicially determined. As stakeholders at the forefront of Nigeria's arbitral practice, arbitrators must give respect to Nigeria law by upholding it and not doing anything that brings it into disrepute24. An arbitral panel rendering an award disregarding the law is liable, on the authorities, to have the same set aside25.
iv) Comparison with another jurisdiction – fraud is arbitrable (in India)
The approach of the courts in India bears on this issue; where until relatively recently the legal provisions placed 'fraud and misappropriation' outside the purview of an arbitral tribunal26 - on grounds that such issues 'cannot be dealt with properly in arbitration'. However, in Swiss Timing Ltd v Organising Committee of the Commonwealth Games27, there was a departure from previous decisions notwithstanding the fraud element. On that occasion the Indian Supreme Court held that all issues arising in the dispute (including the allegation of fraud) were in fact capable of being resolved by arbitration28.
I refer again to Dallah's case29. Notwithstanding that the tribunal30 had determined its jurisdiction (Kompetenz-Kompetenz), the UKSC upheld a decision of the lower court to intervene in an award declining enforcement31. To criticise a Nigerian court applying similar principles and finding a legal basis to intervene again would be unfair.
v) Enforcing arbitration clauses/binding nature of an award
It is trite that an arbitral award is conclusive, final and binding. 'Estoppel per rem Judicata"; that is the position of Nigerian law32. Once the parties have elected arbitration, they cannot turn around to object; provided the award is good on the face of it33. In other words, "Once an arbitration clause is retained in a contract which is valid and the dispute is within the contemplation of the clause, the court should give regard to the contract by enforcing the arbitration clause. It is therefore the general policy of the court to hold parties to the bargain which they had entered"34.
On the authorities, it is far too casual to label Nigeria's courts interventionist. While some decisions may provide a basis for criticism35, numerous judicial pronouncements confirm the country's pro-arbitration stance. The recent decision in Crestar Integrated Natural Resources Limited36 bears this out. Although an anti-arbitration injunction was granted in the case, the reasoning founding the court's decision is, in my humble view, unassailable.
Briefly, the dispute flowed from an SPA entered into between Crestar and the Defendants in the matter of an oil block. The Agreement contained a Dispute Resolution clause; providing for arbitration in London. When a dispute later arose, Crestar approached the Federal High Court seeking several reliefs and preservatory orders. The Defendants filed an Application to stay of the court's proceedings pending arbitration. They also prayed the court to discharge the injunction (granted exparte). It suffices to say the court rejected the Defendants arguments, ruling in favour of Crestar37. The Defendants appealed. The appeal lodged, Crestar filed an application praying the court for an injunction (to stay the arbitral proceedings). The Appellants raised a jurisdictional point that given ACA s34, the court was without jurisdiction to intervene. A second issue was whether the court could grant the injunction sought.
Following the parties' arguments and considering decided cases in a number of jurisdictions38, the court (taking account of the specific facts and circumstances of the case) ruled that it could grant the injunction notwithstanding that the tribunal was outside the jurisdiction of the court: "...the issue in the appeal will be compromised if the arbitration is allowed to proceed to an award"39. While the court did intervene on this occasion, the earlier comments of the court, per His Lordship Obaseki-Adejumo bear highlighting:
"I must say here that the situation in the instant case is peculiar because (sic) injunction being sought by the Applicant is not merely an anti-arbitration injunction but one in which a foreign tribunal will be enjoined thereon. The need for caution in the grant of such injunctions in this respect cannot be over-emphasized...this kind of injunction is not granted as a matter of cause but will generally only be granted in exceptional circumstances".
In context, Tulip (Nigeria) Limited v Noleggioe Transport Maritime SAS40 is also important. The case concerned an application to enforce in Nigeria an award obtained in the United Kingdom. The application was upheld. The point of appeal to the Court of Appeal was whether the lower court was right in its award of interest; not on the substantive issues or that the lower court was wrong in its recognition and enforcement orders. In other words, an instance of a Nigerian court enforcing an award obtained internationally; further stating Nigeria's credentials as a viable seat to resolve disputes.
vi) Limitation
Related to the above are the issues tied to 'limitation' in enforcement proceedings. The position of Nigerian law on an action the subject of an arbitration agreement is that time begins to run from the date of accrual of the cause of action; not the date of the award.41 That position however potentially works hardship; potentially shutting out an otherwise valid enforcement claim. Happily, this is now being resolved by enactments. Section 35(5) in the new Lagos State Arbitration Law is an example; 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. So, where an arbitration gets drawn and contentious, the time to enforce the award (in the event it is necessary to approach the court) would count from when the award is made. Although this provision is yet to be tested, the approach of Nigerian courts in cases of clear legislative drafting is to give the literal interpretation42.
vii) Arbitrator (mis)conduct
just as intervention predicated on arbitrator misconduct is a basis for intervention in foreign jurisdictions, so is the position in Nigeria43. While conduct amounting to misconduct remains the subject of discussion, where a Nigerian court intervenes in an arbitration/award on the basis of arbitrator misconduct, then prior to an interventionist label, it is apt to consider the facts of the case.
The established practice of a Nigerian court faced with a complaint of arbitrator misconduct is 'to fall back on the common law to determine what constitutes misconduct'44. An arbitrator who fails to comply with the express or implied terms of the arbitration agreement misconducts himself; giving the court a right to intervene. In other words, an arbitrator who decides unilaterally to move the venue of the parties choosing to a different location, is likely to face a challenge. As practitioners in Nigeria we are beginning to see threatened instances of this.
A Nigerian court which intervenes in such an arbitration ought not to be labelled interventionist. The preference of the parties in choosing a venue, is to be upheld; not relegated to 'arbitrator convenience' as to where the venue ought to be.
Attracting Investment
Jurisdictions with apparatus for the swift resolution of disputes have fared better when it comes to foreign direct investment; in contrast to those labelled unfriendly. Among the key drivers of foreign investment is a country's infrastructure for resolving disputes (enforcement of arbitral agreements; neutrality of the courts, etc.). In this respect, jurisdictions such as Paris, New York, London, with developed infrastructure and grounded in minimalist intervention philosophies, have dominated as international seats. Newer jurisdictions such as Singapore, Hong Kong, have also established their credentials.45
Africa's experience on the other hand has been muted. While domestic arbitration continues to grow, it has quite a bit of catching up to do if it is to serve as a seat for international disputes. This fact cannot be glossed over.
For its part, Nigeria is at a crossroads. The Federal government is keen to attract foreign investment; to grow other sectors of the economy; Agriculture, Mining, etc.46 Investments are important to these objectives. On the other hand, an established arbitral system is critical to investor confidence. The two are mutually exclusive. "Arbitration is both the creator and a creature of economic growth and development. But political commitment is required from African governments in order to realise the full potential that an established arbitration system as an engine and facilitator of economic development"; are the words of one renowned arbitration practitioner47. Very apt words indeed.
Conclusion
Nigeria's arbitral framework can and must develop further. However, a view that its judiciary is anti-arbitration is imbalanced; as it fails to give due regard to the actualities on ground. Others also have a role to play; government and other stakeholders; including in-house counsel and practitioners. This is where the focus must shift. Judicial philosophy and court administration of cases are separate matters.
Footnotes
1 Although the jurisdiction of the court is not ousted by reference to arbitration; see Obembe v Wemabod Estates Ltd (1977) 5SC.
2 Subject to statutory restriction: See MV Panormous Bay v Olam Nig Plc (2004) 5NWLR (Pt 85)
3 Czarnikow v Roth, Schimit & Company (1922) 2KB 478; Per Banks LJ at page 484.
4 Michael Mcllwrath and John Savage, International Arbitration and Mediation. A Practical Guide (Alphen aan den Rijn: Kulwer Law International, 2010), p 327.
5 World Bank: 'Ease of Doing Business 2016'; Nigeria currently ranked 169 out of 189 countries surveyed
6 Nigerian Arbitration and Conciliation Act Cap A18, Laws of the Federation of Nigeria ("LFN") 2004.
7 The IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation may be an instance of this; dating back to an award in 2004 and which, on account of delays in the Nigerian courts, enforcement of has been sought in the English courts. See the recent decision of the English Court of Appeal EWCA Civ1144 & 1145. See also below at 35.
8 For instance, the enactment by the Lagos State Government of the Lagos State Arbitration Law (No 8) 2009; applicable to all arbitrations in Lagos State; save where the parties have agreed otherwise. Also, the establishment of the Lagos State Court of Arbitration; created by the Lagos Court of Arbitration Law; the International Centre for Arbitration & Mediation Abuja; Regional Centre for International Commercial Arbitration (Cap R5) LFN 2004 among others.
9 The establishment of the Lagos State Court of Arbitration; created by the Lagos Court of Arbitration Law.
10 Footnote 9 (Supra)
11 Section 57(2) of the ACA defines what constitutes an 'international' arbitration.
12 Judicial philosophy and court administration of cases are separate matters
13 (2010) UKSC 46
14 (1954) 1QB 8, 12-13
15 See NNPC v Kilfco (2011) 10 NWLR (Pt 1255) 209; considering ACA Section 12 "competence of a Tribunal to Rule on its jurisdiction.
16 Kano State Urban Development Board v Fanz Construction Company Limited (1990) NWLR (Pt.142) 1.
17 See Savoia Ltd v Shonubi (2000) 12 NWLR 539 at 551; Onward Enterprises Ltd v. NV Matrix (2010) 2 NWLR (Pt. 1179) 531. See also Statoil (Nig) Ltd v Nigerian National Petroleum Corporation (2013) 14NWLR (Pt 1373) 1; where the Court of Appeal had an opportunity to pronounce on ACA section 34; the extent of court's power to intervene. Also in Nigerian Agip Exploration Limited (NAE) v Nigerian National Petroleum Corporation (CA/A/628/2011) deciding a similar point.
18 The argument is that as these issues are specifically mentioned in the ACA (i.e., sections 4 and/or 5 for a Stay of Proceedings; section 7 Appointment of Arbitrators) a court may intervene in relation to them. Where on the other hand a matter is not provided for in the Act, that on account of the wording of section 34, that in those circumstances a court might not intervene. That to do so is to go outside of the Act.
19 "This Act shall not affect any other law by virtue of which certain disputes – (a) May not be submitted to arbitration; or (b) May be submitted to arbitration only in accordance with the provisions of that or other law."
20 Section 251 Constitution of the Federal Republic of Nigeria 1999 (as amended).
21 Federal Inland Revenue Service v Nigerian National Petroleum Corporation & 4 others. FHC/ABJ/CS/774/2011 (unreported).
22 Nigeria's state oil company and a number of International Oil Companies.
23 Subject to the outcome of an appeal.
24 In context, the decision of the Court of Appeal in Shell Petroleum Development Company of Nigeria Ltd & others v Crestar Integrated Natural Resources Limited (Unreported Suit No 331M/2015) is helpful. Although the substantive issues are yet to be decided, an issue is as to the validity of a clause in violation of the Nigeria Oil & Gas Industry Content Development Act.
25 Sections 29 and 30 ACA
26 See Radhakrishnan v Maestro Engineers (2010) 1SCC 72
27 (2013) Arbitration Petition No 34
28 For an analysis of Swiss Timing Ltd, see Kartikey Mahajan "The Arbitrability of Fraud in India"; International Journal of Arbitration, Mediation and Dispute Management" Vol. 81 No1 February 2015 page 48.
29 Supra at No 14
30 An ICC arbitration in Paris
31 See also the English decision Excalibur v Texas Keystone Inc (2011) EWHC 1624 Comm; in the matter of an arbitration commenced in New York and simultaneous proceedings commenced in the Commercial Courts in London. In sum, having ruled that it had jurisdiction to determine the validity of the arbitration agreement, the court then issued an injunction against the New York arbitration continuing.
32Raz Paul Gazi Construction Company v FCDA (2001) 10 NWLR (Pt. 722) 559
33 See for instance, Commerce Assurance Limited v Alli (1992) 3 NWLR (Pt. 233) 710 at 275; Savoia Ltd v Shonubi (Supra at footnote 18); Onward Enterprises Ltd v. NV Matrix (Supra at 18).
34 Onward Enterprises Ltd v. NV Matrix (2010) 2 NWLR (Pt. 1179) 531
35 The IPCO (Nigeria) Limited v Nigerian National Petroleum Corporation (award of 2004) for instance, where the successful party (on account of the delays of the Nigerian courts) applied to the English Courts to enforce its award. While its application was declined at the lower court – given the injunction against the parties in Nigeria, in November 2015, the English Court of Appeal upheld IPCO's application; overturning the lower court's decision. And, this notwithstanding the pendency of the injunction in Nigeria.
36 Supra at 25.
37 Crestar had contended that the court ought not to stay its proceedings because the Defendants had not discharged the burden placed on them by s5(2)(b) ACA. In other that they had not shown that they were willing and ready to do all things necessary to the proper conduct of the arbitration. The ruling of the lower turned on section 83 (3) of the Evidence Act and a letter written by the Defendants which the court ruled was a document made in contemplation of the suit and consequently inadmissible.
38 Especially the approach taken by the courts in England; Supra footnote 32.
39 An 'illegality' point was pivotal to the court's decision and the importance of preserving the res.
40 2011 (4NWLR) Part 1237 at 254.
41 See Murmansk State S. S Line v. Kano Oil Millers (1974) 2 SC p. 1; City Engineering Nig. Limited v. Federal Housing Authority (1997) 9 NWLR Part 520, p. 224
42 AG Anambra v AG Federation (2007) 12NWLR (Pt 1047) 49; Agip (Nig) Ltd v Agip Petroli International (2010) 5NWLR (pt 1187) 348; Nafiu Rabiu v State (1980) 8-11 SC 1130;
43 ACA sections 29 (2) and 30 (1); albeit that the Act does not provide a definition; merely that a court may intervene where there is misconduct.
44 Taylor Woodrow v. Etina Werk [1993] 1 NSCC 415 at 422
45 In context it is apt to appreciate related developments in the Middle East. See "A Common Law Court in an Uncommon Environment: The DIFC Judiciary and Global Commercial Dispute Resolution": Professor Jayanth K Krishna & Priya Purohit. http://ssrn.com/abstract=2482532
46 Government policy, reflected in the current budget (2016) is to increase non-oil receipts. In other words, to move away from a dependency on oil; the nation's main income earner for many years.
47 Harry Matovu QC. 'This Day Newspaper interview June 3, 2014.
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