Nigeria

In summary

This article examines Nigeria’s Arbitration and Mediation Act 2023 (AMA). The AMA repealed the Arbitration and Conciliation Act 1988, which had governed arbitration and conciliation in Nigeria for 35 years. The enactment of the AMA was enthusiastically welcomed by the arbitration community both in Nigeria and internationally, and it is expected that the AMA, which addressed the gaps and limitations of the ACA and introduced some completely new provisions, will enhance the efficiency of arbitration and the attractiveness of Nigeria as a seat of international commercial arbitration.

Discussion points

• Overview of the legal framework for arbitration in Nigeria before the enactment of the AMA
• New innovations introduced by the AMA

Referenced in this article

• Arbitration and Mediation Act 2023
• Arbitration and Conciliation Act 1988

Introduction

After 35 years of being the principal legislation regulating arbitration practice in Nigeria, it had become clear that the Arbitration and Conciliation Act 1988 (ACA) needed to be refreshed to bring it in line with international best practices and to address some of its gaps and limitations. Although the Nigerian House of Representatives passed the bill for repeal of the ACA in 2020, it was not until May 2023 that the bill was finally signed into law.

The new Arbitration and Mediation Act 2023 (AMA) addresses the deficiencies of the ACA and goes a step further in introducing some innovative provisions, including expanding the scope of the ‘in writing’ requirement^[1] and making it mandatory for a court to grant a stay of proceedings pending arbitration unless the agreement is void, inoperative or incapable of being performed.^[2] It also abolished the twin torts of maintenance and champerty and includes provisions on limitation periods for enforcement of an arbitral award, the appointment of emergency arbitrators and the power of the court to grant interim measures, among other things.

Arbitration framework prior to enactment of the AMA

The first piece of arbitration legislation in Nigeria was the Arbitration Ordinance 1914 (the Ordinance 1914), which was based on the English Arbitration Act 1889. The Ordinance was subsequently re-enacted as the Arbitration Ordinance 1958 (the Ordinance 1958).^[3] The Ordinance 1958, which had 19 sections, was applicable to ‘the Northern, Western and Eastern Regions and to Lagos and the Southern Cameroons as if they were each a Region’,^[4] and it related only to domestic arbitration. Each of the regions later adopted the Ordinance 1958 and incorporated it into their respective regional laws.^[5]

Although the Ordinance 1914 became inadequate and could not deal with many of the new situations that arose after its enactment, it remained the principal arbitration legislation in Nigeria for a long period until the Arbitration and Conciliation Decree (later the ACA) was promulgated in 1988 under military rule.

The ACA was enacted to provide a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation and to make the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) applicable to any award made in Nigeria or any contracting state arising out of international commercial arbitration.

The Arbitration Rules of the United Nations Commission on International Trade Law (UNCITRAL) were applicable in Nigeria, having been enacted as the Arbitration Rules in the First Schedule to the ACA. The ACA substantially conformed with the UNCITRAL Model Law. Although the UNCITRAL Model Law was revised in 2006, Nigeria did not amend the ACA to incorporate the revised provisions of the Model Law.

Major innovations introduced by the AMA

According to its Explanatory Memorandum, the AMA repealed the ACA and aims to provide a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and mediation. It makes the New York Convention applicable to any award made in Nigeria or any contracting state to the Convention arising out of international commercial arbitration.

This article does not attempt to undertake an exhaustive section-by-section comparison of the AMA with the ACA; rather its focus is to highlight some of the most impactful or innovative provisions of the AMA. In appropriate cases, comparisons are made with the ACA to show how the AMA has either improved or completely changed the provisions of the ACA.

Expanded definition of ‘in writing’

The meaning of the word ‘writing’ as a requirement for a valid arbitration agreement was broadened in section 2(2) of the AMA, which provides that an arbitration agreement shall be considered to be in writing if its content is recorded in any form, regardless of whether the agreement or contract was concluded orally, by conduct or by any other means.

Section 2(4)(a) provides that the in-writing requirement is also met if it is drafted by a means of electronic communication, as defined in section 91, and the information contained in it is accessible for subsequent reference. Section 91 defines ‘electronic communication’ to mean any communication that the parties make by means of data messages (ie, any information generated, sent, received or stored by electronic, magnetic, optical or similar means, including electronic data interchange, electronic mail, telegram, telex or telecopy).

The definition of the word ‘writing’ in the AMA is markedly broader and more robust than in the equivalent ACA provision, which seems to lean more in favour of a document signed by the parties or that is in physical form. The AMA, therefore, reflects modern commercial realities whereby contracts are entered into electronically.

Death or change of status of a party to an arbitration agreement

Section 3 of the ACA provided that an arbitration agreement shall not be invalidated by reason of the death of any party to the agreement, but shall, in that event, be enforceable by or against the personal representative of the deceased.

Section 4 of the AMA is wider in scope. In addition to providing that an arbitration agreement shall not be invalidated owing to the death of any of the parties to the agreement, it also provides that the authority of an arbitrator shall not be revoked by the death, bankruptcy, insolvency or other change in the circumstances of any party by whom the arbitrator was appointed.

Courts’ power to stay proceedings pending reference to arbitration

The contradictory provisions of sections 4(1) and 5(2) of the ACA created confusion regarding whether the courts are mandated to order a stay of proceedings pending arbitration or whether their power in this regard is discretionary: while section 4(1) provided that, upon the request of any of the parties, the court shall order a stay of proceedings and refer the parties to arbitration before the parties’ submission of their first statements on the substance of the dispute, section 5(1) provided that if any party to an arbitration agreement commences an action in any court with respect to a matter that is the subject of the agreement, any party to the agreement may apply to the court to stay the proceedings at any time after appearing but before delivering any pleadings or taking other steps in the proceedings.^[6]

The ACA further provided that the court may make an order staying the proceedings if it is satisfied that (1) there is no sufficient reason why the matter should not be referred to arbitration under the arbitration agreement, and (2) the applicant was, at the time the action was commenced, and remains ready and willing to do all things necessary to the proper conduct of the arbitration.

The courts interpreted section 5(2) of the ACA to mean that a party applying for stay of proceedings needed to have commenced arbitration, which was unduly burdensome considering that it is not the party that applies for stay of proceedings that has a claim.

In MV Panormos Bay v Olam (MV Panormos Bay)^[7] the Nigerian Court of Appeal held that the defendants who had applied for a stay of proceedings pending arbitration were not entitled to have the matter referred to arbitration because they had failed to show the steps they had taken to commence arbitration. It also held that the deposition contained in the defendants’ affidavit in support of their application – which stated that they were ready and willing to do anything necessary for the matter to be decided by arbitration and for the proper conduct of the arbitration – was insufficient and that ‘it is the party praying for arbitration as an “applicant” that has the duty to comply with S.5(2)(b) of the said Act by commencing the arbitration proceedings which the appellants have refused to do’.

The decision in MV Panormos Bay was followed by the Court of Appeal in the case of UBA v Trident (UBA).^[8] The Court of Appeal held that the party applying for a stay of proceedings pending arbitration must demonstrate unequivocally by documentary evidence that it is willing to arbitrate. According to the Court, the party does so satisfactorily by notifying the other party in writing of its intention to refer the matter to arbitration and by proposing an arbitrator or arbitrators to determine the dispute.

In Mekwunye v Lotus Capital,^[9] the Court of Appeal departed from its previous decisions in MV Panormos Bay and UBA: it rejected the contention that the applicant for a stay of proceedings (Lotus Capital) should have commenced arbitration or shown the steps it had taken to commence arbitration before it could be entitled to an order staying further proceedings in the matter. According to the Court, ‘placing the burden [on the applicant] of presenting documentary evidence to support an application for stay of proceedings pending arbitration constitutes a departure from the plain provisions of section 5(2) of the Act’, noting that it was sufficient for an applicant for a stay of proceedings pending arbitration to affirm its willingness to participate in arbitration if commenced by the claimant.

However, the decision of the Court of Appeal in UBA was affirmed by the Supreme Court in July 2023.^[10] The Supreme Court affirmed the decision of the Court of Appeal that the party applying for a stay of proceedings pending arbitration must demonstrate unequivocally by documentary evidence that it is willing to arbitrate. This means that but for the intervention of the AMA, the position under Nigerian law would have been that, to succeed in an application for a stay of proceedings, the party applying must demonstrate unequivocally by documentary evidence that it is willing to arbitrate.

The confusion caused by the contradiction between sections 4(1) and 5(1) of the ACA has been resolved by section 5(1) of the AMA, which makes it mandatory for a court to grant an application for stay of proceedings pending arbitration unless the arbitration agreement is found to be void, inoperative or incapable of being performed. This referral should occur before the parties’ first statement on the substance of the dispute.

Number of arbitrators

The AMA provides that the parties to an arbitration agreement may agree on the number of arbitrators to constitute an arbitral tribunal.^[11] If there is no agreement regarding the number of arbitrators, the arbitral tribunal shall consist of a sole arbitrator.^[12]

The provision for a sole arbitrator as the default number could be seen as preferable to the default three-member panel provided for in the ACA because the fees payable to a three-member panel would be more than those payable to a sole arbitrator. A three–member panel may also be inappropriate for low value claims.

Limitation period for enforcement of an arbitration award in Nigeria

The issue of the limitation period for enforcement of an arbitration award in Nigeria was one that needed to be addressed by legislation because of the unfavourable consequences of the pre-AMA judicial authorities on the issue.

Although the ACA had no provisions regarding the limitation period for the enforcement of arbitration awards in Nigeria, the limitation laws of the various states in Nigeria made provisions for the application of those laws to arbitration in the same way they would to court actions. For example, section 62 of the Limitation Law of Lagos State provides that ‘this Law and any other Limitation enactment shall apply to arbitration as they apply to actions in the court’, and section 8 (1)(d) provides that actions to enforce an arbitration award, where the arbitration agreement is not under seal or where the arbitration is under any law other than the ACA, cannot be brought after six years have lapsed since the date on which the cause of action arose.

Although it is undeniable that arbitral proceedings must be commenced within the time limit provided in the applicable law – which, depending on the applicable law, is either five or six years – the crucial question is whether the time begins to run, for purposes of enforcing the award, from the date of the initial breach of the underlying contract or from the date of publication of the award.

In Murmansk State Steamship Line v Kano State Oil Millers (Murmansk)^[13] the Nigerian Supreme Court held that the limitation period for the enforcement of an arbitral award begins to run from the date the cause of action accrued and not the date when the award was issued. It held that the statutory limitation period^[14] for the enforcement of the award began to run in 1964 when the underlying agreement between the parties was breached and not from the making of the award in 1966.

The Supreme Court restated its position on this point in City Engineering v Federal Housing Authority (City Engineering).^[15] The effect of this is that unless arbitration proceedings are concluded and an award is issued within the limitation period that applies to the cause of action, the resulting award may be caught by statute bar and become unenforceable.

The AMA has introduced significant changes to ameliorate the effects of the Supreme Court’s decisions. Section 34 of the AMA contains four important provisions relating to the application of limitation laws to arbitral proceedings, as follows:

• applicable statutes of limitation shall apply to arbitral proceedings in the same way they apply to judicial proceedings;
• in computing the time prescribed by a statute of limitations for the commencement of judicial, arbitral or other proceedings in respect of a dispute that was the subject matter of (1) an award that the court orders to be set aside or declares to be of no effect, or (2) the affected part of an award that the court orders to be set aside or declares to be of no effect, the period between the commencement of the arbitration and the date of the order referred to in points (1) or (2) shall be excluded;
• in determining when a cause of action accrued, any provision that an award is a condition precedent to bring legal proceedings in respect of a matter to which an arbitration applies shall be disregarded; and
• 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.

The changes introduced by the AMA address the concerns of arbitration practitioners and the business community regarding the effect of the decisions of the Supreme Court in the Murmansk and City Engineering cases. One of the unfortunate consequences of the Supreme Court’s decisions had been that successful award creditors, in some cases, ended up with unenforceable awards, given that the Court had decided that the limitation period for enforcement of arbitration awards runs even during the arbitration proceedings.

Third-party funding

Section 61 of the AMA has abolished the torts of maintenance and champerty, including being a common barrator, in relation to third-party funding of arbitration. This section applies to arbitrations seated in Nigeria and to arbitration-related proceedings in any court in Nigeria.

Section 62(1) provides that where a third-party funding agreement is made, the party benefiting from the agreement shall give written notice containing the name and address of the third-party funder to the other party or parties, the arbitral tribunal and, where applicable, the arbitral institution. The written notice should be made on or before the commencement of the arbitration, or after the commencement of the arbitration as soon as the funding agreement is made. The cost of securing third-party funding will be considered as one of the costs of arbitration, which the tribunal must allocate in its final award under section 50(1) of the AMA.

Appointment of an emergency arbitrator

Unlike the ACA, the AMA provides for the appointment of an emergency arbitrator. Section 16(1) of the AMA provides that a party that requires emergency relief may, concurrent with or following the filing of a request for a dispute to be referred to arbitration but before the constitution of the arbitral tribunal, 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. If the arbitral institution or court determines that it should accept the application, it shall, unless the parties agree otherwise, appoint an emergency arbitrator within two business days of the date the application is received.

A party can challenge the appointment of an emergency arbitrator. Unless the parties otherwise agree, a challenge against the appointment of the emergency arbitrator shall be made within three days of the day the party that makes the challenge receives the notification of the appointment, or of the date when the party was informed of the facts and circumstances on which the challenge is based, where that date is after the receipt of the notification.^[16]

The emergency relief proceedings must be in accordance with the provisions of article 27 of the First Schedule to the AMA.^[17] Further, an application under section 16 and article 27 of the First Schedule to the AMA shall not prevent a party from seeking urgent interim measures from a court under section 19 of the AMA, which allows a party to seek interim measures of protection from a court.^[18] Similarly, any application for urgent interim measures from a competent court is not deemed to be an infringement or waiver of the arbitration agreement.^[19]

Power of the court to grant interim measures of protection

Section 19 of the AMA expressly empowers a court to issue protective interim measures for, and in relation to, arbitration proceedings that are seated in Nigeria or another country in relation to court proceedings. This power must be exercised within 15 days of any application.^[20]

Power of arbitral tribunal to order interim measures of protection

Regarding the power of an arbitral tribunal to order protective interim measures, the AMA goes beyond merely granting an arbitral tribunal power to order such measures, as had been the case under the ACA: section 20(2) of the AMA provides the definition of an interim measure, and section 21(1) provides the conditions for the grant of interim measures.

A party requesting an interim measure under section 20(2)(a), (b) and (c) must satisfy the arbitral tribunal that:

• harm for which adequate reparation cannot be obtained by a damages award is likely to result if the measure is not ordered, and the harm substantially outweighs the harm that is likely to result to the party against whom the measure is directed if the measure is granted; and
• there is a reasonable possibility that the requesting party may succeed on the merits of the claim, provided that any determination on the possibility does not affect the discretion of the arbitral tribunal to make any subsequent determination.^[21]

Application for preliminary orders

The AMA provides that unless otherwise agreed by the parties, 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.^[22] The tribunal may grant a preliminary order if it considers that prior disclosure of the request for the interim measure to the party against whom it is directed may frustrate the purpose of the measure.^[23] The conditions for the grant of an interim measure stipulated under section 21(1) of the AMA also apply to any preliminary order, provided that the harm to be assessed under section 21(1)(a) is the harm likely to result from the order being granted or not granted.^[24]

Immediately after the arbitral tribunal has made a determination in respect of an application for a preliminary order, the tribunal shall give notice to all parties of the request for interim measures, the application for the preliminary order, the preliminary order, if any, and all other communications, including indicating the content of any oral communication between a party and the arbitral tribunal in relation thereto.^[25]

A preliminary order expires after 20 days have passed since the date on which it was issued by the arbitral tribunal. The tribunal may issue an interim measure adopting or modifying the preliminary order, after the party against whom the preliminary order is directed has been given notice and an opportunity to present its case.^[26] A preliminary order is binding on the parties but is not subject to enforcement by a court. It also does not constitute an award.^[27]

Consolidation of arbitral proceedings

Section 39 of the AMA introduces, for the first time, consolidation of arbitral proceedings and concurrent hearing. Parties may agree that the arbitral proceedings shall be consolidated with other arbitral proceedings, including arbitration proceedings involving a different party (with the agreement of that party),^[28] or concurrent hearings shall be held on such terms as may be agreed.^[29] The arbitral tribunal shall not order the consolidation of proceedings or concurrent hearings unless the parties agree to the making of such an order.^[30]

Joinder of parties

Unlike the ACA, which had no provisions for joinder of parties in an arbitration, section 40 of the AMA provides that the arbitral tribunal shall have the power to allow an additional party to be joined to the arbitration, provided that, prima facie, the additional party is bound by the arbitration agreement giving rise to the arbitration. The arbitral tribunal’s decision to order a joinder is, however, without prejudice to its power to subsequently decide any question on its jurisdiction arising from such decision.^[31]

Grounds for setting aside an award

Under the ACA, a party can apply to set aside an award on grounds of misconduct on the arbitrator’s part, or where the arbitral proceedings, or award, had been improperly procured; however, the ACA did not provide guidance on what amounted to misconduct or improper procurement, therefore leaving the courts with wide discretion to determine what constitutes misconduct.

In the case of KSUDB v Fanz Construction,^[32] the Court of Appeal, relying on various English cases, listed several acts that would constitute misconduct by an arbitrator, including error of law on the face of the award. Misconduct, therefore, became an infinitely malleable or a catch-all concept that allowed for the importation of all sorts of allegations against an arbitrator.

Under section 55(2) of the AMA, a setting-aside application cannot be made on the ground of an error on the face of the award. Under section 55(3) of the AMA, an award can only be set aside if the party making the application provides proof that:

• a party to the arbitration agreement was under some legal incapacity;
• the arbitration agreement is not valid under the law to which the parties subjected it or, failing such indication, under the laws of Nigeria;
• the party making the setting-aside application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present its case;
• the award deals with a dispute that is not contemplated by or that does not fall within the terms of the submission to arbitration;
• the award contains decisions on matters that are beyond the scope of the submission to arbitration; however, if those matters beyond the scope of the agreement can be separated from those within the scope, the part of the award containing decisions on matters that cannot be submitted to arbitration can be set aside; or
• the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the parties’ agreement, unless the agreement was in conflict with a mandatory provision of the AMA, or, in the absence of the parties’ agreement, the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the AMA.^[33]

The court may also set aside an arbitral award if it finds that the subject matter of the dispute cannot otherwise be settled by arbitration under the laws of Nigeria or the award is against Nigerian public policy.^[34]

The AMA’s limitation of the grounds to set aside an award to those expressly stated in its section 55(3) is a welcome development that eliminates recourse to vague and nebulous common law grounds, such as misconduct and error of law on the face of the award.

Award review tribunal

One of the innovations introduced by the AMA is the award review tribunal. Section 56 provides that, notwithstanding section 55(1) of the AMA,^[35] the parties may provide in their arbitration agreement that an application to review an arbitral award on any of the grounds set out in section 55(3) shall be made to an award review tribunal.

If the parties have agreed that an award shall be reviewed by an award review tribunal, a party that is aggrieved by an arbitral award and seeks to challenge the award on any of the grounds set out in section 55(3) of the AMA shall send the other party a written communication that indicates its intent to challenge the award within three months.^[36]

Unless the parties agree otherwise, the award review tribunal comprises the same number of arbitrators as that in the arbitral tribunal that first determined the dispute.^[37]

Conclusion

The AMA is a modern arbitration law reflecting international best practices. It is hoped that the AMA will further stimulate the growth of arbitration in Nigeria and enhance Nigeria’s appeal as a seat of arbitration in the Africa.

Endnotes

^[1] Arbitration and Mediation Act 2023 (AMA), section 2. The AMA defines what constitutes electronic communication in section 91 by referring to various modern means of electronic communications.

^[2] AMA, section 5(1).

^[3] Laws of the Federation of Nigeria and Lagos 1958, Cap 13.

^[4] Arbitration Ordinance 1958, section 1(2).

^[5] See, for example, Laws of Western Region of Nigeria 1959, Cap 8, Arbitration Law.

^[6] Under Nigerian law, the word ‘shall’, when used in a statute, connotes an obligation or duty while the use of the word ‘may’ implies choice or discretion. See Nwankwo v Yar’Adua (2010) 12 NWLR (Pt 1209) 518 at 589, paragraph B-C; Bamaiyi v AG Federation (2010) 12 NWLR (Pt 722) 468.

^[7] MV Panormos Bay v Olam (Nigeria) Plc (2004) 5 NWLR (Pt 865) 1.

^[8] UBA v Trident Consulting Limited (2013) 4 CLRN 119.

^[9] Mekwunye v Lotus Capital (2018) LPELR-45546(CA).

^[10] UBA Plc v Trident Consulting Ltd (2023) 14 NWLR (Pt 1903) 95.

^[11] AMA, section 6(1).

^[12] AMA, section 6(2).

^[13] Murmansk State Steamship Line v Kano State Oil Millers Ltd, 1974-75 NSCC 590.

^[14] In this case, it was the English Statute of Limitation 1623, which requires that a civil action be commenced within six years of the cause of action.

^[15] City Engineering (Nig) Ltd v Federal Housing Authority (1997) 9 NWLR (Pt 520) at 224. See also Tulip (Nig) Ltd v Noleggioe Transport Maritime SAS (2011) 4 NWLR (Pt 1237) 254.

^[16] AMA, section 17(1).

^[17] AMA, section 16(9).

^[18] AMA, section 16(10).

^[19] AMA, section 16(11).

^[20] AMA, Third Schedule.

^[21] AMA, section 21(1).

^[22] AMA, section 22(1).

^[23] AMA, section 22(2).

^[24] AMA, section 22(4).

^[25] AMA, section 23(1).

^[26] AMA, section 23(4).

^[27] AMA, section 23(5).

^[28] AMA, section 39(1)(a).

^[29] AMA, section 39(1)(b).

^[30] AMA, section 39(2).

^[31] AMA, section 40(2).

^[32] Kano State Urban Development Board v Fanz Construction Company Limited (1986) 5 NWLR (Pt 39) 74 at 89 to 90.

^[33] AMA, section 55(3).

^[34] AMA, section 55 (3)(b).

^[35] The section relating to applications for setting aside an arbitral award.

^[36] AMA, section 56(2).

^[37] AMA, section 56(4)(a).