A new dawn for arbitration in Nigeria

Gareth Mills, partner, and John Olatunji, associate, both in the commercial dispute resolution team of law firm Charles Russell Speechlys examine Nigeria’s new ADR landscape.

Earlier in the summer of this year, the National Assembly of the Federal Republic of Nigeria delivered on its commitment to revamp the legal framework for resolving commercial disputes by arbitration and mediation in Nigeria, by replacing the Arbitration and Conciliation Act 1998 with a new regime in the form of the Arbitration and Mediation Act 2023 (the New Act).

Now that the New Act has had some months to “bed in” it is clear that the statutory changes, some of which are discussed below, are going a long way towards increasing Nigeria’s position as an alternative dispute hub for the sub-Saharan region.

It was recognised by the Nigerian legislature that following the failure of commercial relationships, Alternative Dispute Resolution (via Arbitration, Mediation, Conciliation etc) (ADR) was being widely viewed as a preferred and expedited means of resolving disputes rather than the utilisation of the traditional court processes. With a clear objective of promoting and imposing expediency to the resolution of disputes via ADR, the various updates to the New Act have clearly been welcomed by ADR practitioners and international business alike as they provide much needed assurance to prospective and existing investors in Nigeria that in the event of a dispute with a counterparty, justice can be dispensed expeditiously.

Whilst the updates to the New Act extends to mediation proceedings, this article will focus solely on the notable changes concerning arbitral proceedings.

DEFAULT NUMBER OF ARBITRATORS AND ARBITRATOR IMMUNITY

The New Act states that parties may agree the number of arbitrators to be appointed in the event of one or other instigating arbitration proceedings. However, the default number of arbitrators has been changed to one rather than three as provided by the Act’s predecessor.

Consistent with international best practice, the New Act confirms that appointed arbitrators (including emergency arbitrators – as discussed below) have immunity from liability for anything done or omitted in the discharge or purported discharge of their functions, unless their action or omission was in bad faith.

AWARD REVIEW TRIBUNALS

The New Act seems to encourage commercial parties to provide in their arbitration agreement (or otherwise agree) that an aggrieved party may submit an arbitral award for review by a so called ‘Award Review Tribunal’ (ART), within three months of the date the parties received the final version of the arbitral award, on any of the grounds that a High Court of Nigeria (a High Court) may set aside an arbitral award under the Act.

Parties may agree on the composition of, and the procedure to be followed by, the ART, otherwise, the ART will consist of the same number of arbitrators as the initial arbitral tribunal and may conduct the arbitral proceedings in a manner is considers appropriate.

The New Act imposes its objectives of expediency to arbitral proceedings by requesting the ART to “endeavour” to render its decision within 60 days of its constitution.

If the ART sets aside an award in whole or in part, a High Court may reinstate an award if it finds that the decision of the ART is “unsupportable”. Where the ART affirms an award in whole or in part, a High Court can only set aside an award if it finds that an award is not arbitrable or contrary to public policy.

This is an unconventional approach and it is not immediately clear when or why parties would agree to an additional layer of review to their awards. It is however optional and it will be interesting to see if parties make use of the process.

THIRD-PARTY FUNDING

Third-party funding (TPF) offers businesses a means of pursuing claims while preserving liquidity and avoiding the risk of carrying the cost of expensive litigation on their own books. 

Historically, third parties were prohibited from funding disputes in Nigeria due to the common law doctrines of maintenance and champerty. This obstacle has now been removed by the New Act for arbitrations seated in Nigeria and to arbitration-related proceedings in any court within Nigeria.

Under the New Act, parties in receipt of TPF are required to disclose its existence and details of the funder to other parties of the arbitral proceedings, the arbitral tribunal and where applicable, the arbitral institution. The disclosure of these details is expected to occur either at the commencement of the arbitral proceedings or as soon as possible once funding is arranged if funding is obtained during the proceedings.

While the New Act does not require a recipient of TPF to disclose full details of their agreement with the funder, an application for security of costs must be supported by an affidavit stating whether under the funding arrangement the funder has agreed to cover adverse cost orders.

The New Act permits respondents to recover the costs of obtaining TPF against a claimant in situations where their case is successful and they are consequently awarded their costs (subject to any factors that might determine the amount of costs).

GROUNDS FOR SETTING ASIDE AWARDS

In addition to promoting the use of Award Review Tribunals, there are two significant changes in respect of setting aside arbitral awards. Firstly, the New Act clarifies that an “error on the face of the award” and “where an arbitrator has misconducted himself” (an available ground under section 30 of its predecessor) are no longer prima facie grounds on which an arbitral award may be set aside.

Secondly, it has made it more difficult for arbitral awards to be set aside by requiring a party, in addition to establishing a ground to set aside an award, to satisfy a High Court that the arbitral award “has caused or will cause substantial injustice to the applicant”.

EMERGENCY ARBITRATOR

The appointment of an emergency arbitrator to decide on interim applications before the composition of an arbitral tribunal now has statutory footing. A party that requires emergency relief may apply for the appointment of an emergency arbitrator to the arbitral institution designated by the parties or the High Court. If accepted, the institution or the High Court must appoint an emergency arbitrator and notify the parties within two business days (unless the parties agree otherwise). A party who wishes to challenge the appointment of an emergency arbitrator must make the challenge within three days of the appointment of the emergency arbitrator and the institution, or the High Court must determine the challenge within three business days of the date the challenge was made.

Upon being appointed, the emergency arbitrator must determine the issues in dispute within 14 days. The decisions of the emergency arbitrator are binding on the parties and enforceable; however, they may serve only as a temporary relief for a party, as they can be modified, terminated or annulled in part or entirely, when the arbitral tribunal is composed.

INTERIM MEASURES

Notably, unless prohibited by agreement of the parties, at the request of a party, the arbitral tribunal may grant “temporary measures” that may order a party to: (a) maintain or restore the status quo pending determination of the dispute; (b) take action that may prevent, or refrain from taking action that is likely to cause, current or imminent harm or prejudice to the arbitral process itself; (c) provide a means of preserving assets out of which an award may be satisfied; or (d) preserve evidence that may be relevant and material to the resolution of the dispute or preserve the subject matter of the arbitration itself.

The party seeking a temporary measure must satisfy a two-limb test, being: (a) the anticipated harm is not adequately reparable by an award of damages and outweighs the harm that is likely to be caused to the other party; and (b) there is a reasonable possibility that the requesting party may succeed on its claim.

The New Act also provides a framework for the enforcement of the interim measures granted by the tribunal.

LIMITATION PERIOD

The New Act has also now helpfully clarified 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.

LOOKING AHEAD

Although the success of the New Act will largely depend on its further implementation over time, it is a significant improvement on the previous statute and is in line with internationally recognised principles. The New Act is also unique in its promotion of the use of Award Review Tribunals, the use of which will enable parties to limit the Nigerian Court’s ability to review an award. It will be interesting to see if this process is used and whether the concept will be taken up in other jurisdictions.