Prevalence of International Arbitration as a Method of Resolving Disputes in Nigeria

There does not appear to be a prevalence of international arbitration in Nigeria. However, there appears to be, on an anecdotal basis, increased participation in international arbitration as a result of choice of parties. Several arbitral bodies have been established for the purpose of conducting international arbitrations in Nigeria in the recent past, which may be seen as a reflection of the apparent prevalence of international arbitration in Nigeria.

The Use of International Arbitration in Nigeria by Domestic Parties

Domestic parties cannot by law ordinarily engage in international commercial arbitration, except where the place of arbitration is outside Nigeria or the performance of the contract is outside Nigeria. Be that as it may, domestic parties would ordinarily use litigation as the method of dispute resolution, rather than arbitration (Section 57(1) of the Arbitration and Conciliation Act, 1988).

Basis on which International Arbitration is Used in Nigeria

Where there is an arbitration agreement between parties, domestic parties have limited choice other than to submit to arbitration, as the courts ordinarily enforce arbitration agreements. Parties are encouraged by appropriate rules of court to seek mediation before proceeding to litigation. International arbitration is mostly used during enforcement of foreign arbitral awards. With the current high level of awareness and several arbitration institutions located in Nigeria, however, there is an expectation that arbitration will become more prevalent in Nigeria in future.

During the pandemic, a number of arbitrations were conducted online. It would seem that the use of information technology reduced the negative impact of COVID-19 in the conduct of international arbitration.

Industries in Nigeria Experiencing Increased International Arbitration Activity in 2021–22

The oil industry is experiencing a boost in international arbitration, perhaps as a result of divestment by international oil corporations in Nigeria.

The reasons for the growth in arbitration may be attributed to the robust enforcement of arbitration agreements by the Nigerian courts. Indeed, in the enforcement of awards, there is a deliberate reluctance to interfere with the awards on the grounds of public policy (Section 52(2) (b) (ii) of the Arbitration and Conciliation Act 1988).

Industries in Nigeria Experiencing a Decrease in International Arbitration Activity in 2021–22

There is at present no trend to indicate that any particular sector of the economy is currently experiencing decreased international arbitration activity as a result of the COVID-19 pandemic.

The most commonly used arbitration institution is that of the International Chamber of Commerce, as company legal advisers appear to be more familiar with the International Chamber of Commerce.

No new arbitration institution was established in Nigeria in the period 2021–22.

There are no courts specially designated by legislation for the hearing of disputes related to international or domestic arbitrations. However, it is perhaps necessary to add that the heads of the courts reserve the discretion under practice directions to identify a particular court or division to handle such matters.

The Arbitration and Conciliation Act of 1988 governs international arbitration in Nigeria. There is also the Arbitration Law of Lagos State of 2009. There is no significant divergence in these laws from the UNCITRAL Model Law. However, mention must be made of provisions for the death of an arbitrator and multiparty arbitrations in the Arbitration Law of Lagos State (Section 15(1) of the Arbitration Law of Lagos State 2009).

There has been no significant change to the arbitration law in the past year although there is pending legislation before the National Assembly of Nigeria – the Arbitration and Mediation Bill – which may change the arbitration law and practice landscape.

In order to be enforceable under the laws of Nigeria, an arbitration agreement must be in writing and it must be in respect of commercial disputes (Section 3(3) of the Arbitration Law of Lagos State 2009, and Section 1 read together with Section 57 of the Arbitration and Conciliation Act 1988).

Subject Matters Not Referred to Arbitration under the Governing Law in Nigeria

In order to be referred to arbitration in Nigeria, a case must be in respect of commercial matters, as clearly defined in Section 57 of the  Arbitration and Conciliation Act 1988. 

The subject matters excluded by other laws are admiralty claims, marriage, chieftaincy disputes, criminal matters, administrative law matters, labour disputes other than for employment contracts, defamation, etc.

It must be stated that the definition of arbitration in the Lagos State of Nigeria does not restrict arbitration to commercial disputes, and it declares that an arbitration agreement between parties may be for the settlement of any dispute (Section 63 of the Arbitration Law of Lagos State 2009). This provision is of course subject to the requirements of the applicable law, especially in admiralty matters, where a designated court has exclusive jurisdiction to determine such disputes (Section 19 of the Admiralty Jurisdiction Act 1991).

General Approach for the Determination of Whether or Not a Dispute is Arbitrable in Nigeria

The general approach to determining the arbitrability of a dispute starts with scrutiny of the arbitration agreement or submission. The applicable law would also be examined with the purpose of determining whether there is any restriction to jurisdiction, such as in admiralty disputes.

Approach of National Courts in Determining Law Governing Arbitration Agreement

The courts must first make a determination whether or not the dispute is a domestic or an international arbitration. If the arbitration is domestic then the law of Nigeria is applicable. If the arbitration is international, the courts examine the arbitration agreement to determine whether the parties agreed on the law governing the subject matter of the agreement apart from the law of the seat of arbitration.

In the absence of an agreement and sometimes subject to conflict of laws principles, the courts may apply a suitable law for the resolution of the dispute.

Generally, the courts hold the view that parties have the freedom of agreement to choose the method of settlement of disputes unless there is a provision of the law which takes away this right of the parties. Thus the approach of the national court is to give effect to the wishes of the parties as embodied in the arbitration agreement, subject to any restrictive provision of the law.

Approach of National Courts in Enforcement of Arbitration Agreements

There is robust enforcement of arbitration agreements by the Nigerian courts. Indeed, in the enforcement of awards, there is a deliberate reluctance to interfere with the awards on the grounds of public policy (Section 57(j) of the Arbitration Law of Lagos State 2009).

Generally, arbitration agreements are enforced by the national courts subject to intrinsic factors questioning the validity of the agreement, and extrinsic factors with respect to want of jurisdiction and arbitrability of the dispute (Sections 51(1) and 52 of the Arbitration and Conciliation Act 1988).

The Validity of an Arbitration Clause If the Contract in Which It Is Contained Is Invalid

This issue has not come squarely before the Nigerian courts for adjudication. However, by the provisions of the arbitration laws of several states in Nigeria, the fact that the contract is null and void may not of itself entail the invalidity of the arbitration clause (Section 19(2) of the Arbitration Law of Lagos State 2009). 

The Rule of Separability from an Arbitration Clause Contained in an Invalid Agreement

The rule of separability of arbitration clauses contained in invalid agreements is provided in the laws of Nigeria (Section 12(2) of the Arbitration and Conciliation Act 1988).

It must, however, be noted that based on the decisions of appellate courts in Nigeria on general contractual principles, no benefit would appear to be derived from a contract that is determined to be illegal. Whether an arbitration agreement would be regarded as an exception is a moot point, in the light of very clear legislative provision for separability of the arbitration clause from the null agreement.

It must be stated that generally, with respect to private arbitrations, there are no limits to the party’s autonomy in the appointment of arbitrators (Section 6 of the Arbitration and Conciliation Act 1988; Section 7(1) of the Arbitration Law of Lagos State 2009).

It is, however, mandated by the national laws that the independence and impartiality of the arbitrators must not be impinged in the exercise of that freedom. There are, of course, other limits determined by the qualification criteria agreed by the parties, as well as the advisability of having an arbitrator of a different nationality from the parties in an international arbitration.

Furthermore, where the number of arbitrators appointed is two or any even number, the law requires that an additional arbitrator must be appointed (Section 7(2) of the Arbitration Law of Lagos State 2009).

However, there are statutorily enforced arbitrations in some industrial sectors, such as in communication and labour disputes, that might restrict party autonomy (Section 254© of the Constitution of the Federal Republic of Nigeria, 1999 as amended and Sections 6, 9 and 12(1 and 5) of the Trade Dispute Act 1976; Sections 4(p), 73 and 76 of the Nigerian Communication Act 2003).

Default Procedure for Selection of Arbitrators

In circumstances where the parties’ chosen method for selecting arbitrators fails, there is a detailed default appointment procedure, in which the appointing authority takes over the role, failing which, the chief justices of the various high courts will make the appointment upon the application of a party (Section 7 of the Arbitration and Conciliation Act 1988).

Default Procedure for Multiparty Arbitration

With the national law, that is, the Arbitration and Conciliation Act 1988, there is no default procedure for multiparty arbitrations.

However, there is a robust provision for the default constitution of the arbitral tribunal under the Arbitration Law of Lagos State 2009, applicable to Lagos State of Nigeria only, in the event of the failure of the contractual method in a multiparty arbitration. That process involves the Lagos Court of Arbitration making the appointments (Section 8(3c) of the Arbitration Law of Lagos State 2009).

Selection of Arbitrators by Courts in Nigeria

In the absence of an appointment process agreed by the parties or in the event of a failure in the appointment process stipulated by the parties, the courts are empowered to intervene (Section 7(2) of the Arbitration and Conciliation Act 1988).

Furthermore, where a party is not satisfied with the award of an arbitral tribunal regarding the challenge to an appointment, the courts have the power to intervene where an arbitrator’s appointment is contrary to the qualification criteria agreed upon or where it casts doubt on the independence and impartiality of the arbitral tribunal.

The court is required to take into consideration any qualifications that are stipulated in the arbitration agreement and such other factors that would ensure the appointment of an independent and impartial arbitrator, including the nationality of the arbitrator (Section 7(5) of the Arbitration and Conciliation Act 1988).

There are specific provisions of the national law governing the challenge or removal of arbitrators. 

Grounds for Challenging Arbitrators

The grounds must be related to justifiable doubts about the qualification of the arbitrator and the independence and impartiality of the arbitrator (Sections 8(3) and 45(3) of the Arbitration and Conciliation Act 1988; Section 10(3) (a) of the Arbitration Law of Lagos State 2009).

There is a continuing responsibility to the parties and on the part of the arbitrator, for detailed and full disclosure of anything that may cast justifiable doubt as to the independence and impartiality of an arbitrator before their appointment as an arbitrator and during the arbitration proceedings (Sections 8(2) and 45(2) of the Arbitration and Conciliation Act 1988).

Non-commercial disputes may not be referred to arbitration under the national law.

Importantly, certain disputes are excluded by law from settlement by arbitration, such as disputes classified under admiralty jurisdiction.

Furthermore, some matters can only be submitted to arbitration in accordance with the provisions of that law or another law (Section 35 of the Arbitration and Conciliation Act 1988).

Under the national law, the arbitral tribunal is enjoined to rule on any challenge to its jurisdiction (Section 12(1) of the Arbitration and Conciliation Act 1988).

Under the national law, where a party can show that the cause of action is not arbitrable, or the arbitral tribunal is improperly constituted, or the cause of action is caught by contractual or statutory limitation, the court may set aside an award on the grounds of want of jurisdiction. 

The national courts are often wary of intervening in arbitration proceedings. There is a general reticence or reluctance to nullify an arbitration proceeding on the grounds of jurisdiction unless the grounds can be clearly and distinctly substantiated, especially on the nature of the claim, limitation of action, etc.

The national courts have the authority to review negative rulings on jurisdiction.

The right to go to court to challenge the jurisdiction of the tribunal must be after the tribunal has rendered an interim award on its jurisdiction. To do otherwise would be premature and would constitute an abuse of court process.

The reasons for the award are considered to see whether these disclose an error of law on the face of the record when it comes to issues of jurisdiction. The arbitral award will be reviewed de novo in this instance.

However, in matters concerning admissibility of evidence, the national courts take the view that parties are bound by the decisions of their appointed arbitrators, for good or bad, therefore, a review in such circumstances would be deferential. However, where egregious decisions may be brought under the conditions for setting aside an arbitral award, the courts may review the decision de novo.

The national courts hold a very strong view that agreements must be satisfied and would therefore take a dim view of any attempt to circumscribe an arbitration agreement by proceeding to court. Indeed, the provisions of the arbitration law allow for such court proceedings to be stayed upon an appropriate application being brought to court by the other party (Section 6 of the Arbitration Law of Lagos State 2009). 

However, even though there may be an arbitration agreement between parties, it is not unlawful to begin proceedings in court and the cause will not be stayed if the other party does not raise any objection to the dispute being heard by a national court.

There is no circumstance whatsoever where an individual or entity that is not party to an arbitration agreement or submission will be bound by the arbitral award to which it is not a party.

Arbitration in Nigeria is consensual, with the exception of labour disputes and communication industry sector disputes, hence, there is no provision under national law that would allow an arbitral tribunal to exercise jurisdiction over individuals that are not parties to the arbitration agreement or a submission. Indeed such a proposition is contrary to the constitution of Nigeria.

Unless otherwise agreed by the parties, the arbitral tribunal can indeed award preliminary and interim reliefs (Sections 21(2) and 23(2) of the Arbitration Law of Lagos State 2009).

Such a relief is binding and would be in relation to protection or preservation of the subject matter of the dispute and there may in return be an order for associated security costs (Section 29(1) of the Arbitration Law of Lagos State 2009). 

The parties may agree for the courts to play a role in granting preliminary or interim relief. Additionally, an arbitral tribunal itself may seek the intervention of the court in these circumstances.

The circumstances under which a court will play a role in preliminary or interim relief in arbitration proceedings relate to conservation of the subject matter of the dispute, or the sale of perishable products.

If the defendant is resident in Nigeria or the contract is to be executed in Nigeria, there would indeed appear to be no restriction to the granting of an interim injunction in a foreign-seated arbitration.

The reliefs would be for the conservation of goods or sale of perishable products.

Use of Emergency Arbitrators

In Nigeria, there is no provision for emergency arbitrators under the law. Hence, an arbitral tribunal is not regarded as being properly constituted in that circumstance and there can be no granting of interim or preliminary relief.

The national laws allow for the arbitral tribunal and the courts to order security for costs in appropriate cases (Section 49 of the Arbitration and Conciliation Act 1988; Section 53 of the Arbitration Law of Lagos State 2009).

There are national laws and rules governing the procedure of arbitration in Nigeria. 

There is the Arbitration and Conciliation Act 1988 and the arbitration rules made pursuant thereto.

There is the Arbitration Law of Lagos State 2009, and the Lagos Court of Arbitration Rules applicable thereto.

Procedural Steps for Conducting Arbitration Proceedings in Nigeria

Notice of Arbitration must be served to the other party (Section 32 of the Arbitration Law of Lagos State 2009).                                                                                                                                                                                                                                           

The appointment of arbitrators must thereafter be made in accordance with the provisions of the arbitration agreement, failing which, by the appointing authority or the courts.

The arbitral tribunal will subsequently commence the proceedings.

Arbitrators have the following powers and duties:

• power to award interim reliefs and security for costs (Sections 21 and 53 of the Arbitration Law 2009 of Lagos State);
• power to rule on jurisdiction (Section 12 of the Arbitration and Conciliation Act 1988);
• power to rule on admissibility of evidence;
• power to fix time and extend time for the parties to take certain actions (Section 36 of the Arbitration and Conciliation Act 1988);
• power to appoint experts (Section 22 of the Arbitration and Conciliation Act 1988; Section 42 of Arbitration Law 2009 of Lagos State);
• power to render awards;
• power to correct awards (Section 28 of the Arbitration and Conciliation Act 1988; Section 50 of the Arbitration Law of Lagos State 2009);
• power to interpret awards (Section 28 of the Arbitration and Conciliation Act 1988);
• power to grant additional awards (Section 28 of the Arbitration and Conciliation Act 1988);
• power to set aside awards (Sections 29 and 48 of the Arbitration and Conciliation Act 1988);
• power to consolidate different arbitration proceedings (Section 40 of the Arbitration Law of Lagos State 2009);
• power to subpoena witnesses (Section 23 of the Arbitration and Conciliation Act 1988);
• power to fix costs and fee (Section 49 of the Arbitration and Conciliation Act 1988; Section 51 of the Arbitration Law of Lagos State 2009);
• power to order a deposit for costs (Section 50 of the Arbitration and Conciliation Act 1988); 
• power to rule on inspections and discoveries (Section 20(2) of the Arbitration Law of Lagos State 2009); and
• power to determine the arbitration procedure in the absence of agreement.

Qualifications/Requirements for Legal Representatives Appearing in Nigeria

A person that has not been called to the bar in Nigeria cannot render legal services in Nigeria. Hence, irrespective of whether it is domestic or international arbitration, the legal advice and representation has to be given by a lawyer called to the Nigerian Bar (Section 2 of the Legal Practitioners Act 1975).

However, parties may choose anybody to represent their interest as long as there is no indication that the person is acting as a lawyer.

The parties have the right to agree on the collection and submission of evidence, failing which, the tribunal is empowered to rule on these issues, guided by the principle of fairness, justice, reciprocity and timeliness.

There may be oral hearings or documents-only proceedings or a combination of both, with the principle of equality maintained (Section 20(1) of the Arbitration and Conciliation Act 1988).

There are no specific rules, save that the Evidence Act 2011, is inapplicable to arbitrations. Despite that, the arbitral tribunal is expected to take into account the usages of the trade applicable to the transaction and decide in accordance with the terms of the contract.

The arbitral tribunal determines the admissibility, relevance, materiality and weight of evidence for both international and domestic arbitrations, nevertheless subject to such rules as institutional arbitration bodies may require (Section 31(3) of the Arbitration Law of Lagos State 2009; Section 15(3) of the Arbitration and Conciliation Act 1988).

The best evidence rule applies, which may not necessarily be in complete alignment with the Evidence Act 2011, which applies to court matters.

Both the national law and the Lagos State law allow robust intervention to support the production of documents and witnesses, subject only to the requirement that those witnesses must ordinarily be compellable in litigation. There is no difference between parties and non-parties, in this regard (Section 23 of the Arbitration and Conciliation Act 1988; Section 43 of the Arbitration Law of Lagos State 2009).

The national courts can always intervene to order the production of documents and the attendance of compellable witnesses (Section 23(1) of the Arbitration and Conciliation Act 1988).

The entire arbitration proceedings are confidential to the extent that the parties have not agreed otherwise. The proceedings ordinarily take place in camera.

However, during recognition and enforcement of awards, the hearings are before a court and the hearing before the court and the award may not necessarily be confidential as they form part of the public record, unless there is an order of court to the opposite effect.

The award must be in writing.

It must state the reasons for the award, unless otherwise agreed by the parties.

The award must be signed by the arbitrators and contain the date and place where the award was made.

The award may not be made public, except with the consent of the parties.

There is no time limit to render an award, except where the parties have agreed a timeframe (Section 26(1–3) of the Arbitration and Conciliation Act 1988; Section 47(1–3) of the Arbitration Law of Lagos State 2009).

There are no limits on the types of remedies that an arbitral tribunal may award unless the parties have agreed otherwise. 

Parties are entitled to recover interest and legal costs on the basis that the cost follows the event. The parties may, however, agree how costs are to be shared. If there is no agreement between the parties, the tribunal will determine the costs and act on the basis that the cost follows the events (Sections 46 and 53 of the Arbitration Law of Lagos State 2009).

Interest is payable on the basis of an agreement between the parties to that effect. Interest is also payable where there is a custom to that effect or where there is a fiduciary relationship between the parties that was unduly exploited.

Parties cannot appeal the award as it is final and binding on them. 

However, it is possible for parties to apply for non-recognition of the award or setting aside of the award. The procedure is to file an application before the national court within such timelines as are stipulated by the various high court civil procedure rules. The grounds will usually be misconduct by the tribunal, want of jurisdiction, fair hearing, arbitrability and public policy (Section 57 of the Arbitration Law of Lagos State 2009).

Under the national law, parties cannot exclude or expand the scope of appeal as no such right is given by any legislation and it cannot be by agreement as that would be unconstitutional.

The standard of judicial review is deferential, as parties take their arbitrators' decision for good or bad.

Nigeria ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, and domesticated the same as a national law in 1988.

Procedures and Standards for Enforcing an Award in Nigeria

Nigeria has domesticated the New York Convention on the Recognition of Foreign Arbitral Awards. Furthermore, various rules of court allow an application for the enforcement of arbitral awards to be made.

The victorious party is required to file for recognition and enforcement within set timelines. The original of the award must be attached to the court process. Thereafter, the award is deemed as the judgment of the court (Section 56 of the Arbitration Law of Lagos State 2009).

Enforcement of an Award in Nigeria Set Aside by the Court in the Seat of Arbitration

An award set aside in the seat of arbitration will not be enforced in Nigeria upon an application by the losing party to have the award set aside or not recognised.

An application to stay further proceedings on the enforcement can always be brought if the award is undergoing a challenge at the seat of arbitration (Section 52(3) of the Arbitration and Conciliation Act 1988).

Extent to which the State or a State Entity May Successfully Raise a Defence of Sovereign Immunity at the Enforcement Stage

A defence of state immunity might form part of the grounds of public policy in applying for the non-recognition of an award. However, the state is subject to the laws of the country and such a defence may be tenuous, as the courts are very reticent in setting aside an award on the grounds of public policy.

Approach of the Courts Towards Recognition and Enforcement of Arbitral Awards

The general approach is that parties are bound by their agreements. If they choose private adjudication, the courts will enforce their bargain. The approach is that parties get the arbitrators they choose and should abide by the consequence of their decision.

Standard of Domestic Courts Refusing to Enforce Foreign Arbitral Awards on the Grounds of Public Policy 

The courts apply the domestic public policy in refusing to enforce international arbitral awards (Section 52(2) (b) (ii) of the Arbitration and Conciliation Act 1988; Section 57(2j) of the Arbitration Law of Lagos State 2009). However, such public policy arguments rarely get traction in the courts.

There is no provision for class-action arbitration or group arbitration in the national law. 

There are several ethical codes and professional standards that apply to counsel and arbitrators, in particular:

• there must be strict confidentiality; 
• there must not be conflict of interest; and
• there must be independence and impartiality on the part of arbitrators.

There are no rules or restrictions on third-party funders. 

With the exception of Lagos State of Nigeria, an arbitral tribunal has no power to consolidate separate arbitration proceedings. In Lagos State, the parties would need to agree in order for the consolidation to be granted by the arbitral tribunal (Section 40(1) of the Arbitration Law of Lagos State 2009).

The courts can only intervene in an arbitration proceeding to the limited extent granted by the arbitration law, and there is no law for the consolidation of arbitration proceedings.

Unless a third party has agreed to be bound by the outcome of a particular arbitration proceeding, it is against the Constitution of Nigeria for a party to be bound by the arbitral award in a proceeding to which they are not a party, as that would amount to a denial of fair hearing. 

The national courts do not have jurisdiction to bind foreign third parties that are not a party to the case.