International Quarterly — Issue 34

Arbitration reform in Nigeria

By Ben Smith, Senior Associate & Oliver Weisemann, Trainee, Fenwick Elliott

In May of last year, the Nigerian Senate passed the Arbitration and Mediation Bill 2022 (the “2022 Bill”), representing the most significant reform of its arbitration law in over thirty years (assuming it is not affected by the upcoming general election).1 The legislation it replaced, the Arbitration and Conciliation Act 1988, based on the 1985 edition of the UNCITRAL Model Law on International Commercial Arbitration (the “1988 Act”), has come under significant criticism in recent years.

Criticisms of the 1988 Act

A particular point of criticism has been the lack of provisions for interim relief in support of an arbitration, as under the 1988 Act, only an arbitral tribunal may grant interim relief, and this is only in respect of a pending arbitration.2 This lacuna has occasionally caused issues for parties seeking injunctive relief before the Nigerian courts, as illustrated in the case of NV Scheep v MV S Araz (2000)3, where the Nigerian Supreme Court refused to grant an injunction on the basis that it considered that, for the court to be able to do so, the substantive dispute concerned needed to be before the court for determination.

The 1988 Act has also been criticised for the lack of guidance it contains on emergency arbitrators and the enforceability of emergency arbitrators’ orders being entirely silent on the point. In relation to absent definitive guidance, it has been suggested that the enforceability of the orders of an emergency adjudicator remained in doubt, raising questions concerning the compatibility of this aspect of the Arbitration Act with the New York Convention, to which Nigeria is a signatory.4

Furthermore, the 1988 Act has attracted criticism by way of its lack of provisions dealing with limitation. This issue became apparent by way of the case of City Engineering Nig Ltd v FHA5 where the Court determined that the limitation law of Lagos state not only applied to the arbitral award in question; it applied from the date of the cause of action, rather than the date of the award.6

Many of the above are common criticisms of the older arbitration laws on the continent, which are now undergoing reform. Prior to reform in 2021, the applicable arbitration provisions in Ethiopia faced similar criticism concerning the lack of interim measures and the extensive power of the courts to review (and even revise) arbitral awards and rule on the arbitral tribunal’s jurisdiction.7 Similarly, a lack of interim measures was a point of criticism of the pre-reform arbitration regimes in both Tanzania8 and Sierra Leone.9

In contrast, the position in respect of the New York Convention is less consistent, as while Ethiopia and Sierra Leone have come under criticism for not acceding at all before doing so in 202010, some states such as Nigeria and Tanzania have been contracting states for over fifty years11 and have only garnered limited criticism concerning the extent to which their national laws give effect to the convention.

Have the criticisms been addressed?

These points, among others, have been addressed in the newly passed 2022 Bill; for example:

  • The new provisions now mirror those of the UNCITRAL Model Law on International Commercial Arbitration as updated in 2006.12 This change broadens the Tribunal’s powers to permit it to issue interim relief throughout the proceedings. 
  • The courts are now also able to avail of powers to grant interim measures protection, provided the seat of the arbitral proceedings is in Nigeria.13
  • The 2022 Bill addresses the uncertainty surrounding emergency arbitrators with provisions establishing the right of a party to apply for or challenge the appointment of an emergency arbitrator and the procedure for doing so (setting a target of two business days following receipt of the application).14 It also establishes procedures for challenging the appointment of an emergency arbitrator and determining the seat of the emergency arbitration. 
  • The 2022 Bill retains the applicability of the existing Limitation Acts while, crucially, providing that, where proceedings to enforce or challenge an arbitral award are brought, the calculation of the limitation period is to exclude the dates between the date of commencement and the date of the award.15
  • The 2022 Bill has also removed misconduct of the arbitrator as grounds for challenging an arbitral award.

These changes go to significant lengths to address the criticisms previously levied at arbitration process under the 1988 Act. Parties should feel more secure in the knowledge that the courts of Nigeria possess more comprehensive powers to protect their interest in ongoing proceedings and should be less likely to refuse to enforce or permit a challenge to an arbitral award.

Innovative provisions

Third-party funding

The 2022 Bill also appears to increase the attractiveness of Nigeria as a seat of arbitration. It expressly permits third-party funding of arbitration proceedings and introduces provisions for the disclosure of third-party funding and security for costs against third-party funders. This may signal the beginning of a broader trend of adopting legislation to facilitate third-party funding in Africa, as following the lead of jurisdictions such as Hong Kong and Singapore, both Nigeria and Sierra Leone have adopted such provisions within the last year.16

Award Review Tribunals

A novel provision of the Bill is the introduction of the option for parties to agree to have challenges to the award heard by an Award Review Tribunal. The Tribunals will be constituted of the same number of arbitrators as the original arbitral tribunal and will have exclusive jurisdiction to review challenges to the Award.17 The Bill also provides that an award affirmed by an Award Review Tribunal may only be set aside by the courts on grounds of not being arbitrable under Nigerian law, or incompatibility with public policy.

Arbitration and reform on the continent of Africa

The reforms taking place in Nigeria are part of a broader pattern of arbitration reform throughout Africa, with Ethiopia, Tanzania and Sierra Leone18 having been the latest nations to modernise their arbitration regimes. Common themes include:

  • An increase in deference to the jurisdiction of the arbitral tribunal;
  • Improved interim measures; 
  • A decreased scope to challenge said jurisdiction; and 
  • A reduction in the national courts’ ability to hear challenges to or refuse to enforce arbitral awards. 

Where required, significant steps have been taken to fully embed the New York Convention into the national framework. Further, the recent reforms have been used to strengthen arbitral institutions in these states, with both Tanzania and Sierra Leone establishing arbitration centres intended to aid in the administration of arbitration and advise on arbitration policy as part of their reforms.19

This may be due in part to the increase in arbitrations taking place across Africa. In a 2022 survey conducted by SOAS20, 89 percent of respondents involved in Construction and Infrastructure agreed that activity in the field was on the rise. 36 percent of respondents expressed a preference for arbitration as a dispute resolution mechanism, the single most popular response, significantly more popular than dispute boards, mediation and the local courts. Further, respondents expressed a strong preference for the use of the law of African states as the applicable law in an arbitration, 78 percent preferring this to foreign law. In the African context, Nigeria is a popular seat for arbitrations, Lagos coming second in a 2020 SOAS survey.21

Comment

The appetite for international arbitration in Nigeria, and Africa more generally, is evident, and the consensus is that arbitration is on the rise on the continent. The recent efforts of governments like the governments of Nigeria, Tanzania and Sierra Leone to ensure their arbitration regimes cater to this effectively is a welcome development.

The 2022 Bill represents a crucial step forward in this regard in eliminating provisions that have historically underpinned core criticisms of and influenced preconceptions (rightly or wrongly) about Nigeria’s arbitration regime and incorporate innovations. The true impact of its provisions naturally remains to be seen, but the 2022 Bill may well be the key to enable Nigeria to unfold its true potential and embed itself as a leading arbitration hub on the African continent.

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Ben Smith

Tel: +44 (0)20 7421 1986
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