This article was featured in Jus Mundi‘s 2023 Arbitration Year in Review, in collaboration with VYAPs, a yearly collection of articles from jurisdictions all around the globe updating you on arbitration-related developments from the previous year.
THE AUTHORS:
Konyin Osipitan, Associate at Templars
Efemena Iluezi-Ogbaudu, Associate at Linklaters
Titilope Sinmi-Adetona, Associate at Aluko & Oyebode
Adetola Adebesin, International Arbitration Attorney
The year 2023 was an eventful year for arbitration in Nigeria. From legislative reforms to important decisions and activity in investor-state arbitration, the Nigerian arbitration landscape continues to evolve to meet the users’ needs and thrive as a dispute resolution mechanism. This report highlights the most significant developments of the past year – notably, the enactment of the Arbitration and Mediation Act 2023 (“AMA”) dominated the scene in the past year.
Legislative Developments
Nigeria Welcomes New Arbitration Law
In May 2023, Nigeria enacted a new arbitration law, welcoming a new regime that repealed the 35-year-old law. The new law consolidates Nigeria’s pro-arbitration approach and aims to enhance and strengthen Nigeria’s arbitration system and foster Nigeria’s status as a leading arbitration venue. The salient features of the AMA are highlighted below:
Enforcement of Arbitration Agreements
Section 5 of the AMA mandates courts to stay proceedings commenced in contravention of the arbitration agreement unless found void, inoperative, or incapable of being performed. This important change removes the discretion granted to courts and the controversial requirement for an applicant to prove their readiness to proceed with the arbitration applicable under the previous legislation. Crucially, this provision brings Nigeria’s legislative framework into full compliance with its New York Convention (1958) obligations.
Judicial Intervention – Challenge and Enforcement of Awards
The AMA resolves the question as to whether, and if so, to what extent, Nigerian courts, when called upon to set aside an award or to refuse its recognition/enforcement, can undertake a review of the award on its merit. Although not contained as a ground for challenging an award or refusing its enforcement under the old law, Nigerian courts have previously set aside or refused to enforce arbitral awards on grounds of “error on the face of the award” finding such error as arbitrator misconduct. (See Taylor Woodrow (Nig) Ltd v. Suddeutsche Etna-Werk GmbH (1993) 4 NWLR 127.
Under the current legal framework, the question of error of law on the face of the award cannot be a ground to set aside an award or forestall its enforcement, as Section 55 (2) of the AMA clearly states that an application for setting aside an arbitral award shall not be made on such ground. The grounds for challenging or refusing the enforcement of an award are now entirely aligned with the New York Convention (1958) and laws of leading arbitration hubs.
Interim Measures
Sections 19 and 20 of the AMA empower the tribunal and courts, respectively, to grant interim measures in aid of arbitration. Previously, only arbitral tribunals could grant protective measures which, without a framework for emergency arbitration, led to the failure of an interim remedy where the tribunal was not yet constituted.
However, judicial attitude in this regard has evolved, and courts have increasingly been minded assisting parties where there is a good faith application for interim relief. These provisions, therefore, codify the intervention already implemented by Nigerian courts and will greatly assist parties in arbitration to preserve the res pending the determination of the substantive dispute.
Third-Party Funding
The AMA clarifies the applicability of Third-Party Funding (“TPF”) in Nigerian-seated arbitrations and arbitration-related court proceedings. The new law explicitly permits TPF arrangements and disapplies the common law doctrines of maintenance and champerty.
The AMA also requires disclosure of the existence of funding and details of the funder to the other party or parties to the arbitration, the arbitral institution, and the tribunal. A benefit afforded to a party in receipt of third-party funding is that the Act expressly brings the costs of obtaining third-party funding within the costs of the arbitration. Such costs are, therefore, in principle, capable of recovery as part of any award of costs in an arbitration.
Award Review Tribunal
Perhaps the most innovative provision of the AMA is section 56, which introduces an Award Review Tribunal (“ART”). The ART is designed to perform a review function akin to a court of the seat considering an application to set aside an arbitral award. The process is an opt-in option where parties may provide in their arbitration agreement or otherwise agree after the issuance of the award.
A dissatisfied party may challenge an award before an ART within three months of the award date on the same grounds that a party may seek to challenge an arbitral award by recourse to the Nigerian court. This novel provision displaces the court’s review in this sense, except in cases of public policy concerns. Although the exact mechanics of the procedure and its practical implementation remain to be seen, if successful, the ART mechanism would set Nigeria apart as a first-class venue.
Significant Cases
Nigeria Prevails in the P&ID Saga
In October 2023, the English High Court upheld Nigeria’s challenge to a US$11 Billion award and set aside one of the most controversial international arbitration awards in P&ID v. Ministry of Petroleum of Nigeria. The Court found that the award was obtained by fraud and procured through false evidence, corrupt payments, and improper retention of leaked documents. The decision also calls for ‘the facts and circumstances of this case to provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration’.
The dispute arose from an unsuccessful gas processing project between P & ID and the government of Nigeria, resulting in a favorable liability award for P & ID and a subsequent damages award of US$6.6 Billion with pre and post-award interest at 7% per annum in 2017. Following the English court’s 2019 decision granting leave to P & ID to enforce the award, Nigeria sought to challenge the award under Sections 67 and 68 of the English Arbitration Act (1996).
Following an eight-week trial in London that commenced in January 2023, the court found that P&ID, and certain individuals associated with it, had committed bribery throughout the arbitration, knowingly presented false evidence, and had corruptly and improperly obtained and utilised Nigeria’s internal legal documents to benefit its own position in the arbitration. The court therefore set aside the awards as contrary to English public policy.
Deviating from the English courts’ usual minimalistic approach to reviewing arbitral awards, the court considered evidence of perjury and collusion, including evidence obtained through a multi-jurisdiction investigation. Knowles J. further found that P&ID practiced “the most severe abuses of the arbitral process” to procure the awards from the London-seated arbitral tribunal. In December 2023, Knowles J. refused leave to appeal his ruling setting aside the award against Nigeria bringing an end to one of the most high-profile disputes in the field of arbitration and a decade-long legal proceeding.
Supreme Court Reaffirms Pro-arbitration Stance
In November 2023, Nigeria’s Supreme Court handed down a landmark judgment in Nigeria National Petroleum Corporation (NNPC) v. Fung Tai Eng. Co. Ltd. (2023) 15 NWLR (Pt. 1906) 117. The decision relates to a dispute arising from the failure to implement an arbitral award and the subsequent challenge of the award by the NNPC.
The significance of this decision is twofold. First, it brings to the fore the precincts of judicial intervention in arbitration in Nigeria, and second, it affirms the autonomy of Nigerian seated arbitrations. Importantly, the court reiterated the limited scope of judicial review of arbitral awards under Nigerian law and warned parties from using the challenge process as a recourse to challenge the merits of an award.
The minimalistic approach reaffirmed in this case is consistent with the long-standing jurisprudence of Nigerian courts, as well as international best practices.
Eni Suspends ICSID Arbitration with Nigeria
On the international front, Italian energy multinational Eni has suspended its International Centre for Settlement of Investment Disputes (“ICSID”) arbitration against Nigeria following the country’s announcement that it would withdraw civil claims worth US$1.1 billion in which it accused Eni of corruptly acquiring an oilfield license. Eni commenced ICSID arbitration against Nigeria in October 2020 over a dispute relating to the acquisition of OPL 245, an oil-rich offshore field awarded to the two oil companies in 2011.
The parties agreed to suspend the proceedings on November 23, 2023, until February 23, 2024, presumably to reach settlement terms. While it remains to be seen if discussions will be successful, the recent development signals Nigeria’s new government’s approach to investment disputes. (See Eni and others v. Nigeria).
Court of Appeal Overturns Decision on Arbitrator Bias
Nigeria’s Court of Appeal has overturned a 2020 decision of the High Court of Lagos State setting aside an award on the ground of arbitrator non-disclosure in Global Gas v. Shell Petroleum. The court of first instance had curiously found that the arbitrator’s non-disclosure amounted to misconduct, which led to the set aside of the arbitral award, notwithstanding that a challenge on the same grounds had been dismissed by the International Court of Arbitration of the International Chamber of Commerce (“ICC”).
This decision, which was heavily criticised by the Nigerian arbitration community for its pronouncements such as ‘a challenged arbitrator should resign’, was set aside on grounds of procedural fair hearing. The Court of Appeal held that the High Court’s failure to make any pronouncements on the application to enforce the award, after consolidating the hearing of the challenge and enforcement proceedings, amounted to a denial of fair hearing. On this basis, it set aside the High Court’s decision and remitted the challenge and enforcement applications to the High Court for reconsideration.
ABOUT THE AUTHORS:
Konyin Osipitan is an Associate in the Dispute Resolution group at Templars, Lagos – Nigeria. She routinely appears as counsel in large commercial disputes before Nigerian courts and tribunals. Konyin also has experience in arbitrations conducted under the UNCITRAL, LCIA and Lagos Court of Arbitration Rules and her practice spans across complex debt recovery, energy, construction, and employment disputes. She is a member of the Chartered Institute of Arbitrators, U.K. (MCIArb).
Efemena Iluezi-Ogbaudu is an Associate at Linklaters in London, United Kingdom. With a background in commercial litigation before Nigerian courts, he now focuses on commercial and investor-state arbitration under major procedural rules (ICSID, ICC, UNCITRAL, LCIA) as well as public international law disputes. He has considerable experience in oil and gas, lending, and finance and intra corporate disputes. He is qualified to practice in Nigeria.
Titilope Sinmi-Adetona is an Associate at Aluko & Oyebode and volunteer Counsel at the Lagos Chamber of Commerce International Arbitration Centre (LACIAC), both in Lagos, Nigeria. Titilope is qualified to practice in Nigeria and advises on all aspects of corporate and commercial law spanning different sectors.
Adetola Adebesin is an international arbitration attorney with over six years of experience representing corporates, multi-nationals, and governments in high profile commercial and investment disputes. He has practiced with leading Firms in Nigeria, Switzerland and the United Kingdom and regularly acts as counsel under most of the institutional arbitration rules including the ICC, LCIA, SIAC, Swiss Rules, UNCITRALand ICSID. Adetola is admitted to practice in Nigeria.
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