A field not covered: Arbitration and the Nigerian constitution (2)

Treating arbitration as within “trade and commerce” is consistent with the decision of the Supreme Court in Attorney-General of Ogun State v Aberuagba (1985). In Aberuagba, the court noted that the mere fact that an item is not specifically included in the Exclusive Legislative List does not automatically mean that the federal government has no legislative power on the matter. The members of the court considered that the phrase “trade and commerce”, as such, has a wide and embracing meaning. Eso JSC, borrowing from the American Supreme Court, observed that to restrict the word “commerce” merely to buying and selling would be to “restrict a general term, applicable to many objects, to one of its significations.”

In light of the conceptual consideration of arbitration as a business sector and the embracing approach of the Supreme Court to “trade and commerce”, it is appropriate to conclude that arbitration is encompassed within “trade and commerce” in item 62 of the exclusive legislative list of the 1999 Constitution. It follows that the federal legislature has competence over arbitration – at least concerning interstate or international trade and commerce.

As for states’ legislatures, the Aberuagba case and general doctrine provide insights consistent with the conclusion that they also have legislative competence over interstate or international commercial arbitration. Specifically, Aberuagba acknowledged that the federal legislature did not have completely exclusive power over trade and commerce and that state and local governments “have their respective shares to control trade and commerce.” The court also held, in light of item H paras 18 and 19 of the Concurrent List of the 1979 Constitution, that  a state legislature has competence to enact laws concerning trade and commerce within its borders; and that a state legislature has competence to enact laws for the industrial and commercial development of the state.

In light of Aberuagba, to the extent that a state law on arbitration concerns trade and commerce within its borders, and/or has as one of its objectives industrial and commercial development of the state, the law would ordinarily be within the constitutional legislative competence of the state. However, if such law also concerns matters of interstate or international trade and commerce the question would arise if this is not straying into an area of exclusive competence of the federal legislature. To address this, supporters of the Lagos Law have invoked the common law doctrine of “pith and substance”.

A criticism of the “pith and substance” approach as invoked is that it did not clearly establish Lagos’ constitutional legislative competence over arbitration. That criticism is met in tracing a state’s competence to enact arbitration legislation to its powers over trade and commerce and for industrial and commercial development of the state. Yet, there is a need to address the potential straying into an area of federal legislative competence. Here, a combination of an extension of the pith and substance argument (invoking a further principle called “the concurrency principle”), constitutional interpretation principles established by the Nigerian Supreme Court, and party autonomy principles underlying arbitration and its private nature, together provide a sound basis for accepting that federal and states’ legislatures can have coexisting legislative competences over interstate and international commercial arbitration.

The concurrency principle is to the effect that where constitutional powers of the federal and state authorities overlap, the features of a law passed by one relating to its area of competence may be as important as those which touch upon the other’s areas of competence. In such case, it would not be possible to allocate legislative competence exclusively to either government. In other words, each of the legislatures would be within its constitutional authority to enact such legislation. In respect of arbitration, this should not pose a problem in a federal structure since separate federal and state legislation both extending to interstate and international commercial arbitration can coexist without conflict – even if they contain provisions differing in particular respects. As the Supreme Court acknowledged, the mere existence of differing provisions does not ipso facto create inconsistency; Attorney-General of Ogun State v Attorney-General of the Federation, especially per Fatayi-Williams CJN and Idigbe JSC.

In relation to constitutional interpretation, the Supreme Court reiterated in Aberuagba that the fundamental principle is that such interpretation as would serve the interest of the Constitution and best carry out its objectives and purpose should be preferred and that relevant provisions must be read together, not disjointly. On the private nature of arbitration and the principle of party autonomy, it is widely accepted that the parties should have the freedom to determine the law applicable to their arbitration not only in terms of substantive law but also in respect of the overarching lex arbitri. Accordingly, an approach which widens and enhances choice is to be preferred to one which restricts choice. For Nigeria, the approach which enhances choice is that which allows a federal arbitration regime to exist alongside state regimes, giving informed parties the ability to select the most suitable for their purposes. This seemed to be acknowledged by the Court of Appeal in Stabilini and was commended as “making sense”. It is also the approach followed by the court of first instance in Etuk and is a far superior approach to the “covering the field” approach invoked by the Court of Appeal.

As proposals for new arbitration legislation are still under consideration, future federal arbitration legislation should not repeal or jeopardise state arbitration legislation. Rather, it should follow the approach of the Lagos Law which was commended by the Court of Appeal and allow parties to interstate or international commercial arbitration the choice to select as between federal legislation and appropriate state arbitration legislation. This is the approach most suitable for advancing the causes of attracting trade and investment to Nigeria, attracting arbitration business to Nigeria and specific Nigerian states, and the long pursued goal of presenting Nigeria as an arbitration friendly jurisdiction and viable arbitration venue.

 

Gbenga Bamodu