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Arbitration in Nigeria: 2018 review and 2019 outlook (Part I)

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2018 was a very interesting year for the arbitration community in the world over. We witnessed several momentous developments for international arbitration in Africa and particularly, in Nigeria. As will be shown in this post, 2018 marked the pre-birth of an era in the history of arbitration in Nigeria, which if allowed to thrive, take its full course, and followed through conscientiously, will ensure that Nigeria,not only becomes one of the preferred seats for arbitration in Africa, but also the world over.

Matters arising on proposed changes to arbitration law in Nigeria

One of the major significant events for arbitration in Nigeria for the year 2018, happened in the first quarter of 2018. In February 2018, the Senate of the Federal Republic of Nigeria (FRN) passed the much-anticipated Arbitration and Conciliation Act (Repeal and Re-Enactment) Bill 2017 (The Bill).

The Bill has, since Quarter 1 of 2018, been pending before the House of Representatives (HoR) of the FRN (the second legislative chambers) and awaiting the passageas well as the concurrence of the HoR. It is hoped that the Bill will be passed and concurred to by the HoR, upon taking on board,apt comments received fromconcerned stakeholders of the arbitration community in Nigeria. Upon the final passage of the Bill and its coming into force, further to the Presidential assent given, the Bill portends great potentials, for not only increasing foreign investments in Nigeria, but also boosting the confidence of investors. This is because the advent of the new Arbitration Act will position Nigeria become one of the preferred seats of arbitration.

Consequently, ensuring an early passage of the much awaited and promising Bill in the First Quarter of 2019 or better still, before the end of the Second Quarter of 2019, will be quite helpful in setting the tone on the readiness of the Nigerian government, to charm the attention of foreign investors. This will equallydemonstrate to all, Abuja’s commitment to building a friendly business environment in Nigeria.

It may further be safely asserted that the passage of the Bill, in either Quarter 1 or 2 of 2019, has the tendency to make more (foreign) investors to consider Nigeria for investments. It will also encourage themtogravitate more towards making Nigerian law – the governing law of their contracts. This is in addition to such investors choosing Nigeria as the preferred seat of arbitration.

Matters arising on the $8.9 billion arbitration award against the Nigerian government

Another notable incident of 2018 which has already surfaced in 2019 is the $8.9 billion arbitration award issued against Nigeria. As things currently stand, Nigeria risks losing a whopping $9 billion worth of assets in the UK to a British firm, Process and Industrial Developments Limited (P&ID). It remains to be seen whether P&ID, through the English Court, will seize Nigeria’s commercial assets in England, in a bit to levy execution of the award earlier obtained.

By way of background, it will be recalled that the Nigerian government was accused of reneging on its obligation to supply gas to P&ID under an agreement to build and operate an Accelerated Gas Development Project (Gas Project) to be located in Cross River State, Nigeria. It was P&ID claim that the negligence of the Federal Government of Nigeria (FGN) frustrated the construction of the Gas Project, and as a result, depriving P&ID the potential benefits expected from 20 years’ worth of gas supplies. It is worth noting that the Award against Nigeria was about $6.59 billion but following the refusal by the Nigerian government to enter an appeal for over five years, the arbitral award attracted additional $2.3 billion in accumulated interest at 7 per cent rate per annum, making the entire sum due from the Nigerian government – $8.9 billion award.

The final award notwithstanding, an out-of-tribunal agreement for the payment of $850 million (about 9.6 per cent of the $8.9 billion award) was successfully reached with P&ID during the erstwhile President Goodluck Ebele Jonathan government. However, the responsibility for the disbursement of funds to P&ID was passed on to the then incoming administration of President Buhari. However, rather than take the recommended action, the President Buhari led administration opted to set aside the settlement agreement, directing its lawyers to return to the tribunal for renegotiation with the engineering firm, while seeking to set aside the award completely. In 2019, it will be interesting to see how the lingering issue stemming from the final award will be resolved.

Third party funding in Nigeria and the Queen Mary University of London 2018 International Arbitration Survey

2018 also saw the emergence of Third-Party Funding (TPF) as a contemporary issue amongst arbitration enthusiasts in Nigeria and even beyond. For instance, The Queen Mary University of London (QMUL) in conjunction with White & Case, conducted the 2018 QMUL White & Case International Arbitration Survey. In the International Arbitration Survey(the Survey) conducted, concerns were raised by different stakeholders with respect to disclosure obligations and potential pitfalls when dealing with TPF.Views for the Survey obtained from a sundry pool of participants in the international arbitration community, including but not limited to arbitrators, private practitioners, representatives of arbitralinstitutions, academics with keen interests in arbitration, in-house counsel,experts, third-party funders alike and non-alike, reveal that: 97% of respondents chose international arbitration as their preferred dispute resolution method; “Cost” continues to be seen as arbitration’s worst feature; there is a seemly “lack of power in relation to third parties;” the five most preferred seats of arbitration are London, Paris, Singapore, Hong Kong and Geneva; preferences for a given seat continue to be primarily determined by its “general reputation and recognition;” followed by users’ perception of its ‘formal legal infrastructure;’ the national arbitration law; the neutrality and impartiality of its legal system; and its track record in enforcing agreements to arbitrate and arbitral awards.

Riding the waves of the foregoing and taking into accountthe increased preference by the international arbitration community for pro-arbitration legislative regimes such as Hong-Kong and Singapore, one could then understand why the strategic move made in Quarter 1 of 2018 is deserving of special mention and commendation.

One sure needs no soothsayer to come to conclusion that Nigeria has, by the introduction of the Bill, stepped up her game in arbitration law and practice. It also needs not telling that the end game of Nigeria becoming a force to reckon with amongst the comity of preferred global arbitration regimes, is likely to be increased by the imminent arbitration regime.

The Bill specially include provisions which give the impression that Nigeria is ready to join the bandwagon of pro-arbitration legislative regimes for TPF. Even more instructive is the impression that apart from TPF upon coming into force will have effectively overridden the common law position of maintenance and champerty.

While the seemly innovations in the Bill that relate to TPF have not yet fully address all concerns in this regard and the commendation given notwithstanding, it is humbly submitted that, the shortcoming nonetheless, the efforts made thus far in ensuring the Bill gets to the point it is now, is quite commendable. This is because arbitration in Nigeria would no longer be business as usual once the Bill comes into force.

However, it is expected that the Bill will be fully revised before the end of Quarter 1 or at most, Quarter 2 of this year to include more substantive provisions when it is hoped the Bill will have been passed, concurred and assented to, with a view to having the force of law and becoming the substantive law for arbitration in Nigeria. What better way to bounce back, reposition the economy and put the country back on the right track, after the general elections, than this?

Nigeria and the Move towards First Emergency Arbitrator and Interim Measures/Reliefs

The provisions made for the appointment of a first emergency arbitrator (“EA”) and interim measures of protection as well as emergency reliefs in the Bill currently pending before the HoR, became the one of the hot topics in the arbitration community in Nigeria in 2018.

While the use of emergency arbitrator in the conduct of arbitral proceedings has become the trend in some other advanced arbitration jurisdictions, it remains to be seen, upon the Bill coming into force hopefully later this year, how the arbitral tribunal will implement these provisions. It will equally be great to see, in no distant time, whether the arbitral tribunal will be minded construing the conditions necessary for the grant of interim measures, along the lines of the established case law, for granting interim injunctions in litigation matters before Nigerian Courts.

Conclusively, it is expected that the HoR will pass the Bill most likely in either Quarter 1 or Quarter 2 of 2019. It is also envisaged that the passage of the much-awaited Bill will provide the boost needed to increase foreign investment in Nigeria. There is a good business case for foreign investors to invest in Nigeria after the 2019 general elections and going forward, more developments regarding enforcement of international arbitral awards are to be expected.

 

Joseph Onele

Onele is a Legal Practitioner based in Lagos. He wrote via – [email protected]

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