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Developing Nigeria into an international centre for commercial arbitration in Africa

As the world is fast turning into a global village where international commerce and international trade relations is being carried out across state boundaries, it is inevitable that there would be disputes and disagreements arising out of contractual relations between private and corporate investors, as well as between States. Litigation has always been the traditional means of dispute resolution for private, domestic or international conflict. Unfortunately, the underlying nature of litigation is adversarial and this has led to a breakdown of relations between litigants. Innovative means of resolving disputes have been recommended and developed, in a bid to maintain international trade relations and encourage investors across state boundaries and as a result international commercial arbitration has since rapidly become the favoured option for such parties.

International commercial arbitration proceedings often take place in London, Paris, Switzerland, Singapore, Dubai, Cairo and the United States of America, even where the subject matter of the disputes or the parties have no connection with the venue. The reasons for such choices of venue range from personal feelings of the parties, which may always be difficult to ascertain, to the presence of certain basic legal structural requirements parties look for in an international arbitration centre.

Furthermore, foreign investors are increasingly channelling their investments through companies established in jurisdictions that have ratified a bilateral investment treaty.  Bilateral investment treaties involving African states usually provide for the arbitration to be at the International Centre for Settlement of Dispute (ICSID) pursuant to the Washington Convention or the Additional Facility Rules, or ad hoc arbitration pursuant to the UNCITRAL Arbitration Rules. Arbitration at the ICSID pursuant to the Washington Convention is particularly appealing because such arbitrations are not subject to the procedural laws of any state and the awards of such tribunals are enforceable in the 140 plus states that have ratified the Washington Convention as if they were a final judgment of the courts of that state, subject to the state’s laws of sovereign immunity.

Nigeria possesses the legal framework required for the conduction of International commercial arbitration proceedings. The Arbitration and Conciliation Act 2004 is based on the UNCITRAL Model Law, which aimed at harmonising and improving national laws along worldwide consensus on the principles of international commercial arbitration practice. The basic advantage of the Model Law is that it allows parties to refer to international arbitral procedures of their choice, subject only to imperative rules assuring respect for fair procedure. Its widespread adoption by developed and developing countries is attributable to the imperative of reassuring foreign parties to international contracts that local legislation is familiar with and accepts international arbitration. The Act also incorporated the 1976 UNCITRAL Model Arbitration Rules. The Rules are designed to be used ad hoc, which makes it possible for most institutional or non-institutional arbitral forums to apply them if the parties so stipulate. Moreover, the Act implements the New York Convention on Recognition and Enforcement of Foreign Arbitral Awards. Nigeria has also since ratified the ICSID in 1966 and is a signatory to over 18 bilateral treaties/agreements.

Federal enactments have been made in support of arbitration with most of them making express provisions requiring any disputes arising out of the subject matter be referred to arbitration. Over 12 federal enactments have been promulgated in this regard, including the 1999 Constitution which states in Section 19 (d) that the foreign policy shall amongst other things be “respect for international law and treaty obligations as well as the seeking of settlement of international disputes by negotiation, mediation, conciliation, arbitration and adjudication”.

Recently, Lagos State enacted two arbitration laws, with the aim of enabling Lagos emerge as the hub of commercial arbitration in West African. On 18th May 2009, the Arbitration Law (Law No 10 2009) (Lagos Arbitration Law) and the Lagos Court of Arbitration Law 2009 was passed. The Lagos Arbitration Law applies to all arbitration with Lagos as the seat, unless the parties have expressly agreed otherwise, and the Lagos Court of Arbitration Law establishes the Lagos Court of Arbitration.

There is currently a Draft Federal Arbitration Act  and a Uniform States Arbitration and Conciliation Law which has been proposed but is yet to be enacted. Court rules are also presently being modified to enable the court direct parties to a matter before it, in appropriate cases even in the absence of a prior arbitration agreement between them, to explore and exhaust the avenue of arbitration or other forms of alternative dispute resolution processes before the matter can proceed to trial. This is being done through the proposed Arbitration Claims and Procedure Rules.

As with the rest of the world, arbitration can be held in Nigeria as ad hoc or under an institutional body. Notable institutions in Africa for example include, the Asian African Legal Consultative Organisation (AALCO); Cairo Regional Centre for International Commercial Arbitration (CRCICA;, International Centre for the Settlement of Investment Disputes (ICSID); and Organization for the Harmonisation of Business Law in Africa (OHADA). There are various arbitration institutions that have been established and they have helped promote the development of arbitration in Nigeria – Negotiation and Conflict Management Group (NCMG); the Multi door court houses in Lagos (LMDC), Kano (KMDC) and Abuja (AMDC); Institute for Dispute Resolution (IDR); Chartered Institute of Arbitrators UK, Nigeria branch; Chartered Institute of Nigeria; Lagos Chamber Arbitration Centre of the Lagos Chamber of Commerce and Industry (LAC); Lagos Regional Centre for International Commercial Arbitration (LRCICA).

The LRCICA has an international personality like the ICSID and the arbitration rules adopted is a modified version of the UNCITRAL Arbitration rules. The relevant statute on investment arbitration is the Nigerian Investment Promotion Commission Act, (NIPCA) 2004 which was first enacted in 1995. It provides for the resolution of disputes between the Federal Government and investors through the International Centre for the Settlement of Investment Disputes.

Furthermore, arbitration has been embraced in different aspects of transactions and in different industries. Some forms of arbitration have been institutionalised hence there is Construction Arbitration with the Society for Construction Industry Arbitrators Nigeria (SCIARB); Maritime Arbitration with the Maritime Arbitrators Association of Nigeria (MAAN); Oil and Gas; Industrial Arbitration and Investment Arbitration.

The attitude of the judiciary in Nigeria has equally changed with the courts having a favourable outlook towards arbitration. Indeed the various tiers of courts, including the apex court have passed notable judgments upholding, embracing and encouraging the arbitration process.

There has been increasing awareness of arbitration in Nigeria which can be traced as far back as the model oil exploration licenses and oil mining leases adopted by the major oil companies that intensified operations in the country during the post-independence era, to the vast number of domestic contracts, especially in the construction, labour and aviation sectors that contain elaborate clauses on arbitration. Undoubtedly, however, it is in relation to international trade and commerce that arbitration has been primarily relied upon. Preference for arbitration by foreign investors has gradually been accepted as natural, even in contracts involving the Nigerian Federal or State government. As further evidence of its preparedness to embrace arbitration as a dispute settlement mechanism in all its domestic and international contracts, the Secretary to the Federal Government of Nigeria issued Circular No. SGF/9OP/1/S.3/V329, dated March 10, 2004, directing that all international and domestic contracts involving ministries, parastatals, and extra-ministerial agencies should contain an arbitration clause of a particular model.

According to the International Court of Arbitration (ICC) Bulletin, it was recorded that Nigeria rose from an average of 2 arbitrations per year between the years 1991 – 1999 to 23 in 2000. According to the report, Nigeria and South Africa were the African countries with the most number of involvements in international arbitration proceedings in the ICC between 1999 and 2009 however Egypt was the most frequently chosen venue for arbitration proceedings conducted in Africa.

Undoubtedly Nigeria’s presence has and is still being felt as a major contributor to international commercial arbitration in Africa and in the world at large. These contributions have been in terms of scholarly work, participation in international commercial arbitration proceedings as parties and or arbitrators, with innumerable qualified citizens lending their service to the process in various capacities. In addition, domestic arbitration has witnessed an exponential growth with more parties subscribing to arbitration, including professional bodies. The presence of reputable institutions in Nigeria has played a positive role in ensuring the smooth running of arbitration proceedings. Local legislations have been enacted in support of arbitration and the judiciary continues to lend its support and uphold arbitration. Furthermore, the legal structure required for international arbitration currently exists in Nigeria. Nigeria definitely possesses the hallmarks and ticks all the boxes for an international centre for commercial arbitration, especially at this time of our democracy.