A new national arbitration law, the Arbitration and Mediation Act, 2023 (the AMA), came into force in Nigeria on 26 May 2023, replacing the Arbitration and Conciliation Act (the ACA) that had remained unchanged for over three decades. Here are some notable features of the AMA:
LOCKS-IN ARBITRATION AGREEMENTS: Under the old law, the ACA, courts had wide discretion in deciding whether to enforce or disregard an arbitration agreement. The previous provisions allowed a party to revoke an arbitration agreement with the court's permission, and courts could refuse to stay proceedings even if a valid arbitration agreement existed. The court could find reasons to prevent the referral of matters to arbitration or if the defendant did not demonstrate readiness and willingness to participate in the arbitration. This permissive approach often led to inconsistent outcomes. However, the AMA eliminates this discretion and mandates courts to enforce arbitration agreements by staying proceedings and referring parties to arbitration, unless the court determines that the agreement is void, inoperative, or incapable of being performed.
ELECTRONIC ARBITRATION AGREEMENT: Similar to the ACA, the AMA requires that an arbitration agreement be in writing. However, the new law acknowledges that an arbitration agreement can be in writing if its content is recorded in any form, regardless of whether the agreement or contract was concluded orally, by conduct, or by other means. This provision recognizes the validity of electronic communication as a form of writing if the information is accessible and usable for subsequent reference. Electronic communication, in this context, includes data messages transmitted through electronic, magnetic, optical, or similar means, such as electronic data interchange, electronic mail, telegram, telex, or telecopy.
A SOLE ARBITRATOR IS THE NEW DEFAULT: Unless the parties agree otherwise, an arbitral tribunal will now consist of a sole arbitrator, as opposed to three arbitrators under the repealed law. Additionally, if parties in international arbitration fail to specify the procedure for appointing an arbitrator or cannot agree on the choice of an arbitrator, the appointment will be made by the Director of the Regional Centre for International Commercial Arbitration, Lagos, as designated under the AMA.
APPOINTMENT OF EMERGENCY ARBITRATOR AND VIRTUAL PROCEEDINGS: The AMA introduces the provision for parties to request the appointment of an emergency arbitrator to obtain emergency relief. This request can be made concurrently with or following the filing of a request for arbitration but prior to the constitution of the arbitral tribunal. The proceedings of the emergency arbitrator can take place through in-person meetings at a suitable location or through virtual means such as video conferencing, telephone, or other similar methods of communication.
OBTAINING AND ENFORCING INTERIM RELIEF: The new law strengthens provisions on interim measures. Parties in need of urgent relief before the constitution of an arbitral tribunal can apply for interim relief either to a court or to an emergency arbitrator. An emergency arbitrator, appointed by the court or the designated appointing authority, specifically considers applications for interim relief. Interim measures can also be enforced as court orders.
QUALIFIED IMMUNITY FOR ARBITRATORS: The AMA affirms the immunity of arbitrators and arbitral institutions from liability for acts or omissions that occur in the course of their functions under the Act, with the exception of acts or omissions done in bad faith.
THIRD-PARTY FUNDING: Historical common law doctrines such as maintenance and champerty, which made it risky to finance litigation or arbitration in exchange for a share of any monetary award, no longer apply to third-party funding arrangements in connection with arbitration seated in Nigeria or arbitration-related proceedings before a Nigerian court, as per the provisions of the AMA.
COSTS OF THIRD-PARTY FUNDING: The costs associated with obtaining third-party funding will now be considered as part of the arbitration costs that the tribunal is obliged to allocate in its final award. This prospect of off-balance-sheet claim prosecution is expected to make arbitration clauses even more popular in commercial agreements. It is likely that a specialized niche of third-party funders will develop in response to this development, leading to a significant increase in arbitration cases.
APPLICATION OF LIMITATION LAWS TO ARBITRATION AND MEDIATION PROCEEDINGS: The AMA resolves the debate regarding whether statutory limitation periods can be invoked in arbitration and the limitation period for enforcing an arbitral award. Under certain state limitation laws, including the Limitation Law of Lagos State, the Supreme Court interpreted that the six-year limitation period for enforcing arbitral awards should be calculated from the date on which the dispute arose, rather than the date of the award. The AMA overrides this interpretation and allows for the invocation of statutory limitation periods in arbitration. It clarifies that the limitation period for enforcing arbitral awards starts from the date on which the party received the award. Additionally, if a court sets aside or annuls an arbitral award, the limitation period applicable to the dispute excludes the period between the commencement of the arbitration and the order annulling the award. Furthermore, the limitation period is suspended when parties resort to mediation and resumes on the day the mediation ends without a settlement.
LIMITED RECOURSE AGAINST ARBITRAL AWARD: Under the old regime, a court could set aside an arbitral award if there was misconduct by the arbitrator, if the award was improperly procured, or if there was an error on the face of the award. Nigerian courts often interpreted "misconduct" to include apparent errors of law made by the arbitrator in deciding the merits of the dispute. However, the new law limits the grounds for setting aside an arbitral award to those relating to the validity of the arbitration agreement, the jurisdiction of the tribunal, and the observance of due process and fair hearing. This aims to prevent unsuccessful parties from abusing the grounds for setting aside awards to frustrate the successful parties.
THE AWARD REVIEW TRIBUNAL: Instead of review by a court, parties may agree to submit an arbitral award for review by an Award Review Tribunal (ART). The parties can agree on the composition and procedure of the ART. If they fail to agree, the ART will consist of the same number of arbitrators as the original arbitral tribunal and may adopt any procedure it deems fit. Parties may apply to the ART on any of the grounds upon which a court may set aside an award. If the ART affirms the award, further recourse may be made to a court, but only on the grounds that the dispute is non-arbitrable or that the award is contrary to public policy. If the ART sets aside the award, a court may reinstate the original award (or part of it) if it finds the grounds adduced by the ART to be "unsupportable."
CLARITY ON THE POWER OF NIGERIAN COURTS TO SET ASIDE FOREIGN-SEATED AWARDS: The Nigerian Court of Appeal's decision in December 2021, setting aside an arbitral award resulting from a Geneva-seated arbitration, caused controversy among arbitration users and practitioners in the region. This was due to unclear provisions in the old law that failed to differentiate between the nature of recourse against foreign-seated and Nigeria-seated arbitral awards. The new statute eliminates this ambiguity by distinguishing between setting-aside proceedings applicable only to awards with a Nigerian seat and refusal of recognition and enforcement proceedings applicable to foreign-seated awards. This brings Nigerian law in line with the New York Convention, which considers annulment as the prerogative of the Court of the seat.
EXPRESS PROVISIONS ON THE POWER TO AWARD INTEREST: Under the previous regime, there was a contentious issue regarding the power of an arbitral tribunal to award pre-award interest. However, in the recent case of UES v. RMAFC, the Supreme Court held that an arbitral tribunal could award pre-award interest. Nevertheless, the new law includes an explicit provision that empowers an arbitral tribunal not only to award pre-award interest but also simple and compound interest as either pre-award or post-award interest.
POWER OF ARBITRAL TRIBUNAL TO CONSOLIDATE, ORDER CONCURRENT HEARINGS, AND JOIN ADDITIONAL PARTIES: Subject to the agreement of the parties, the arbitral tribunal has the authority to order the consolidation of arbitral proceedings with other proceedings or order concurrent hearings. The tribunal may also allow the joinder of an additional party if there is prima facie evidence that the additional party is bound by the arbitration agreement, which forms the basis of the tribunal's jurisdiction. These provisions ensure that Nigerian-seated arbitration will have flexible proceedings, similar to what is seen in other jurisdictions.
SPECIALIZED COURT RULES FOR ARBITRATION CLAIMS: Special rules have been introduced to expedite proceedings when an arbitration claim or appeal is brought before Nigerian courts. These rules modify the ordinary litigation procedures to eliminate bureaucratic hurdles and reduce the time taken for steps in arbitration claims and appeals. This will significantly speed up the resolution of arbitration matters in both first-instance and appellate courts.
NOTABLE POINTS ON MEDIATION: The new law replaces reconciliation with mediation as the officially supported Alternative Dispute Resolution (ADR) option. Taking inspiration from the Convention on the International Settlement Agreements Resulting from Mediation (the Singapore Convention), the Arbitration and Mediation Act (AMA) establishes a framework for the practice of mediation in Nigeria. Some key innovations under the AMA include the following:
- settlement agreement resulting from mediation is binding on the parties and enforceable in Court as a contract, consent judgment or consent award;
- statements made during mediation are inadmissible in arbitral or judicial proceedings;
- international settlement agreements made in a country other than Nigeria may be enforced in line with the Singapore Convention if the foreign state is a party to the Singapore Convention and the difference arises out of a legal relationship, whether contractual or not, considered commercial under the laws of Nigeria.
CONCLUSION
The AMA, by design, overrides a fair amount of anachronistic arbitration case law, and in critical areas, it replaces judicial uncertainty with concrete prescriptions in the statute. These developments, combined with purposeful innovations in the AMA, such as provision for third-party funding and specialised court rules for arbitration-related claims and appeals, reinforce the stability, speed, and efficiency that has made arbitration the preferred dispute resolution mechanism in international commerce.
As the new law comes to be applied to business disputes, express provisions in the statute enjoin the Courts to settle such controversies "in conformity with the general principles on which the Act is based", having regard to "its international origin and the need to promote uniformity in its application" (37). All things considered, the AMA keeps Nigeria firmly in step with global trends in international arbitration and reaffirms its status as a prime destination for cross-border dispute settlement in Africa.
--
Read the original publication at Olaniwun Ajayi LP.