Rethinking the Viability of International Commercial Arbitration in Nigeria

Rethinking the Viability of International Commercial Arbitration in Nigeria

ABSTRACT

International commercial arbitration is a means of resolving disputes arising under international commercial contracts. The complications associated with international commercial transaction make the growth of arbitration necessary. The necessity arises from the fact that the participants in international commercial transactions are from different jurisdictions and enforcement of right through litigation will involve the possibility of conflict of laws. With current issues relating to industrialisation and globalization, different conflict areas have emerged and will surely continue to emerge. From the foregoing therefore, International Commercial Transactions are widely used in oil exploitation and exploration in Nigeria and is surrounded by conflicts, grievances and controversies that need to be resolved for peaceful and harmonious existence in the country. The initial inroad into arbitration of international commercial transaction came from New York Convention, 1958. This incorporates the UNCITRAL Rules and Model law. The UNCITRAL Arbitration Rules provide set of procedural rules upon which parties may agree for the conduct of arbitral proceedings. The Model law made provision for uniformity and modernizing the national laws on arbitration of member countries by recognizing the need to curtail judicial intervention to the formation of the arbitration agreement. In Nigeria, the Arbitration and Conciliation Act provided for the adoption of the New York Convention and a unified legislation for arbitration in Nigeria. This work expounds on the viability of International Commercial Arbitration in Nigeria. It aims at ascertaining the options that can encourage International Commercial Arbitration in Nigeria. The work discusses the legal and Institutional frameworks for arbitration in Nigeria and the viability of International Commercial Arbitration in other jurisdiction around the world; Enforcement and challenges of Arbitration in Nigeria and factors that can encourage International Commercial Arbitration in Nigeria. The work adopted the doctrinal method of research; placing reliance on both primary source materials like legislation and secondary materials like case-law, textbooks, journals, conference papers, articles, reports and internet materials. The work found that the use of arbitration in modern dispute settlement in Nigeria is still faced with the challenges and skepticism surrounding the presumed un-enforceability of such foreign clauses. Nigerian courts are reluctant to enforce these clauses, resulting from the apparent divergent legislative and judicial policies and the issues of whether foreign arbitration clauses are void as being Ouster clauses. The work recommends that the Judiciary must adopt a pro-enforcement stance when dealing with enforcement of arbitration agreement and awards; Nigerian judges must be wary of granting anti-arbitration injunctions, except in exceptional cases; the security situation and perception of corruption must both be addressed; several state governments are encouraged to enact arbitration statutes to aid arbitration within their jurisdiction. The work concludes that arbitration will enhance the viability of international commercial transactions and is recommended in Nigeria.

CHAPTER ONE

GENERAL INTRODUCTION

1.1 Background to the Study

Trade or commercial transactions are usually associated with the possibility of disputes arising and the complications associated with international commercial transactions makes the growth of arbitration both necessary and important. The necessity and importance arises from the fact that the participants in international commercial transactions are from different jurisdictions. Also, the enforcement of rights through litigation will involve the possibility of conflict of laws, high cost and delay in the process of dispute resolution.

The initial inroad into arbitration of international commercial transactions came from the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards also known as the New York Convention, 1958. The United Nations Commission on International Trade Law (UNCITRAL) was established by the United Nations General Assembly by its Resolution 2205 (xxi) of 17 December 1966 ‘ ‘‘to promote the progressive harmonization and Unification of International trade law’’.

When world trade began to expand dramatically in the 1960’s, national government began to realize the need for a global set of standards and rules to harmonize national and regional regulations, which until then governed international trade. UCITRAL Arbitration Rules provide a comprehensive set of procedural rules upon which parties may agree for the conduct of arbitral proceedings arising out of their commercial relationship and are widely used in ad hoc arbitrations as well as administered arbitrations. The Rules cover all aspects of the arbitral process, providing a model arbitration clause, setting out procedural rules regarding the appointment of arbitrators and the conduct of arbitral proceedings, and establishing rules in relation to the form, effect and interpretation of the award. At present, there exist three different versions of the Arbitration Rules: (i) the 1976 version; (ii) the 2010 revised version; and (iii) the 2013 version which incorporates the UNCITRAL Rules on Transparency for Treaty-based Investor-State Arbitration.

A model law is a legislative text that is recommended to states enactment as part of their national law. Model laws are generally finalized and adapted by UNCITRAL at its session. The Model Law provides a set of rules which would facilitate the settlement of international commercial disputes by bringing about uniformity and modernizing the national laws on arbitration of member countries. It aimed at recognising the need to curtail judicial intervention to the formation of the arbitration agreement, the appointment of the arbitral tribunal, any challenges to such appointment that may arise, the basic rules of conduct of arbitration proceedings to the termination of proceedings by the making of the arbitral award, the finality of such award and the grounds on which the arbitral award may be challenged before the national courts.

In Nigeria, the Arbitration and Conciliation Act (ACA), 1988 provided for the adoption of the New York Convention and also provided a unified legislation for arbitration in Nigeria. The 1988 ACA replaced the Arbitration and Conciliation Act, 1958. In Nigeria, adjudication by the traditional courts seems unable to meet the challenges of dispute resolution, and in particular international commercial disputes. Therefore, arbitration became an option geared towards creating opportunity for effective service and justice delivery to promote harmonious relationship between disputants. It aims at avoiding or reducing the bickering in industry or organization and avoiding the floodgate of litigations.

The need for the enforcement of decisions arising from relevant statutes resulted in the setting up of International Centre for Settlement of Investment Disputes (ICSID). Nigeria enacted the International Centre for Settlement of Investment Disputes (Enforcement of Awards) Act, which provides for the enforcement in Nigeria of an award by the ICSID in Nigeria.

Arbitration intends that dispute resolution will be achieved within a reasonable time rather than unreasonable length of period and that justice delayed is justice denied, and to avoid the litigation process where the wheels of justice grind very slowly. The litigation process involves enormous amounts of cost that bothers on time, energy, and money. The use of arbitration in modern dispute settlement in Nigeria is still faced with the challenges and skepticism surrounding the presumed un-enforceability of such foreign clauses via Nigeria’s national courts resulting from the apparent divergent legislative and judicial policies and the issue of whether foreign arbitration clauses are void as being ouster clauses. Thus, the need to rethink its viability of international commercial transactions with respect to their extent, benefit and perceived limits or drawbacks in Nigeria.

1.2 Statement of the Problems

The problem which arbitration is designed to overcome still persists as dispute resolution is not achieved within a reasonable time. Thus, putting Nigerian disputants to great cost and expense going abroad, when in fact most of the disputes can be arbitrated under Nigeria’s arbitration laws, or within Nigeria. Nigeria is still rarely preferred as a jurisdiction of choice (either as lex arbitri or as locus arbitri) or seldom selected as an arbitral body. With dispute resolution are conducted outside Nigeria mostly in London or Singapore.

With current issues relating to industrialisation and globalization, different conflict areas have emerged and will surely continue to emerge, especially with international commercial transactions. The activities of government, multi-nationals and individuals bring about conflict. In the instance in Nigeria, oil exploitation and exploration which involves international commercial transactions is increasingly associated with conflicts and controversies. For a developing nation like Nigeria that is craving for foreign direct investments, there has to be an established high level of confidence in resolution of disputes so as to encourage investors.

The use of arbitration in modern dispute settlement in Nigeria is still faced with the challenges and skepticism surrounding the presumed un-enforceability of such foreign clauses via Nigeria’s national courts resulting from the apparent divergent legislative and judicial policies and the issue of whether foreign arbitration clauses are void as being ouster clauses. Thus, the need to rethink its viability of international commercial transactions with respect to their extent, benefit and perceived limits or drawbacks in Nigeria.

The research would go about in breaking down these problems that have inhibited the viability and growth of International Commercial Arbitration in Nigeria Viz, the exposition of the challenges, the causal elements of these challenges and the potential solutions of these challenges. The research would specifically find answers to the questions relating to the advantages cum benefits of arbitration as a means of settlement of disputes, exposing some of the drawbacks to International Commercial Arbitration in Nigeria, and running a comparative analysis on the viability of International Commercial Arbitration in other jurisdictions around the world.

1.3 Research Questions

This research project will address three research questions:

a) What are the legal and institutional frameworks for arbitration in Nigeria?

b) What makes International Commercial arbitration viable in other jurisdiction around the world?

c) What factors can encourage International commercial Arbitration in Nigeria?

1.4 Aim and Objectives of the Study

The aim of this study is to present a rethink on the viability of international commercial arbitration in conflict resolution and dispute settlement of international commercial arbitration in Nigeria. The specific objectives of the study include:

a) To determine the legal and institutional frameworks of arbitration in Nigeria.

b) To analyse the viability of International Commercial Arbitration in other jurisdictions around the world.

c) To ascertain factors that can encourage International Commercial Arbitration in Nigeria.

1.5 Significance of the Study

The need for disputes arising from commercial transactions to be settled expediently has been accepted by all, including the courts. This support has continued because the courts cannot cope with the volume of cases before them and parties are encouraged to use ADR and arbitration to settle matters that may arise.

The significance of this study on international commercial arbitration will show the cost implications on the disputants. Equally, it will set out what might encourage more referral of international arbitration cases to Nigeria and identify the challenges facing Arbitration in Nigeria. This will serve the interest of judicial officers, legal practitioners, policy formulators, and the Law Reforms Commissions at Federal and State levels in bringing out the viability of international commercial arbitration in Nigeria so that steps can be taken to improve on it.

1.6. Research Methodology

This research adopted a doctrinal methodology. Reliance was placed on arbitration statutes, international conventions and treaties, as primary source of data, while, secondary sources of data include textbooks, journals, newspapers, law reviews, and case law. The study made use of descriptive and comparative designs in analysing the data for the research.