Nigeria

Introduction

The effectiveness of arbitration as a mechanism for the settlement of commercial disputes is judged by the ease with which the resultant arbitral award is enforced through the courts, in the event that the award debtor does not voluntarily comply with the award. An arbitral award is useless if the winning party is either unable to enforce the arbitral award or only able to do so after an expensive and sometimes protracted legal battle. This article highlights some of the major pitfalls that are usually encountered in the course of attempting to enforce an arbitral award through the Nigerian court system. Some of the pitfalls include the frequent and, one might add, mostly unfounded and abusive reliance on ‘misconduct’ as a ground for setting aside an arbitral award and which tactic in turn is caused or encouraged by the lack of a statutory definition of what constitutes ‘misconduct’ for purposes of setting aside an arbitral award. Other pitfalls include the issue of identifying the appropriate court for purposes of submitting an application for the recognition and enforcement of an arbitral award, using the right procedure when applying for the recognition and enforcement of an arbitral award, as well as the vexed issue of the limitation period for the enforcement of an arbitral award that in Nigeria, and except for arbitrations conducted under the Lagos State Arbitration Law of 2009, is reckoned from the time the underlying contractual cause of action accrued rather than from the date the award is made. The aim of this article is to highlight such pitfalls so that parties and practitioners will be aware of and guard against them or, to the extent permissible by law, proactively address them contractually.

Absence of a definition of ‘misconduct’ as grounds for setting aside an arbitral award

Sections 29 and 30 of the Arbitration and Conciliation Act^[1] (the ACA) set out the very limited grounds on which a court can set aside an arbitral award at the instance of an aggrieved award debtor. Such grounds include misconduct on the part of the arbitrator and improper procurement of the award. However, the term misconduct is not defined under the ACA and as a consequence of this lacuna, the courts in Nigeria have resorted to the definition of misconduct under the common law. In the case of Kano State Urban Development Board v Fanz Construction Company Limited,^[2] the Nigerian Court of Appeal, relying on various English cases, distilled various acts and procedural irregularities that would constitute misconduct by an arbitrator, including, among others:

• a breach of the rule of natural justice;
• where the arbitrator obtains information from one party in the absence of the other;
• the arbitrator examines a witness in the absence of one party who was not given opportunity to cross-examine the witness afterwards;
• receiving inadmissible evidence; and
• where the arbitrator acts outside his or her powers or in excess of his or her jurisdiction.

In the Taylor Woodrow case,^[3] the Supreme Court stated as follows:

It is difficult to give an exhaustive definition of what may amount to misconduct on the part of an arbitrator or umpire. The expression is of wide import, for an arbitrator’s award, unless set aside, entitles the beneficiary to call on the executive power of the state to enforce it, and it is the court’s function to ensure that the executive power of the court is not abused. It is accordingly misconduct for an arbitrator to fail to comply with the terms, express or implied, of the arbitration agreement. But even if the arbitrator fully complies with those terms, he will be guilty of misconduct if he makes an award which on grounds of public policy ought not to be enforced. Much confusion has been caused by the fact that the expression ‘misconduct’ is used to describe both these quite separate grounds for setting aside an award, and it is not wholly clear in some of the decided cases on which of these two grounds the award has been set aside. However, on one or other of these grounds the expression includes on the one hand that which is misconduct by any standard, such as being bribed or corrupted, and on the other hand mere ‘technical’ misconduct, such as making a mere mistake as to the scope of the authority conferred by the agreement of reference. That does not mean that every irregularity of procedure amounts to misconduct.

As a result of the absence of a definition in the ACA of what constitutes misconduct for purposes of setting aside an arbitral award, mischievous award debtors have turned the term into a capacious and open-ended concept that accommodates all kinds of, mostly frivolous and unfounded, allegations and complaints against an award. As we will show shortly, in most cases, the allegations of misconduct turn out to be frivolous and unfounded when closely examined by the courts, but only after the award creditor must have been put through the rigours of expensive and protracted litigation that usually end up in the appellate courts.

In Taylor Woodrow of Nigeria Limited v Suddeutsche Etna-Werk Gmbh,^[4] a Nigerian construction company entered into a subcontract with a German company, with a view to the latter executing certain works. A sole arbitrator appointed by the parties found for the German company and made an award in the sum of 1.2 million deutsche marks, or its naira equivalent, in its favour. The Nigerian company applied, unsuccessfully, to the High Court of Lagos State to set aside the award on the grounds that the arbitrator misconducted himself by misinterpreting certain clauses of the subcontract. On a further appeal to the Supreme Court, that court unanimously dismissed the appeal and stated as a general principle that where the parties choose their own arbitrator to be the judge in the dispute between them, they take their arbitrator for better or for worse to be the judge both as to decisions of law and decisions of fact in the dispute between them. The court further held that, although Nigerian courts have jurisdiction to set aside an arbitral award in appropriate circumstances where an arbitrator has truly misconducted himself or herself or where the arbitral proceedings or award were improperly procured, a party cannot be permitted to object to the arbitrator’s decision either upon the law or the facts simply because the award is not in their favour.

In the case of Arbico Nigeria Limited v Nigeria Machine Tools Limited,^[5] both the High Court and the Court of Appeal refused to set aside the award on the grounds of alleged misconduct. It is noteworthy that the allegation of misconduct that was levelled against the arbitrator by Arbico was simply that by reformulating an issue that was referred to the arbitrator for determination, the arbitrator had inadvertently excluded Arbico’s counter claim from his determination. A further allegation of misconduct made by Arbico was that by appointing a firm of architects and consultants to examine the remedial works carried out by Arbico, and by receiving their report into evidence, Arbico’s right to a fair hearing had been breached since the firm of architects and consultants did not accord Arbico a hearing before preparing their report.

Perhaps it is the case of Triana Ltd v UTB Plc^[6] that best illustrates the frivolous use of misconduct as a ground for setting aside an arbitral award. In that case, Triana Ltd (Triana), Universal Trust Bank Plc (UTB) and Globus Enterprises Ltd (Globus) had entered into a tripartite warehousing management agreement by which Triana agreed to warehouse some goods belonging to Globus and to release them upon the instructions of UTB. During a stock-taking exercise, it was discovered that some of the goods had gone missing. Consequently, UTB who financed the purchase of the goods, commenced arbitration against Triana for the value of the missing goods. The three-member arbitral tribunal made an award against Triana who then applied to set aside the award on grounds of misconduct, among others. According to Triana, one of the arbitrators had failed to disclose that he had acted against Globus in a different matter. In fact, the arbitrator in question was appointed by Triana. The court held that Triana had not established misconduct against the arbitrator in question, that the matter in respect of which the arbitrator acted against Globus was unrelated to the dispute that was submitted to the tribunal. The court also found as a fact that one of the lawyers to Triana at the arbitral proceedings was aware of the fact that the arbitrator in question had acted against Globus in a different and unrelated matter before nominating him as an arbitrator in the matter.

Approaching the court for enforcement and recognition through the proper procedure

Another pitfall on the road to enforcement is the issue of the kind of application that should be filed when seeking recognition and enforcement of an arbitral award. The issues in this regard usually revolve around whether to apply for recognition and enforcement of an arbitral award by way of a motion on notice, motion ex parte or originating motion. While the ACA states that an arbitral award shall be recognised as binding upon an application in writing to the court, it does not specify the type of application that should be made to the court. Consequently, recourse is often had to the Civil Procedure Rules applicable to the particular court where recognition and enforcement is sought. Order 39 r.4(1) of the High Court of Lagos State Civil Procedure (2012) provides that every motion on notice to set aside, remit or enforce an arbitral award shall state in general terms the grounds of the application. The problem, however, is that a motion on notice is usually filed in an existing suit and is not in itself an originating court process by which a new matter can be commenced. There have therefore been instances where an order for the recognition and enforcement of an arbitral award is challenged on grounds that it has been obtained through a wrong procedure. In the case of Triana Ltd v UBT Plc,^[7] it was held by the Court of Appeal that the ACA does not specify the type of application to be filed for the recognition and enforcement of an arbitral award and that it was therefore sufficient to make an application by a motion on notice. The court reiterated this view in Stabilini Visinoni Ltd v Mallinson & Partners Limited.^[8]

Although Order 52 r.15 of the Federal High Court (Civil Procedure) Rules 2009 provides that every application under the Arbitration and Conciliation Act to, among others, set aside an award, shall be made by originating motion. Order 52 r.16 thereof provides that an application to enforce an arbitral award in the same manner as a judgment or order of the court may be made ex parte but the court hearing the application may order the application to be made on notice. In the recent case of Allied Energy Ltd & Anor v Nigerian AGIP Exploration Ltd,^[9] the Court of Appeal set aside an order for the recognition of a London Court of International Arbitration award on grounds that it was obtained ex parte pursuant to Order 52 r.16 of the Federal High Court (Civil Procedure) Rules. The court held that since the three month-period that the award debtor was entitled to apply to set aside the award had not expired, the application ought to have been on notice to and served on the award debtor. According to the court, a requirement to put the award debtor on notice of an application to enforce an arbitral award must be read into the provisions of section 31 of the Arbitration and Conciliation Act

In order to avoid this kind of attacks on arbitral awards, Order 28 of the High Court of Lagos State (Civil Procedure) Rules 2019 now provides that any application in any alternative dispute resolution proceedings, including an application to enforce an arbitral award, shall be by originating motion on notice.^[10]

What the above analysis shows is that an award creditor must ensure that an application for the enforcement of an arbitral award is made using the proper application in accordance with the rules of the relevant court where recognition and enforcement is sought. What is clear now from the decision of the court in the Allied Energy case is that it prudent to put the award debtor on notice of any application to enforce an arbitral award even if the rules of the court permit an ex parte application.

Being in the proper court

In taking steps to enforce an arbitral award in Nigeria, care must be taken to ensure that the application for the recognition and enforcement of the award is made in the appropriate court. This is because the issue of jurisdiction is so fundamental that any proceedings conducted by a court without jurisdiction would be declared a nullity and liable to be set aside no matter how well conducted.^[11] Jurisdiction is so fundamental that it can be raised at any time in the proceedings including for the first time at an appeal stage.^[12] In relation to the recognition and enforcement of an arbitral award, section 51 of the ACA provides that ‘an arbitral award shall, irrespective of the country in which it is made, be recognised as binding and subject to section 32 of this act,^[13] shall upon an application in writing the court, be enforced by the court’. For purposes of the Act, ‘court’ is defined^[14] to mean ‘the High Court of State, the High Court of the Federal Capital Territory, Abuja of the Federal High Court’. At first glance, it would seem from the definition of court in the ACA that an application for the recognition and enforcement of an arbitral award may be made in either the High Court of a State, the Federal High Court or the High Court of the Federal Capital Territory Abuja; that is however, not the case. Under the Constitution of the Federal Republic of Nigeria (1999, as amended), there is a constitutional allocation of subject matter jurisdiction between the Federal High Court and the High Court of the State or the High Court of the Federal Capital Territory. For instance, matters pertaining to aviation, admiralty, maritime, copyright, patents, design and trademark are exclusively reserved for the Federal High Court.^[15] This being the case, it is of vital importance that an application for the recognition and enforcement of an arbitral award is made in the court that would have jurisdiction over the subject matter of the dispute assuming the matter where to be litigated.

In Federal University of Technology Akure v BMA Ventures (Nig) Ltd,^[16] the Court of Appeal held (relying on the provisions of section 251 of the Constitution) that the Federal High Court lacked the jurisdiction to grant the application for the recognition and enforcement of an arbitral award given that the subject matter of the proceedings was a breach of a simple contract in respect of which the Federal High Court lacks jurisdiction. Accordingly, the court held that the order recognising the award for enforcement was null and void.^[17] Unfortunately, this is not a matter that the parties can address in their arbitration agreement because as a matter of Nigerian law, parties cannot by contract vest jurisdiction in a court where that court lacks jurisdiction statutorily.

Limitation period for enforcement of an arbitral award

The ACA does not specify a limitation period for the enforcement of an arbitral award in Nigeria. Therefore, to determine the limitation period for the enforcement of an arbitral award, recourse will be made to the limitation laws of the various states in Nigeria. The limitation law of Lagos (the Lagos Limitation Law)^[18] provides^[19] that ‘this Law and any other limitation enactment shall apply to arbitration as they apply to actions in the court.’^[20]

Generally, however, the limitation period for the enforcement of an action based on contract is either five or six years, depending on the applicable limitation law^[21] For instance, the Lagos Limitation Law^[22] provides that an action founded on simple contract shall not be brought after the expiration of a period of six years from the date of the cause of action. In relation to the enforcement of an arbitral award, the Lagos Limitation Law goes further to provide that an action to enforce an arbitration award, where the arbitration agreement is not under seal or where the arbitration is not under any enactment other than the ACA, cannot be commenced after a period of six years from the date of the cause of action. The law provides as follows:^[23]

Actions barred after certain periods of six years:

(1) The following actions shall not be brought after the expiration of six years from the date on which the cause of action accrued:

(a) Actions founded on simple contract

[. . .]

(d) actions to enforce arbitration award, where the arbitration agreement is not under seal or where the arbitration is under any enactment other than the Arbitration and Conciliation Act.

Section 7(1)(d) of the Limitation Act of the Federal Capital Territory, Abuja,^[24] (the Limitation Law of the FCT) is similar to section 8(1)(d) of the Lagos State Limitation Law. Under the limitation laws of some other states in Nigeria, actions founded on breach of contract are required to be commenced within a period of five years from the date the cause of action accrued. For example, section 16 of the Limitation Law of Rivers State provides that no action founded on contract shall be brought after the expiration of five years from the date on which the cause of action accrued.^[25] It is to be noted that while, as shown above, the Lagos State Limitation Law specifically lists an action to enforce an arbitral award among causes of actions that cannot be litigated after the expiration of a period of six years from the date of the accrual of the cause of action, the limitation laws of most states only provide for the time limit to commence an action founded on a contract (which, of course, includes arbitration). while also providing that the limitations law shall apply to arbitration as they apply to court actions.

The question that award creditors are often confronted with is when does time begin to run for purposes of an application to enforce an arbitral award? Is it from the date of the initial breach of the underlying contract or from the date of publication of the award?

The Supreme Court of Nigeria was confronted with this question in the case of Murmansk State Steamship Line v Kano State Oil Millers Ltd.^[26] The facts of that case are that the plaintiff entered into a charter party agreement with the defendant to provide a cargo of groundnuts. The charter party included an agreement to refer any disputes to arbitration under Russian law. The defendant defaulted under the charter party by failing to load the cargo of groundnuts when the ship was presented at the port by the plaintiff to be loaded on the agreed date. The dispute was referred to a Moscow arbitral tribunal, which made an award in favour of the plaintiff against the defendant on 28 February 1966. The plaintiff brought an action on 2 February 1972 in the High Court of Kano State to enforce the arbitral award. The High Court dismissed the plaintiff’s claim and the Court of Appeal affirmed the High Court’s decision. Dissatisfied with the decision of the Court of Appeal, the plaintiff further appealed to the Supreme Court.

In its decision, the Supreme Court held that the limitation period for the enforcement of an arbitral award begins to run from the date the cause of action accrued and not the date when the award was issued and that the statutory limitation period^[27] for the enforcement of the award in the case began to run in 1964 when the underlying agreement between the parties was breached and not from the date of publication of the award in 1966.

The Supreme Court restated its position on this point in the case of City Engineering (Nig) Ltd v Federal Housing Authority.^[28] In that case, the court, in interpreting section 8(1)(d) of the Lagos Limitation Law, held that since the arbitration agreement between the parties in that case was not under seal and the arbitration was not under any enactment other than the arbitration law, the limitation period for enforcement of the award was six years, commencing from the date of the breach of the underlying contract which is the date of accrual of the cause of action.

It is therefore possible for arbitration proceedings to be commenced within the limitation period only for the limitation period to kick in even before the award is made.

It is noteworthy that the Lagos State Arbitration Law^[29] has addressed this problem by introducing significant changes to ameliorate the effect of section 8(1)(d) of the Lagos Limitation Law and its interpretation by the Supreme Court. The Lagos Arbitration Law contains two very important provisions relating to the application of limitation laws to arbitral proceedings.

• First, it provides that, in calculating the time prescribed by the applicable limitation laws for the commencement of actions in courts, arbitral and other proceedings in respect of a dispute that is the subject of either an award that the court orders to be set aside or declares to be of no effect, or the affected part of an award that the court orders to be set aside or declares to be of no effect, the period between the commencement of the arbitration and the date of the order of the court shall be excluded.
• Second, the Lagos Arbitration Law provides that, in calculating the time limit for the commencement of proceedings to enforce an award, the period between the commencement of the arbitration and date of the award shall be excluded.

For arbitrations conducted under the Lagos State Arbitration Law, these provisions have addressed the concerns of arbitration practitioners and the business community regarding the effect of the decisions of the Supreme Court in the Murmansk and City Engineering cases. Although section 64 of the Lagos State Limitation Law provides, somewhat similarly, that:

Where the court orders that an award be set aside or orders, after the commencement of an arbitration, that the arbitration will cease to have effect with respect to the dispute referred, the court may further order that the period between the commencement of the arbitration and the date of the order of the court will be excluded in computing the time fixed by this Law or any other limitation enactment for the commencement of the proceedings, including arbitration.^[30]

It nevertheless should be observed that this provision has two defects. First, it does not address the problem of when time begins to run for the purposes of enforcement of an arbitral award. Second, on the issue of an award that the court orders to be set aside, the power of the court to order the exclusion for limitation purposes of the period between the commencement of arbitration and the date of the order is discretionary because of the use of the word ‘may’. Under Nigerian law, the use of the word ‘may’ in a statute connotes discretion compared to the use of the word ‘shall’, which is imperative.^[31]

In the light of the foregoing we recommend an urgent review and amendment of the ACA, Limitation Law of Lagos State and limitation laws of the various states of the Federation of Nigeria in order to include provisions similar to that contained in section 35, subsections (2)(a), (b) and (5) of the Lagos State Arbitration Law.

Conclusions and recommendations

While it is important to highlight the potential pitfalls on the way to award enforcement such as we have discussed in this article so that both arbitration practitioners and users can become aware of and guard against them, it is also important to legislatively address some of the identified loopholes that bad faith award debtors usually exploit to frustrate an attempt to enforce an arbitral award.

In this regard, there is an urgent need for legislative intervention in order to clearly define, delineate and circumscribe the contours of misconduct as a ground for setting aside an arbitral award. Although the courts do rigorously examine allegations of arbitrator’s misconduct with the result that only in a few deserving cases are awards set aside on grounds of misconduct, the fact that what constitutes misconduct remains somewhat open-ended owing to the absence of a clear and precise statutory definition, which tend to embolden bad faith award debtors to try to stretch the concept of misconduct by seeking to set aside an award on the basis of every irregularity in the arbitral process.

Further, there is an urgent need to amend the ACA as well as the limitation laws of the various states in Nigeria to include provisions similar to those contained in the Lagos State Arbitration law in relation to the limitation period for enforcement of an arbitral award as well as the nature of application that is required to enforce an arbitration award. In the meantime, and pending the amendment of the relevant laws, parties need to ensure that their claims are commenced as soon as possible bearing in mind that time begins to run for purposes of enforcing an arbitral award from the very moment the cause of action accrues, as in, when the underlying contractual breach occurs, unless the proceedings are conducted under the Lagos State Arbitration Law. It is also important that parties bear this in mind throughout the arbitration proceedings, including in setting hearing timescales. In relation to the jurisdiction of the various high courts over recognition and enforcement proceedings, parties and their foreign counsel need to seek local counsel advice as to the appropriate court as ending up in the wrong court may be quite fatal to the award. Finally, it seems prudent to ensure that an application to recognise and enforce an arbitral award is served on the award debtor even where the relevant rules of court provide that such application may be made ex parte.

Notes

^[1] Chapter A18 Laws of the Federation of Nigeria 2004.

^[2] (1986) 5 NWLR (Pt. 39) 74 at 89–90.

^[3] (1992) 24 NSCC (Part 3), 1993 4 NWLR Pt 285 SC 127.

^[4] (1992) 24 NSCC (Part 3), 1993 4 NWLR Pt 285 SC 127.

^[5] [2002] 15 NWLR (Part 1).

^[6] (2009) 12 NWLR (Pt.1155)313.

^[7] (2009) 12 NWLR (Pt.1115)313.

^[8] (2014) LPELR-23090.

^[9] (2018) LPELR-45302 (CA).

^[10] See also Rule 7(1) of the Arbitration Application Rules 2009 made pursuant to the Lagos Arbitration Law 2009 provides that an application to enforce an award or an interim award or decision in the same manner as judgment or order shall be made by originating motion.

^[11] See Ohakim v Agbaso (2010) 19 NWLR [Pt 1226] 172.

^[12] See Anyanwu v Ogunewe & Ors (2014) LPELR 22184 (SC).

^[13] Section 32 deals with the grounds for setting aside an arbitral award.

^[14] See section 57.

^[15] Section 251 of the 1999 Constitution.

^[16] (2018) LPELR-44429(CA)

^[17] See also Kabo Air Limited v The O Corporation Limited [2014] LPELR 23616 CA. It would appear that the courts do not adhere to the strict jurisdictional dichotomy between the Federal High Court and the High Court of a State or the High Court of the Federal High Court in case of an application for the appointment of an arbitrator. In Magbagbeola v Sanni, (2005) upholding the decision of the Court of Appeal (2002) 4 NWLR (Pt 756) 193, the Supreme Court held on the basis of the definition of Court in section 57 of the Arbitration and Conciliation Act that both the Federal High Court and the State High Court have the jurisdiction to appoint an arbitrator.

^[18] Chapter L84, Laws of Lagos State 2015.

^[19] Section 62.

^[20] See also for instance section 61 of the Limitation Act Chapter 522 Laws of the Federal Capital Territory Abuja which provides that ‘This act and any other limitation enactment shall apply to arbitration as they apply to actions in the court’. See for similar provisions, 34 of the Limitation Law Chapter L14 Laws of Cross River State and section 34 of the Limitation Law of Akwa Ibom State (Cap. 78) Laws of Akwa Ibom State 2000.

^[21] In the case of Tulip (Nig) Ltd v Noleggieoe Transport Maritime SAS (2011)4 NWLR (Pt 4) 254 at 284 (para C) where the Nigerian Court of Appeal held that the applicable limitation law in relation to the enforcement of an arbitral award is the limitation law of the forum where enforcement is sought.

^[22] Chapter L84, Laws of Lagos State 2015 Edition.

^[23] Section 8, Lagos Limitation Law.

^[24] Chapter 522 Laws of the Federal Capital Territory.

^[25] See also, section 16 of the Limitation Law of Cross Rivers State Chapter L14, Laws of Rivers State 2004 and section 16 of the Limitation Law ( Chapter 78) Laws of Akwa Ibom State 2000.

^[26] 1974–75 NSCC 590.

^[27] In this case it was the English Statute of Limitation 1623 which requires that a civil action must be commenced within a period of six years of the cause of action.

^[28] (1997) 9 NWLR (Pt.520) at 224. See also Tulip (Nig) Ltd v Noleggieoe Transport Maritime SAS. (2011) 4 NWLR (Pt 1237) 254.

^[29] Law No.10 of 2009. Now Chapter A11 of the Laws of Lagos State 2015.

^[30] Section 63 of the Limitation Act of the FCT is similar to section 64 of the Limitation Law of Lagos State.

^[31] See the cases of BAT (Invest) Ltd v AG Lagos State (2014) NWLR (Pt 1433) 260 and Corporate Ideal Ins Ltd v Ajaokuta Steel Co Ltd.