Nigeria

In summary

Recent decisions of Nigerian courts have continued to demonstrate that Nigerian courts are arbitration friendly and would not set aside arbitration awards except in truly deserving circumstances. In one recent decision, Nigeria’s highest court, the Supreme Court, deprecated the unfortunate trend whereby award debtors mount all kinds of, mostly frivolous and unsubstantiated, challenges to arbitral awards. In that case, the Supreme Court not only emphasised the need for parties to arbitration agreements to abide by the awards resulting from such agreements, but also highlighted the correlation between respect for and enforcement of international arbitration agreements and building and sustaining a globally respected dispute resolution system on the one hand and the attractiveness and competitiveness of Nigeria as an investment destination on the other. Although the statement of the Supreme Court in that case was an obiter dictum since the appeal was dismissed on technical grounds, the statement is nonetheless significant because an obiter dictum of the Supreme court carries a lot of weight and would likely influence the decision of the lower courts. Also, the fact that the Supreme Court made such an important policy statement in relation to arbitration is an indication of the Court’s exasperation with the trend of frivolous challenges to arbitral awards.

Discussion points

• Supreme Court pronouncement on the need for litigants to respect arbitral awards
• Existence of an arbitration clause does not oust the jurisdiction of the court

Referenced in this article

• Metroline (Nig.) Ltd. v Dikko
• Optimum C. &. P. Dev. Ltd. v Ake Shareholding Ltd.
• Bill & Brothers Ltd. v Dantata & Sawoe C.C. Ltd.

Notable pronouncement of the Supreme Court of Nigeria on the need for litigants to respect arbitral awards

Metroline (Nig.) Ltd. v Dikko^[1]

In this case, the appellants, Metroline Nigeria Limited, Sheba International Limited, Axis Consulting, Design Matrix Associates and Inter Arc Concept Limited entered a joint venture agreement referred to as JVA 2004 (JVA). Clause 8 of the JVA provided that ‘any dispute or question in connection with the Joint Venture or this deed shall be referred to a single arbitrator to be appointed by the Chief Judge of the [Federal Capital Territory, Abuja] in accordance with the Arbitration Act/Law for the time being in force.’ Disputes arose among the joint venture partners which caused the respondent, Alhaji Mukhtar Mohammed Dikko, to apply to the Chief Judge of the Federal Capital Territory, Abuja (FCT) to appoint a sole arbitrator pursuant to the JVA. The sole arbitrator that was initially appointed by the Chief Judge of the FCT for the reference recused himself because of some issues around bias, and the Chief Judge had to appoint another sole arbitrator who thereafter conducted the arbitration and published the final award dated 3 April 2017.

The appellants were unhappy with the award and applied to the High Court of the FCT to have the award set aside, while the respondent simultaneously applied to the same court to have the award recognised and enforced as a judgment of the court. The High Court delivered a consolidated judgment wherein it refused to set aside the award but recognised the award for enforcement in the same manner as its judgment. The appellants were also dissatisfied with the judgment of the High Court and appealed to the Court of Appeal. The Court of Appeal, in a unanimous decision, dismissed the appeal. The appellants further appealed to the Supreme Court.

The Supreme Court dismissed the appeal on technical grounds because the appellants’ grounds of appeal were grounds of mixed law and facts for which the appellants were required to obtain leave of the Supreme Court pursuant to section 233(3) of the Constitution of the Federal Republic of Nigeria 1999 (as amended) (the Constitution), but which leave was not sought and obtained. Given the failure of the appellants to seek and obtain the required leave of the Supreme Court, the respondent contended that the appeal was incompetent and urged the Supreme Court to dismiss it. The Supreme Court agreed with the respondent and dismissed the appeal.

Although the appeal was not decided on the merits, one of the justices that heard the appeal, Justice Rhodes-Vivour JSC (now retired), took the opportunity to restate the supportive attitude of the Nigerian courts towards arbitration and deprecated the disturbing trend of filing all manner of unsubstantiated and spurious challenges to arbitral awards in Nigeria. Rhodes-Vivour, JSC in his supporting judgment stated:

I intend to comment on the disturbing trend where all manner of appeals are filed against awards. It is time litigants fully understand, respect and appreciate the nature of arbitration agreements they freely enter into. It is the duty of counsel to explain the nature of these agreements and not encourage their clients to disregard them when they get unfavorable awards. Arbitration agreements ought to be respected and the resultant awards complied with. We should always bear in mind the importance of respecting arbitration agreements, more so those that have international connotations. Building up and sustaining a globally respected dispute resolution system are major steps for the growth of our Nation into a preferred investment destination.
The Nigerian Legal System, following international standards, has legislated on the nature of arbitration awards to be final and binding and only to be interfered with by the courts in the exceptional circumstances enunciated in the relevant arbitration statutes. Arbitration is widely acknowledged as an alternative to litigation which enables expeditious dispute resolution. Commendably, the legal framework provides for court interference in specified circumstances only. However, the unfortunate trend in which litigants with the assistance of counsel who fail to appreciate their duties as officers of the court, all in a bid to win their clients’ case by all means, bring unsubstantiated and spurious challenges against otherwise good arbitration awards and the arbitration tribunal, ought to be frowned upon and discouraged. The courts should not allow itself to be used as a tool to set side otherwise good awards or frustrate legitimate arbitration awards.

Comments

As already noted, the appeal was dismissed on technical grounds. However, the fact that Justice Rhodes-Vivour deemed it necessary to deprecate the unfortunate trend whereby parties to arbitration agreements mount all kinds of frivolous challenges to unfavourable awards underscores the Supreme Court’s attitude to arbitration and frivolous challenges to arbitral awards. Although the Justice’s statement in this respect is an obiter dictum given that the appeal was not decided on the merits, an obiter dictum of the Supreme Court, being the highest court in the country, carries a lot of weight and would usually influence the decisions of the lower courts in appropriate cases.

Available statistics indicate that Nigerian courts are arbitration friendly and would, in most cases, enforce arbitral awards or deny challenges to enforcement of arbitral awards. A recent study^[2] of arbitration-related court decisions by Nigerian courts that analysed 49 cases in which the arbitral awards were directly challenged (‘challenge cases’) (as opposed to cases where enforcement was resisted or opposed by the award debtors) revealed that 47 concerned domestic awards (constituting 96 per cent of the cases reviewed), while two cases concerned international awards (4 per cent of the cases reviewed). Out of the 47 domestic cases, 12 awards were successfully challenged (26 per cent), while the challenge was unsuccessful in 35 cases (74 per cent). The challenge in international arbitration was unsuccessful. In relation to enforcement proceedings, the report analysed 41 cases under this category. Thirty-three of these cases related to domestic awards (80 per cent), while eight cases concerned international awards (20 per cent). Out of the 33 domestic awards, 26 were enforced (79 per cent), while seven were unenforced (21 per cent). Of the eight international awards, seven were enforced (88 per cent), while one was unenforced (12 per cent).

While the report confirmed hitherto anecdotal evidence that Nigerian courts are arbitration friendly in terms of their ultimate determination of awards challenges, the trend whereby award debtors mount frivolous and unsubstantiated challenges to arbitral awards coupled with the protracted litigation that such challenges would usually involve tends to give a wrong impression about the efficacy of arbitration as a viable alternative to litigation. Given this backdrop, the Supreme Court’s statement is very timely, and it is hoped that it will cascade down the judicial hierarchy and help to stem the ugly tide of frivolous challenges to arbitral awards.

A decision of an arbitral tribunal awarding a relief that is contingent upon the fulfilment, on a future date, of a condition does not affect the finality or validity of the award.

Optimum C. &. P. Dev. Ltd. v Ake Shareholding Ltd.^[3]

In this case, Optimum Construction & Property Development Limited (Optimum, the applicant) and Ake Shareholdings Limited (AKL, the respondent) entered into a sublease agreement and agreed to submit all disputes arising from the sublease agreement to arbitration. A dispute arose between the parties concerning Optimum’s performance of its obligations under the sublease agreement and the dispute was submitted to arbitration. Following the conclusion of the arbitral proceedings, the sole arbitrator rendered an arbitral award dated 19 August 2011 in favour of AKL granting some of AKL’s claims. Among other reliefs, the sole arbitrator directed Optimum to, within six months of the date of the award, hand over a copy of the fire and general insurance of the property to AKL and carry out the necessary repair works on the property as identified in the minutes of a joint inspection meeting held on 26 August 2010 and the reports dated 10 December 2008 and February 2011, respectively. Furthermore, Optimum was allowed relief from forfeiture of the lease on the fulfilment of two conditions: namely, that it should hand over a copy of the fire and general insurance over of the property to AKL and carry out the necessary repair works as identified in the reports within six months.

Optimum failed to either hand over a copy of the fire and general insurance of the property to AKL or carry out the necessary repair works within the six-month period as directed in the award. Consequently, AKL filed an application in the High Court of Lagos State seeking an order of forfeiture of the lease in view of Optimum’s failure to comply with the conditions stipulated in the award, the fulfilment of which would entitle it to relief from forfeiture of the lease. The High Court ruled on AKL’s application and held that the arbitral award was inconclusive and, therefore, unenforceable. AKL’s application was consequently struck out for being incompetent.

Dissatisfied with the ruling of the High Court, AKL appealed to the Court of Appeal. The Court of Appeal disagreed with the High Court’s decision that the award was inconclusive and, therefore, unenforceable. Specifically, the Court of Appeal held that: (1) the award was clear, unequivocal, and unambiguous; (2) the award was final and conclusive; and (3) the award was not doubtful on its face and was valid, enforceable and should have been enforced summarily because the award had granted Optimum relief from forfeiture of the lease only on the conditions that Optimum handed over to AKL a copy of the fire and general insurance of the property and carried out the necessary repair works, a condition that Optimum had breached. The court further held that having flouted the terms of the award, Optimum lost the protection of the relief from forfeiture of the lease and an order of court was required to formally terminate the lease by ordering the forfeiture of the lease due to Optimum’s failure to comply with the terms of the award. The appeal against the decision of the High Court was consequently allowed and the decision of the High Court was set aside. The Court of Appeal went further to enforce the award by revoking the award of relief from forfeiture, which was made conditional and which condition Optimum had failed to fulfil.

Dissatisfied with the decision of the Court of Appeal, Optimum appealed to the Supreme Court. Optimum did not, however, seek the leave of the Supreme Court to file the appeal, the grounds of which were of mixed law and facts. The appeal was, as a result, dismissed for being incompetent. Subsequently, Optimum filed an application at the Supreme Court seeking an order of the Supreme Court increasing the time within which it could seek leave to appeal on grounds of facts or mixed law and facts, an order granting leave to appeal on grounds of facts or mixed law and facts, and an order increasing the time to appeal on grounds of facts or mixed law and facts. In considering whether to grant Optimum’s application, the Supreme Court had to consider whether Optimum’s proposed grounds of were arguable and had reasonable prospect of success.

Ruling on Optimum’s application, the Supreme Court held that from the express terms of the award, the arbitrator intended it to be a final and conclusive resolution of the dispute between the parties and did not leave any factual issue for further determination by the arbitrator. The Court further held that the prescription of a period of six months within which the directives in the award should be carried out did not render the award inconclusive and that the award became enforceable upon the expiry of the said period of six months. Based on the foregoing, Optimum was refused leave to appeal against the decision of the Court of Appeal.

Comments

We agree with the decision of the Court of Appeal as affirmed by the Supreme Court that the part of the award directing or requiring Optimum to hand over a copy of the fire and general insurance of the property to AKL and carry out the necessary repair works as identified within six months as conditions for enjoying relief from forfeiture of the lease did not make the award inconclusive and unenforceable. It is not unusual for awards to require acts or payments to be performed or paid on future dates. That an act or payment is to be performed or made on a clearly specified future date does not make such award inconclusive or unenforceable. What is more, the award was clearly expressed to be final, and the arbitrator did not retain jurisdiction to deal with any matters or to issue a supplemental award in the event that the respondent did not comply with the directions in the award.

While the Court was only required to examine the proposed grounds of appeal for which leave to appeal was required to determine whether the grounds were, prima facie, arguable or disclosed good cause for why leave should be granted, the Court recognised that it was not required at the stage of considering the application to decide whether the appeal would succeed or fail on the proposed grounds and should only decide whether the grounds were substantial, arguable and triable, yet the Court decided the issues raised in the appeal even though it was not considering the merits of the appeal at that stage. The Court’s decision reflects its increasing impatience or disapproval of what it described in the case of Metroline v Dikko as the trend of filing frivolous and substantiated appeals against arbitral awards. This is because the Court also held that ‘This protracted litigation over the summary enforcement of an unchallenged arbitral award defeats the purpose of the arbitration clause in the sub-lease agreement. The parties to an agreement include an arbitration clause to avoid litigation and resolve their dispute through arbitration, to obtain a fair, consensual and non-hostile resolution of the disputes by an impartial third party without unnecessary expense and delay.’

The existence of an arbitration clause in a contract does not oust the jurisdiction of the court

Bill & Brothers Ltd. v Dantata & Sawoe C.C. Ltd.^[4]

In this case, Dantata and Sawoe Construction Co. (Nig.) Ltd. (DSC, the first respondent) made an application for a statutory right of occupancy over a plot of land to the Federal Capital Development Authority of the Federal Capital Territory (FCT), Abuja (FCDA, the third respondent) for the purpose of erecting a high-rise building. Based on DSC’s application, a development lease agreement that contained an arbitration clause was executed between DSC and the FCDA and a plot of land for the construction of the high-rise building was allocated to DSC. DSC took possession of the land and began construction thereon. Subsequently, the Honourable Minister of the Federal Capital Territory (the Minister of the FCT, the second respondent) and the FCDA revoked the licence issued to DSC thereby withdrawing the grant of the plot upon which DSC had already commenced the construction of a high-rise building. The Minister of the FCT and the FCDA also issued a stop-work order to DSC and issued a certificate of occupancy over the same plot of land to Bill & Brothers Ltd, Sa’Adah Global Enterprises and Mapit Consultants Ltd (the appellants). Also, the Minister of the FCT and the FCDA respondents demolished the fence that DSC had already erected around the land.

Aggrieved by the actions of the Minister of the FCT and the FCDA, DSC commenced an action against the Minister of the FCT, the FCDA and the appellants at the High Court of the FCT challenging the actions of the Minister of the FCT and the FCDA. In its judgment, the High Court found for and entered judgment in favour of DSC. Specifically, the High Court declared the actions of the Minister of the FCT illegal, null and void, set aside the revocation of the licence as well as the stop-work order and eviction of DSC from the land and restored DSC’s possession and right of occupancy over the land. The High Court also granted injunctive reliefs and awarded monetary damages against the Minister of the FCT and the FCDA in favour of DSC.

Dissatisfied with the decision of the High Court, the appellants appealed to the Court of Appeal. On appeal, one of the issues submitted for determination by the appellants was whether in view of the arbitration agreement contained in the development lease agreement between DSC and the Minister of the FCT and the FCDA, the High Court was deprived the jurisdiction to hear and determine the suit thereby rendering the judgment a nullity. The appellants argued that the existence of an arbitration agreement in the development lease agreement between DSC and the Minister of the FCT and the FCDA meant that the High Court lacked the jurisdiction to hear and determine the suit and therefore, the entire judgment of the High Court was a nullity. In response, it was submitted on behalf of DSC that the jurisdiction of the court is not ousted even where a matter deserves reference to arbitration. Rather, the court can stay proceedings pending arbitration. It was further submitted on behalf of DSC that since the appellants were not parties to the agreement, they could not invoke the arbitration clause therein and that the Minister of the FCT and the FCDA, who were parties to the agreement, having waived the right to insist on the matter being referred to arbitration, it was not for the appellants to raise the issue of arbitration.

The Court of Appeal rejected the argument of the appellant and held that an arbitration agreement does not oust the court’s jurisdiction because the jurisdiction of a court is granted to it by the Constitution and the statute establishing the court. Thus, parties cannot by their agreement seek to oust the jurisdiction so determined. The Court of Appeal further held that an arbitration clause only postpones the right of either of the parties to the agreement to resort to litigation in court and when a party to the arbitration agreement promptly and properly raises the same issue, the court seized of the matter will lean towards enforcing the clause, not by striking out the case for want of jurisdiction but by staying proceedings pending arbitration. The Court of Appeal agreed with DSC’s submission that since the appellants were not parties to the agreement, they could not seek to enforce the benefit of the arbitration clause therein.

Comments

As rightly noted by the Court of Appeal, an arbitration agreement does not oust the jurisdiction of the Court. Jurisdiction of courts is granted to them by the Constitution and statutes establishing such courts and parties cannot, by their agreement, oust the jurisdiction of the courts. What the Arbitration and Conciliation Act (ACA)^[5] provides for is a stay of proceedings pending reference to arbitration whenever a party, in breach of an arbitration clause commences an action in court. However, it is only the parties to an agreement containing an arbitration clause that can enforce said clause. The appellants argued that under section 4(1) of the ACA, a non-party to an arbitration agreement can apply to stay proceedings pending arbitration. Section 4(1) of the ACA provides that ‘A court before which an action which is the subject of an arbitration agreement is brought shall, if any party so request not later than when submitting his first statement on the substance of the dispute, order a stay of proceedings and refer the parties to arbitration.’ The Court of Appeal, however, rejected this submission and held that it amounted to reading said section 4(1) in isolation from the related section 5(1), which provides that ‘If any party to an arbitration agreement commences any action in any court with respect to any matter which is the subject of an arbitration agreement any party to the arbitration agreement may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings.’ The view canvassed by the appellants to the effect that a non-party to an arbitration agreement can, pursuant to section 4(1) of the ACA, apply for stay of proceedings pending reference of the dispute to arbitration is erroneous. Although section 4(1) does not contain the words ‘any party to an arbitration agreement’, it stands to reason that since only a party to a contract can enforce it, a non-party to an arbitration agreement cannot apply for stay of proceedings and referral of a dispute to arbitration, particularly where, as in this case, the parties to the arbitration agreement have submitted to the court’s jurisdiction and decided not to invoke the arbitration clause contained in their development lease agreement.

Notes