Nigeria

The limitation laws of various states1 in Nigeria are applicable to arbitration in the same manner that they apply to actions in court. Among other considerations, limitation laws reflect the public policy that there must be an end to litigation and so a party who is tardy and does not use his right of action before the limitation period is over loses that right for ever as his cause of action is extinguished. The consequence of a successful plea of the defence of limitation to a claim is, therefore, quite drastic as such a suit is liable to be dismissed.2 The interaction of limitation law with arbitration is on different levels and often raises difficult questions. For instance, what is the time frame within which a party must initiate arbitration proceedings in order not to lose its right of action? What is the time limit within which an arbitral award must be enforced? When does that time begin to run? Does it begin to run from the date the award was rendered or from the date of the breach of the underlying contract?

In this article, we have examined the issue of the limitation period for the enforcement of an arbitral award in Nigeria, and, specifically, the question of when does time begin to run for the purposes of an application to enforce an arbitral award? As already indicated, Nigeria is a federation of 36 states and the Federal Capital Territory, Abuja, and each state has enacted its own limitation law. While the limitation laws of the various states in Nigeria are in many respects similar to the Limitation Law of Lagos State, we have based our presentation mainly on the Limitation Law of Lagos State because of the pre-eminent status of Lagos as the commercial nerve centre of Nigeria and the entire West African sub-region as well as an emerging seat of arbitration in Africa.3 However, where necessary, we also make reference to the limitation laws of other states in Nigeria.

Legal framework of arbitration in Nigeria

Nigeria is a common law country and the principal law on commercial arbitration is the Arbitration and Conciliation Act (ACA).4 Nigeria is a signatory to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 (otherwise known as the New York Convention) and has, in the ACA, domesticated the Convention. The ACA is in substantial conformity with the UNCITRAL Model Law, which was adopted at the Convention of the United Nations Commission on International Trade on 18 June 1985, and recommended to member countries by the General Assembly of the United Nations on 11 December 1985. Although the UNCITRAL Model Law was revised in 2006, Nigeria has not yet amended the ACA to incorporate the revised provisions of the Model Law. It should be mentioned that the government of Lagos State in Nigeria has enacted its own Arbitration Law, which substantially conforms with the revised provisions of the Model Law.

Limitation period for enforcement of an arbitral award in Nigeria

Lack of provision in the Nigerian ACA on the limitation period for enforcement of an arbitral award

The ACA does not provide for a limitation period for the enforcement of an arbitral award in Nigeria. However, the limitation laws of the various states in Nigeria provide that the limitation laws shall apply to arbitration as they apply to court actions (for example, in section 62 of the Limitation Law of Lagos State (the Lagos Limitation Law))5.

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.6 For instance, the Lagos Limitation Law provides that an action founded on simple contract shall not be brought after the expiration of a period of six years from the date on which the cause of action accrued. In relation to 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 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 follows7:

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,8 (the Limitation Law of the FCT) is similar to section 8(1)(d) of the Lagos 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.9 It is to be noted that while, as shown above, the Lagos 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 within which to commence an action founded on a contract (which includes arbitration) while also providing that the limitations law shall apply to arbitration as it applies to court actions.

While there is no question that an arbitral proceeding must be commenced within the time limit provided in each applicable limitation law (ie, five or six years depending on the applicable limitation law), the crucial question is when does time begin to run for the 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.10 The plaintiff had entered into a charter party agreement with the defendant to provide a cargo of groundnuts. The charter party included an agreement to refer any dispute 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 – 28 February 1964. 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 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 period11 for the enforcement of the award 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.12 In that case, the Supreme 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 ACA, the limitation period for enforcement of the award was six years, starting from the date of the breach of the underlying contract, which is the date of accrual of the cause of action.

Briefly, the facts of that case were that the parties entered into a written agreement dated 17 December 1974 whereby the appellant (City Engineering Nig. Ltd) was to build a number of housing units in a town in Lagos State. The agreement contained an arbitration clause by which all matters in dispute in connection with the execution of the contract were to be submitted to an arbitrator. A dispute arose between the parties and on 12 December 1980, the respondent terminated the contract. The dispute was later submitted to an arbitrator on 11 December 1981. The arbitration ended in November 1985 when an award was issued in favour of the appellant. Upon the respondent’s failure to pay the award debt, the appellant applied to enforce the award in November 1988.

The respondent resisted the enforcement of the award on the ground that the award had become statute barred and, therefore, unenforceable. The High Court of Lagos State held that the cause of action arose on or around 12 December 1980 and expired six years after that date; and that the time limit for enforcement of the cause of action was six years, which ran out on 12 December 1986. The appellant was dissatisfied with the decision and appealed to the Court of Appeal, which upheld the decision of the High Court.

On a further appeal to the Supreme Court, it was agreed by both parties that section 8(1)(d) of the Lagos Limitation Law was the applicable limitation law and that the limitation period was six years. The point of divergence, however, was in relation to the date that the limitation period began to run (ie, whether on 12 December 1980 when the cause of action arose or November 1985 when the arbitrator made his award). In its decision, the Supreme Court upheld the decisions of both the High Court and the Court of Appeal and held that the limitation period began to run from the date of the accrual of the cause of action in 1980 and not from the date of the award. It is noteworthy that the decision of the Supreme Court on this matter was handed down by a full panel of the Supreme Court that was constituted to review all the previous decisions of the Supreme Court that were thought to be in conflict with the position adopted by the Supreme Court in the case of Murmansk State Steamship Line v. Kano State Oil Millers Ltd. It is equally important to note that the Supreme Court took the opportunity to robustly consider both academic and English judicial decisions that were cited in the brief of argument that was submitted by the appellant and that tended to suggest that a new cause of action is created upon the publication of an arbitration award and that for purposes of an action to enforce such an award time begins to run from the date of the award and not from the date of the underlying cause of action.13

It has been argued that the provision of section 7(1)(d) of the Limitation Law of the FCT, which is in pari materia with section 8(1)(d) of the Lagos Limitation Law fails to draw a line between commencing an action in arbitration and enforcing an arbitration award and that it is a fresh action under the common law to enforce the implied agreement of the parties to give effect to a valid arbitration award that the aforesaid sections 7(1)(d) of the Limitation Act of the FCT and 8(1)(d) of the Lagos Limitation Law but not an application under section 31 of the ACA to enforce an arbitral award.14

The current position of Nigerian law to the effect that the time limit for enforcement of an arbitral award begins to run from the date of the breach of the underlying contract that gave rise to the award as opposed to the date of the award creates practical difficulties and could potentially lead to bizarre and disastrous outcomes. For instance, it would mean that if arbitral proceedings are commenced within the statutory limitation period but for whatever reasons the award is issued after the expiration of the applicable limitation period, the person in whose favour the award has been made would only have an unenforceable award and therefore, a pyrrhic victory. We submit that the better view is that the publication of the award gives rise to a fresh cause of action and, therefore, the time to enforce the award should be reckoned from the date of the award.15 There is, therefore, an urgent need for a legislative reform or amendment of the ACA to correct the anomaly.

It is noteworthy that the Lagos State Arbitration Law16 is already ahead of the curve on this issue as it has introduced 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 State 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 was 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 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.

This provision, which has no equivalent in the ACA, has addressed, with respect to arbitration conducted under the Lagos State Arbitration Law, 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 (see above). Although section 64 of the Lagos Limitation Law provides 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’,17 it 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 with the use of the word ‘shall’, which is imperative.18

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

Conclusions and recommendations

The objective of the parties when submitting their disputes to arbitration is to completely and finally resolve their disputes by obtaining enforceable awards. The hallmark of a modern arbitration law is, therefore, to enhance the efficiency and effectiveness of an arbitral award by removing roadblocks to enforceability of the award. The current state of Nigerian law regarding the time limit within which an arbitration award can be enforced is not pro-arbitration to the extent that the limitation period is reckoned from the date of the original breach as opposed to the date when the award is issued. While the Lagos State Arbitration Law has moved ahead of the curve in this regard, there is a significant need for reform in the ACA, a federal statute, because the modern and commendable provision contained in the Lagos State Arbitration Law would only apply to arbitrations conducted under or pursuant to that Law but not to those conducted under the ACA.19 Most arbitration agreements in Nigeria or involving Nigerian counterparties are made subject to the ACA. Unless this lacuna in the law is urgently addressed, parties to an arbitration agreement may be unwilling to subject their arbitrations to the ACA. This is more so because section 8(1)(d) of the Lagos State Limitation Law and section 7(1)(d) of the Limitation Law of the FCT seem to recognise two exceptions to the rule therein provided, namely (1) when the arbitration agreement is under seal; or (2) where the arbitration agreement is under any enactment other than the Arbitration and Conciliation Act.

Notes

  1. Nigeria is a Federation comprising of 36 states and the Federal Capital Territory.
  2. See the cases of Plateau Const. Ltd v Aware (2014) 6 NWLR (Pt. 1404) 519; and Yare v N.S.W & I. C. (2013) 12 NWLR (Pt. 1367) 17. Indeed, in the case of Bauchi State Government v National Population Commission and the Attorney General of the Federation (2014) LPELR-23729 (CA), the Nigerian Court of Appeal described limitation of action laws as the ruthless watchman that guards the gates to the sanctuary of justice.
  3. Lagos is also home to most of the notable arbitration institutions, such as the Chartered Institute of Arbitrators (UK) Nigerian Branch, the Chartered Institute of Arbitrators Nigeria, the Lagos Regional Centre for International Commercial Arbitration, the Lagos Court of Arbitration and the Lagos Multi Door Court House which is a Court – annexed ADR Centre.
  4. Chapter A18, Laws of the Federation of Nigeria 2004.
  5. Chapter L84 Laws of Lagos State 2015. See also section 61 of the Limitation Act, 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 34 of the Limitation Law Chapter L14 Laws of Cross River State and section 34 of the Limitation Law of Akwa Ibom State, Laws of Akwa Ibom State 2000.
  6. In the case of Tulip (Nig.) Ltd v Noleggieoe Transport Maritime S.A.S. (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.
  7. Section 8, Lagos Limitation Law 10.
  8. Chapter 522, Laws of the Federal Capital Territory.
  9. 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.
  10. 1974-75 NSCC 590.
  11. In this case it was the English Statute of Limitation 1623 that requires that a civil action must be commenced within a period of six years of the cause of action.
  12. (1997) 9 NWLR (Pt.520) at 224. See also Tulip (Nig.) Ltd v N.T.M.S.AS. (2011) 4 N.W.L.R (Pt.1237) 254.
  13. The Supreme Court was referred to but refused to follow the decision of Otton J. in Agromet Motoimport v Maulden Engineering (1985) 2 All E.R. 436 where the learned judge made reference not only to Russel on Arbitration (20th edition) but also to Mustil and Boyd: Commercial Arbitration (1982) p. 162 and held, while interpreting section 7 of the English Arbitration Act 1980, that the date of accrual of cause of action is the date on which the award ought to have been honoured, not the date on which the original cause of action giving rise to the arbitration proceedings arose. See also International Bulk Shipping & Services Ltd v Minerals & metals Trading Corpn. Of India & Ors. [1996] 2 Lloyd’s Report 474.
  14. See Commercial Arbitration Law and Practice in Nigeria by Paul O Idornige, Panaf Press, Abuya (2015) at page 378.
  15. Paul Idornigie Op Cit.
  16. Law No.10 of 2009. Now Chapter A11 of the Laws of Lagos State 2015.
  17. Section 63 of the Limitation Act of the FCT is similar to section 64 of the Limitation Law of Lagos State.
  18. See the cases of B.A.T. (Invest.) Ltd. v A.G. Lagos State (2014) 16 NWLR (Pt. 1433) 260 and Corporate Ideal Ins. Ltd. v Ajaokuta Steel Co. Ltd. (2014) 7 NWLR (Pt. 1405) 165.
  19. Section 2 of the Lagos State Arbitration Law provides that 'From the commencement of this Law, all arbitration within the State shall be governed by the provisions of this Law except where the parties have expressly agreed that another arbitration law shall apply.

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