A recent appeal filed before the Court of Appeal, Port-Harcourt Judicial Division, on Nigerian courts’ jurisdiction to set aside an arbitral award made outside the country, irrespective of the country in which it is made, has once again brought to the fore the provisions of Article 1(3) 1958 New York Convention. ADEOLA OJO, in this report, explores opinion of judicial experts on the jurisdiction of Nigerian courts and agreements on foreign arbitral awards.
The question of whether Nigerian courts have jurisdiction to set aside foreign-seated arbitration awards is one that has been asked over time with no clear agreement on the extent of the jurisdiction Nigerian courts have. This question came up again following a recent appeal filed by a company, Oil & Industries Services Ltd v. Hempel Paints (South Africa) Pty Ltd, before the Court of Appeal sitting in Port-Harcourt. The appeal was a result of a decision of the High Court of Rivers State, which had answered the question in the negative.
In an earlier decision, in a case involving Limak v. Sahelian Energy & Integrated Services Limited, the Abuja Division of the court had declared that Nigerian courts “are expressly conferred with jurisdiction to set aside an arbitral award made outside Nigeria irrespective of the country in which it is made.”
However, in a landmark judgment, the Court of Appeal distanced itself from Limak and, correctly, affirmed that Nigerian courts lacked jurisdiction to set aside a foreign-seated arbitration award.
This raised more questions, adding to the concern about conflicting court judgments in the Nigerian judiciary. It also raised concern that the Court of Appeal might, as it often does, double down on its decision in Limak, more so as one of the panel members that concurred in Limak, sat as the presiding judge in the panel that heard Hempel.
Speaking on the issue in a piece titled, ‘Litigation, mediation and arbitration,’ Kolawole Mayomi, a partner in the law firm of SPA Ajibade & Co, who acted as counsel to the successful party in the appeal, Hempel Paints South Africa Pty Ltd, gave an explanation on issues in the matter.
According to him, Hempel Paints A/S is a global manufacturer of paints and served the African market through its South African subsidiary while Oil & Industrial Services Ltd (OIS) is a paint distributor based in Port-Harcourt, Rivers State, Nigeria; “the parties entered into a distributorship contract which incorporated an arbitration clause, wherein the parties agreed to submit any dispute to arbitration. The arbitration clause further provided that such disputes will be settled by a sole arbitrator seated in London and appointed in accordance with the arbitration rules of the London Court of International Arbitration.
“A dispute arose over OIS’s failure to settle Hempel’s invoices for the supply of paint products. Hempel filed a suit before the High Court of Rivers State to recover the debt. OIS, however, filed a preliminary objection to the suit, arguing that the matter should be referred to arbitration as provided in the parties’ contract. The court upheld the objection and ruled that the dispute should be referred to arbitration. Thereupon, Hempel commenced arbitration proceedings against OIS before the London Court of International Arbitration (LCIA) in London, England, and the parties appointed a sole arbitrator to conduct the proceedings. The sole arbitrator, by agreement of the parties, heard the matter on a documents-only basis and issued a Final Award (“the LCIA Award”) which upheld Hempel’s claims.
“Subsequently, Hempel filed an enforcement application before the High Court of Rivers State, Nigeria, to enforce the LCIA Award against OIS on its home turf. OIS filed a counter-affidavit to contest the enforcement of the LCIA Award, and also commenced a separate suit seeking to set aside the award on several grounds, inter alia, that the sole arbitrator had misconducted herself.
“The two suits were consolidated before a single Judge (Diepiri J), and a central part of the parties’ argument was whether the court had jurisdiction to set aside the LCIA Award, being a foreign-seated arbitration award. In a reasoned ruling dated 27 January 2020, Diepiri J., upheld Hempel’s argument that Article V(1)(e) of the New York Convention 1958, as domesticated into Nigerian law had allocated jurisdiction to set aside a foreign seated arbitration award to the court of the seat of the award, in this case, London. Accordingly, it was held that the Nigerian court lacked jurisdiction to set aside the LCIA Award. Aside from the issue of jurisdiction, the court went on to consider the set-aside suit on its merits and dismissed it as specious.”
Arguments
Dissatisfied, OIS filed an appeal to the Court of Appeal, Port-Harcourt Division, in January 2020 to challenge the High Court’s above ruling. Once again, the issue of the Nigerian court’s jurisdiction to set aside a foreign-seated award took central stage. The Appellant argued that the Arbitration and Conciliation Act (ACA) 1988 regulated the procedure for the enforcement of any arbitration award in Nigeria, and that sections 29, 30 and 48 of the ACA 1988 which gave Nigerian courts the power to set aside arbitral awards did not make a distinction between domestic or international awards. It submitted that a Nigerian court could set aside the LCIA Award, regardless of its origin or seat and the High Court had unnecessarily fettered its own jurisdiction by embracing the doctrines of reciprocal international treaties, whereas Nigeria’s sovereign status suggests the prioritisation of domestic laws.
It further argued that since the court had decided that it lacks jurisdiction to set aside the arbitral award, it was wrong for it to proceed to consider the merits of the set-aside application to decide whether the arbitrator had misconducted herself.
Hempel, in response, argued that the High Court was right to decline jurisdiction to set aside the LCIA Final Award issued by a sole arbitrator seated in London. It drew the court’s attention to the difference between the judicial remedies of setting aside an arbitral award and refusal to recognise and enforce an arbitral award, relying on Article V(1)(e) and Article VI of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 as domesticated into Nigerian law and argued that only the High Court of England has jurisdiction to entertain the application to set aside the LCIA Award, and that the Nigerian court could only refuse recognition of the award. Counsel noted that since Article V(1)(e) of the New York Convention had been domesticated into Nigerian law, any inconsistency between sections 29, 30 and 48 of the ACA 1988 and Article V(1)(e) of the New York Convention should be resolved in favour of the New York Convention.
And while parties in OIS v. Hempel were awaiting hearing of the appeal, the Abuja Division of the Court of Appeal gave judgment in Limak v. Sahelian Energy & Integrated Services Ltd where a panel unanimously set aside a Geneva-seated ICC arbitration award on grounds that the enforcement of the award in Nigeria was against public policy, as the contract that was the subject of the award failed to comply with the mandatory regulations of the National Office for Technology Acquisition and Promotion (NOTAP) Act. But in ordering that the ICC award should be set aside, the court applied section 48 of the ACA and sweepingly asserted that Nigerian courts are conferred with jurisdiction to set aside any arbitral award made outside Nigeria, irrespective of its seat.
The decision unarguably led to conflicting opinions, with many experts questioning the rationale of this decision and arguing that this ruling defeats the reasonable expectations of investors and businesspeople that applications to nullify arbitral awards obtained in neutral foreign seats should only be entertained by the courts of such neutral seats.
Part of the argument is that it is settled law that a domesticated foreign treaty provision (i.e., the New York Convention) must be accorded precedence over indigenous statutory provisions in Nigeria. As such, to the extent that section 48 of the ACA 1990 is incompatible with article V(1)(e) of the New York Convention.
In its judgment, after carefully considering the judgment of the High Court and the parties’ argument on appeal, the Court of Appeal made the following findings: the lower court was correct to assert that it does not have the jurisdiction to set aside the LCIA Award, as it does not have supervisory jurisdiction over the arbitration process seated in London. The court stated its findings on this issue, thus:
Upon examining the application, the [lower] court concluded correctly that it had no jurisdiction to set aside the arbitral award rendered under the Rules of the London Court of International Arbitration, which venue was the seat of the arbitration.
The court reasoned that given that the parties had agreed that the seat of arbitration shall be in London, England, and that the decision of the sole arbitrator appointed by them shall be final and binding; it is untenable for a Nigerian court to set aside the award, as such power can only be exercised by a court in England since the seat of arbitration in this case was in London, England.
However, despite the extensive debate of counsel at the hearing, the judgment was silent on, and did not make a single reference to the Limak decision. This silence is quite significant, given that one of the judges that decided Limak was assigned to sit as the presiding judge on the panel that heard the Hempel appeal and wrote the lead judgment of court. The major inference to be drawn from the studied judicial silence, therefore, is that the court would rather draw a line under Limak and move forward.
This case reinforces the application of the principles of the New York Convention 1958 in Nigeria and brings clarity to the extent of Nigerian court’s powers to intervene in foreign-seated arbitration proceedings. The Court of Appeal accepted that the Convention had allocated supportive jurisdiction in respect of arbitral proceedings to the court of the country where the arbitration is seated. Furthermore, only the court of the seat may suspend or set aside an arbitral award, whilst the court of other jurisdictions may refuse the recognition or enforcement of the award.
Furthermore, the case reinforces the Nigerian courts’ pro-finality stance in respect of arbitration awards. In a long line of cases, the Nigerian courts have consistently held that the powers of the court to set aside an arbitral award are not to be lightly exercised, even in cases of alleged misconduct of the arbitrator. This principle was emphatically stated by the Supreme Court in the recent case of NNPC v. Fung Tai Engineering Co Ltd.,9 thus: “the set-aside jurisdiction of the court should not be exercised unless… there has been something radically wrong and vicious in the proceedings.” The above question was the subject of a recent hard-fought appeal; Oil & Industries Services Ltd v. Hempel Paints (South Africa) Pty Ltd,10 argued before the Court of Appeal, Port-Harcourt Division.
Challenging, enforcing arbitration awards in Nigeria
The primary legislation applicable to arbitration is the Arbitration and Conciliation Act, Chapter A18, Laws of the Federation of Nigeria 2004 (ACA). Section 26 of the ACA states that an arbitral award shall be in writing and signed by the arbitrator or arbitrators, and that if the arbitral tribunal comprises of more than one arbitrator, the signatures of a majority of the members of the arbitral tribunal shall suffice provided the reason for the absence of any signature is stated.
The award is also expected to state the reasons upon which its conclusions are based unless the parties have agreed that no reasons are to be given or the award is on agreed terms under section 25 of the ACA (consent award). The award shall also state the date on which it was made and the place of arbitration and a copy of the award shall be delivered to each party.
Provisions on modification, clarification or correction
Section 28 of the ACA provides that a party may, within 30 days of receipt of an arbitral award, with notice to the other party, request the arbitral tribunal to correct in the award any errors in computation, any clerical or typographical errors or any errors of a similar nature, and give an interpretation of a specific point or part of the award. The tribunal shall revert within 30 days. The tribunal may also, on its own volition, within 30 days of the date of the award, correct any error.
The parties can also request the arbitral tribunal to make an additional award as to the claims presented in the arbitral proceedings but omitted from the award. An additional award shall be made within 60 days of the request.
Section 29(2) provides that the court may set aside an arbitral award if a party makes an application (on notice to the other party) and furnishes proof that the award contains decisions on matters that are beyond the scope of submission to arbitration. However, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award that contains decisions on matters not submitted may be set aside.
Section 30(1) provides two further grounds for setting aside an arbitral award. The first ground is if an arbitrator has misconducted himself or herself. The instances of misconduct were set out by the Supreme Court of Nigeria in Taylor Woodrow (Nig.) Limited v S.E. GmbH [1993] 4 NWLR (Pt 286) 127. Second, the court may set aside an award if it was improperly procured or tainted by fraud.
Whereas an appeal attacks the merits of an arbitral award; which is not permitted under Nigerian law), a setting aside application is essentially a complaint that due process was not observed by an arbitral tribunal in making an arbitral award.
In international awards, section 48 of the ACA mirrors article V of the New York Convention 1958) and provides two grounds for setting aside the award:
If a party making the application furnishes proof that – (i) that a party to the arbitration agreement was under some incapacitation; (ii) that the arbitration agreement is not valid under the law that the parties have indicated should be applicable; (iii) that he or she was not given proper notice of the appointment of an arbitrator, or of the arbitral proceedings, or was otherwise not able to present his case; (iv) that the award deals with a dispute not contemplate by, or falling within the terms of the submission to arbitration; (v) that the award contains decisions on matters that are beyond the scope of the arbitration; (vi) that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with the agreement of the parties; (vii) where there was no agreement within the parties under paragraph vi, that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with this Act [the ACA]; or if the court finds that – (i) that the subject matter of the dispute is not capable of settlement by arbitration under the laws of Nigeria; or (ii) that the award is against the public policy of Nigeria.
What is the applicable procedural law for recognition and enforcement of an arbitral award in your jurisdiction? Is your jurisdiction party to treaties facilitating recognition and enforcement of arbitral awards?
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 shall, upon the award creditor’s application, be enforced by the court.
It is of note that Nigeria is a signatory to the New York Convention (NYC) and has domesticated the Convention by incorporating it as the Second Schedule to the ACA. Thus, a foreign arbitral award may be enforced in Nigeria under the ACA or, directly pursuant to the New York Convention. Nigeria ratified the International Centre for Settlement of Investment Disputes (ICSID) Convention in 1965, and domesticated it through the International Centre for Settlement of Investment Disputes (Enforcement of Awards) Act 1967.
A foreign arbitral award may also be enforced pursuant to the Reciprocal Enforcement of Judgments Act 1922, which was promulgated to ensure ease of registration and enforcement of court judgments obtained in the United Kingdom and certain Commonwealth countries and includes the enforcement of arbitral awards in the definition of judgments, as long as they have become enforceable as judgments of a court in the country in which the award was handed down.
Nigeria made a reservation under article 1(3) of the Convention to the effect that she would apply the Convention only on the basis of: reciprocity to the recognition and enforcement of awards made only in the territory of another contracting state party to the Convention, and to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the laws of the Federal Republic of Nigeria.
Court with jurisdiction over application for recognition, enforcement of arbitral awards
The Federal High Court and the various state high courts have jurisdiction to entertain an application to enforce an arbitral award, be it domestic or foreign. This was confirmed in Magbagbeola v Sanni [2002] 4 NWLR (Pt 756) 193, where the Court of Appeal ruled in Kabo Air Limited v The O’Corporation Limited [2014] LPELR 23616 CA, albeit in the context of the enforcement of a judgment of the High Court of Gambia, that it is the particular court that would have had original subject-matter jurisdiction over the underlying dispute that would have capacity to entertain an application to enforce a foreign judgment arising therefrom.
Accordingly, it may be prudent to file an application for enforcement of an arbitral award in the particular court; Federal High Court or state high court, which would have had jurisdiction to entertain the subject matter of the dispute that was resolved in the arbitration. However, in respect of an ICSID award, the Supreme Court of Nigeria is the only court with jurisdiction to entertain enforcement proceedings.
Also speaking on enforcement of foreign arbitral awards and the challenge of time in Nigeria, Oyetola Muyiwa Atoyebi, SAN, states that “Nigeria’s recognition and enforcement of foreign arbitral awards demonstrates its dedication to creating a favourable environment for international arbitration, thereby reinforcing its commitment to upholding the rule of law and promoting reliability in the country’s dispute resolution mechanisms, while formerly, the position of the Supreme Court in Nigeria on the limitation of time with respect to the enforcement of foreign awards in Nigeria is that time starts counting from when the cause of action arose, the Arbitration and Mediation Act 2023 brought a novel provision that the applicable time limit on arbitral proceedings shall be as it applies to judicial proceedings. This is a laudable provision as it will aid a party seeking enforcement of a foreign award to bring an action conveniently, where the party against whom the award was made breaches the implied duty to abide by the award.”
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