ARBITRATING FOREIGN INVESTMENT DISPUTES IN NIGERIA: PROSPECTS AND CHALLENGES

By;Dorothy Ufot SAN 
 
Nigeria’s investment laws and policies are geared towards
liberalisation, deregulation and competition. Accordingly, all sectors
of the economy are open to both foreign and domestic investment. As a
result of this favourable climate and the country’s economic and
political stability, Nigeria has become increasingly attractive to
foreign investors. However, with increased investment comes increased
potential for disputes. This update examines the infrastructure
available in Nigeria for the arbitration of investment disputes.

Bilateral investment treaties
Nigeria has entered into bilateral investment treaties (BITs) with the following countries:

• Egypt (not yet in force);
• Finland (not yet in force);
• France (August 1 1991);
• Germany (not yet in force);
• Korea (February 1 1999);
• the Netherlands (February 1 1994);
• Spain (not yet in force);
• Switzerland (April 1 2003);
• Turkey (not yet in force); and
• the United Kingdom (December 11 1990).

All of these BITs explicitly afford the following protection to prospective foreign investors:

• fair and equitable treatment;
• standard protection against expropriation, which provides that
  expropriation must be in the public interest and be accompanied by
  prompt, adequate and effective compensation. It must further take place
  under “due process of law”;
• most favoured nation treatment;
• full protection and security for all investments within Nigeria;
• a standard umbrella clause under which the state undertakes to
  observe any obligation it may have entered into with regard to
  investments of foreign nationals or other contracting parties;
• the free transfer of payments without restrictions in a freely convertible currency at the prevailing market rate; and
• the resolution of foreign investment disputes through arbitration.

Investment arbitration
Investment arbitration is essentially statute driven. The relevant
statute governing investment arbitration in Nigeria is the Nigerian
Investment Promotion Commission Act (Cap N117, Laws of the Federation of
Nigeria 2004). This statute, which was first enacted in 1995, deals
extensively with investment promotion in Nigeria, with specific
provision for the resolution of disputes arising between an investor and
any government of the Nigerian Federation or any agencies of
government.
Section 26 of the acts provides for the resolution of investment disputes through arbitration as follows:

All Nigerian BITs provide a right of recourse to international
arbitration. The BITs with France, Germany, Korea, the Netherlands and
the United Kingdom provide for exclusive ICSID arbitration. All other
BITs allow investors to pursue an arbitration claim through ICSID or ad hoc arbitration in accordance with the UNCITRAL rules or any other rules mutually agreed by the parties.
The Spain BIT allows for the use of the ICSID Additional Facility if a
contracting party is not an ICSID Convention country, while the Turkey
BIT makes express alternative reference to the International Chamber of
Commerce International Court of Arbitration.
As yet, no publicly available awards have been issued against Nigeria
under any of the BITs. Equally, the Nigerian courts have never been
called upon to enforce an investment treaty award against Nigeria.
However, the courts have demonstrated a pro-enforcement bias in the
sphere of commercial arbitration.
Two cases have so far been filed against Nigeria at ICSID in respect
of its investment treaties, but both were discontinued before the
conclusion of the arbitration proceedings:

• Guadalupe Gas Products Corporation v Nigeria (ICSID) Case ARB/78/1 – discontinued on July 22 1980; and
• Shell Nigeria Ultra Deep Limited v Federal Republic of Nigeria (ICSID) Case ARB/07/18 – discontinued on August 1 2011.

Arbitration framework
Arbitration and Conciliation Act
The legal framework for arbitration in Nigeria is set out in the
Arbitration and Conciliation Act (Cap A18, Laws of the Federation of
Nigeria, 2004). The Arbitration and Conciliation Act is modelled on the
United Nations Commission on International Trade Law (UNCITRAL) Model
Law, and applies throughout the Nigerian Federation.
ICSID Convention
Nigeria ratified the International Centre for Settlement of Investment
Disputes (ICSID) Convention as far back as August 23 1965. The ICSID
Convention has been implemented in Nigeria through the International
Centre for Settlement of Investment Disputes (Enforcement of Awards) Act
(Cap 120, Laws of the Federation of Nigeria, 2004).
The ICSID Act provides for the enforcement of ICSID awards directly
at the Nigerian Supreme Court as the court of first instance.
New York Convention
Nigeria became a signatory to the New York Convention 1958 on March 17
1970, adopting both the reciprocal and commercial reservations. The
convention came into force in June 1970.
The New York Convention has been implemented in the Arbitration and
Conciliation Act. One of the act’s stated objectives is to make the
convention applicable to any award issued in Nigeria or any contracting
state arising out of international commercial arbitration. The
convention was implemented in Nigeria without modification and its full
text is set out in the second schedule of the act.
Section 54 of the act makes the New York Convention expressly applicable to Nigeria by providing that:

Section 51(1) of the act, on the recognition and enforcement of
awards, provides that: “an arbitral award shall, irrespective of the
country in which it is made, be recognised as binding and shall, upon
application in writing to the court, be enforced by the court.”
This provision received judicial backing from the Nigerian Court of
Appeal when the court, in upholding the recognition and enforcement of
an arbitral award issued in the United Kingdom in Tulip Nigeria Limited v Noleggioe Transport Maritime SAS ((2011) 4 NWLR (Part 1237) at p254), held as follows:

The court further held in Tulip that “A foreign arbitral
award is now enforceable in Nigeria directly pursuant to the New York
Convention to which Nigeria is a signatory”; and that “An action shall
not be brought after the expiration of six years from the date on which
the cause of action accrued in an action to enforce an arbitral award”.
Court support for arbitration
The Nigerian courts are arbitration friendly and maintain a
pro-enforcement bias in relation to the enforcement of arbitration
agreements and arbitral awards. In Onward Enterprises LTD v MV Matrix (2010) 2 NWLR (part 1179) 530, the Court of Appeal held that:

In the more recent case of Continental Sale Limited v R Shipping Inc
(2013) 4 NWLR (part 1343) 67, the appellant – a Nigerian party – denied
being given proper notice of the appointment of an arbitrator or of the
commencement of arbitration proceedings, despite its acknowledgment of a
notice of arbitration sent to it by email (for more details please see “Appeal court rules on serving arbitration notice by email“).
In upholding the high court decision registering the UK arbitral award
in Nigeria, preparatory to enforcement, the Court of Appeal held as
follows:

Arbitration infrastructure
The following arbitration institutions operate in Nigeria:

• the Regional Centre for International Commercial Arbitration, Lagos;
• the Chartered Institute of Arbitrators, Nigeria Branch;
• the Society for Construction Industry Arbitration;
• the Maritime Arbitrators Association of Nigeria;
• the Arbitration Commission of the ICC Nigerian National Committee; and
• the Lagos Court of Arbitration.

The Regional Centre for International Commercial Arbitration in Lagos
shares the same pedigree as the regional centres in Cairo and Kuala
Lumpur. It is purpose built, with internationally comparable facilities
and hearing rooms. The centre is centrally located in one of Nigeria’s
prime business districts, with close proximity to the international
airport and choice hotels and restaurants.
Arbitration proceedings also frequently take place at the Hilton Hotel in Abuja, Nigeria’s administrative capital.
Nigeria also boasts the following qualified arbitration practitioners:

• 12 chartered arbitrators;
• 89 fellows;
• 290 members; and
• 1,235 associates.

It is also home to many other available personnel required for the
conduct of international arbitration, such as experienced counsel,
registrars, secretaries and recorders.
However, despite the abundant availability of resources in Africa and
the existence of major arbitrations involving African states,
particularly in the oil and gas and energy sectors, African arbitrators
and counsel are seldom appointed to participate in these proceedings.
Instead, both foreign and African parties invariably instruct foreign
counsel, who in turn appoint foreign arbitrators. When counsel are
appointed from Africa, they are appointed often only to advise on local
laws.
Challenges of arbitrating in Nigeria
The challenges of arbitrating in Nigeria include the following:

• the risk of anti-arbitration injunctions being issued;
• perceptions of corruption;
• the obsolete Federal Arbitration Law; and
• the length of time that it takes for arbitration and enforcement
  cases to reach the Supreme Court for final determination of the rights
  of the parties.

Tips for successful arbitration
Arbitration clauses should be thoroughly negotiated and properly
drafted in precise and unambiguous terms, in order to avoid intervention
by the courts. Prospective foreign investors should also appoint
knowledgeable counsel during the negotiation stage of the agreement. In
the event of a dispute arising, prospective foreign investors should
make an informed selection of arbitrators, because once these have been
appointed they cannot generally be replaced.
The arbitration proceedings should further be conducted
expeditiously, bearing in mind the limitation period for the
commencement of an enforcement action, which is six years from the date
of accrual of the cause of action in a simple contract. The Supreme
Court has ruled that this time begins to run from accrual of the cause
of action resulting in the arbitration proceedings, and not from the
date of the award. Accordingly, time is of the essence for the
commencement of enforcement proceedings.
The Supreme Court has also held that the timeframe for instituting an
action to set aside an arbitral award is 90 days from the date of the
award. However, arbitration awards are not lightly set aside. As Nigeria
is a signatory to the New York Convention, recognition and enforcement
of arbitral awards may be refused only on the grounds recognised under
the New York Convention.
Conclusion
Nigeria has signed and implemented the New York and Washington
Conventions on the recognition and enforcement of foreign arbitral
awards, has signed bilateral and multilateral investment treaties
offering full protection to foreign investors – including recourse to
international and/or investment arbitration – and has in place the
necessary personnel and infrastructure for the successful conduct of
arbitration, including arbitration-friendly courts. Despite this,
however, few international arbitrations take place in Nigeria.
With the increased potential for disputes arising from increased
foreign investment in the country, Nigeria should rightly become an
equally attractive destination for international arbitration, and now is
the time to make this happen.
There is thus an urgent need to address this issue and build capacity
for the resolution of investment disputes both within Nigeria and
across the wider region, if the continent is also to benefit from the
results of increased foreign direct investment inflow into Africa.

For further information on this topic please contact Dorothy Ufot SAN at Dorothy Ufot & Co by telephone (+234 1 463 1723) or email (dorothy.ufot@dorothyufotandco.com).