The Obembe’s Clog in the Wheels of Arbitration Law in Nigeria by Kayode Omosehin

The Obembe’s Clog in the Wheels of Arbitration Law in Nigeria by Kayode Omosehin

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Preliminary View

One of the few cases in
which a controversial pronouncement has ever been made by the Nigerian courts
arbitration-related disputes, the case of Obi Obembe v. Wemabod Estates
Ltd. (1977) All NLR 130
 takes the prize. It is relatively the oldest
decided case on the right of a defendant to insist that a dispute in respect of
an agreement containing arbitration clause must be referred to arbitration. In
the Obembe case, no earlier Nigerian case was cited or relied upon.
It appears to be the oldest judicial precedent on when a defendant can
rightfully request that parties to a judicial proceedings be referred to
arbitration in accordance with their agreement.

The Facts
The case was filed at the
High Court of Lagos State in 1971 and constituted in Suit No. LD/85/71.
The dispute arose from the wrongful termination of the plaintiff/appellant’s
(“appellant”) appointment as a consulting engineer. The appellant’s claim was
based partly on the scale of fees laid down in a booklet published by the
Association of Consulting Engineers in London (Exhibit 3). The respondent
defended the suit and did not file any motion for stay of proceedings even
though clause 17 in part 11 of Exhibit 3 contained reference to arbitration in
case of dispute. The suit went to trial and judgment was delivered upon
conclusion of trial.

The Decision by the Trial
In the judgment of the
High Court delivered on 28th September 1973, the appellant’s case was dismissed
on the ground that the appellant did not prove his case as he did not lead any
evidence or put in any document to support his case. However, the judge went
further to observe that
“Had I been in a position
on the facts to find any of the plaintiff’s claims proved I would have been
unable to enter judgment in his favour in view of the Arbitration Clauses 17 in
part 11 of Ex. 3 at page 37 which the parties had agreed would govern their

The Appeal to the Supreme
Being dissatisfied with
the judgment of the High Court of Lagos State, an appeal was lodged to the
Supreme Court. The Supreme Court (consisting of Fatayi-Williams, Bello and
Obaseki J.S.C.) held that the lower court was in error to have dismissed the
appellant’s case and consequently held as follows: “For the above
reasons, the appeal succeeds but only in respect of that part of the judgment
of the trial judge dismissing the plaintiff/appellant’s claim for resident
supervision by his engineer.”

In the said judgment of
the Supreme Court, Fatayi-Williams CJN made a general statement that has now
generated confusion in the state of the Nigerian law of arbitration. Mr.
Kehinde Shofola (now SAN), Counsel to the Appellant had raised issue regarding
the learned trial judge’s observation about the failure of the appellant to
submit his claim first to arbitration before coming to court. The learned
counsel contended that arbitration clauses fall into two classes. In one class,
the provision for arbitration is a mere matter of procedure for ascertaining
the rights of the parties with nothing in it to exclude a right of action on
the contract itself, but leaving it to the party against whom an action is may
be brought to apply to the discretionary power of the court to stay proceedings
in the action in order that the parties may resort to the procedure which they
have agreed. In the other class, arbitration followed by an award is a
condition precedent to any other proceedings being taken, any further
proceedings then being, strictly speaking, not upon the original contract but
upon the award made under the arbitration clause.

In agreeing with Mr.
Sofola, the Supreme Court held that the facts of the case fit into the first
category stated in Mr. Sofola’s submission. The Supreme Court therefore held at
page 140 of the law report that the arbitration agreement did not oust the
jurisdiction of court and that either party to the agreement in dispute can,
before a submission to arbitration or an award is made, commence legal proceedings
in respect of any claim or cause of action included in the submission. The
Supreme Court thereafter held that it was erroneous of the learned trial judge
to observe as he did that even if the appellant had proved his case, he (the
trial judge) would have been unable to enter judgment in the appellant’s
favour. The conclusion of the Supreme Court, as can be gleaned from page 141 of
the law report, was based on the fact that;

 “No stay was asked for by
the defendants/respondents after they were served with the writ of summons. On
the contrary, they accepted service of the statement of claim, filed their own
statement of defence, testified in their defence, and took part in the
proceedings until judgment was delivered. In order to get a stay, a party to submission
must have taken NO step in the proceedings”.

Where the Supreme Court
Went Wrong in Obembe’s case
His lordship,
Fatayi-Williams CJN who delivered the judgment of the Supreme Court said at
page 141 of the law report that: “In order to get a stay, a party to
submission must have taken NO step in the proceedings. A party who makes any
application whatsoever to the court, even though it be merely for application
for extension of time, takes a step in the proceedings. Delivery of a statement
of defence is also a step in the proceedings.” 
(Emphasis mine) The
underlined statement has worked great hardship and injustice in the
administration of arbitration law in Nigeria.

There is nothing in the
facts of the Obembe’s case to justify the pronouncement made by
Fatayi-Williams CJN. An application for extension of time could be for many
purposes including to enter a conditional appearance, challenge jurisdiction,
etc. Under Nigerian law, entering of appearance is not and cannot be a bar to
the right of the defendant under Section 5 of the ACA to insist on referring a
dispute to arbitration. See Confidence Insurance Ltd. v. The Trustees
of Ondo State College of Education Staff Pension (1999) 2 NWLR (Pt. 591) 373 at
386-387 paragraphs C-G. 
 It is a bit of a stretch of the law to
pronounce, as Fatayi-Williams JSC did, that any application whatsoever (even
though it be merely for extension of time) constitutes “taking steps” in a
With due respect, the Obembe case
is not a valid authority for an issue on whether a party has taken steps in a
judicial proceedings. This is because the issue was not canvassed in the case
at the High Court from where the appeal culminated to the Supreme Court. The
portion of the judgment of the High Court touching on arbitration and taking
steps in the judicial proceedings was a mere observation made by the way in the
judgment of the trial judge. The said observation was made suo motu and obiter.

Interestingly, the High
Court judge had observed in his decision as follows: “Had I been in a
position on the facts to find any of the plaintiff’s claims proved I would have
been unable to enter judgment in his favour in view of the Arbitration Clauses
17 of Exh. 3 at page 37 which parties had agreed would govern their contract.”
foregoing observation of the High Court judge, in my respectful view, is an obiter
 as it did not form the basis of the trial court’s dismissal of
the appellant’s case. Obiter dictum is of no legal consequence
in the Nigerian legal system though it may carry considerable weight if it
emanates from the Supreme Court.

In view of the foregoing,
the ground of appeal complaining against the said observation, the
determination of which culminated into the pronouncement of Fatayi-Williams
CJN, ought to have been struck out for being incompetent as the ground of
appeal complained against an obiter and not against the ratio
. The law is trite that it is only against the ratio
 in a judgment and not anobiter dictum that an
appeal (if any) can be lodged. The Supreme Court in A.I.C. LTD V. NNPC
(2005) 22 NSCQLR 903, at 925 (2005) 5 SC (PT. 11) 60
 and obiter dicta as follows: “The
ratio decidendi of a case represents the reasoning or principle or ground upon
which a case is decided. Obiter simply means in passing, incidental, cursory.
Obiter dicta reflects, inter alia, the opinions of the Judge, which do not
embody the resolution of the Court.”

The ground and issue
formulated by the appellant in the Obembe case in respect of
the observation made by the trial judge ought to have been struck out by the
Supreme Court for being incompetent. Failure to strike out the erroneous ground
and the issues consequently led to the undoubtedly erroneous pronouncement by
Fatai-Williams CJN that “A party who makes any application whatsoever
to the court, even though it be merely for application for extension of time,
takes a step in the proceedings”
. Consequently, the pronouncement of
Fatayi-Williams CJN is not a statement of the law, rather it was a
pronouncement made from the Supreme Court’s needless determination of a ground
of appeal complaining against an obiter dictum. It was a profligate
use of judicial time for a needless cause.

In Chami V. UBA
Plc. (2010) 6 NWLR (PT. 1191) 474 at 493 Paragraphs E- F
, the Supreme Court
made the point so clear that grounds of appeal must attack only the ratios in
a judgment, when it was held thus: “It is settled law that issues
for determination must be distilled from Grounds of Appeal which Ground(s) must
attack the ratio decidendi of the judgment not anything said by the way, or
obiter dicta or be formulated in vacuo, as issue 5 in the instant case.”
is therefore my humble view that the pronouncement of Fatai-Williams CJN was
made per incuriam which ought to be overruled or jettisoned by
a subsequent panel of Supreme Court. It is not enough to distinguish cases from
the Obembe’s case in order to avoid the shackles of judicial
precedent (as in Fawehinmi Construction Co. Ltd. v. O. A. U [1998] 6 NWLR
(Pt. 553) 171)
, the Obembe’s case needs to be overruled.

In line with the power of
the Supreme Court to depart from or overrule its previous where it is shown or
demonstrated that the earlier decision is either erroneous in law, or given per
 or that it has become an instrument of injustice or where the
decision complained of hinders the proper development of the law (e.g. the law
of arbitration), it is therefore my humble submission that the decision in Obembe case
should be overruled by another panel of the Supreme Court not for the hardship
or injustice that it creates but also for being a major impediment to the
development of arbitration law in Nigeria. See Veepes Industries Ltd vs
Cocoa Industries Ltd (2008) ALL FWLR (Pt.425) 1667 at 1687; Bakare v. NRC
(2007) ALL FWLR (Pt.391) 1663
 It is useful to note
that the referenced decision was delivered by the Supreme Court at the time
when there was no what is today known as the Court of Appeal. All appeals from
the High Court then were entertained by the Supreme Court which consisted of
panel of justices still trying to appreciate the concept of arbitration. At the
time, all appeals from the Supreme Court went to the Privy Council consisting
of English Justices. Now, Nigerian legal system has evolved and our judicial
policy cannot in 2016 be such that stultifies alternative dispute resolution

If the arbitration law
must be seen to be developing in Nigeria, Obembe’s case must be
overruled or corrected by an amendment of the Arbitration and Conciliation Act
to allow more discretion to local courts to ensure parties resolve their
dispute by agreed alternative resolution method. Also, local court should be
more inclined to granting stay of proceedings for the purpose of arbitration
than refusing it. It is said that in keeping with the informality of the
arbitration process, the law is generally keen to uphold the validity of
arbitration clauses even when they lack the normal formal language associated
with legal contracts. The fact that both parties have expressed intention to
arbitrate their dispute should weigh heavily in the mind of the deciding judge
in granting stay of proceedings. See the case of SINO-AFRIC AGRICULTURE
(2013) LPELR-22370
. The grounds for refusing a motion for stay ought to be
very compelling, and the onus should rest always on the party opposing
resolution of the dispute by arbitration. In the absence of any binding
authority, the right to seek a stay of proceedings should only be lost upon
service of a substantive defence on the merits as held in the case of Usi
Enterprises Limited v. Kogi State Government (2005) 1 NWLR Part 908 page 494 at
. A mere application for adjournment to enable the defendant file
defence should not constitute taking steps if the defendant
thereafter applies for stay of proceedings rather than file defence. This
approach will be consistent with our declared intention to encourage and
entrench arbitration as an alternative dispute resolution in Nigeria.

The fact that a defendant
makes an objection to the court’s jurisdiction on ground of an invalid
originating process or service objection (while reserving his right to request
stay of proceedings under Section 5 of the ACA) should not amount to taking
steps merely because the defendants brings an application for stay much later
after the initial jurisdictional objection. This much was made very clearly inFawehinmi
Construction Co. Ltd. v. O. A. U [1998] 6 NWLR (Pt. 553) 171 at page 184

“When party has a right
whether by way of agreement or under statute he can exercise it at the earliest
time and can equally waive it if the statutory right is not absolute and
mandatory. The waiver must be clear and unambiguous like allowing all evidence to
be taken or even decision given before challenging the hearing. It will then be
shown that the party, deliberately refused to take advantage of the right when
it availed him. Such failure to take advantage of a right must be so clear that
there will be no other reasonable presumption than that the right is let go.
The preliminary skirmishes in this case at the trial Court could not by any
imagination be presumed to be a waiver. The defendant had not filed his
statement of defence and service of the statement of claim on it is certainly
not a waiver by it. Had it filed a statement of defence but with indication
that the preliminary objection will be raised that the suit was not properly
before the Court, it would not (sic) have been a waiver.”

Also, the mere inclusion
of a prayer to set aside a subsisting injunctive order in addition to a prayer
for stay of proceedings in the same motion paper should not be regarded as
having taken steps in the proceedings. See the case of Williams vs
Williams & 3 Ors. (2013) 3 CLRN 114
. The steps that a
defendant is alleged to have taken in a judicial proceeding to defeat his right
to arbitration must be so clear and positive as to constitute a waiver of his
right to insist on the resolution of the dispute by arbitration. The steps must
be inconsistent with an application for reference to arbitration.


Credits –
Bet you have heard that the Nigerian economy is explosive right now and many corporations around the world from China to the Middle East
and Europe want a piece of the action. As a Legalnaija reader, we hope you are
part of this economic revolution and have here prepared a checklist on some of
the many relevant laws to pay attention to if you intend doing business in
Nigeria. These laws have corresponding agencies who regulate the law and ensure
compliance with its rules. The list of laws include;

  1. Companies and Allied Matters Act (CAMA) CAP C20), LFN 2004
  2. Companies Income Tax Act, CAP C21, LFN 2004
  3. Arbitration and Conciliation Act, CAP A18, LFN 2004 
  4.  Federal Inland Revenue Service (Establishment Act) No. 15,
  5.  Customs & Excise Management Act, CAP C45, LFN 2004 

    Export (Incentives & Miscellaneous Provision) Act, CAP
    E19, LFN 2004 

  7.  Federal High Court Act, CAP F12, LFN 2004 

    Foreign Exchange (Monitoring & Miscellaneous Provisions)
    Act CAP F34 LFN 2004 

  9.  Immigration Act, CAP
    11, LFN 2004 

    Insurance Act (No.1) 2003 

  11.  Investments & Securities Act 2007
  12.  Industrial Inspectorate Act, CAP 18, LFN 2004 
  13.  Industrial Dev. (Income Tax Relief) Act, Cap17, LFN 2004 
  14.  National Office for Technology Acquisition and Promotion Act,
    CAP N62, LFN 2004 
  15. Nigerian Investment Promotion Commission Act, N17,LFN 2004
  16. Nigerian Mineral and Mining Act, No. 20 ,2007
  17. Stamp Duties Act, CAP C58, LFN 2004
  18. Petroleum Profits Tax Act( CAP P!#) LFN 2004 
  19. Partnership Law of Lagos State
Adedunmade Onibokun,