On 23 May 2023, Nigeria introduced the 2023 Arbitration and Mediation Act (the “New Act”), repealing its 35-year-old arbitration act (the 1988 Nigerian Arbitration and Conciliation Act, Cap A18). The New Act aims to “provide a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and mediation”. It also “make[s] applicable, the convention on the recognition and enforcement of foreign arbitral awards (New York Convention) to any award made in Nigeria or in any contracting state arising out of international commercial arbitration.”[1]
In line with international practice, the New Act is primarily based on the 2006 UNCITRAL Model Law and applies to both domestic and international arbitrations. It significantly improves Nigeria’s arbitration framework and should enhance its role as one of the leading arbitration jurisdictions in Africa.
In this note, we analyse the main features of the New Act.
The Award Review Tribunal
The New Act gives the parties to arbitrations seated in Nigeria the possibility of reviewing their arbitration awards by an Award Review Tribunal (the “ART”) (Section 56).
Section 55(3) of the New Act provides the grounds on which a party seeking to review the award may bring its challenge.[2] These grounds are identical to those for setting aside an arbitral award under the 2006 UNCITRAL Model law.[3]
The ART is an opt-in mechanism. Thus, unless expressly included in the arbitration agreement, the ART (or the sole arbitrator sitting as an ART) will have no jurisdiction over the parties’ challenges by default (Section 56(1)). Similarly, the mechanism is only available for arbitrations seated in Nigeria.
The ART can set aside the award in whole or part. It may also uphold the arbitration award (Sections 56(8)(9)).
Upon the application to set aside the arbitral award before the court, the court’s approach will depend on the ART’s decision:
- if the ART has partially or wholly set aside the award, the court can reinstate the award if it finds the decision unsupported (Section 56(8)); or
- if the ART has affirmed the arbitral award, the court can only set aside the award on the basis of public policy or non-arbitrability (Section 56(9); see also Section 55(3)(b)).
While the ART may add an extra layer of complexity to the arbitration proceeding, the ART’s decision may reduce the scope of the court’s review at a later stage.
Challenges addressed to the ART must be submitted within three months from the date the party making the application received the award (Section 55(4)). The ART shall endeavor to render its decision within 60 days from the date it was constituted (Section 56(6)).
Third-Party Funding in Nigeria
Before the New Act, third-party funding arrangements were prohibited in Nigeria due to the common law torts of maintenance and champerty. These torts have now been suppressed for third-party funding in relation to arbitration (Section 61). Nigeria is now one of the very few jurisdictions to adopt legislation related to third-party funding, following Singapore and Hong Kong.[4]
Further, Section 62(1) establishes that a party benefiting from a third-party funding arrangement must disclose to the other party, the arbitral tribunal and the arbitral institution the name and address of the funder.
It should be noted that the New Act also provides that if a party brings a security for costs application based on the disclosure of a third-party funding arrangement, the arbitral tribunal may allow the funded party to provide the tribunal with an affidavit confirming whether or not the funder has agreed to cover an adverse costs order (Section 62(3)).
Emergency Arbitrator and the New Arbitration Act
The New Act introduces a straightforward procedure to appoint and challenge an emergency arbitrator (Section 16). While it is unusual for national arbitration acts to contain provisions regarding emergency arbitrators, the New Act’s provisions are in line with those of major arbitral institutions, such as the LCIA and the ICC.[5]
Prior to the constitution of the arbitral tribunal, the parties may apply to the court or the arbitral institution to designate an emergency arbitrator (Section 16(1)).
The emergency arbitrator shall have the power to rule upon the applicable proceeding and any objections (First Schedule, Article 27(1)). He or she must also render the decision in the form of an order within 14 days from the file’s receipt (First Schedule, Article 27(2)).
The Emergency Arbitrator’s decision is binding, and any party may seek enforcement before the Nigerian courts (First Schedule, Article 27(6)). On the other hand, the decision does not bind the arbitral tribunal, which may terminate, modify or suspend the emergency arbitrator’s decision (First Schedule, Article 27(8), see also Article 27(9)).
Enforcement of Interim Measures in Arbitration Proceedings in Nigeria
An interim measure is a temporary measure to protect the parties’ interest pending a final decision. The power to grant interim measures is considered inherent within the arbitral tribunals’ powers, or it might be exercised by national courts.
Sections 19 and 20 of the New Act provide a shared power between arbitral tribunals and national courts. Thus, any party can directly apply to Nigerian courts concerning interim measures for arbitrations seated in Nigeria or other jurisdictions (Section 19).
Given the urgency of interim relief, orders in relation to applications for provisional measures must be issued within 15 days of the application (Section 19).
Whereas the question of the enforcement and recognition of interim measures is still debatable, the New Act introduces a new provision explicitly authorizing the enforcement of interim decisions (Section 28(1)). In this respect, the New Act provides limited grounds for the refusal of enforcement of interim decisions (Section 29(1)), for instance:
- a decision of the arbitral tribunal with respect to the provision of security as a condition for the grant of the interim measure has not been complied with;
- the interim measure has been suspended or terminated by the arbitral tribunal or any other competent authority; or
- if the court finds that the interim measure is incompatible with the powers conferred by the court. In this case, the court can adjust the interim measure without modifying its substance. Despite its relatively broad discretion, it is essential to highlight that the court merely acts as a supportive mechanism to arbitral tribunals (see Section 29(3)).
Mediation in Nigeria: An Alternative to Arbitration
Unlike the previous act that contained provisions related to conciliation, Part II of the New Act introduces new detailed provisions related to mediation for international and domestic dispute matters (Section 67-87).
For example, the New Act deals with the conduct of mediation, the immunity of mediators, and confidentiality.[6]
The New Act also provides for the enforcement of settlement agreements as a contract, consent judgement or consent award (Section 82(2)) and sets limited grounds to refuse enforcement, namely:
- a party to the settlement agreement was under some incapacity;
- the settlement agreement was deemed void, incapable of being performed, modified or did not become binding;
- the obligations in the settlement agreements have been performed or are not clear; or
- the mediator failed to disclose information that may raise doubts as to his or her impartiality or independence.
Other Key Provisions
In addition to the above, there are also the following developments for parties considering bringing an arbitration in Nigeria:
- Appointing Authority: Section 59 designates the Director of the Regional Centre for International Commercial Arbitration of Lagos as the default appointing authority for international matters.
- Grounds for Setting Aside an Arbitral Award: Section 55 provides the grounds on which a party may request an arbitral award to be set aside. The grounds mirror those provided in the 2006 UNCITRAL Model Law.[7] Under Section 57, enforcement of an arbitral award can be refused on grounds similar to those of the Model Law.[8]
- Enforcement of the Arbitration Agreement: Section 5 provides that Nigerian courts must stay proceedings commenced in breach of an arbitration agreement unless the court finds that the arbitration agreement is void, inoperative or incapable of being performed.
- Arbitration Costs and Final Award: the New Act requires the arbitral tribunal’s fees to be “reasonable in amount”, taking into consideration the amount in dispute and the complexity of the case (Section 50(2)). Also, if the parties fail to pay the arbitration fees, arbitral tribunals and institutions may place a lien on final awards until the amounts are paid in full (Section 54(1)).
- Arbitration Proceedings Rules: the New Act (Third Schedule) introduces a set of arbitration proceedings rules with the objective of modernizing and expediting arbitration-related proceedings in Nigeria’s courts.
Concluding Remarks
The above developments are welcome in one of the leading economies of Africa. The New Act reaffirms Nigeria’s commitment to being an arbitration-friendly jurisdiction. While the impact of the new provisions remains to be seen, the New Act is a significant move for the growth of arbitration in Nigeria and Africa.
[1] 2023 Nigerian Arbitration and Mediation Act, Explanatory Memorandum.
[2] Section 55(3)(a) of the 2023 Nigerian Arbitration and Mediation Act provides the following: “the party who makes the application furnishes proof that (i) a party to the arbitration agreement was under some legal incapacity, (ii) the arbitration agreement is not valid under the law to which the parties have subjected it, or failing such indication, under the laws of Nigeria, (iii) the party who makes the application was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present its case, (iv) the award deals with a dispute not contemplated by or does not fall within the terms of the submission to arbitration, (v) the award contains decisions on matters which are beyond the scope of the submission to arbitration, provided that, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters not submitted to arbitration may be set aside, (vi) the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the agreement of the parties, unless the agreement was in conflict with a provision of this Act from which the parties cannot derogate, or (vii) where there is no agreement between the parties under subparagraph (vi), that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with this Act;”.
[3] See 2006 UNCITRAL Model Law, Article 34(2).
[4] See, e.g., Singapore Civil Law (Third-Party Funding) (Amendment) Regulations 2021 (available here); Hong Kong Arbitration and Mediation Legislation (Third Party Funding) (Amendment) Ordinance 2017, Section 98E (available here).
[5] See, e.g., 2020 LCIA Arbitration Rules, Article 9B; 2021 ICC Arbitration Rules, Article 29.
[6] See 2023 Nigerian Arbitration and Mediation Act, Sections 73, 76, and 81.
[7] See 2006 Model Law, Article 34.
[8] See 2006 Model Law, Article 36.
