Nigeria's recently passed Arbitration and Mediation Bill seeks to bring the country's arbitral practices in line with global standards, reaffirming Nigeria's position as one of the leading centres for commercial arbitration in Africa.
On 10 May 2022, Nigeria's Senate passed an amendment bill (the "Bill") which, once signed by the President, will replace its current Arbitration and Conciliation Act of 1988. The Bill contains numerous provisions that will be of interest to entities seeking to arbitrate in Nigeria, including clauses on third-party funding ("TPF"), emergency arbitrators and the recognition and enforcement of interim measures. The Bill also introduces an unusual concept – an award review tribunal. We address some of the most interesting developments arising as a consequence of the Bill below.
Within international arbitration, TPF is a non-recourse arrangement where typically an independent commercial fund, with no prior connection to a dispute, provides funding to a party to the proceedings, in return for a share of any potential damages awarded. There has been a substantial growth in funding activity in arbitration over the years, with the global funding industry now worth in excess of US$15 billion. Permitting TPF is therefore seen as advantageous to a jurisdiction's attractiveness as an arbitral seat. Nigeria made a first attempt to indirectly legalise TPF when it introduced an amendment bill in 2008 that, if it had become law, would have allowed a party to claim the costs of obtaining TPF as part of its costs of arbitration.1
The Bill goes further by expressly abolishing two obstacles to TPF in relation to arbitration, namely the common law torts of maintenance and champerty and introducing substantive provisions allowing TPF in Nigeria-seated arbitrations and arbitration-related proceedings in any Nigerian court.2 Whilst TPF is accepted in many jurisdictions, the Bill makes Nigeria only the third jurisdiction to directly adopt such express legislation, following Singapore and Hong Kong in 2017.3
The Bill imposes a disclosure obligation on the party benefiting from a TPF agreement. Basic information on the existence of the funding agreement, including the name and address of the funder, must be disclosed to the other parties, the arbitral tribunal and, where applicable, the arbitral institution. This disclosure must be made at the commencement of the arbitration or immediately thereafter (if the funding agreement is signed after the arbitration has commenced). A benefit of imposing an obligation to disclose this information is that it gives the tribunal the opportunity to proactively manage issues of conflict of interest that may arise in the context of a funded arbitration.
The Bill also provides that where a respondent brings a security for costs application based on the disclosure of TPF, the tribunal may allow the funded party or its counsel to provide the tribunal with an affidavit confirming whether the funder has agreed to cover adverse costs orders. The affidavit is intended to form part of the information that the tribunal will consider in its decision on the security for cost application. For the respondent, such confirmation may be of some assistance given that the security for costs application is likely to have been made because of concerns that the funded party would be unable to pay the respondent's costs if ordered to do so. However, the reality is that much will hinge on the terms of cover set out in the funding agreement.
Another way the Bill has responded to the changing needs and desires of arbitration users is through the introduction of emergency arbitrator provisions. The Bill introduces a clear set of rules governing the process for appointing and challenging the appointment of an emergency arbitrator. Consistent with global best practices, the process is designed to be swift to achieve the desired outcome. For instance, if the arbitral institution or court accepts a request for the appointment of an emergency arbitrator, the appointment must be made within two business days and a challenge decision must be made within three business days.
Emergency arbitrator procedures have proven to be an effective means of obtaining urgent relief and ultimately provide another flexible tool that can be wielded by parties and counsel alike in arbitration proceedings (for example, in settlement discussions). Although specific provisions on emergency arbitrator are rarely found in statute, the provisions in this Bill are similar to those found in the rules of a number of leading arbitral institutions, such as the LCIA and ICC, and those of the Lagos Court of Arbitration in Nigeria. Whilst there are slight differences in the approach adopted in such arbitral institutional rules (e.g. the LCIA will appoint an emergency arbitrator within three days, longer than the two days provided in the Bill,4 and the ICC can appoint an emergency arbitrator even before the arbitration is commenced5), the Bill's emergency arbitrator provisions seek to achieve the same objective.
Any decision of the emergency arbitrator shall be binding on the parties and can be enforced upon application to the court. However, any such decision may be modified, suspended or altogether terminated by the emergency arbitrator, following a reasoned request by a party. In addition, any decision of the emergency arbitrator shall cease to be binding if (i) decided by either the emergency arbitrator or the arbitral tribunal, (ii) upon the final arbitral award being rendered, (iii) upon the termination of the arbitration or (iv) if the arbitral tribunal is not constituted within 90 days from the date of the emergency arbitrator's decision.
Finally, the Bill expressly reserves the right for parties to seek urgent interim measures directly from the courts, rather than the using the emergency arbitrator option offered by the Bill. The decision to seek interim measures from the court will not be deemed an infringement or waiver of the arbitration agreement.
Interim Measures and its Enforcement
An "interim measure" is defined under the Bill as any "temporary measure" that orders a party to: (a) maintain or restore the status quo pending determination of the dispute; (b) take action that would prevent harm or prejudice to the arbitral process; (c) provide a means of preserving assets; or (d) preserve evidence.
The Bill affirms the power of arbitral tribunals to grant interim measures where appropriate and provides clear guidance on the conditions that should be met for relief to be granted. The tribunal needs to be satisfied that: (a) harm not adequately reparable by an award of damages is likely to result if the measure is not ordered, and such harm substantially outweighs the harm that is likely to result to the party if the measure is granted; and (b) there is a reasonable possibility that the requesting party will succeed on the merits of the claim. In addition, the arbitral tribunal can modify, suspend or terminate an interim measure or preliminary order if facts were concealed in the application, or if it was obtained fraudulently.
Notably, the definition of "interim measure" and the conditions for granting the interim measure in the Bill are identical to those in the UNCITRAL Model Law 2006. In addition, such provisions are also in line with the established rules of arbitral institutions such as the ICC, LCIA, UNCITRAL and SIAC, which all explicitly contain the power to grant interim or conservatory measures.
In addition, the Bill provides that tribunal-issued interim measures awarded in any jurisdiction are binding and can be enforced before Nigeria's courts. In allowing its enforcement, the court may request that the party seeking enforcement provides appropriate security where none had originally been ordered by the arbitral tribunal. The court may however refuse to enforce the interim measures on the grounds for resisting recognition and enforcement of a final award, as set out in the New York Convention. These include an invalid arbitration agreement, excess of power or where the subject dispute is not capable of settlement by arbitration under the laws of Nigeria.
Award Review Tribunal
The Bill also introduces the unusual concept of an award review tribunal (the "ART"), giving parties the option to specify in their arbitration agreement that awards made in arbitrations seated in Nigeria may be reviewed by a second arbitral tribunal. Once constituted, the ART will endeavour to give its award within 60 days.
This novel option gives dissatisfied parties a second bite at the cherry before ultimately resorting to the courts. This is because if the ART sets aside the award in whole or in part, a party may then apply to the court to have the decision of the ART reviewed. A party may nonetheless apply to the court for the enforcement of the award pending a decision by the ART. However, any court must stay the enforcement application pending the decision of the ART and the court may make any order, including requesting the provision of security for the award.
This additional layer of review therefore has the potential to increase cost for the parties and ultimately slow down award enforcement. One upside though is that once the ART has partially or wholly upheld an award, the award can only be set aside by a court on the limited grounds of arbitrability and / or public policy. Since the ART is an optional provision, it remains to be seen if this advantage would be sufficient incentive for parties to include it in their arbitration agreement.
Significant developments in line with global trends
The range of provisions introduced by this Bill are likely to increase Nigeria's attractiveness as a major arbitration hub in Africa and globally. Most of these new provisions reflect key developments in international arbitration and global best practices adopted by the UNCITRAL Model Law and in many leading arbitral institutions. The provisions on TPF and emergency arbitrators are particularly commendable and demonstrate Nigeria's commitment to adopt the latest arbitral practices. It remains to be seen how the funding market will react to the Bill and whether third party funders may be more willing to fund Nigeria-seated arbitrations. What can be in no doubt is that users of arbitration will welcome the positive initiatives introduced in the Bill.
Isabella Conceicao Silva (White & Case, Trainee Solicitor, London) contributed to the development of this publication.
1 See further our previous alert, "Third Party Funding in Arbitration: Reforms in Nigeria". The current Bill also retains this provision allowing a party to claim the costs of obtaining TPF as part of its costs of arbitration.
2 The torts of maintenance and champerty hark back to when TPF was disapproved of, with many jurisdictions refusing to recognise and enforce arrangements under which third-parties funded litigation. 'Maintenance' is the improper support of litigation in which the supporter has no legitimate concern without just cause or excuse. 'Champerty' is an aggravated form of maintenance and occurs when the maintaining party pays some or all of the costs of a party in return for a share of the proceeds of the action or suit. In essence, in jurisdictions where these two torts continue to apply, most funding arrangements may be subject to challenge.
3 See further our previous alert, "A changing landscape: third-party arbitration funding in Singapore and Hong Kong".
4 LCIA Arbitration Rules, Article 9B, Rule 9.6.
5 ICC Rules of Arbitration, Article 29(1).
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities. This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice. © 2022 White & Case LLP
White & Case means the international legal practice comprising White & Case LLP, a New York State registered limited liability partnership, White & Case LLP, a limited liability partnership incorporated under English law and all other affiliated partnerships, companies and entities.
This article is prepared for the general information of interested persons. It is not, and does not attempt to be, comprehensive in nature. Due to the general nature of its content, it should not be regarded as legal advice.
© 2022 White & Case LLP