Feb 5, 2014


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:
"1. Where a dispute arises between an investor and any Government of the Federation in respect of an enterprise, all efforts shall be made through mutual discussion to reach an amicable settlement.
2. Any dispute between an investor and any Government of the Federation in respect of an enterprise to which this Act applies which is not amicably settled through mutual discussions, may be submitted at the option of the aggrieved party to arbitration as follows:-
a) in the case of a Nigerian investor, in accordance with the rules of procedure for arbitration as specified in the Arbitration and Conciliation Act; or
b) in the case of a foreign investor, within the framework of any bilateral or multilateral agreement on investment protection to which the Federal Government and the country of which the investor is a national are parties; or
c) in accordance with any other national or international machinery for the settlement of investment disputes agreed on by the parties.
3. Where in respect of any dispute, there is disagreement between the investor and the Federal Government as to the method of dispute settlement to be adopted, the International Centre for Settlement of Investment Dispute Rules shall apply. "
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:
"where the recognition and enforcement of any award arising out of an international commercial arbitration are sought, the Convention on the Recognition and Enforcement of Foreign Awards (hereinafter referred to as 'the Convention') set out in the second schedule to this decree shall apply to any award made in Nigeria or any contracting state:
a) provided that such contracting state has reciprocal legislation recognising the enforcement of arbitral awards made in Nigeria in accordance with the provisions of the Convention.
b) that the Convention shall apply only to differences arising out of legal relationship which is Contractual."
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:
"By the provision of section 51(1) of the Arbitration and Conciliation Act, an arbitral award shall irrespective of the country in which it is made, be recognised as binding subject to the provisions of the Act, and shall upon application in writing to the court, be enforced by the court."
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:
"once an arbitration clause is retained in a contract which is valid and the dispute is within the contemplation of the clause, the court will give regard to the contract by enforcing the arbitration clause. It is therefore the general policy of the court to hold parties to the bargain which they freely entered."
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:
"1. The spurious argument that service of notice was not in writing cannot fly.
2. Email is a form of communication that is set down in writing. It is not oral. The fact that it is electronic is immaterial. It is not in thin air. It can be downloaded and is as real as a hard copy of the letter or mail in your hand.
3. Since the intention of the email messages and the correspondence from the Respondent, the Solicitor and the Arbitrator to the Appellant was to achieve the result of communicating the fact that the arbitration proceedings had been initiated at various stages of the process, there has been effective service of the whole arbitration process on the Appellant."
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.
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).


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