May 22, 2018

Building A Culture Of Arbitration And The Need For A National Policy On Arbitration | Dr. Olisa Agbakoba OON, SAN, FCIArb & Ridwan ‘Tola Bello, LLM, MCIArb.

The judicial system has proven extremely inadequate at processing cases or enforcing decisions. Courts are slow and generally considered inefficient for reasons that include funding, poor physical facilities, staff shortages, congestions, and inadequate training etc. The average duration for the resolution of cases in Nigerian courts is between 10 – 20 years spanning the entire tiers of the judicial system. This is evidently unmanageable in any economy.

The enforcement of commercial contracts or settlement of disputes continues to be a primary concern for entrepreneurs and investors. Economic reforms and investment growth are hardly achieved and barely successful in face of dispute resolution constraints. The reason is that Litigation has become such a major bottleneck to business that it is no longer seen as an effective mechanism for timely resolution of commercial dispute. Reliable alternative methods of resolving commercial disputes became imperative hence the introduction and wide acceptance of Alternative Dispute Resolution (ADR) processes or mechanisms.

Arbitration has become the established method of determining international commercial disputes. All over the world, states have modernized their laws of arbitration to take account of this fact. In a recent survey conducted by White and Case, in collaboration with Queen Mary University, School of International Arbitration on the Improvements and Innovations in International Arbitration, 90% of the respondents to that survey confirmed that international arbitration is their preferred dispute resolution mechanism.

New arbitral centers are being established and there is rapid development of law and practice of arbitration. International treaties such as the New York Convention of 1958 on the Recognition and Enforcement of Foreign Awards as well a body like UNCITRAL[1] is essential to the effectiveness of Arbitration internationally.

The attraction is that international arbitration is conducted in different countries and against different legal, cultural backgrounds with a striking lack of formality but upon certain and acceptable international standards, norms and ethics.  Records support the establishment and effectiveness of arbitration institutions. International institutions driving arbitration includes the ICC in Paris, SIAC in Singapore, LCIA in London, HKIAC in Hong Kong. In addition to arbitration services provided by these institutions, they set rules and other procedural requirements which attract users universally.

Nigeria generates a significant volume of commercial transactions (both domestic and international with about 80 percent of these transactions originating or terminating in Lagos). Unfortunately, dispute arising from these transactions are ultimately arbitrated in foreign countries. This situation has been attributed to the inadequacy and efficacy of Nigeria’s legal and institutional framework for Arbitration. The “flight” of “domestic” (i.e. purely Nigerian) arbitration cases to arbitral venues outside Nigeria is unhelpful to Nigeria’s economic empowerment and development strategy programme (NEEDS). It also means loss of revenue for majority of lawyers and other ADR practitioners. Various efforts and proposals have been made at the national level and some states too. The Repeal and Re-enactment Bill of the Arbitration and Conciliation Act 1988 currently before the legislature makes an attempt at addressing this issue. What is required is a commitment and affirmative steps for actualization of the proposals.

In line with promoting policies which encourage the development of arbitration in this region, there is currently a bill before the National Assembly for the amendment of the Arbitration and Conciliation Act (ACA) 1988. Under the present 30 years old framework, lengthy and expensive are words that are often used to describe arbitration proceedings in Nigeria. These are words which should not be associated with arbitration as a means of dispute resolution. The reform will help the argument for making Nigeria a preferred seat of arbitration and thus increasing Nigeria’s share of arbitration.

The Olisa Agbakoba Legal Mediation and Arbitration Center submitted a proposal to the House Committee in charge of the repeal and the re-enactment of the Arbitration and Conciliation Act. Our proposal seeks to introduce in the Bill an opt-in provision for fixing the seat of arbitration in Nigeria. We propose that where parties have failed to determine Seat and Place of the Arbitration, the Arbitration tribunal should revert to Nigeria as the forum or seat for the Arbitration. This would invariably promote the growth of the industry and also encourage investment, drive economic development and improve Arbitration practice and culture amongst Arbitrators and relevant professionals.

Another example of policies that drive the growth and culture of arbitration is the Lagos Arbitration Law 2009. Lagos remains the commercial hub of the nation with the potential of becoming an international financial and investment center in Africa. However, it requires an efficient commercial dispute resolution environment founded on enabling legal and institutional frameworks. In United Kingdom, the London Court of International Court of International Arbitration (LCIA) in London derives tremendous support from the London City Corporation with the London Chamber of Commerce as one of the core drivers. In view of foregoing, affirmative action could be taken by a state like Lagos. During my tenure as the NBA President, precisely in 2008, I made a proposal to the Lagos State Government on the need for establishment of a Domestic Arbitration Center in Lagos as a pilot initiative. The state then started the process by introducing ‘a Bill for a Law to provide for the establishment, management and operation of a Center which would act as a Court for Commercial Arbitration as other Dispute Resolution (ADR) Mechanisms in Lagos State and for connected purposes therewith’. This resulted in the establishment of the Lagos Court of Arbitration in Lekki, Lagos.

In Nigeria, business managers (or their legal advisers) who have to decide on the advantages of choosing Nigeria as an arbitration forum will be interested to see that the appropriate frameworks are in place. What prevails at Ad Hoc Arbitration and ADR bodies applying different kind of rules; favourably and unfavourably to the parties. Nigeria has commercial centers like Lagos, Abuja, Port Harcourt and Kano with the potential of becoming international financial and investment centers in Africa. A national culture of Arbitration is imperative as a framework and symbol of institutional arbitration.

In fact, a national culture or policy on arbitration will galvanize the improvement of domestic arbitration and provide the platform for development and standardization of Ad hoc Arbitration process. As an international organization, the Regional Center for International Arbitration (RCIA) Lagos is constrained to drive the kind of national support required for development and practice of Arbitration. The fact is that Nigeria can emulate the practice in successful jurisdictions like Singapore or Malaysia, which have strategically positioned themselves in their regions as arbitration hubs, generating enough dispute resolutions to act as a catalyst in the development of their respective economies. They achieved this by a national policy and culture of arbitration. Another country that has seen significant development by adopting a national policy in arbitration recently is Rwanda with the establishment of the LCIA-backed Kigali International Arbitration Center. Mauritius and Egypt have shown themselves to be sound choices for African arbitral seats, and their use in intra-African arbitrations should be promoted.

It is worthy of note that not one African arbitration centre has attained its full potential. This could be attributed to the fact that there are simply too many of them. Limited resources should be channeled efficiently for the development of three or four regional centres, which are fully equipped with state-of-the-art facilities and information technology. If establishing a regional centre faces too much red-tape, then governments should consider simply promoting those African institutions which have successfully established themselves (such as the LCA, CRCICA, Mauritius International Arbitration Centre and the KIAC which have all struck the right balance between being supported by their respective governments, without control or interference from them), and making them the default choice in their contracts. This removes an item from public expenditure, and may have benefits in terms of the political leverage to be gained from encouraging the use of one or more of these centres.

Next Steps –
Under the tenure of the former Attorney General of the Federation, Prince Bola Ajibola, the Nigerian policy of Arbitration was at its height. It was under this tenure that the Regional Center of Arbitration was setup. The Government needs to promote its arbitration policy by fully backing a center of arbitration. The Lagos Court of Arbitration (LCA) undoubtedly, has potential to become a powerhouse in international arbitration in West Africa. Its strong institutional rules and the recent development in arbitration legislation in Nigeria demonstrates that it can gain the trust and acceptance of the region, and this should be a good springboard from which to build an international arbitration centre and a regional arbitration hub.

If this centre was promoted in intra-African arbitrations, then it would build a track record of international arbitrations (albeit from other African countries), and gain enough credence to administer non-African arbitrations.

Stakeholders such as banks, maritime operators, government agencies need to propel the development of arbitration by keying into the sector. Contracts in these sectors need to contain arbitration clauses. Disputes resulting from such contract should be arbitrated in Nigeria. There should be no reason for a purely Nigerian dispute between Nigerian parties to be arbitrated in London. There is a need to grow the Nigerian arbitration jurisprudence and expertise.

Stakeholders also need to engage Presidential Enabling Business Environment Council (PEBEC) on the ease of doing business. The council must understand that for there to be growth or development in Arbitration, an arbitration policy is crucial. Investors need to be assured that in the event of any dispute, there is an efficient legislative framework on arbitration to resolve such commercial dispute.

Conclusion - Telling the World

Nigeria must be cognizant of its bargaining power. In the scramble for resources, investors will be forced to accept local or regional arbitral systems and/or African seats, or risk losing deals. Indeed, in a survey conducted by Simmons & Simmons in 2015, 72% of respondents said that they would consider using local or regional arbitral systems, and 58% said they would use an African seat.

In order to develop arbitration in this region and prop Nigeria as a regional hub in West Africa, it is incumbent on us to take active steps to increase awareness. We must build up the capacity of our arbitration centres, then market them aggressively. We must make legislative reforms an agenda priority, then publicise them widely. Stakeholders need to develop more seasoned Nigerian Arbitrators by encouraging partnerships between international law firms and locally-based firms. This will enable the transfer of knowledge and skills, and the opportunity to gain from the wealth of experience which international law firms have to offer, in order to build local capacity.

In all these efforts, it is important to act quickly and capitalize on the current interest in the continent and Nigeria, as this will eventually wane. If we are successful, perhaps what might emerge is a more mature Nigerian arbitration jurisprudence, and evolution of an African-centric style of arbitration, or at the very least, one in which Nigeria has had an influence.

The culture and policy of arbitration in Nigeria is still at its infancy.

[1] United Nation Commission on International Trade Laws