Nigeria

Ngo-Martins Okonmah
ALN Nigeria I Aluko & Oyebode, Lagos
Ngo-Martins.Okonmah@aluko-oyebode.com

Chizaram Mbah
ALN Nigeria | Aluko & Oyebode, Lagos

Adeleresimi Philips-Adeleye
ALN Nigeria | Aluko & Oyebode, Lagos

Joy Mgbado
ALN Nigeria I Aluko & Oyebode, Lagos

1. What is your jurisdiction?

Nigeria.

2. Are the FIDIC forms of contract used for projects constructed in your jurisdiction? If yes, which of the FIDIC forms are used, and for what types of projects?

The FIDIC form of contract is one of the standard forms of contract in use for projects constructed in Nigeria. The specific FIDIC form used depends on the nature and type of project. For the construction of buildings, the Conditions of Contract for Building and Engineering Works Designed by the Employer (Red Book) are used. In large-scale infrastructure projects, it is not unusual to find contracts based on the Conditions of Contract for Plant and Design-Build (Yellow Book). The Conditions of Contract for EPC/Turnkey Projects (Silver Book) are used in projects with a heavy engineering component, such as process or power plants. The Silver Book is also used for funder-led projects, where the project’s bankability depends on the contractor assuming a single point of responsibility. In Nigeria, the 1999 editions of the FIDIC forms are more commonly used than newer editions.

3. Do FIDIC produce their forms of contract in the language of your jurisdiction? If no, what language do you use?

The FIDIC forms of contract are produced in English, which is Nigeria’s official language.

4. Are any amendments required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what amendments are required?

It does not appear that there are any clauses or sub-clauses of FIDIC Conditions of Contract that contravene mandatory provisions of Nigerian law, such that they would require amendments for them to become operative in Nigeria.

5. Are any amendments common in your jurisdiction, albeit not required in order for the FIDIC Conditions of Contract to be operative in your jurisdiction? If yes, what (non-essential) amendments are common in your jurisdiction?

Although contracts based on the FIDIC forms are enforceable under Nigerian law, modifications are sometimes made to some provisions to meet the requirements of the specific project. These amendments are based more on commercial considerations than for legal purposes. For example, provisions on access to and possession of the site (Sub-Clause 2.1) are sometimes modified to take care of interruptions that may be experienced due to protests and disruptions caused by local communities. The contractor will want to ensure that it is the responsibility of the employer to ensure uninterrupted possession and access is maintained. The employer, on the other hand, will usually want to limit its responsibility to providing access and possession at the beginning of the project only, with the risk of any future impediments by the local community borne by the contractor. It is not unusual for such clauses to impose the responsibility on the contractor to facilitate community engagement to achieve the project outcome.

Also, sub-clauses 20.2–20.4 dealing with the appointment and decision of a dispute adjudication board (DAB) are usually excluded in the FIDIC forms, except for contracts that are being financed by development finance institutions (DFIs) or where the DAB is intended to operate as a standing DAB. This is because there is not much familiarity with the DAB procedure in Nigeria, and parties sometimes view adjudication as duplicating and elongating the dispute resolution mechanism when, ultimately, the decision of the DAB would be reviewed on its merits in arbitral proceedings or the courts.

If the FIDIC forms are used in the oil and gas sector, the parties would include clauses that incorporate specific local content requirements that operators are required by law to incorporate into procurement and services contracts.

6. Does your jurisdiction treat Sub-Clause 20.2.1 of the 2017 suite of FIDIC contracts as a condition precedent to Employer and Contractor claims?

There is no reported case law dealing with Sub-Clause 20.2.1 of the 2017 suite of FIDIC contracts as a condition precedent to employer and contractor claims. However, it is reasonably certain that Nigerian courts will treat Sub-Clause 20.2.1 of the 2017 suite of FIDIC contracts as a condition precedent to claims, given the express exclusion of claims in the event of non-compliance with the condition precedent. In addition, the sub-clause uses the word ‘shall’ in the exclusion of claims, which under Nigerian law has an obligatory connotation and not merely directional. Nigerian courts may also be persuaded by the policy consideration underpinning the interpretation of time bar provisions in construction contracts as the condition precedent given the early notification of claims by the contractor affords the employer the opportunity to investigate such a claim early and avoid or mitigate the events giving rise to such claims.

7. Are dispute boards used as an interim dispute resolution mechanism in your jurisdiction? If yes, how are dispute board decisions enforced in your jurisdiction?

There is no regulatory framework governing the use of dispute boards as an interim dispute resolution mechanism in Nigeria. As a result, the use of dispute boards is essentially contractual, based on the parties’ agreement. Therefore, it is not unusual for parties to adopt the dispute board as a form of interim dispute resolution mechanism in a multi-tiered dispute resolution clause to avoid the piling up of claims and achieve the real-time resolution of claims.

As there is no statutory framework regulating the use of dispute boards in Nigeria, the decision of a dispute board is not enforceable in its own right. Therefore, the successful party, depending on the terms of the contract, may commence arbitration on the decision of the dispute board for the purpose of procuring an award that will be enforced by the court. Alternatively, the successful party may institute an action for the enforcement of the parties’ agreement to comply with the decision of the dispute board.

While Sub-Clause 21.7 of the 2017 suite of FIDIC contracts expressly empowers the successful party to refer the failure to comply with a dispute avoidance and adjudication board’s (DAAB) decision that has become final and binding directly to arbitration without any need to first refer the failure itself to the DAAB, the 1999 suite of FIDIC contracts is not explicit on the right of a party to refer the failure by the other party to comply with the decision of the DAB directly to arbitration. This lacuna in the 1999 suite of FIDIC contracts has giving rise to arguments in a jurisdiction (PT Perusahaan Gas Negara (Persero) TBK v CRW Joint Operation (2015) SGCA 30) that the failure to comply with the DAB decision must first be referred to the DAB before commencing arbitration. There has been no decision by Nigerian courts that have decided a similar question. However, it is likely that Nigerian courts would adopt a pragmatic and practical approach, allowing the failure to comply with the DAB’s decision to be referred directly to arbitration for the purpose of enforcing compliance.

8. Is arbitration used as the final stage for dispute resolution for construction projects in your jurisdiction? If yes, what types of arbitration (ICC, LCIA, AAA, UNCITRAL, bespoke, etc) are used for construction projects? And what seats?

In Nigeria, it is common for parties to adopt arbitration as the final stage in the resolution of a construction dispute. Whether the arbitration is ad hoc or institutional depends on the nature of the project. If it is a domestic project, it is likely that the arbitration would be ad hoc or administered by the Lagos Court of Arbitration (LCA), Lagos Chamber of Commerce International Arbitration Centre (LACIAC) or any of the multi-door courthouses. However, for large infrastructure projects or projects with significant value, it is not unusual for parties to adopt a foreign arbitration institution as the administering authority, despite the project being wholly domestic. If it is a cross-border transaction, it is likely that the arbitration would be institutional and the arbitral institution that features prominently in construction projects is the International Chamber of Commerce (ICC), the international court of arbitration. The other arbitral institution that is used is the London Court of International Arbitration (LCIA).

9. Are there any notable local court decisions interpreting FIDIC contracts? If so, please provide a short summary.

There is no reported court decision that has interpreted FIDIC contracts in Nigeria.

10. Is there anything else specific to your jurisdiction and relevant to the use of FIDIC on projects being constructed in your jurisdiction that you would like to share?

A disincentive to the adoption of a multi-tiered dispute resolution clause, like the dispute resolution clause in the FIDIC forms requiring DAB as a mandatory pre-arbitration step, is the limitation period for the enforcement of arbitral awards. The Nigerian Supreme Court in the case of City Engineering v FHA (1997) All NLR 1 determined that the cause of action in an application to enforce an arbitral award is the same as the cause of action to the underlying dispute that gave rise to the arbitration. As a result, for the purpose of enforcing an award, time begins to run not when the award was issued but when the cause of action accrued under the underlying contract. The effect of this decision is that parties in arbitration are in a race against time to arbitrate and enforce any ensuing award before the expiry of the limitation period for the claims.

Even though DABs are designed as a straightforward process enabling disputes to be resolved quickly, in practice, the process could be protracted due to difficulties in constituting the DAB or dilatory tactics by parties to the DAB proceedings. The result is that parties run the risk that, by the time the decision of the DAB is referred to arbitration and arbitration culminates in an award, the limitation period for the enforcement of the award may have elapsed.

However, Nigeria recently enacted the Arbitration and Mediation Act 2023, which eliminates this problem by excluding the period between the commencement of arbitration and the date of the award for the purpose of computing time in the enforcement of an arbitral award, thereby encouraging the use of pre-arbitration techniques, such as dispute boards.

Another point of note is the requirement under Section 5 of the repealed Arbitration and Conciliation Act for an applicant seeking to enforce an arbitration agreement to demonstrate readiness and willingness ‘to do all things necessary to the proper conduct of the arbitration’. The Nigerian Supreme Court in UBA Plc v Trident Consulting Limited (2013) 14 NWLR (Pt 1903) 95 construed the provision to mean that the party applying for a stay of proceedings pending arbitration must demonstrate unequivocally by documentary evidence that it is willing to arbitrate. In other words, the party must have commenced arbitration.

This posed a challenge for the multi-tiered dispute resolution clause like that found in the FIDIC forms. First, the party seeking to enforce the arbitration agreement is not the party that has a claim, so requiring such a party to commence arbitration is counterintuitive. Second, and particularly more important for the FIDIC forms, in requiring a party to commence arbitration as a prerequisite to enforce an arbitration agreement, there is a risk that such a party would be waiving its right to insist on compliance with mandatory pre-arbitration steps contained in the dispute resolution clause and possibly acting against its commercial self-interest. However, this requirement has been removed from the new Arbitration and Mediation Act as all an applicant has to show to enforce an arbitration agreement is that the arbitration agreement is not void, inoperative or incapable of being performed.