Eko Atlantic City under construction in Lagos, Nigeria. Credit: MOdAMO/Shutterstock

This article discusses the suitability of the Nigerian Arbitration and Conciliation Act (ACA) to construction disputes. It discusses court-ordered injunctions in aid of the arbitration process, the recognition and enforceability of orders, directions of emergency arbitrators and limitation laws to the enforcement of arbitral awards. It also suggests amendments to the ACA.

The Arbitration and Conciliation Act

The legal regime for arbitration in Nigeria predates its independence with the establishment of the Arbitration Ordinance of 1914.^[1] The Arbitration and Conciliation Decree No 11 of 1988 (the Decree) was promulgated by the military regime to provide an integrated legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation.^[2] The Decree applied to domestic commercial arbitration throughout the Federation of Nigeria^[3] and international commercial arbitration.^[4]

Prior to 1988, the legal regime was not totally harmonised, as there were local laws on commercial arbitration throughout the country. These laws included: the Arbitration Law of Lagos State 1958,^[5] the Arbitration Law of Former Eastern Region 1963,^[6] the Arbitration Law of Kano State,^[7] and the Arbitration Law of Cross Rivers State.^[8] It is worth mentioning that the provisions of these laws were derived from the Arbitration Ordinance of 1914.

The emergence of a democratic government prompted the name change of the Arbitration and Conciliation Decree to the 1988 Arbitration and Conciliation Act (ACA),^[9] which practically had the same provisions as the Decree and has remained in force ever since.^[10] The ACA was fashioned from the 1985 UNCITRAL Model Law on International Commercial Arbitration (the ‘Model Law’) with some modifications.^[11] Accordingly, 22 sections of the ACA have almost identical provisions to the Model Law,^[12] while 16 sections are formed from the Model Law with certain alterations.^[13] Ten sections are unrelated to the Model Law.^[14]

There is an ongoing debate on the legislative competence of the federal government to legislate over arbitration and conciliation matters. This is because Nigeria operates a federal system of government with both federal and state governments having the legislative competence to legislate over matters allocated by the Constitution of the Federal Republic of Nigeria 1999. While the federal government has the exclusive power to legislate over matters listed in the exclusive legislative list,^[15] both federal and state governments have powers to legislate over matters listed in the concurrent legislative list.^[16] If a matter is not listed in the exclusive or concurrent legislative lists, such a matter is said to be on the residual list and the state government has the exclusive legislative competence to legislate over such matters.^[17]

The exclusive legislative list does not contain arbitration and conciliation. As a result, some have argued that matters of arbitration and conciliation are within the exclusive legislative competence of the state. Another school of thought, however,^[18] has argued that since international trade and commerce is contained in the exclusive legislative list,^[19] arbitration and conciliation fall within the exclusive legislative competence of the federal government.

In 2005, the National Committee on the Reform and Harmonisation of Arbitration and ADR Laws in Nigeria came to the view that: ‘The Federal Government has the constitutional power and competence to legislate on arbitration and conciliation but only in respect of trade and commerce which are international or inter-state.’^[20]

The Committee recommended an amendment to the ACA and a Uniform State Arbitration and Conciliation Law.^[21] However, while the federal bill is still awaiting enactment, Lagos State proceeded to adopt the Lagos State Arbitration Law 2009.^[22]

Although this article focusses on the ACA, where applicable, reference will be made to the Lagos State Arbitration Law 2009.

Section 15(1) of the ACA compels arbitration under the ACA to be conducted in accordance with the ACA Rules. It provides that, ‘the arbitral proceedings shall be in accordance with the procedure contained in the Arbitration Rules set out in the first schedule to this Act’. By this provision, it is arguable that Section 15(1) of the ACA runs contrary to the principle of party autonomy to the extent that it legislates the applicable rules for domestic arbitration. It renders parties to domestic arbitration governed under the ACA incapable of deciding the arbitration rules of choice for their dispute.

The ACA, like the UNCITRAL Model Law on which it was modelled, does not explicitly regulate any form of multi-party arbitration. However, Section 15(2) of the ACA provides:

‘where the rules referred to in subsection (1) of this section contain no provision in respect of any matter related to or connected to any arbitral proceedings, the arbitral tribunal may, subject to this Act, conduct the arbitral proceedings in such a manner as it considers appropriate so as to ensure fair hearing’.

It can be argued that Section 15(2) of the ACA may be used as a basis for an arbitral tribunal to order consolidation or joinder in cases where the applicable arbitral rules are silent on multi-party arbitration. This position is debatable. It is unlikely that an arbitral tribunal would allow the conduct of multi-party arbitration solely based on the provision of Section 15(2) of the ACA. The discretion of the tribunal under Section 15(2) merely concerns ancillary procedural questions, such as rules on the taking of evidence, witness statements and the organisation of hearings, and cannot be applied to core questions that may have a significant impact on the conduct of the proceedings, such as multi-party arbitration. Therefore, if the relevant arbitration agreements are silent on multi-party arbitration and parties cannot reach an agreement on the matter, the arbitral tribunal may not use Section 15(2) as a jurisdictional basis to order consolidation or joinder over a party’s objection.

It should be noted that the UNCITRAL Rules, on which the ACA Rules are modelled, contain no explicit provision on consolidation or the intervention of third parties in pending arbitration.

However, the most recent revision of the UNCITRAL Rules, the 2010 UNCITRAL Rules, includes a provision on joinder. Article 17.5 states:

‘the arbitral tribunal may, at the request of any party, allow one or more third persons to be joined in the arbitration as a party provided such person is a party to the arbitration agreement, unless the arbitral tribunal finds, after giving all parties, including the person or persons to be joined, the opportunity to be heard, that joinder should not be permitted because of prejudice to any of those parties. The arbitral tribunal may make a single award or several awards in respect of all parties so involved in the arbitration’. (emphasis added)

Court-ordered injunction in support of arbitration

Despite the ability of arbitral tribunals to grant interim measures of protection, courts usually step in to act when an arbitral tribunal is yet to be constituted, or there are no provisions for the appointment of an emergency arbitrator, or the interim relief sought is urgent.^[23] In the construction sector, a court-ordered injunction might be appropriate where a party is seeking relief that will bind a third party, including for instance, where a contractor wishes to obtain information from a consultant engaged by the employer to support its case. Where the employer is not in possession of the consultant’s information and where there is no direct contractual link between the contractor and consultant, the contractor may be better served by making an application to the court to order production of that information.^[24]

However, the ACA contains no provision specifically empowering Nigerian courts to grant injunctions in aid of arbitration proceedings. It only empowers an arbitral tribunal to grant interim and/or injunctive relief in favour of a party to a pending arbitration.^[25]

In the absence of a specific provision in the ACA, it is debatable whether the courts can grant injunctions in support of arbitration proceedings. Two schools of thought have emerged. The first is that Nigerian courts can only grant injunctions in support of arbitration proceedings if the issues in dispute are brought before the courts.^[26] This viewpoint relies on the Nigerian Supreme Court decision in NV Scheep v MV S Araz,^[27] where the court refused to grant an interim order for security in support of an arbitration procedure the seat of which was in London. The Supreme Court held that security for damages is not a cause of action that can ground a claim, as the court cannot hear and determine a case where the only purpose of the action brought before it is for security in respect of foreign arbitration proceedings. In other words, the substantive dispute must be before the court before interim orders of injunction can be granted. The admitted exception to this rule is statutory intervention permitting the court to grant interim relief in the absence of a substantive claim. Nevertheless, as the ACA contains no specific provisions on court-ordered injunctions in support of arbitration proceedings, this exception does not apply.

The alternative school of thought is that a Nigerian court has the power to grant interim relief in support of arbitration.^[28] In the cases where this approach was adopted, it was held that the choice of arbitration does not bar resort to the Nigerian court to obtain security for any eventual award.^[29] The Nigerian courts have relied on Article 26(3) of the ACA Rules as validation for the exercise of the court’s jurisdiction to grant injunctive relief pending arbitration.^[30] Article 26(3) of the ACA Rules provides that ‘a request for interim measures addressed by any party to court shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of that agreement’.

While Article 26 has been relied on by Nigerian courts (ie, the Federal High Court^[31] and the State High Court^[32]) in the granting of an injunction in support of arbitration, it is unlikely that such a decision would stand on appeal considering the decision of the Supreme Court of Nigeria on the subject. Also, Article 26, construed properly, does not confer to the courts the power to grant injunction in support of arbitration. It merely provides that a request to the court for interim measures by either party to the arbitration would not operate to waive the right of parties to arbitrate their dispute before any tribunal of choice.

It is understandable that Nigeria’s courts would adopt a proactive approach in support of arbitration by granting injunction in aid of arbitration. However, unless reforms are made to the ACA empowering the court to grant injunction in aid of arbitration, there will continue to be doubts as to the jurisdiction of the courts to grant injunction in support of arbitration.

Unlike the ACA, Section 44(2) of the English Arbitration Act specifically empowers English courts to grant interim injunctions in support of arbitration.^[33] However, such powers can only be exercised by the courts where the arbitrators do not possess the necessary powers to act or are unable to act.^[34] Where such powers have been explicitly conferred on the arbitrators by the parties or the arbitrators have default powers under Sections 38(3)–(6) of the English Arbitration Act, then the courts cannot act. Finally, it should be noted that Section 44 of the English Arbitration Act is a non-mandatory provision, and therefore parties to an arbitration agreement can opt to exclude its application.

The UNCITRAL Model Law provides in Section 5, Article 17J for interim measures ordered by courts in support of arbitration, and specifically provides that ‘a court shall have the same power of issuing an interim measure in relation to arbitration proceedings irrespective of whether their place is in the territory of the enacting state, as it has in relation to proceedings in courts’. The existence of an arbitration agreement does not limit the powers of a competent court to grant interim measures under the Model Law.

Recognition and enforceability of orders and directions of emergency arbitrators

Under some institutional rules,^[35] including the International Chamber of Commerce Rules, parties may appoint an emergency arbitrator to deal with urgent applications before the full tribunal is constituted.^[36] The requirement for emergency arbitrators is perhaps most prominent in construction disputes, where there is often a need for emergency arbitrators to grant urgent relief such as the prevention of a call on the performance bond, preservation of assets, securing the claim or to suspend the application of liquidated damages.

The perceived advantages of seeking relief from an arbitrator rather than a court are that: (1) it is more consistent with the parties’ agreement to avoid approaching the national courts, especially if one party has concerns about the neutrality of a particular national court; (2) the key arbitral institutions are able to draw on a large pool of arbitrators and have the facilities to deal with applications on an urgent basis; (3) confining the dispute to arbitration maintains the confidentiality of the proceedings, which may not be the case once a reference has been made to court; and (4) the appointment of an emergency arbitrator will not require the applicant party to instruct additional local counsel to deal with an ancillary court application, as many jurisdictions prohibit foreign counsel from appearing before the courts. While the key benefit of appointing an emergency arbitrator over seeking relief from the main tribunal (once constituted) would of course be urgency, there is also the potential advantage that the emergency arbitrator is appointed on a one-off basis and will not form part of the main tribunal. Therefore, the perceived risk of any prejudgment of the merits often associated with seeking interim relief from the main tribunal is eliminated.

There are, nonetheless, limitations on the relief that an emergency arbitrator may grant. In particular, and in contrast to the relief available through the courts, it is typically not possible for an arbitrator to grant relief without notifying the other party. A party seeking a without notice freezing injunction to prevent the dissipation of assets would therefore likely still need to apply to the courts.^[37] Given the consensual nature of arbitration, it would also not be possible to seek any form of relief from an emergency arbitrator that would bind a third party, such as making premises available for inspection, or compelling the attendance of witnesses, as the arbitrator only has jurisdiction between the contracting parties.

A further and overriding consideration is the extent to which any order given by an emergency arbitrator would actually be enforceable and therefore effective. This is because only final, not interim, arbitral awards are enforceable under the New York Convention. As an award rendered by an emergency arbitrator can be varied or lifted by the main tribunal once constituted, there is an argument that it is not truly final and binding in accordance with Article V.I(e) of the Convention. As the New York Convention does not define an ‘arbitral award’, whether an award rendered by an emergency arbitrator could be recognised and enforced as if it were a court order is dependent on national legislation. Although some institutions have included provisions that explicitly confirm the binding nature of awards rendered by emergency arbitrators, this is unlikely to be sufficient in practice.

As a result, some jurisdictions have enacted legislation recognising the enforceability of orders and directions of emergency arbitrators. For instance, Singapore amended its International Arbitration Act to recognise the enforceability of emergency arbitrator’s orders.^[38] Similarly, the Hong Kong Arbitration Ordinance has been amended.

The ACA is silent on the enforceability of the orders of emergency arbitrators. In the absence of specific provisions for the recognition and enforcement of an award by an emergency arbitrator, there will always be doubts as to whether such an award would be enforceable by Nigeria’s courts under the New York Convention.

Similarly, the English Arbitration Act contains no specific provision recognising the enforceability of orders of emergency arbitrators. The question of whether interim relief granted by an arbitral tribunal would be effective was considered by the English court in Starlight Shipping v Tai Ping Insurance,^[39] against the background of Section 44(5) of the English Arbitration Act, which provides that a court shall only act: ‘if or to the extent that the Arbitral Tribunal, and any arbitral or other institution or person vested by the parties with power in that regard, has no power or is unable for the time being to act effectively’. Although the decision in that case was not made in the context of awards granted by emergency arbitrators, the judge held that while an arbitral tribunal could act effectively by rendering a final award, this was not the case for an interim award, which would not be enforceable under the New York Convention.

The recent case of ZCCM Investments Holdings v Kanasanshi Holdings Plc and Another,^[40] suggests that English law will determine whether or not emergency arbitrators’ decisions are equivalent to awards or procedural orders before deciding issues on substance or procedure.^[41] This judgment may enable English courts to interpret emergency arbitrators’ decisions as final and enforceable, using reasoning similar to that found in the US courts.^[42] Alternatively, as in France, it may be found that emergency arbitrators’ decisions will not constitute awards, on the basis that they are provisional and may be modified, meaning that they do not finally dispose of claims or issues. Moreover, it is unclear whether an emergency arbitrator can be considered an arbitrator under English law.^[43]

In light of this, it is recommended that reforms to the ACA consider enforceability of orders of emergency arbitrators. This would ensure that parties to both domestic and international arbitration relating to construction disputes can secure urgent remedies pending the constitution of the tribunal.

The effect of the Nigerian Limitation Law on the enforcement of arbitral awards issued under construction contracts

The position of the Supreme Court of Nigeria in City Engineering Nig Ltd v FHA on the limitation period for the enforcement of an award has created extreme difficulties for parties to a construction dispute as a result of the complicated nature of dispute resolution in standard construction contracts. In that case, the parties entered into a contract to build houses in Festac Town, Lagos State. During construction, a dispute arose, and the Federal Housing Authority threatened to terminate the construction contract in December 1980. Arbitration commenced a year later and ended in November 1985. The action to enforce the award was filed in 1988. However, the relevant Lagos State limitation law provided that an action to enforce an arbitration award could not be brought after six years from the date on which the cause of action accrued. Ogundare JSC for the Supreme Court held that:

‘a distinction must be drawn between an action to enforce an arbitral award – this is provided for in the arbitration law itself, and the relief that can be granted in such an action is an order enforcing the award as if it were a judgment of the court. And an action for damages for breach of an implied promise to perform a valid award where it is open to the court to order damages for failure to perform the award or decree, an appropriate case, specific performance of the award or grant an injunction restraining the losing party from disobeying the award or grant a declaratory relief. In my respectful view, the statutory period of limitation in respect of the former form of action runs from the breach that gave rise to the arbitration’.^[44]

The effect of this rule is that parties must commence and conclude arbitral proceedings within the period provided under the applicable limitation law in order to enforce such an award under the ACA. If parties are unable to conclude arbitration in a timely manner, they run the risk of their award being barred from enforcement under the ACA having become statute barred.

Standard forms of contract generally provide for a dispute resolution mechanism (pre-arbitral steps) to be followed before an arbitration can be initiated in respect of a construction dispute. For instance, sub-clause 66 of the FMW^[45] Form of Contract requires disputes to be settled by the engineer giving its decision within 90 days, failing which, or should the parties be dissatisfied with the decision, the parties may within 90 days refer the dispute to an arbitrator.

Another instance is the dispute resolution clause in the 2017 FIDIC suite of contracts, which requires the parties to fulfil certain condition precedents before they may resort to arbitration. There is also the Dispute Avoidance Adjudication Board (DAAB) procedure, which provides that the DAAB must deliver its decision within 84 days of a dispute being referred to it.^[46] One striking point is that if one of the parties fail to comply with the DAAB’s decision, the non-defaulting party can refer the non-compliance to arbitration in accordance with sub-clause 21.6.^[47] The effect, therefore, is that parties to construction disputes run the risk of having their arbitral awards being given the mandatory requirement to comply with pre-arbitration steps prior to initiating arbitral proceedings. There is, therefore, an urgent need to reform the enforcement of arbitral awards, particularly as it relates to construction disputes, to ensure that parties are able to enforce arbitration awards derived under construction contracts.

Suggested improvements to the ACA

It is the author’s view that the ACA is unsuitable to construction arbitration and improvements should be adopted. Although the ACA allows for flexibility on matters of evidence and presentation of a party’s case before the tribunal, it contains no provisions supporting multi-party arbitration, which is critical to construction disputes.

Also, there is a good argument that in compelling parties to adopt the ACA Rules for all arbitration conducted under the ACA, the ACA may be preventing parties from selecting other institutional bodies that may be preferred for construction disputes. The only alternative is for parties to adopt such other rules to augment the existing vacuum in the ACA Rules, which in principle is possible. However, the most efficient approach would be for the ACA to be amended to provide for the optional application of the ACA Rules, thereby allowing parties to select the rules of other institutional bodies preferred for construction arbitration disputes.

The ACA also contains no specific provision on the question of court-ordered injunction in support of arbitration, unlike the UNCITRAL Model Law and the English Arbitration Act. The absence of specific provision on the subject leaves doubts as to the ability of Nigerian courts to grant interim relief, especially in light of the Nigerian Supreme Court’s decision in NV Scheep v MV S Araz. It is suggested that the ACA be amended to confer on the courts the specific power to grant interim relief in support of arbitration as this is necessary for the effective and efficient conduct of the arbitration process, irrespective of whether it relates to international or domestic arbitration.

The ACA does not regulate the enforceability of orders and directives of emergency arbitrators. Given the acceptability of emergency arbitrators in the rules of most international and regional arbitration institutions, the absence of regulation on the enforcement of orders of emergency arbitrators continues to cast doubt on the enforceability of such orders in Nigeria under the New York Convention. It is therefore recommended that amendments be introduced to the ACA specifically recognising the enforceability of orders and directives of emergency arbitrators. Such an amendment would settle the question of whether orders of emergency arbitrators are final under Nigerian law for purposes of enforcement under the New York Convention.

Simon Ejiofor Ossai MCIArb, CMIOSH, FIIRSM, FRSPH is a consultant at Epinots in London, United Kingdom and can be contacted at s.ossai@epinots.com.