The Nigerian Arbitration and Mediation Act 2023: A comparison with the Arbitration and Conciliation Act 2004 and global practices

Tiwalade Aderoju 
Olympus Solicitors and Advocates, Lagos
tiwaade@ymail.com
 

Introduction

The field of arbitration and mediation has witnessed significant developments over the years, with legislative changes often reflecting evolving global practices. Nigeria, in an attempt to get up to speed with the evolution of the global best practices in the arbitration and mediation ecosystem, enacted the Arbitration and Mediation Act 2023 (the 'New Act' or 'AMA') on 26 May 2023.

The repeal of the 35-year-old Arbitration and Conciliation Act of 1988 (the 'ACA' or 'Old Act') by the New Act signifies a significant legal transition. However, this transition goes beyond mere repeal, as the New Act addresses and improves upon the weaknesses and inadequacies present in the Old Act. It achieves this by incorporating numerous provisions from the UNCITRAL Model Law of 2006, aligning Nigeria's arbitration and mediation framework with international standards.[1] Consequently, the New Act not only reinforces Nigeria's status as a prominent commercial hub but also demonstrates the nation's unwavering commitment to creating a conducive environment for alternative dispute resolution in accordance with contemporary global norms.

This article delves into the New Act, highlighting its innovative provisions and drawing comparisons with the Old Act and international best practices in arbitration.

Key changes and provisions

The New Act is divided into three (3) Parts with ninety-two (92) and three Schedules. The Parts and Schedules are:

Part I: Arbitration - This Part applies to both domestic (all disputes between parties/entities within the jurisdiction of Nigeria’s thirty-six states and the Federal Capital Territory), Nigerian seated arbitrations as seen in section 1(6); whilst also having extra-territorial application as seen in section 1(7) of the act.

Part II: Mediation - Unlike the Old Act, which did not provide for mediation, the New Act provides for the settlement of both domestic and international disputes through mediation subject to Nigerian Law.

Part III: Miscellaneous provisions

The Schedules: The New Act contains three (3) Schedules. The First Schedule contains Arbitration Rules serving as the guiding framework for resolving disputes brought under the jurisdiction of the New Act.  These rules apply when Parties consensually agree that these rules apply to their arbitration proceedings. The Second Schedule is dedicated to the domestication of the Convention on the Recognition and Enforcement of Arbitral Awards (New York Convention) within the legal framework of Nigeria. Lastly, the Third Schedule comprises the Arbitration Proceedings Rules, providing additional procedural details and guidelines for arbitration proceedings conducted under the New Act. These rules in the Third Schedule are concerned with arbitration applications before the High Courts. These schedules collectively facilitate the efficient and structured application of the New Act's provisions.

Some of the novel provisions introduced in the New Act are as follows:

Sets out clear objectives of the Act 

The ACA was silent on the objectives of the Act - this left room for ambiguity in interpretation as the lawmakers' intent was not expressly spelt out. However, the Arbitration and Mediation Act 2023 sets out the legislative objective.[2]

Enforcement of arbitration agreements

The previously existing ambiguity within Sections 4 and 5 of the ACA regarding whether granting an order for a stay of proceedings pending arbitration was a mandatory or discretionary function of the court has now been resolved. 

Under the ACA, the court had the discretion to allow or reject an application for a stay of proceedings depending on the ability of the Applicant to show sufficient reason or willingness to proceed with arbitration as per the arbitration agreement.[3] This can be seen in the case of Enyelike v Ogoloma,[4] where it was held that 'An application seeking a stay of proceedings to enable parties refer to arbitration is not granted as a matter of course. For such an application to be granted, the applicant must have taken no step in the proceedings'. However, with the advent of Section 5 in the AMA, a mandatory obligation has been placed on the court  to refer parties to arbitration and stay proceedings unless the arbitration agreement is “void, inoperative, or incapable of being performed.'

The use of accessible electronic communication

The Old Act had also had a narrower definition of writing, which could take the form of a document signed by the involved parties. It also allowed for agreements to be formed through exchanges of 'letters, telex, telegrams, or other modes of communication' that could create a record of the arbitration agreement.[5] 

In contrast, the New Act maintains these established forms of written agreements and introduces the concept of 'electronic communication' to meet the writing requirement. According to the AMA, an arbitration agreement can now be considered validly written if it is made through 'electronic communication' that is readily accessible and can be used for future reference. If an electronic communication meets these criteria, it fulfils the conditions for a valid arbitration agreement.[6]

The term 'electronic communication' in the AMA is defined in Section 91 to encompass any communication made through data messages, which includes information generated, sent, received, or stored by electronic, magnetic, optical, or similar means. This definition covers various forms of electronic communication, such as email, text messages, social media chats, and more.

While the ACA may have left room for interpretation regarding what constitutes 'other means of communication' under its provision, the AMA has effectively clarified and resolved this ambiguity by explicitly including 'electronic communication' as an acceptable form of satisfying the mandatory requirement for a written arbitration agreement.

Default number of arbitrators 

Under the New Act, a notable alteration is the adjustment of the default number of arbitrators from three to one.[7] This alteration carries substantial significance, particularly in the context of domestic arbitrations, where the financial burden of compensating three arbitrators has posed a hindrance for participants. This shift aligns Nigeria's arbitration framework with established global standards, mirroring the provisions of the UNCITRAL Model Law. In cases where the involved parties cannot agree on a single arbitrator, an intriguing provision in Section 7(3) empowers the non-defaulting party to seek recourse through the court or, remarkably, any arbitral institution operating in Nigeria to facilitate the appointment process. 

Emergency arbitrators 

Another noteworthy provision in the Act is the introduction of the emergency arbitrator proceedings, outlined in Section 16. This provision enables parties to seek interim relief before the formation of the Arbitral Tribunal by applying to their designated arbitral institution or the court for the appointment of an emergency arbitrator. If the application is approved, the arbitral institution or the court is required to designate the emergency arbitrator within two business days of receiving the application.[8] Importantly, the rulings issued through these emergency proceedings are binding  and enforceable by the parties while awaiting the final decision from the Arbitral Tribunal. It should however be noted that the Arbitral Tribunal can modify or suspend emergency decisions reached at the emergency proceedings. There are also circumstances these emergency decisions cease to be binding.

This provision is designed to streamline and expedite the arbitration process in Nigeria. It aligns with the arbitration procedure rules of leading global arbitral institutions such as the London Centre of International Arbitration (LCIA)[9] and the International Chambers of Commerce (ICC).[10] 

Recognition and enforcement of interim measures

The global landscape regarding the recognition and enforcement of interim measures has been a subject of controversy. However, the New Act in Nigeria takes a decidedly pro-enforcement position in this regard. It permits a party to pursue the recognition and enforcement of an interim measure in a manner akin to that of an arbitral award, as outlined in Section 28. This approach explicitly prohibits the court from engaging in a substantive review of the interim measure, restricting any refusal to specific grounds, mirroring the criteria for refusing the recognition and enforcement of an arbitral award.

Statute of limitation for arbitral proceedings

The AMA is also widely celebrated because it laid to rest the issue of computation of time within arbitral proceedings. In the case of City Engineering Nig. Ltd v Federal Housing Authority,[11] the Supreme Court held that the statutory period of limitation starts to run for the purpose of the enforcement of an arbitration award at the date of the accrual of the original cause to action. Section 34 of the Act extends the application of the limitation statutes to arbitral proceedings, aligning them with the rules governing judicial proceedings. This new provision offers added protection to arbitral and mediation proceedings by excluding the commencement of arbitration and the date of the award, particularly in cases involving disputes related to an award.[12] This measure enhances the safeguarding of arbitral and mediation processes. 

Consolidation of arbitral proceedings

Unlike the ACA, which lacked provisions for consolidating arbitral proceedings, the AMA introduces the possibility of consolidating ongoing arbitral proceedings, even when different parties are involved.[13] Additionally, the AMA allows for concurrent hearings, but it is important to note that the decision to pursue consolidated or concurrent hearings rests solely with the parties involved. Arbitral Tribunals are explicitly prohibited from ordering such hearings, except with the consensus of parties.[14] The adoption of consolidated and concurrent hearings has the potential to yield significant advantages, including cost and time savings, as well as a reduction in the duplication of arbitral proceedings. This, in turn, can help conserve valuable judicial resources should parties choose to approach the court for interim orders or challenge an arbitration award.

Joinder of parties

The joinder of parties is another significant stride in Nigerian arbitration introduced by the New Act. This provision confers Arbitral Tribunals with discretionary authority to include an additional party in the arbitration, provided that prima facie evidence exists showing that the party is bound by the arbitration agreement giving rise to the arbitration.[15]

The inclusion of the term 'prima facie', as under Section 40 of the New Act, connotes the need for reasonable belief or facts evidencing the party’s obligation under the agreement. This provision is in tandem with the principles outlined in the UNCITRAL Arbitration Rules,[16] which empowers an Arbitral Tribunal to join a third party after considering various factors such as the legal interests of the parties, the potential conflict of interests, and the timing of the request.[17]

Third-party funding 

The enactment of the Arbitration and Mediation Act aligns Nigeria with jurisdictions like Singapore and Hong Kong by explicitly allowing third-party funding, enhancing its appeal as a dispute resolution hub in Africa. Section 91 of the Act defines a third-party funder as an entity or person not involved in the dispute but who financially supports part or all of the proceedings' costs in various ways. Importantly, the Act abolishes the prohibitive torts of maintenance and champerty concerning arbitration and related court proceedings, thus permitting third-party funding arrangements.[18] It also introduces regulations for disclosing third-party funding[19] and security for costs related to third-party funders.[20] The Act mandates disclosure of the funder's identity to counterparties, the Arbitral Tribunal, and, when applicable, the arbitral institution. 

This shift may mark the beginning of a broader trend in Africa to facilitate third-party funding.

Arbitrator’s immunity

The New Act introduces a significant provision: it acknowledges and grants immunity to arbitrators, appointing authorities, and arbitral institutions executing their duties, except in cases of proven bad faith.[21] This provision is a novel addition not found in the ACA and aims to protect arbitrators while carrying out their responsibilities, similar to judicial officers It ensures impartial decision-making by alleviating concerns about personal liability, allowing arbitrators to focus solely on the case's merits and exercise independent judgment without fear of legal consequences for their decisions.

The Award Review Tribunal (ART)

Termed an 'unusual concept',[22] the New Act introduces a unique provision allowing parties to opt for a review of their arbitral award by an Award Review Tribunal (Section 56). This mechanism falls within the parties' jurisdiction and permits a second tribunal to assess challenges to an arbitral award, mirroring the grounds considered by a court for setting aside an award. Similar to the court's authority, the Award Review Tribunal can either partially or fully set aside the award or uphold it entirely. The Tribunal is expected to decide within 60 days of its establishment. In cases where the Award Review Tribunal's decision is deemed unsound, the court possesses the authority to reinstate the award that was previously set aside. However, the court can only set aside an award upheld by the Award Review Tribunal on the grounds of non-arbitrability and public policy.

Mediation

In contrast to the Old Act, the Arbitration and Mediation Act (AMA) embraces mediation as a legitimate dispute resolution mechanism within Nigeria. Unlike the ACA, the New Act defines ‘mediation’ as 'the process where parties seek the assistance of a neutral third party or parties to help them in reaching a mutually agreeable resolution for their dispute arising from a contractual or legal relationship'.[23] This definition gives an encompassing and wider application to mediation, conciliation and other analogous mechanisms. 

The AMA’s framework was largely influenced by the UNCITRAL Model Law on International Commercial Mediation, 2018. It defines the scope of disputes amenable to mediation under the Act, outlines the procedure for commencement of mediation, specifies the number of mediators required,[24] delineates the procedures at mediation, addresses issues bordering on the immunity of mediators[25] and their fees, and many more. Furthermore, the AMA acknowledges the applicability of the Singapore Convention on Mediation, 2018, for enforcing international settlement agreements made outside of Nigeria, contingent upon the State's accession to the Singapore Convention.[26]

Conclusion

The Arbitration and Mediation Act of 2023 has established a legal framework that enhances the transparency, speed, autonomy, and enforceability of arbitral awards and mediation settlement agreements. These critical elements are vital for a robust and efficient arbitration system that solves the evolving needs of businesses and individuals seeking fair and effective dispute resolution by impartial tribunals, free from unnecessary delays or costs.

This Act also demonstrates Nigeria’s commitment to bolstering its reputation, promoting arbitration within its borders and aligning its practices with global standards in international arbitration.

However, it is important to recognise that no legislation is flawless. Challenges may surface during the Act's implementation and interpretation, necessitating ongoing evaluation and potential amendments to address emerging issues effectively.

[1] The Arbitration and Conciliation Act was in force before the UNCITRAL Model Law on International Arbitration, 2006, the UNCITRAL Model Law on International Commercial Mediation, 2018, etc. Thus, the New Act merely adopted these Model laws thereby adopting international best practices.
[2] Section 1 of the Arbitration and Mediation Act 2023 (the 'AMA').
[3] Section 5 of the Arbitration and Conciliation Act 2004 (the 'ACA').
[4] 14 NWLR (Pt. 1107) 247 (2008).
[5] Section 9 (1) (a-c) of the ACA.
[6] Section 2 (4) (a) ibid.
[7] Section 6 (2) ibid.
[8] Section 16 (5) ibid.
[9] Article 9B, LCIA Arbitration Rules.
[10] Article 29, ICC Rules of Arbitration.
[11] 9 NWLR (Part 520) 224 (1997).
[12] Section 34 (4) ibid.
[13] Section 39 (1) (a) ibid.
[14] Section 39 (2) ibid.
[15] Section 40 ibid.
[16] The UNCITRAL Arbitration Rules (2021): UNCITRAL Expedited Arbitration Rules and UNCITRAL Rules on Transoaewny in Treaty-based Investor-State Arbitration.
[17] Article 17(5) of the UNCITRAL Arbitration Rules.
[18] Section 61 ibid.
[19] Section 62 (1) ibid.
[20] Section 62(3) ibid.
[21] Section 13(1) ibid.
[22] Opeyemi L, Robert W. "Recent Arbitration Reforms in Nigeria." White & Case Online Blog. 15 June 2022. Accessed 25 September 2023. Available at: https://www.whitecase.com/insight-alert/recent-arbitration-reforms-nigeria.
[23] Section 91 (1) ibid.
[24] Section 72 ibid.
[25] Section 81 ibid.
[26] Section 87 ibid.