Arbitration in Nigeria: The dawn of a new era of readiness and willingness to arbitrate
Arbitration in Nigeria is regulated by the Arbitration and Conciliation Act (ACA), which was enacted in 1988 and has its roots in the UNCITRAL Model Law. It is undeniable that the promulgation of the ACA has contributed immensely to the development of arbitration as a sustainable alternative mechanism for disputes (particularly commercial disputes) resolution in Nigeria, instead of litigation. However, there has always been the lingering question as to whether the development of arbitration in Nigeria has been hampered by the fact that, in many cases, disputes in respect of which the parties have agreed to arbitrate still end up being litigated in the courts. There have also been questions as to whether the courts have been providing adequate support to the process of arbitration, in terms of the manner in which arbitration agreements are enforced in Nigeria.
READY AND WILLING TO ARBITRATE
The very first point at which the court has the opportunity to demonstrate judicial support for arbitration is the enforcement of an arbitration agreement by way of an Order for stay of proceedings pending arbitration. Under Nigerian law, if any party to an arbitration agreement commences any action in any court with respect to any matter which is the subject of the agreement, the other party to the agreement has two alternative options, which are to (a) to take steps in the litigation proceeds, in abandonment of the arbitration agreement, or (b) apply to the court for an Order of stay of proceedings pending arbitration. The focus here is option (b). In Nigeria, the provisions of section 5 of the ACA, regulate applications for Orders of stay of proceedings pending arbitration and provide that:
5. (1) If any party to an arbitration agreement commences any action in any court with respect to any matter which is the subject of an arbitration agreement any party to the arbitration agreement may, at any time after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the court to stay the proceedings.
(2) A court to which an application is made under subsection (1) of this section may, if it is satisfied-
(a) that there is no sufficient reason why the matter should not be referred to arbitration in accordance with the arbitration agreement; and (b) that the applicant was at the time when the action was commenced and still remains ready and willing to do all things necessary to the proper conduct of the arbitration, make an order staying the proceedings.
In the determination of an application of stay of proceedings pending arbitration, section 5(2) of the ACA uses the word ‘may’, thereby leaving the question of whether or not stay ought to be granted to the discretion of the court which, in any event, must be exercised judicially and judiciously. In exercising this discretion, the court must be satisfied as to the fulfilment of three conjunctive conditions, which are that firstly, the Applicant must have taken no step in the proceedings, secondly, there must be no sufficient reason why the matter should not be referred to arbitration and thirdly, the Applicant must be, at the time when the action was commenced, and still remains ready and willing to do all things necessary to the proper conduct of the arbitration.
With respect to the third condition in particular, the position of Nigerian law as to what amounts to satisfactory proof of readiness and willingness to do all things necessary to the proper conduct of the arbitration has been as decided by the Court of Appeal in the cases of MV PANORMOS BAY V OLAM (2004) 5 NWLR (PART 865) 1 and UNITED BANK FOR AFRICA PLC V TRIDENT CONSULTING LIMITED (2013) 4 CLRN 119. Essentially, the Court of Appeal held in those cases that an Applicant for stay of proceedings pending arbitration must demonstrate unequivocally by documentary and/or other visible means that he is willing to arbitrate. Such demonstration is satisfactorily done by notifying the other party in writing of his intention of referring the matter to arbitration and by proposing in writing an arbitrator or arbitrators for the arbitration. The position taken by the Court of Appeal in the two aforementioned cases has often faced criticism on the ground that it places a burden, on an applicant for stay of proceedings pending arbitration, which is more onerous than is contemplated by section 5(2) of the ACA.
A NEW ERA
Following a recent decision of the Court of Appeal, it appears that the court is relaxing its stance on what is required of an applicant in demonstration of readiness and willingness to arbitrate for the purposes of fulfilling the condition set out in section 5(2)(b) of the ACA. In the case of DR. CHARLES D. MEKWUNYE v. LOTUS CAPITAL LIMITED & ORS (2018) LPELR-45546 (CA) the Court of Appeal had cause to consider the provisions of section 5(2)(b) of the ACA as well as its previous decisions in MV PANORMOS BAY V OLAM and UNITED BANK FOR AFRICA PLC V TRIDENT CONSULTING LIMITED. In the LOTUS CAPITAL case, the court observed that the position taken in its previous decisions, to the effect that it is not enough for an Applicant for stay to merely depose that he is ready and willing to ensure the proper conduct of the arbitration “constitutes a departure from the plain provisions of Section 5(2) of the Act”. It was also held that unless the adverse party controverts the mere affidavit deposition of an applicant as to his willingness and readiness to arbitrate, the Court is at liberty to treat such deposition as having satisfied the condition of section 5(2)(b) and make the Order for stay.
Importantly, the court limited the applicability of UNITED BANK FOR AFRICA PLC V TRIDENT CONSULTING LIMITED by holding that the decision is only potent and tenable in instances where the Applicant’s deposition in the affidavit in support of the Application for stay is challenged and/or contradicted by the Respondent. In such cases, it will be necessary for the Applicant to provide further evidence in support of his deposition in that regard. Consequently, where the Respondent does not challenge the Applicant’s mere affidavit deposition as to readiness and willingness to arbitrate and there is no sufficient reason to why the matter should not be referred to arbitration, the court is entitled to make an Order of stay of proceedings.
MOVING FORWARD…
Going by the decision of the Court of Appeal in the LOTUS CAPITAL case, it is apparent that the court has restricted the applicability of its earlier decisions in the MV PANORMOS BAY V OLAM and UNITED BANK FOR AFRICA PLC V TRIDENT CONSULTING LIMITED by relaxing the burden on an Applicant seeking an Order of stay of proceedings pending arbitration. Going by this decision, it is apparent that the courts are now more willing to give judicial support to arbitration through the exercise of judicial discretion in favour of the enforcement of valid arbitration agreements through a clearly liberal but welcome
interpretation of section 5(2) of the ACA. Ultimately, in the grand scheme, this no doubt provides a positive answer to the question of whether the courts are doing enough to support arbitration in Nigeria.
Mofesomo Tayo–Oyetibo is the Managing Counsel of Twelve Legal and an expert in commercial disputes resolution.
mofe@twelvelegal.com