Author: Natasha Mellersh
Nigeria, one of Africa’s major economies, is of great interest to foreign investors from both inside and outside of Africa. Those investors are turning away from the country’s courts and leading a drive towards arbitration a still-developing discipline in Nigeria.
Rich in natural resources, and with an increasingly diversifying economy, Nigeria offers a sophisticated legal market and a very active disputes landscape.
However, slow and costly court proceedings have deterred many investors from choosing litigation to resolve their disputes. Despite promises of court reforms, investors are increasingly looking to alternative dispute resolution (ADR), particularly towards arbitration.
Despite the preference of investors to choose venues such as London, Paris or Geneva, African regional centres are increasingly providing an alternative. With a number of new regional centres such as the Lagos Court of Arbitration, and initiatives by the courts such as the Multi Door Courthouse – the idea of arbitrating within is gaining traction.
Paula Hodges QC, a London-based partner at Herbert Smith Freehills, counts the ease of enforcement around the world, privacy, neutrality and party autonomy as some of the key benefits of arbitration. These are significant deciding factors when choosing a dispute resolution method “where the dispute has a cross-border element or where the party against whom an award is likely to be enforced has significant assets located outside Nigeria”, she says.
“Arbitration can also be preferred where the person(s) deciding the dispute are likely to need specific expertise (of an industry sector or area of practice).”
However, arbitration is not the only form of ADR available – with conciliation, mediation and others also being offered.
KEEPING UP WITH COMMERCIAL DEMANDS
The courts are doing their best to cope with managing commercial disputes. The High Court of Lagos State and the Lagos Division of the Federal High Court are the courts that bear the greatest strain in terms of the sheer volume of commercial disputes that are submitted to them for adjudication and they have made appreciable effort in tackling this workload.
However, a lot more needs to be done, “both in terms of resources and in terms of processes and procedures”.
For foreign investors, one of the factors in selecting a dispute resolution mechanism is the perception of whether or not their disputes would be resolved quickly and fairly by the local courts:
In recent years, there has been a positive trend of the Nigerian courts holding parties to their agreed bargain.
The Courts have also been more open to supporting arbitration and enforcing arbitral awards. These are all positive steps in attracting foreign investment. All measures that visibly increase the efficiency and impartiality of the Nigerian courts will help to reassure investors that the Nigerian courts represent a suitable forum for the resolution of their disputes.
There has been a considerable drive to reform the courts, and make them more efficient and adaptable to demands of parties. Many Nigerian courts have implemented a fast track route for high value disputes – a move that has been embraced by many foreign investors who have no other option for resolving their disputes.
The Lagos High Court, which handles the bulk of commercial disputes in Nigeria, has recently amended its High Court Civil Procedure Rules to make an attempt at settlement through ADR processes a pre-requisite for filing actions in court. Before filing a claim, the claimant is now obliged to file a pre-action protocol indicating their attempt to seek an out of court settlement.
Thereafter if the High Court Registry believes the matter is capable of settlement, the matter is transferred to an ADR track, where the parties are required to pursue court supervised mediation processes within a fixed period. It is only if this is unsuccessful that the claim returns to the court to be litigated.
It is too soon to see if this procedure will benefit the business community, or merely become another layer of delay in the court system.
While these court reforms are generally seen as a step in the right direction by foreign investors and Nigerian lawyers, not everyone is hopeful that the changes will be sufficiently effective.
