NIGERIA / June 5 2024
1 What are the most popular dispute resolution methods for clients in your jurisdiction? Is there a clear preference for a particular method in commercial disputes? What is the balance between litigation and arbitration? What are the advantages and disadvantages of the most popular dispute resolution methods?
The most popular and preferred dispute resolution methods in Nigeria are litigation and arbitration, although mediation is increasingly gaining momentum. Litigation and arbitration are generally adopted by clients in the resolution of various commercial disputes as these dispute resolution methods provide effective, final, and binding resolutions to commercial disputes.
Most commercial contracts, especially those involving foreign counterparties, typically contain arbitration clauses that seek to refer disputes arising from such contracts to arbitration due to the advantages of arbitration over other dispute settlement mechanisms. Some of the reasons why arbitration is preferred over litigation include the fact that arbitration proceedings are quicker (relative to court proceedings, which are plagued by prolonged delays), confidentiality of arbitration proceedings (unlike court proceedings, which are conducted in open courts and whose records may be obtained by non-parties), and that parties may choose their arbitrators including those with specific subject matter expertise, depending on the nature of the issues in controversy, ease of enforcement, particularly in multiple jurisdictions where an award debtor may have assets.
In relation to disadvantages, one of the main criticisms of arbitration is that it is increasingly becoming very expensive. We have seen a few cases where arbitration proceedings are either withdrawn or stalled due to the inability of one or more of the parties to pay the arbitration costs. Also, the prevalent practice whereby losing parties challenge arbitral awards mostly on frivolous grounds has created the impression that arbitration is but an expensive prelude to litigation. Relative to arbitration, litigation is less expensive. However, litigation in Nigeria is still plagued by undue delays. Litigants in Nigeria have a constitutionally guaranteed right of appeal against court decisions and regrettably this right has been abused by litigants to bring frivolous appeals to frustrate the winning party. Unlike arbitration, which is conducted in private, court proceedings in Nigeria are not private, which means that confidential, market sensitive or strategic commercial information disclosed in litigation could easily get into the public domain or the hands of a competitor.
2 Are there any recent trends in the formulation of applicable law clauses and dispute resolution clauses in your jurisdiction? What is contributing to those trends? How is the legal profession in your jurisdiction keeping up with these trends and clients’ preferences? What effect has Brexit had on choice of law and jurisdiction clauses?
Foreign entities or local entities with significant foreign control are more inclined to choose foreign laws to govern their contracts and often insert multi-tier dispute resolution clauses in their contracts that provide for recourse to negotiation between top executives of both parties as a first step towards dispute resolution and thereafter binding arbitration where negotiation fails. In addition, there is a preference in international transactions to subject disputes arising from such transactions to the exclusive jurisdiction of foreign courts or, in relation to arbitration, to foreign seats, usually the English courts. This trend may not be unconnected with the slow pace of litigation in Nigeria. While most Nigerian lawyers prefer to retain commercial disputes within Nigeria, which has excellent local expertise, the decision is ultimately the client’s particularly where the client is sophisticated and likely to subject local counsel advice to further analysis by their in- house legal team or foreign legal advisers. Regardless of local counsel’s preferences, sound legal advice cannot but recognise the fact that litigation in the Nigerian courts tend to be protracted, a fact that weakens any suggestion during contract negotiation that disputes be resolved in the Nigerian courts. Brexit has had no noticeable effect on the choice of law and jurisdiction clauses in Nigeria. On the contrary, English law and English jurisdiction remain the most popular choice of foreign law and jurisdiction in international contracts involving Nigerian parties that we have seen.
3 How competitive is the legal market in commercial contentious matters in your jurisdiction? Have there been recent changes affecting disputes lawyers in your jurisdiction? How is the trend towards “niche” or specialist litigation firms reflected in your jurisdiction?
The legal market in Nigeria is highly competitive due to the availability of a large pool of highly qualified, experienced, and regarded dispute lawyers who are ranked by international legal directories, such as The Legal 500 and Chambers.
The disputes market is dominated by generalist law firms/practitioners but there is a noticeable trend towards specialisation and niche practice in various areas ranging from energy, aviation, banking, oil and gas, and admiralty. However, the practice among the big law firms appears to be to develop capacity in several niche areas such that they can service clients in those areas rather than focus on and be known for just one or two niche dispute areas.
There have been no recent changes in our jurisdiction affecting disputes lawyers that we are aware of.
4 What have been the most significant (by value or impact) recent court cases and litigation topics in your jurisdiction?
A notable decision that affects the Nigerian jurisdiction both in terms of the value and impact on the Nigerian economy is the case of The Federal Republic of Nigeria v Process & Industrial Developments Limited [2023] EWHC 2638 (Comm), where the English Court set aside an arbitral award made in favour of P&ID, which, as of 2017, stood at US$11 billion. The award was set aside on the grounds that it was obtained by fraud.
5 What are clients’ attitudes towards litigation in your national courts? How do clients perceive the cost, duration, and certainty of the legal process? How does this compare with attitudes to arbitral proceedings in your jurisdiction?
As indicated above, litigation in Nigerian is plagued by inordinate delays. Clients are, therefore, understandably frustrated by the long delays that continue to blight litigation in Nigeria, and this frustration is one of the major reasons for clients pivoting towards arbitration and other ADR mechanisms such as negotiation and mediation. The frequent adjournments and prolonged delays in the Nigerian courts, including appeals that are usually filed for purely strategic reasons make it difficult for clients to manage litigation spend because cases usually last much longer than their estimated timeframes. Another factor that adds to clients’ frustration with litigation in Nigeria is the issue of uncertainty and lack of predictability in judicial outcomes occasioned by inconsistent decisions on similar factual scenarios. Contrariwise, although arbitration is becoming increasingly expensive, clients, particularly in international transactions, still prefer arbitration because it is more expeditious, and they get to choose arbitration seats that are more efficient in case they need cou rt intervention at any stages of the arbitration.
6 Discuss any notable recent or upcoming reforms or initiatives affecting court proceedings in your jurisdiction (including any changes as a result of the covid-19 pandemic).
The covid-19 pandemic affected court proceedings as it did many aspects of human lives. This gave rise to new ways of doing things and the courts were not insulated. During and in the aftermath of covid-19, the heads of the various courts in Nigeria either introduced or refined already existing rules of procedure, guidelines or practice directions for conducting court proceedings virtually.
Furthermore, legislative changes have been made to accommodate electronic depositions and filings. For instance, the Evidence Act was amended in 2023 to provide for electronic deposition, while some courts revised their rules of procedure to allow for electronic filings, depositions and service of court processes by electronic means such as emails and WhatsApp messages.
The High Court of Lagos introduced a purpose-built portal for e-justice delivery at the end of 2022. The portal includes features such as e-filing and online case tracking. The portal enables filing of court processes from anywhere in the world, and payable fees are automatically accessed.
7 What have been the most significant (by value or impact) recent trends in arbitral proceedings in your jurisdiction?
Prior to the covid-19 pandemic, most preliminary and pre-hearing review meetings in arbitral proceedings were held physically. As a result of the covid-19 pandemic, the current trend in arbitral proceedings in Nigeria is that most preliminary and pre-hearing review meetings in arbitral proceedings are now held virtually.
8 What are the most significant recent developments in arbitration in your jurisdiction?
After 35 years of being enacted as the principal legislation regulating arbitration practice in Nigeria, the Arbitration and Conciliation Act 1988, Chapter A18, Laws of the Federation of Nigeria 2004 (the ACA) was repealed and replaced by the Arbitration and Mediation Act 2023 (the AMA). The AMA was assented to by the President of the Federal Republic of Nigeria on 26 May 2023. The enactment of the AMA was enthusiastically welcomed by the arbitration community both in Nigeria and internationally, and it is expected that the AMA, which has addressed the lacuna identified in and the limitations in its application of the ACA and introduced some completely new and innovative provisions, will enhance the efficiency of arbitration and the attractiveness of Nigeria as a seat of international commercial arbitration. For instance, regarding the requirement that an arbitration agreement shall be in writing, the AMA expanded the meaning of the word ‘writing’ in two ways. First, it provides that an arbitration agreement is in writing if its content is recorded in any form, whether the arbitration agreement or contract has been concluded orally, by conduct, or by any other means. Second, it provides that the requirement for arbitration agreement to be in writing is met where it is by an electronic communication and goes on to define what constitutes electronic communication.
The AMA also makes it mandatory for a court to grant stay of proceedings pending arbitration unless the arbitration agreement is void, inoperative or incapable of being performed. This provision addressed the problem caused by the contradictory provisions of sections 4 and 5 of the ACA, which respectively made it mandatory (section 4) and discretionary (section 5(2)) for the courts to grant a stay of proceedings where a matter that is the subject matter of an arbitration agreement is litigated by a party to the arbitration agreement. The AMA also abolished the twin torts of maintenance and champerty which stood in the way of third-party funding of arbitration. The AMA also introduced a truly innovative opt-in mechanism of award review tribunal. Other features of the AMA include the provisions on limitation period for enforcement of an arbitral award, appointment of an emergency arbitrator, the power of the court to grant interim protective measures in aid of arbitration, joinder of parties and consolidation of arbitration proceedings, amplification and delineation of the power of an arbitral tribunal to grant interim measures, exclusion of error of law on the face of the award as a ground for setting aside an arbitral award and omission of misconduct as a stand-alone ground for setting aside an arbitral award.
The AMA also contains Arbitration Procedure Rules that will govern arbitration proceedings both in the High Court and the appellate courts in Nigeria. The rules provide expedited timelines for filings and hearings in arbitration matters. For instance, (1) any arbitration proceedings in the High Court shall be listed in the cause list such that the first hearing shall be no later 30 days after proceedings are served on the defendant or 40 days where the defendant is outside jurisdiction, (2) unless a party requires an oral hearing, the court may decide the entire arbitration claim without an oral hearing, (3) in relation to appeals, the timelines for compilation of record of appeal has been abridged such that the record of appeal arising from arbitration proceedings shall now be prepared by the appellant and filed together with the appeal or within 14 days of filing the appeal, and (4) an arbitration appeal shall be entered in the court’s cause list such that its first hearing shall be no later than six months after the filing of the record of appeal.
These timelines, if implemented in relation to arbitration claims and arbitration appeals, will significantly fast track arbitration proceedings in the Nigerian courts, thus enhancing Nigeria’s appeal as a seat of arbitration.
9 How popular is ADR (e.g., mediation, expert negotiation) as an alternative to litigation and arbitration in your jurisdiction? What are the current ADR trends? Do particular commercial sectors prefer or avoid ADR? Why?
ADR mechanisms, particularly negotiation and mediation, are quite popular in Nigeria. For instance, mediation is the most used ADR mechanism in the settlement of commercial disputes at the Lagos Multi-door Court House (LMDC) as well as in the multi-door courthouses established by 14 other states and the Federal Capital Territory, Abuja. In the High Court of Lagos, matters are mandatorily screened for suitability for referral to mediation at the LMDC.
Based on anecdotal evidence, there has been a steady increase in the number of disputes resolved through mediation in Nigeria, especially through the multi-door courthouses annexed to various high courts in Nigeria. Recent trends show that owing to the recognition of the efficacy of ADR, more states in Nigeria have incorporated ADR into their court rules, so currently, over 14 states and the Federal Capital Territory, Abuja, have incorporated ADR mechanism and created multi-door courts in their court rules.
In 2019, the Chief Judge of Lagos State issued the Expeditious Disposal of Civil Claims Pre-Action Protocol, No. 2 of 2019 which has as one of its objectives, to encourage parties to consider and explore ADR before filing an action. Under the Pre-Action Protocol, before filing an action, a claimant must prepare and serve on the defendant a memorandum of claim setting out concise details of his claim and a proposal for settlement of the dispute using the ADR mechanism, including but not limited to negotiations, mediation, or arbitration. Under the High Court of Lagos State (Civil Procedure) Rules 2019, a claimant must include Pre- Action Protocol Form 01, which is a deposition on oath confirming that the claimant complied with the Pre-Action Protocol and details of the efforts made to resolve the matter amicably.
Similarly, the Federal Capital Territory Abuja, High Court (Civil Procedure) Rules 2018, requires a claimant to file, along with their originating court documents, a Certificate of Pre-Action Counselling, which is a written confirmation by the legal practitioner that they have advised their client on the merits of the case and informed them of the availability of ADR mechanisms. In the same vein, the Federal High Court (Alternative Dispute Resolution) Rules 2018 aims to minimise frustration and delays in justice delivery by providing a standard procedural framework for the fair and efficient settlement of disputes through ADR mechanisms. The Federal High Court (Alternative Dispute Resolution) Rules 2018 established a Dispute Resolution Centre that is now a department of the Court and empowered to, among other things, apply mediation, conciliation, arbitration, neutral evaluation and any other ADR mechanisms in the resolution of disputes, as may from time to time be referred to it from the Court.
Perhaps the most significant development regarding the use of mediation as an alternative dispute settlement mechanism is the recent domestication through the AMA of the Singapore Convention on the Recognition and Enforcement of Settlement Agreements Resulting from Mediation (the Singapore Convention). With the domestication of the Singapore Convention, we expect to see an uptick in the use of mediation as a means of resolving commercial disputes, particularly disputes involving foreign parties.
10. What is the position in relation to litigation funding in your jurisdiction? Is funding available? Have there been any significant developments in this area in your jurisdiction?
Litigation funding is not applicable in Nigeria. This is because under common law, which is also applicable to Nigeria as part of the received English law, agreements for the funding of litigation by third parties are void and unenforceable on grounds of public policy. However, section 61 of the AMA has abolished the twin torts of maintenance and champerty in relation to third-party funding of arbitration. Specifically, section 61 of the AMA provides that the torts of maintenance and champerty, including being a common barrator, do not apply in relation to Third-Party Funding of arbitration. This provision applies to arbitrations seated in Nigeria and to arbitration-related proceedings in any court within Nigeria.
The Inside Track
What is the most interesting dispute you have worked on recently and why?
We were recently involved in a shareholders’ dispute by which certain shareholders of a company commenced several actions in different divisions of the Nigerian Federal High Court alleging that the affairs of the company were being conducted in an unfairly prejudicial and oppressive manner against their interest as minority shareholders of the company. Although the substance of the petitioners’ pleaded case involved alleged bullying, racism, discrimination, intimidation, victimisation, etc, against some employees of the company by the managing director of the company and that the management of the company failed to exercise oversight over the managing director and, or condoned the conducts alleged against him, the action was labelled a shareholders’ minority action, and thus the petitioners were able to obtain an interim order restraining the company’s management from running the company’s affairs and directing the managing director of the company to step down from running the affairs of the company pending the hearing of the petitioners’ motion on notice for similar orders. Although the interim order was eventually set aside, the matter threw up several interesting legal issues, such as whether the Federal High Court had jurisdiction to entertain the petitions, which shorn of its labelling as minority shareholders actions, concerned in substance matters that should have been litigated in the labour and employment court. Other issues raised in the petitions included whether the petitioners had the locus standi to litigate alleged wrongs done to some employees of the company who were not even joined as parties to the suit and whether the court ought to have granted the interim order given that based on the affidavit evidence of the petitioners, the petitioners had not established even on a prima facie basis any wrong to them in their capacities as shareholders. These issues are awaiting determination in appeals filed by the company and its directors.
What do you consider to have been the most significant legal development or change in your jurisdiction of the past 10 years?
The recently enacted Arbitration and Mediation Act of 2023 is, in our view, the most significant legal development or change in our jurisdiction in the past 10 years. The AMA was passed by the lower legislative chamber, the House of Representatives, since 2020 but was not passed by the upper chamber, the Senate until 2022. Second, even after being finally passed by the Senate it took over a year before it received presidential assent to become law, so the AMA was anticipated by the arbitration community. In terms of impact, it contains several provisions (some of which have been highlighted above) that, if properly implemented, would significantly improve the practice of arbitration in Nigeria and potentially make Nigerian an attractive seat of arbitration in sub-Saharan Africa.
What key changes do you foresee in relation to dispute resolution in the near future arising out of technological changes?
We foresee an increase in the deployment of technology in dispute resolution, particularly in such areas as case management, research, discovery and prediction of case outcomes.
