Funmilayo Odude, Partner, Commercial and Energy Law Practice (CANDELP)

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One other bill President Buhari should sign into law 17 Nov 2022

President Muhammadu Buhari signed the Nigerian Startup Bill (NSB) into law on the 19th of October 2022, causing great excitement in the startup ecosystem. I had, in a piece published earlier this year, stated that the NSB, is an important piece of legislation for the purpose of creating a legal and institutional framework for the development of startups in Nigeria and for protecting the space from fraudulent, unlicensed, and unregistered entities. I, however, added that the projection of a holistic legislation as a panacea to regulatory uncertainties and investment attractiveness is a little bit too optimistic and impracticable considering Nigeria’s multi-regulatory landscape.

I posited that constant engagement with stakeholders at all levels until the legal and regulatory space catches up with ongoing innovation would always be required. It is, therefore, hoped that there would be the political will required to effect the provisions of the Act in a manner that would attract the volume of venture capitalism needed for the astronomical growth the Nigerian start up ecosystem is capable of. For a country with the human capital and population that Nigeria has, the tech startup ecosystem presents one of the most sustainable opportunities for the country to develop its economy and tackle the big twin problems of poverty and unemployment.

There is another piece of legislation awaiting the assent of the President that is also capable of attracting ‘investment’ and tourism of a different kind into Nigeria. It is hoped that Mr. President will sign this bill into law before the end of his administration. The bill in reference is the Arbitration and Mediation Bill (AMB), which has been passed by both legislative houses. The Senate passed the Bill on the 10th of May 2022.

The extant Arbitration and Conciliation Act was enacted in March 1988. Given the growth and development in international trade and investment generally and international commercial disputes particularly since that time, it is unsurprising that that piece of legislation has become grossly inadequate to deal with settling of both local and international commercial disputes through alternative dispute resolution mechanisms.

With the growth of alternative dispute resolution (ADR), and arbitration and mediation being the two most popular of the alternative modes of settling commercial disputes, Nigeria has witnessed a huge number of exports of arbitral proceedings to more friendly climes where the laws and procedures adequately ensure better outcomes for the parties. Given the party-driven nature of ADR, it has become common practice for contracts between even Nigerian contracting parties, or contracts to be performed in Nigeria, to specify arbitral seats or rules of procedure out of the country. It is not uncommon to find contracts to be governed under Nigerian law choose countries such as United Kingdom, Singapore, or South Africa as seats for the arbitration. A quick example is the notorious P&ID case where the seat of arbitration was London.

The current Bill awaiting the assent of the President is not the first attempt to amend our arbitration law. Two Bills were drafted in 2006 by the National Committee on the Reform and Harmonisation of Arbitration and ADR Laws in Nigeria, which was chaired by the notable Joseph Olakunle Orojo. However, those Bills did not crystallize into substantive legislations. Following the amendment of the United Nations Commission on International Trade Law (UNCITRAL)’s Model law on international commercial conciliation by the adoption of the Model Law on International Commercial Mediation as well as the adoption of the UN Convention on International Settlement Agreements Resulting from Mediation (the Singapore Convention) in 2018, the current Bill was drafted.

The Bill makes a number of protective provisions for arbitrators, which give more validation to the process and provide comfort for the contracting parties. First, the Bill properly grants an arbitrator independence from the appointing party by providing that the authority of an arbitrator is not revoked by the death, bankruptcy, insolvency, or other change in circumstances of the party who appointed the arbitrator. An arbitrator’s authority is revoked only by his or her own death.

The Bill also provides for the default number of arbitrators as one where parties have not agreed on the number of arbitrators. It further provides that no one is precluded from acting as an arbitrator because of his or her nationality, unless otherwise agreed by the parties. The Bill grants immunity to an arbitrator, appointing authority or arbitral institution in respect of anything done or omitted in the discharge or purported discharge of their functions unless the action or omission was done in bad faith.

With respect to the appointment of arbitrators in international arbitration, the Bill provides that where the parties have not agreed on any procedure for the appointment of an arbitrator or an appointing authority, the Director of the Regional Center for International Commercial Arbitration Lagos shall be deemed to be the appointing authority designated by the parties.

The Bill also makes a number of essential procedural provisions. It provides for the appointment of an emergency arbitrator where urgent steps are required to protect the interest of a party, pending the final determination of the dispute. There is a timeframe within which a contracting party may make such requests and any decision made by an emergency arbitrator is binding and enforceable. A very ingenious provision made in this regard is the choice of a contracting party to either approach the regular courts for such interim measures or to seek the appointment of, and intervention of, an emergency arbitrator.

The Bill also expressly recognizes the validity of virtual proceedings by video teleconferencing or other technological aided means. The innovative provisions in the Bill include the consolidation and joinder of parties. The Bill provides that parties may agree that the arbitral proceedings should be consolidated with other arbitral proceedings, including arbitral proceedings involving a different party or parties with the agreement of that party or parties. The arbitral tribunal is also empowered to allow an additional party to be joined to the arbitration, provided that the additional party is bound by the arbitration agreement that led to the proceedings. These provisions would enhance procedural efficiency by reducing the time and costs of multiple or parallel proceedings and reduce the risk of inconsistent awards.

On awards, the Bill provides for the limitation period of enforcement of awards to exclude the period when the arbitration or mediation proceedings are ongoing. The Bill also limits the grounds on which an arbitral award can be challenged. It expressly states that an ‘error of law’ on the face of an award will not constitute a ground to set aside an award. The Bill is also silent on misconduct being a ground for the setting aside of an award thereby narrowing the grounds upon which an award may be validly challenged. The Bill creates an Award Review Tribunal to whom an application to challenge the award may be made.

One of the most exciting provisions in the Bill relates to third party funding. The Bill abolishes the torts of maintenance and champerty and makes substantive provisions for third party funding in arbitrations seated in Nigeria and arbitration-related proceedings in any Nigerian court. Third party funding as a concept in international arbitration is accepted in many jurisdictions. However, only Singapore and Hong Kong have express legislation adopting it.

Third party funding is a non-recourse arrangement, whereby a party to an arbitration proceedings is funded by an independent fund with no prior connection to the dispute with a view of sharing in any potential damages that may be awarded. This was disapproved of in many jurisdictions under the torts of maintenance (the improper support of litigation in which the supporter has no legitimate connection) and champerty (an aggravated form of maintenance that occurs when the maintaining party pays some or all of the costs of a party in return for a share of the proceeds of the action or suit).

By abolishing both torts, the Bill makes room for third party funding. The Bill further specifically provides that an arbitral tribunal must fix the costs of arbitration in the award, and such costs include the cost of third party funding. It is believed that permitting third party funding is advantageous to a jurisdiction's attractiveness as an arbitral seat, in view of the substantial growth in funding activity in arbitration over the years, with the global funding industry now said to be worth in excess of US$15 billion.

Another exciting provision of the Bill is the codification of the practice of mediation in Nigeria. The Bill recognizes and defines “mediation” as the process whereby parties request a third person or persons to assist them in their attempt to reach an amicable settlement of their dispute arising out of, or relating to, a contractual or other legal relationship, whether referred to by the expression mediation, conciliation, or an expression of similar import. The codification of mediation, conciliation, or similar modes of alternative dispute resolution provides an integrated procedural channel for enforcing other alternative dispute resolution clauses in an agreement.

This Bill, if signed into law, will significantly remodel the administration of arbitral proceedings under Nigerian law and provide for a more efficient and innovative means of administering and enforcing arbitration and mediation agreements and proceedings. This would in turn make Nigeria a more attractive choice as a seat of arbitration by contracting parties. It is hoped that the progress the Bill has made would not be wasted and that the President would assent to the Bill before the end of his tenure.

Funmilayo Odude is a Partner at Commercial and Energy Law Practice (CANDELP).