AUTHORS:  Richard Obidegwu and Leroy Edozien

Background

Arbitration has grown in popularity over the years due to its party centred nature and the more stable timeline for resolution of matters. One of the main issues regarding arbitration is the alarming rate in which losing parties apply to set aside awards, negating the consideration of time effectiveness that lead parties to arbitration in the first place. This paper examines the law and procedure for setting aside arbitral awards in Nigeria and makes comparisons to other jurisdictions to make a reasoned case for retention of the regime.

Nature of an Arbitral Award

An arbitral award is “a decision of the arbitral tribunal on the substance of the dispute and includes any final, interim or partial award and any award on costs or interest but does not include interlocutory orders”^[1].

Article 53 and 54 of the International Centre for Settlement of Investment Disputes (ICSID)^[2] and Article 36 of the United Nations Commission on International Trade Law (UNCITRAL) ^[3] both provide guidance for the treatment of arbitral awards. These two treaties generally provide that parties are bound by arbitral awards and are to enforce its pecuniary obligations.

Setting Aside an Arbitral Award Under Nigerian law

The principal legislation that governs arbitration in Nigeria is the Arbitration and Conciliation Act 1988 Cap A18, Laws of the Federation of Nigeria 2004 (ACA). The ACA was modelled after the UNCITRAL model law.  Section 31 of the ACA makes provision for the recognition and enforcement of arbitral awards. A dissatisfied party can actively seek a declaration that the award is set aside under certain limited circumstances.

Sections 29, 30 and 48 of the ACA, states the instances where a dissatisfied party can apply to set aside an arbitral award. Section 30 (1) of the Arbitration and Conciliation Act Cap A19 LFN 1990 (ACA) empowers a dissatisfied party to seek a declaration for an Arbitral award to be set aside under certain limited circumstances. These circumstances include, misconduct on the part of the Arbitrator or where the arbitral proceedings, has been improperly procured. The ACA has failed to define the meaning of ‘misconduct’, thus, the Nigerian Courts have given their various interpretation of what amounts to misconduct of an arbitrator. Section 48 contains a list of grounds for an application to set aside an arbitral award. It is pertinent to note that the aforementioned application is time bound, section 29 of the ACA provides that an aggrieved party may bring an application within three months from the date of the award.

Approach of Other Jurisdictions

The United States of America has a similar approach in setting aside arbitral awards. US federal law does not permit the appeal of an arbitral award, but it allows for the setting aside of an award. Section 10 of the Federal Arbitration Act (FAA)^[4] states that a court may set aside/vacate an arbitral award under the following grounds: (i) the award is a result of corruption or fraud; (ii) evident partiality or corruption of an arbitrator; (iii) arbitrator misconduct, such as refusing to hear pertinent and material evidence; or  (iv) the arbitrators exceeded their powers, or so imperfectly executed them that  a mutual, final and definite award was not made^[5]. 

For domestic arbitration, in France, an arbitral award cannot be appealed unless the parties have agreed otherwise.[6] However, an arbitral award can be set aside if the parties agreed to allow the appeal of the arbitral award. The grounds and procedure for setting aside a domestic arbitral award are: (i) Arbitral tribunal declared itself wrongly competent or incompetent. (ii) Arbitral tribunal was irregularly constituted. (iv) Arbitral tribunal has ruled on the matter contrary to the given assignment. iv. Adversarial principle has not been respected. (v) Arbitral award is contrary to public policy. (vi) Arbitral award is not grounded or does not state the date on which it has been rendered or the name of the arbitrator(s) or does not include the required signature(s) or was not rendered by a majority vote.[7]

The Case Against Setting Aside an Arbitral Award 

When closely assessed, setting aside of arbitral awards can create different issues. For example, it may create double control. “Double control” in this instance is when a party relies on the same grounds for setting aside an arbitral award and refusal of enforcement of the award. One of the reasons why this is a possibility is because, the UNCITRAL Model Law for setting aside an arbitral award is very similar with^[8]. 

The second issue is the potential of conflicting decisions regarding the same ground between enforcement proceedings and setting aside proceedings. It is possible for conflicting decisions to occur when the court enforcing the award abroad decides differently to the court setting aside the award in the country of origin. In SPP v Egypt, a decision by the President of the District Court of Amsterdam granted enforcement of the Award made in Paris and rejected Egypt’s assertion that a valid arbitration agreement was lacking. Two hours after the aforementioned judgment was given, the Court of Appeal in Paris annulled the award for lack of a valid arbitration agreement^[9]. 

A third issue is the alarming rate at which the losing parties in arbitral proceedings apply to set aside arbitral awards therefore delaying the winning party from reaping the fruits of the award and negating the consideration of time effectiveness which led parties to explore arbitration in the first place. Arbitration which ought to be final in such cases may end up being challenged at the High Court and appeal courts. This generates concerns in the minds of users of arbitration as to whether the right of an aggrieved party to apply to set aside an arbitral award should be expunged since in the long run it would amount to delay in realising the fruits of the award. 

Conclusion and Recommendations

Notwithstanding the identified setbacks, we opine that the setting aside of arbitral awards remains important as it gives the unsuccessful party an avenue for redress when an erroneous award is given.

We commend the recent efforts for the amendment of the ACA which is presently before the Nigerian National Assembly as the Arbitration and Mediation Bill.^[10] It streamlines the instances where a party can apply for the setting aside of an arbitral award to just the grounds stated therein as opposed to the extant position where a party may apply to set aside an award on the basis that there is an error on the face of the award or the wider ground of ‘misconduct’ which gives an endless list of what could amount to misconduct of the arbitrator or Tribunal. We are hopeful that the Bill would scale through and be enacted into law in Nigeria.

[1] Dr Wong Fook Kong, The Arbitration Award (Myiem.org.my, 2020), Retrieved from <http://www.myiem.org.my/assets/download/PMTD_Talk_TheArbitrationAward_121206.pdf> accessed 10 April 2020.

[2] Ibid

[3] UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW, ‘UNCITRAL Model Law On International

Commercial Arbitration 1985 With Amendments As Adopted In 2006′ (United Nations 2008). Pg 20, Retrieved from <https://www.uncitral.org/pdf/english/texts/arbitration/ml–arb/07–86998_Ebook.pdf>; Accessed on April 25, 2020 at 8:24pm.

[4] Hall Street Associates v Mattel, 552 US 576 (2008)

[5] Federal Arbitration Act, Chapter 1 Section 10

[6] Alexandre Bailly and Xavier Haranger, Morgan Lewis, “Arbitration procedures and practice in France: overview”, Thomson Reuters Practical Law, Retrieved from <https://uk.practicallaw.thomsonreuters.com/7-5019500?transitionType=Default&contextData=(sc.Default)&firstPage=true&bhcp=1> accessed May 26, 2020, Article 1491, French Code of Civil Procedure (CCP).

[7] Ibid.

[8] Section 1060 of the German Code of Civil Procedure   

[9] Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt, ICSID Case No. ARB/84/3 

[10] HB 91- A Bill for an Act to repeal the ACA and enact the Arbitration and Mediation Act to provide a Unified Legal Framework for the Fair and Efficient Settlement of Commercial disputes by Arbitration and Mediation, make the New York Convention applicable as well as the Singapore Convention and for related matters.