Nigeria’s New Arbitration Act: A Gateway to Business Opportunities

By Kwadwo Sarkodie and Chérine Ftouki 

Former President Muhammadu Buhari signed Nigeria’s Arbitration and Mediation Act 2023 (the “Act ”) into law on 26 May 2023, replacing the Arbitration and Conciliation Act of 1988. The Act represents a significant overhaul of Nigeria’s legislative framework for arbitration.

The option of arbitration is important to businesses, as it presents a flexible and confidential alternative to the resolution of disputes through the courts.

As such, it is vital that the framework for arbitration is robust, adaptable and reflective of businesses’ needs.

The Act aims to ensure this, with a number of updates which will be important to the Nigerian business community, as well as to overseas investors doing business in Nigeria.

One of the key advancements introduced by the Act is the recognition and enforcement of interim measures (temporary orders to maintain the position pending completion of the arbitration, such as freezing orders that preserve a defendant’s assets until a final decision is made by the tribunal).

The Act treats interim measures as binding and enforceable, similar to arbitral awards, enhancing the flexibility and effectiveness of arbitration in Nigeria.

To address the position where interim measures are particularly urgent, the Act introduces the provision for a statutory emergency arbitrator.

This feature allows a party to seek interim relief before an arbitral tribunal has even been appointed, by applying to the designated arbitral institution or the court for the appointment of an emergency arbitrator.

The Act mandates the appointment of an emergency arbitrator within two business days, and the emergency arbitrator may then proceed directly to address the interim measures sought.

Another crucial aspect of the Act is the explicit regulation of third-party funding in arbitrations seated in Nigeria.

This facilitates third-party funding, which expands the options to pursue and defend arbitration claims, particularly for businesses that may lack the financial means to meet legal fees.

It is also important to note that the Act addresses concerns that third-party funding might give rise to conflicts of interest, by imposing strict regulations to ensure the integrity of third-party funding arrangements.

The Act also introduces the Award Review Tribunal (“ART”), a ground-breaking development in Nigeria’s arbitration landscape. Parties, through their arbitration agreement, can establish the ART as a secondary tribunal to address challenges to arbitral awards, in place of the Nigerian courts.

This aims to reduce delays caused by challenges to awards, which historically the courts have generally processed very slowly.

Challenges must be submitted to the ART within three months, and the ART is required to render a decision within 60 days, providing for significantly faster resolution compared to the referral of the challenge to a court.

Several other notable changes brought about by the Act contribute to enhancing the efficiency and effectiveness of arbitration in Nigeria. In cases where the seat of arbitration is not specified by the parties, Nigeria will serve as the default seat unless the tribunal decides otherwise.

Similarly, if the number of arbitrators is not specified, the default number will be one, reducing potential delays in the constitution of the arbitral tribunal. The Act also recognizes electronic communications as written agreements, accommodating the use of modern technology in arbitration practices.

Moreover, the Act grants arbitral tribunals the authority to decide on challenges to arbitrators, with unsuccessful parties having the option to seek a review by the Nigerian courts.

Additionally, the Act implements provisions from the Singapore Convention on Mediation and the UNCITRAL Model Law on Mediation, thereby supporting and facilitating the use of mediation, in addition to arbitration.

The Act therefore potentially brings numerous advantages for businesses operating in Nigeria. By aligning with international standards, while incorporating innovative features, the Act seeks to foster a more stable and predictable framework for arbitration.

In serving to facilitate the resolution of disputes for both domestic and international businesses, this framework, and its innovative provisions, has the potential to increase certainty, expand the use of arbitration and enhance business and investor confidence.

Kwadwo Sarkodie, Partner, Mayer Brown International LLP ([email protected])

Chérine Ftouki, Global International Arbitration Professional, Mayer Brown International LLP ([email protected])