NIGERIA: An Introduction to Dispute Resolution

Introduction 

Despite initial signs of recovery from the COVID-19 pandemic's impact, litigation timelines in Nigeria are now facing new challenges. The 2023 General Elections and related petitions have clogged court schedules, prioritising electoral disputes over other matters. Additionally, inflation and its effects on the economy, especially the construction sector, add further complexity.

While navigating these unprecedented times, the Nigerian dispute resolution sector is adapting through various proactive measures:

• Courts are implementing measures to expedite case processing and reduce backlogs.

• Utilising virtual hearings and online case management tools improves efficiency and accessibility.

• Encouraging parties to explore mediation and arbitration as faster and more cost-effective alternatives.

Businesses can navigate these challenges by:

• Implementing internal dispute resolution mechanisms and seeking early legal advice.

• Considering mediation and arbitration, especially for smaller disputes.

• Monitoring legal developments and adapting strategies accordingly.

While the current environment presents challenges, the Nigerian dispute resolution sector is demonstrating resilience and adaptability. By embracing innovation and exploring alternative options, businesses can navigate these closing stages of unprecedented times.

Current Economic Conditions Affecting Clients or the Legal Profession

Economic Shocks: Nigeria's economy has faced significant challenges in recent years. Increased insecurity, decreased oil production, and a weakening currency have all contributed to economic difficulties. The legal profession has not been spared, as businesses struggle to afford quality legal services.

2023 Elections: The 2023 elections had a mixed impact on Nigeria. While they sparked litigation and tested legal principles, they also led to the Supreme Court's landmark decision upholding President Tinubu's election.

Fuel Subsidy Removal: President Tinubu's decision to scrap fuel subsidies has been met with fear and hardship for many Nigerians, who face rising costs of living and struggle to afford necessities. The minimum wage remains unchanged, further exacerbating the situation.

Level of Activity, Trends, and Developments in Your Area

In Nigeria, dispute resolution is evolving beyond traditional litigation and arbitration. Mediation, a more cost-effective and amicable approach, is gaining traction among individuals and businesses. This trend has been further accelerated by the COVID-19 pandemic, which has led to a rise in online dispute resolution (ODR).

Disputants are increasingly favouring methods like mediation and arbitration, which aim to preserve relationships while resolving issues. This shift reflects a growing awareness of the benefits of these approaches over litigation. The recent enactment of the Arbitration and Mediation Act has significantly impacted the dispute resolution landscape in Nigeria. Modelled after the UNCITRAL Model Law, the act introduces several reforms:

• Abolition of torts of maintenance and champerty: this removes legal barriers to third-party funding of arbitration.

• Introduction of third-party funding: this enables parties to access funding for arbitration costs.

• Enhanced role of national courts: courts play a more active role in upholding the integrity of arbitration agreements.

• Provisions for interim measures and emergency arbitration: these measures ensure the effective and efficient resolution of disputes.

These changes aim to solidify Nigeria's position as a global arbitration hub, providing a robust framework for international dispute resolution.

New Legislation Affecting Clients  

The Arbitration and Mediation Act 2023 

President Bola Ahmed Tinubu gave his assent to the Arbitration and Mediation Act (AMA) on 26 May 2023, essentially repealing the 35-year-old Arbitration and Conciliation Act 1988. The AMA now contains a wide and liberal definition of an Arbitration Agreement, a definition that was unavailable in the previous Act. The AMA empowers the national courts before which an action is brought and in respect of which there is an arbitration agreement, to refer the parties to arbitration unless the court finds that the arbitration agreement is null and void. The Act has reduced the default number of arbitrators from three to one. To encourage the international nature of this dispute resolution mechanism, no person, irrespective of nationality, shall be precluded from acting as an arbitrator in Nigeria. Where the court is named as the default appointing authority, the AMA provides that it is the chief judge of that court and shall have the power to make such appointment while sitting in chambers. This provision is bound to encourage speedy appointment of arbitrators compared to the time-wasting application filed before judges sitting in public and the entire haul of civil procedure that such appointment was belaboured with previously.

The AMA distinguishes between “seat” and “venue” of arbitration. Under the AMA, the seat of arbitration is the judicial seat of the arbitration for the purpose of determining the law that will govern the proceedings, while the venue is any place that the arbitral tribunal meets for consultation, hearing or inspection. The applicable statutes of limitation apply as in judicial proceedings. On time computation for enforcement of an arbitral award, the AMA provides that the period between the commencement of the arbitration and the date of the award shall be excluded.

Other notable innovative provisions of the Act include third-party funding, consolidation of proceedings, interim measures such as appointment of emergency arbitrator, the award review tribunal and key provisions for international commercial mediation. The AMA includes provisions which promise to set Nigeria up as an arbitration destination and this is a welcome development and prospect for the Nigerian economy. A viable dispute resolution hub is bound to attract businesses and drive investment opportunities.

Business Facilitation (Miscellaneous Provisions) Act 2023

This Act was passed in February 2023 to amend 21 related laws, including the Companies and Allied Matters Act (CAMA), the Immigration Act, the Investment and Securities Act, and the Trademark Act, amongst others. The Act in amending the Companies and Allied Matters Act introduced provisions which exempts foreign companies seeking to do business in Nigeria from the requirement of incorporation as a separate entity. This encourages foreign participation in the nation’s economy. A company limited by shares can now increase its share capital through a resolution of its board of directors, subject to conditions imposed by the company’s articles of association or by the company in general meeting. Also, only existing shareholders of a private company can enjoy pre-emptive rights.

Certain provisions of the Nigerian Export Promotion Council Act were also amended. Relevant stakeholders and industry players have now been included on the board of the Nigerian Export promotion council, thereby allowing for the representation of more sectors in decision-making.

By the amendments to the Immigration Act, entry visas to Nigeria are now required to be issued or rejected with reasons within 48 hours of receipt of valid applications and a comprehensive and up-to-date list of requirements, conditions, and procedures for obtaining visa on arrival as well as all other entry visas, including estimated timeframe are now required to be published on all immigration-related websites, Embassies, and High Commissions, and all Nigerian ports of entry. This will result in an efficient immigration and visa application process, particularly for foreigners wishing to do business in Nigeria.

The Electricity Act, 2023 

The Electricity Act repealed the Electric Power Sector Reform Act. This Act contains several modernised features which deepen the Nigerian Electricity Supply Industry (NESI). The Act provides a comprehensive legal and institutional framework to guide and revolutionise Nigeria’s power sector. There are opportunities for increased electricity supply and enhanced investment prospects within the industry. The Act encourages the adoption of Public-Private Partnerships and concessionary arrangements, as well as opens new horizons for private entities and sub-national governments to actively participate in electricity transmission.

Potential Hurdles or Difficulties Faced by Clients and How These Can Be Overcome

The slow pace of the judicial process continues to be a great challenge for many clients who usually endure several years before their disputes are heard/resolved in court. This situation greatly increased due to the election and the election petitions that had to be determined. Election-related cases are deemed peculiar and must be concluded within a specified period failing which they become statute-barred. It has been suggested that a way out of this problem would be the setting up of special courts and appointing judges to exclusively entertain election-related disputes. However, several factors such as lack of political will and the cost of administration of these courts have dogged its realisation.

Also, the inflation has affected the cost of everything, from petroleum, to cement, sand, construction materials, and everyday cost of living. It has affected businesses’ ability to meet up with repayment of loans, affected contractors’ ability to deliver buildings to customers and several other areas. These inflation realities can be overcome by the parties renegotiating the terms of the contract to permit present economic realities.