Following the controversies that trailed the award of $9 billion against Nigeria by a British Court, London-based Nigerian lawyer and arbitrator Mr. Momoh Kadiri examines the implications of arbitration in the matter and the consequences of the judgment on Nigeria.
- Continued from last week
Firstly, the judgment of Mr Justice Butcher seems to be in accord with English law, which is generally pro-arbitration and adopts a minimalist intervention approach in relation to arbitral awards – there is significant deal of deference given to party autonomy and the arbitral process.
This explains why percentage of successful appeals against arbitral awards in the English courts are the exception rather than the norm. The FRN’s case was brilliantly presented and put before the Court – a fact that even Mr Justice Butcher expressed admiration as highly commendable. Rather unfortunately, it appears that the potency and force of the FRN’s argument was tempered by the fact that no timely objection or challenge was made by FRN in the course of arbitral proceedings.
A timely challenge or appeal to the English court by the FRN, following the Liability Award or the Final Award in July 2014 and July 2015 respectively would have carried much force, as only the English Court has the supervisory jurisdiction as far as the seat of the arbitration is concerned. Thus, it seems a missed opportunity to test the full force in which the contentions that the FRN made before Mr Justice Butcher.
Also, the earlier application to the Nigerian Courts by FRN was misdirected and lacked potency- the application or appeal simply could not impeach the Liability Award as well at the Final Award, given that Nigeria was not the seat of arbitration and Nigerian courts therefore lacked supervisory or curial jurisdiction to review or nullify the awards.
Secondly, it is noteworthy to mention that Mr Justice Butcher did an extensive analysis of both Nigerian law, as the governing law particularly under the Arbitration and Conciliation Act “ACA”, CAP A18 LFN 2004, as well as the applicable Rules, and English law under the Arbitration Act 1996. However, it bears mentioning in this context that both Nigeria and England & Wales are jurisdictions where the respective arbitration legal frameworks are fashioned after the United Nations Commission on International Trade Law (“UNCITRAL”) Model Law. As mentioned above, the spirit and intendment of the Model Law is that of deference – Article 6 provides for each state to designate the court or other authority competent to perform the functions laid down by the Model Law. In light of the above, as the question as to seat had already been determined as England by the arbitral tribunal, the proper approach of the Nigerian court should have been to decline jurisdiction and refer the parties to the English supervisory courts to which any appeal ought to be directed, in recognition of upholding the significance of the Model Law.
Thirdly, the application that was made by FRN in 2015 to the Commercial Court was made out of time and the court was properly entitled to dismiss the application on this basis alone. Part of the explanation or reason that was pleaded by FRN via the Ministry of Petroleum Resources at the material time is, plainly non-excusable, which was that the delay in appealing the Liability Award with the benefit of instructing solicitors based in England was due to the general elections and change in government in Nigeria in 2015. This explanation seems not only unsatisfactory but simply untenable. Afterall, government and governance are not only a continuum but also, the general principles of state responsibility are taken to be fairly well-known by relevant senior government officials. Similarly, adequate provisions exist in English law that give proper recognition to the fact that states do take time to respond. For example, Section 12(2) of the State Immunity Act 1978, which applies to states and state entities, allows states at least two months to respond from the date of service of process on the state’s relevant receiving authority via the Foreign and Commonwealth Office.
Unfortunately, unlike in football – there is no extra-time or “injury time” available to states for failing to take appropriate steps as and when required to properly challenge an arbitral award or ruling. Making a timely challenge in the wrong jurisdiction may not only be seen as forum shopping but could also be perceived as an attempt to circumvent or derail the arbitral process. This behaviour was perhaps exhibited by the FRN, as mentioned above, when the FRN, having failed in their application in the English court on 10 February 2016, then made an application on similar grounds in the Federal High Court of Nigeria on 24 February 2016. Any application needed to be made in a timely fashion to the English Courts.
Conclusion
Whereas the primacy of the FRN’s objections were ably and ‘attractively’ argued by its counsel, Harry Matovu QC, on a multiplicity of grounds, it seems safe to state in conclusion that the most significant issue and objection that proved decisive in the case concerned the issue as to what was the seat of the arbitration -England or Nigeria? The court disagreed with FRN’s objections, finding that the seat of arbitration was England as opposed to FRN’s contention that it was Nigeria. Although the question as to the seat or place of arbitration (especially when the latter is used in a juridical or curial sense) may somewhat be taken as readily ascertainable or as a given when stipulated the within parties’ arbitration agreement, this case highlights not only the importance of ensuring that the dispute resolution and/or arbitration agreement is carefully and robustly negotiated and drafted, it equally underscores the imperativeness of ensuring that the seat of arbitration is carefully selected and expressed with no room for ambiguity in the parties’ underlying contractual agreement. Also, what is further instructive to note is that any objection or challenge, including an appeal as to the proper interpretation or decision on the question of the seat of arbitration, needs to be raised timeously by the relevant disputing party before the appropriate supervisory or curial courts at the seat of the arbitration.
A late or mistaken application to the wrong court is not only liable to dismissal but the cost implication for the party concerned can be astronomically significant. The FRN, as expected, was unable to resist P&ID’s application on this occasion because the combined effect of CPR r. 62.18 in conjunction with section 66 of the Arbitration Act 1996 means that the procedure to enforce an arbitration award in the same manner as the judgment of the court is usually a summary procedure that is made usually without notice.
That judgment was given in favour of P&ID is certainly not the end of the matter. It is stated that the current outstanding sum now due to P&ID is estimated at USD$9.6 billion, which is about a quarter of Nigeria’s foreign reserves, as well as a third of Nigeria’s 2019 total budget. Also, daily interest on the award is about USD$1.2 million, which explains the scale of the final award. Clearly, this raises significant concern for the FRN and it is expected, it will continue to seek to resist execution of the judgment, particularly as a sovereign state. An additional concern for the FRN is this issue was an inherited burden from the previous regime. However, the hope is that this case will provide an incentive for the government to address the underlying issues that have come to the fore as well as take steps to prevent similar occurrences in the future.
Whereas this award is the largest recorded in the public domain against Nigeria, experienced practitioners know very well that unless a party is able to execute an award or judgment, how much it is really worth is something that may be more fanciful than real.
The record USD$50 billion that was awarded against the Russian Federation in 2014 by the Permanent Court of Arbitration in Yukos v Russia (Yukos Universal Limited (Isle of Man) v. The Russian Federation (PCA Case No. AA 227)), after ten years of long, drawn-out proceedings, has yet to be enforced. It will therefore be interesting to see, from both sides, how the next steps unfold.
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