Wednesday, 5 August 2015

COMPREHENSIVE REVIEW OF THE ARBITRATION AND CONCILIATION ACT VIS – A- THE ARBITRATION AND CONCILIATION BILL.



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INTRODUCTION

The provisions in the Arbitration and Conciliation Act 1988 (“the ACA”) are divided into four parts, namely:

Part I: Arbitration

Part II: Conciliation

Part III: Additional provisions relating to international commercial arbitration and conciliation

Part IV: Miscellaneous

However in the proposed Bill there is no longer a separate part dealing with international commercial arbitration” The provisions in Part I of the Bill apply to both international and domestic arbitration, except in those few instances where specific provisions are made in respect of international commercial arbitration.

The overall scheme of the proposed Bill is therefore as follows:


(1)        Part I: Arbitration

(2)        Part II: Conciliation

(3)        Part III: Miscellaneous Matters.

Therefore for the purpose of this review I will now divide the ACA and the Bill into Sections A-C as follows

Section A:       The adoption without any modification of the provisions of some existing sections                        of ACA which the Committee considered suitable and adequate.
Section B:       The modification of the provisions of some of the existing sections of ACA.
Section C:       The introduction of entirely new provisions of topics not dealt with by ACA.


PART I: ARBITRATION

Section A:
Provisions of Part I of ACA which have been adopted

The following provisions of the ACA are considered suitable and were thus not modified or amended. They are:

s.2        -           Arbitration agreement irrevocable except by agreement or leave  of
                        court.
s.3        -           Death of party.
s.11      -           Appointment of substitute arbitrator.
s.17      -           Commencement of arbitral proceedings.
s.18      -           Language to be used in arbitral proceedings.
s.20      -           Hearing and written proceedings.
s.21      -           Default of a party.
s.25      -           Settlement.
s.27      -           Termination of proceedings.
s.28      -           Correction and interpretation of award and additional award.
s.35      -           Extent of application of this Act to Arbitration.
s.36      -           Extension of time.
s.53      -           Application of Arbitration Rules set out in the First Schedule.



Section B:
Provisions of Parts I and III of ACA that have been Modified

1.      Section 1 of the ACA and clause 2 of the Bill: Formal Requirements for Arbitration Agreements:

The 1988 Arbitration and Conciliation Act requires that an arbitration agreement must fulfill any one of the following formal requirements as a pre-condition for its validity, i.e.

(a)  it must be contained in a document signed by the parties to the agreement, or

(b)  it must be contained in an exchange of letters, telex, telegrams or other means of communication which provide a record of the arbitration agreement8.

While the Act recognizes that parties to a contract may incorporate into their contract an arbitration clause contained in another document, nevertheless such incorporation by reference will only be valid if the underlying contract itself is in writing


The above requirement is not consistent with a significant number of well accepted business practices and contemporary forms of business communications.

As presently worded, section 1(1) and (2) of the Nigerian Arbitration Act will
invalidate  arbitration  agreements  reached  under  some  forms  of  business arrangements.

The Bill clarifies that arbitration agreements can be validly concluded by means other than in the form of paper-based documents, as for example, by electronic communications or other forms of data messages, provided such message is “accessible so as to be useable for subsequent reference.


2.      Sections 4 and 5 of ACA 1988 and clause 5 of the Draft Bill: Enforcement of Arbitration Agreements:

The problem in this area arises from two separate provisions in the Arbitration and Conciliation Act which appear to deal with the same subject (stay of judicial proceedings brought in violation of an arbitration agreement) but in different and apparently contradictory terms. On the one hand, section 4 of that Act provides that the court “shall” stay proceedings brought in violation of an arbitration agreement. On the other hand, section 5(2) provides that the court “may” stay proceedings brought in apparently the same circumstances. Since it is recognized that the words “shall” and“may” are generally employed in statutory contexts to draw a distinction between mandatory and discretionary powers respectively, it appears contradictory that the Act obliges the courts to stay judicial proceedings that violate an arbitration agreement, and yet at the same time gives them discretion in the matter.
Therefore clause 5 of the draft Bill applies a mandatory standard of enforcement agreements

3.      Section 6 ACA and clause 6 of the Draft Bill: Number of Arbitrators

While allowing the parties freedom to determine the number of arbitrators, section 6 of the existing Act provides that where the parties make no such determination in their arbitration agreement, the number of arbitrators shall be deemed to be three.
Clause 6(3) of the Bill replaces the three-arbitrator model in section 6 of the existing Act with a single-arbitrator model.
To avert potential deadlock that may arise where parties stipulate for an even number of arbitrators in their arbitration agreement, clause 6(2) of the Bill provides that such agreement shall be deemed as requiring the appointment of an additional arbitrator as chairman of the tribunal.

4.      Section 7 ACA and clause 7 of the Bill : Appointment of Arbitrators

The existing Act makes different default provisions for the appointment of arbitrators, depending on whether the arbitration is domestic (section 7, ACA) or international (section 44, ACA). The Bill merges sections 7 and 44 of the present Act to form a new section 7, which brings together the default provisions for the appointment of arbitrators in domestic and international arbitrations.

5.      Sections 8 and 9 and 45 ACA and clause clauses 9 and 10 of the Draft bill: Challenge of Arbitrators

The Bill brings together the parallel provisions on challenge of arbitrators in sections 8 and 9 (domestic arbitration) and 45 (international arbitration) of the existing Act. The amalgams of these two sets of provisions (clauses 9 and 10 of the Bill) apply to both domestic and international arbitration. The grounds and procedure for challenging an arbitrator are largely the same, but clause 10(6) of the Bill states with better clarity how contentious challenges to an arbitrator are to be decided. Where the parties have designated an appointing authority, such authority decides the challenge. Where they have not designated an appointing authority, the arbitral tribunal decides the challenge


6.      Section 30(2) ACA and clause 11 of the Bill: Removal of Arbitrators by the Court

Section 30(2) of the present Act provides that an arbitrator who has misconducted himself may be removed by the court. Clause 11 of the Bill contains the provisions on removal of arbitrators by the court. Furthermore, the clause 11 of the Bill jettisons the amorphous and pliable concept of “misconduct” as a basis for removing an arbitrator, and provides instead that an arbitrator may be removed by a court on grounds of impartiality, lack of requisite qualifications, physical or mental incapacity or failure to use reasonable despatch in conducting the proceedings.

7.      Sections 10 and 46 ACA and clauses 12 and 14 of the Bill: Termination of Arbitrator’s Mandate and appointment of substitute arbitrator

Clause 12 of the Bill merges the parallel provisions of the existing Act on termination of arbitrators’ mandate (i.e. section 10 in relation to domestic arbitration and section 46 in relation to international arbitration). The proposed section 12 will therefore apply to both domestic and international arbitration alike.

8.      Section 12 of the ACA and clause 16 of the Bill: Competence of the arbitral tribunal to rule on its jurisdiction

This relates to  judicial review of arbitrators’ jurisdictional decisions, and the effect of such review on pending arbitration proceedings. Section 12(4) of ACA does not provide for the continuation of arbitral proceedings while proceedings to review the arbitrator’s decision on jurisdiction are pending in court.
Clause 16(4) of the Bill provide for the continuation of the arbitration proceedings while court review proceedings are pending.
Clause 16(2) of the Bill also corrects a typographical error appearing in section 12(2) of the present Act, by replacing the word “validity” with “invalidity”..

9.      Sections 22(3) and (4) and 47(4) and (5) of the ACA and clause 17 of the Bill: Rules applicable to substance of dispute

Sections 22(3) and (4) and 47(4) and (5) of the ACA make parallel provisions for domestic and international arbitrations respectively in relation to the rules that must be applied by the arbitral tribunal in deciding the substance of the dispute. Clause 17 of the Bill merges these parallel provisions into one single provision under the heading “rules applicable to substance of the dispute”

10.  Section 13 of the ACA and clause 18 of the Bill: Power of court and tribunal to order interim measures of protection

Commercial disputes often arise in circumstances that give rise to the need for some form of interim protective order. For example an order may be required to protect the subject matter of the dispute from deterioration or dissipation, or to prevent a party from frustrating the ultimate result by preemptively transferring assets in the meantime.
Such protective order may be required from a Court before the arbitral tribunal has been
appointed,  or  may  be  required  from  the  arbitral  tribunal  pending  its  final  decision
award
The relevant provisions in the ACA are section 13 of the Act and Article 26 of theArbitration Rules set out in the first schedule to the Act:

Section 13;

Unless otherwise agreed by the parties, the arbitral tribunal may before or during an arbitral proceedings -
(a)  at the request of a party, order any party to take such interim measure of protection as the arbitral tribunal may consider necessary in respect of the subject matter of the dispute; and

(b)  require any party to provide appropriate security in connection with any measure taken under paragraph (a) of this section.


Article 26;

1.         At the request of either party, the arbitral tribunal may take any interim measure it deems necessary in
respect of the subject- matter of the dispute, including measures for the conservation of the goods forming the subject-matter in dispute, such as ordering their deposit with a third person or the sale of perishable goods.

2.         Such interim measures may be established in the form of an interim award. The arbitral tribunal shall be entitled to require security for the costs of such measures.

3.         A request for interim measures addressed by any party to court shall not be deemed incompatible with the agreement to arbitrate, or as a waiver of such agreement.
However it has been recognized that the terse wordings of these provisions leave many questions unanswered.
Clause 18 of the Bill therefore incorporates interim measures of protection and addresses substantially most of the concerns.
First, the power of Nigerian courts to grant interim measures in aid of arbitration is clearly provided for. Secondly, the language of the provision explicitly states that such measures can be granted in aid of foreign arbitrations and in situations where the arbitration is yet to commence. Thirdly, detailed provisions are made as to the type of measures that an arbitral tribunal may order, and the procedures that should guide the tribunal. In particular, provisions are made in relation to: the conditions for the grant of provisional orders; preliminary orders, duties of disclosure on a party applying for preliminary or preservative orders; recognition and enforcement of interim measures and refusal of recognition and enforcement of interim measures.

11.  Section 14 of the ACA and clause 29 of the Bill: Equal treatment of parties

Clause 18 of the Bill essentially reproduces section 14 of the ACA, albeit with the significant addition of a requirement that the tribunal shall ensure a fair resolution of the dispute without unnecessary delay or expense.

12.  Section 15 of the ACA and clause 30 of the Bill: Arbitral proceedings

Clause 30 of the Bill reproduces section 15 of the ACA, but also relocates section 53 of the ACA (which preserves the freedom of the parties in international commercial arbitration to choose any set of nternational arbitration rules) to form an additional sub - section to section 30.

13.  Section 16 of the ACA and clause 31 of the Bill: Place and time of arbitration

Clause 31 of the Bill reproduces section 16 of the ACA, but also empowers the arbitral tribunal to determine the dates and time of arbitration hearings.

14.  Section 26 of the ACA and clauses 45, 47 and 52 of the Bill: Form and contents of award, notification of award, power to withhold award for fees and expenses and parties’ joint and several liabilities for arbitrators’ fees and expenses

Clause 45 of the Bill reproduces section 26 of the ACA in relation to the requirements for the  form and contents of arbitral awards. By an addition to section 26(4) of the ACA, the obligation to deliver a copy of the award to each party is made subject to the power of the arbitrator to exercise a lien on the award for his fees and expenses. Fuller provisions on the power of lien are made in clause 47 of the Bill, including provisions for recourse to court by the parties where the power of lien is exercised. Upon application by any of the parties, the court may order the tribunal to deliver the award subject to payment into court by the applicant of the fees and expenses demanded, or such lesser amount as the court may specify. The section confers other powers on the court to resolve disputes as to arbitrators’ fees and expenses.

15.  Sections 49 and 50 of the ACA and clauses 49 and 50 of the Bill

Sections 49 and 50 of the ACA, which deal with costs and deposit of costs, and which apply only to international arbitration, have been relocated to clauses 49 and 50 of the Bill. By this relocation, the provisions now apply to both domestic and international arbitration.

16.  Sections 29 and 30 of the ACA and clause 53 of the Bill: Application for setting aside an arbitral award

Arbitration is an alternative to litigation. Parties choose arbitration because they do not want the merits of their disputes to be litigated. They wish to take advantage of the speed, efficiency, flexibility and measure of party control that a private arbitral tribunal assures. While this is the case, it is also recognised that some degree of judicial involvement is nevertheless required to provide some “quality control” in the arbitral process.
Clause 53 of the Bill replaces sections 29 and 30 of the ACA. The former grounds for setting aside arbitral awards (and in particular the amorphous and pliable ground of “misconduct”) have been jettisoned. Grounds for setting aside are now restricted to due process, jurisdictional and public policy grounds set out in clause 53(2) of the Bill. To succeed in setting aside an arbitral award, it is not enough to establish that one or more of the grounds under clause 53(2) exists. There is a further duty under clause 53(3) to establish that as a result of the ground relied upon, there has been or there will be substantial injustice.
Further, setting aside is an option of last resort if the court finds that a ground under clause 53(2) has been established. Sub -clauses (3) and (4) of clause oblige the court to first consider remitting the award to the tribunal in part or in whole for reconsideration, and it may only set aside the award if it is satisfied that it will be inappropriate to remit the award for reconsideration. By clause 53 (1) of the Bill, an application to set aside an award must be brought within three months from the date of the award.

17.  Sections 31 and 51 of the ACA and clauses 54 of the Bill Recognition and enforcement of Awards

Sections 31 and 51 of the ACA make parallel provisions for domestic and international arbitration respectively in relation to recognition and enforcement of arbitral awards. Clause 54 of the Bill merges these two provisions into one section which is applicable to both domestic and international arbitrations.

18.  Sections 32 and 52 of the ACA and clause 55 of the Bill: Refusal of recognition and enforcement of arbitral awards

Sections 32 and 52 of the ACA make parallel provisions for domestic and international arbitration respectively in relation to the refusal of recognition and enforcement of arbitral awards (although section 32 does not set out the grounds for refusal of recognition and enforcement). Clause 55 of the Bill merges these two provisions into one section, and the grounds for refusal of recognition and enforcement, which are the same as the grounds for setting aside, are applicable to both domestic and international arbitrations.

19.  Section 54 of the ACA and clause 57 of the Bill: Application of the New York Convention in Nigeria

Nigeria is a party to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 (“the New York Convention”). One of the purposes of the Convention is to provide an international legal framework for the enforcement of arbitral awards. States that are signatories to the Convention (“Convention States”) enjoy the advantage that arbitral awards made in their territories will be enforced in other Convention States in accordance with the terms of the Convention.
Clause 57 of the Bill amends  section 54(1) of the ACA by inserting the words “made in a commercial arbitration in the territory of a State other than the Federal Republic of Nigeria”, so that the New York Convention  now applies to both “foreign” and “international” awards, consistently with Article I of the Convention.

20.  Section 34 ACA and clause 59 of the Bill: Extent of court intervention

Section 34 of the ACA (reproduced in section 59(1) of the Bill)  is the most
important pro vision on the “highly sensitive” issue of the relationship between the courts and the arbitral process the Arbitration and Conciliation Act provides for various stages at which applications may be made to court in respect of an arbitration (e.g. for court support, court supervision or court enforcement), it does not prescribe a procedure for such applications. Consequently, such applications are regulated by the general rules of civil procedure in force in the various States’ and Federal High Courts. While a few jurisdictions have reformed their civil procedure rules by introducing case management and fast-tracking mechanisms (such as the “front- loading” of evidence and legal submissions) others continue to operate civil procedure rules that are outmoded and unsuited to cope with the challenges presented by high case load.
Clause 59 of the Bill incorporates special rules of procedure as a schedule forming part of the proposed Federal Arbitration and Conciliation Act. Such rules will be applicable  on  a  mandatory  basis  in  all  jurisdictions,  state  and  federal.  Significant features of the rules include:


           Frontloading of evidence and written submissions

           Fast-tracking and case management mechanisms applicable at both trial and appellate stages

           Severe consequences for dilatory conduct or tactics, and

           Cost penalties


Section C:

New Subjects and Provisions Introduced by the Draft Bill

1.      Clause 8 of the Draft Bill: Appointment of Umpires

The present Act contains no provision for the appointment of Umpires where arbitration agreements require such appointment. Clause 8 of the Bill therefore enacts a legal framework for Umpire-type arbitrations.

2.      Clause 14 of the Draft Bill: Immunity of Arbitrators

At  common  law  the  immunity  which  Judges  enjoy  in  respect  of  liability in

negligence had been extended to arbitrators. Clause 14 of the Bill therefore puts arbitral immunity on a statutory footing.

3.      Clause 33 of the Draft Bill: Application of statutes of limitation to arbitration

The ACA makes no provisions to regulate the operation of existing limitation statutes vis-à-vis arbitration proceedings.. Clause 33 of the Bill makes provisions for the application of limitation statutes to arbitral proceedings. it provides that existing limitation statutes apply to arbitral proceedings in the same way as they apply to proceedings in court, but with the qualifications that: (i) where a court sets aside an arbitral award, the period between the commencement of the arbitral proceedings and the date of the order setting aside the award will be excluded in computing the period for recommencing arbitral proceedings or commencing judicial proceedings in relation to the same dispute, and (ii) in computing the time for commencing proceedings to enforce an award, the period between the commencement of the arbitral proceedings leading to the award and the date of the award shall be excluded.

4.      Clause 36 of the Draft Bill: Remedies

The ACA makes no provisions in relation to the remedies that an arbitral tribunal may grant. Where the arbitration agreement makes no specific provision on remedies and in the absence of default statutory provisions on the subject, controversy may arise as to whether a particular kind of remedy is available or not.
Clause 36 of the Bill preserves the parties’ autonomy to agree as to the types of remedies that the arbitral tribunal may grant. Further, unless the parties agree otherwise, the tribunal may make declaratory orders, orders of injunction, specific performance of a contract (other than a contract for the sale of land) and rectification, setting aside or cancellation of a deed or other document. The section also empowers the arbitral tribunal to make orders for the payment of money in any currency.

5.      Clause 38 of the Draft Bill: Consolidation, concurrent hearing and joinder

In the event that disputes arise in multiple party contracts, each party may claim for himself the right to appoint an arbitrator, notwithstanding that the arbitration clause (or the relevant set of arbitration rules) provides for a lesser number of arbitrators than there are disputing
parties. Alternatively, there may be a need to resolve specific issues as between multiple
parties who may however not be parties to the same arbitration agreements because their
contractual  relations,  although  arising  from  the  same  or  related  transactions,  are
nevertheless governed by separate contractual documents. When problems of the latter
kind arise in the context of litigation, they are usually solved by invoking the courts’
powers to join interested parties and/or consolidate proceedings.
Subsection (3) to clause 38 of the Bill make provision for the joinder of parties




6.      Clause 44 of the Draft Bill: Interest

The ACA makes no specific provisions in relation to the award of interests. Clause 44 of the Bill makes provision for the award of interest,
While it primarily preserves the freedom of the parties to agree on the powers of the tribunal to award interest, the section provides that in the absence of such agreement, the tribunal may award simple or compound interest from such dates and at such rates as meet the justice of the case. Such award of interest may be made on the whole or part of any amount awarded by the tribunal, in respect of any period up to the date of the award, or on the whole or part of any amount claimed in the arbitration and outstanding at the commencement of the proceedings but paid before the award was made.

7.      Clause 51 of the Draft Bill: Security for costs

The ACA makes no provision in relation to security for costs. Clause 51 of the Bill makes provision for security for costs.


PART II:

CONCILIATION

Section A:
Provisions of Part II of ACA which have been adopted without modification

They are –

s.38      -           Request to conciliate
s.39      -           Commencement of Conciliation proceedings.
s.40      -           Appointment of Conciliators.
s.41      -           Action by the Conciliation body.
s.42      -           Terms of settlement

Section B:
Provisions of Part II of ACA that have been Modified


1.      Section 37 of the ACA and clause 62 of the Bill: Right to settle disputes by conciliation

The provisions of Part II of the ACA are expressed to apply to “conciliation”. There is no definition of “conciliation” in the ACA. Consequently, section 37 of the ACA has been amended by including a definition of “conciliation”. Clause 62(2) of the Bill defines “conciliation” to include “mediation”, as well as any other process (by whatever named called) by which 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 relationship, such third person or persons not having the authority to impose a solution on the disputing parties. The   word  “agreement” in Section 37 has been replaced in  section  62(1)  of  the  Bill  ith  the  word“dispute”.

Section C:

New Subjects and Provisions Introduced by the Draft Bill

1.      Clause 68 of the Bill: Impartiality of the conciliator

Part II of the ACA makes no provisions in relation to the duty of impartiality of the conciliator. Clause 68 of the Bill provides for such duty. Additional subsection was introduced which imposes an obligation on the conciliator to withdraw from the conciliation where the conciliator’s impartiality and neutrality is in doubt.

2.      Clause 69 of the Bill: Disclosure of information

Part II of the ACA makes no provisions in relation to the manner in which a conciliator is authorized to deal with information disclosed to him by a party in relation to the dispute. Clause 69 of the Bill, provides that a conciliator may disclose the substance of such information to any other party to the conciliation, unless the information was provided subject to a specific condition of confidentiality.

3.      Clause 70 of the Bill: Confidentiality of information and proceedings

Part II of the ACA makes no provisions generally for confidentiality of information relating to the conciliation proceedings. Clause 70 of the Bill provides that all information relating to the conciliation proceedings shall be kept confidential, except where disclosure is required under the law or for the purposes of implementation or enforcement of a settlement agreement.  The  parties  may  agree  to  exclude  the  operation  of  this  general  duty  of confidentiality.

4.      Clause 71 of the Bill: Admissibility of evidence in other proceedings

Part II of the ACA makes no provisions to prevent or restrict the use, in other arbitral, judicial or similar proceedings, of information relating to conciliation proceedings.
Clause 71 of the Bill, prevents the use, in other arbitral, judicial or other proceedings, of certain types of information relating to the conciliation process, including: (i) an invitation by a party to engage in conciliation proceedings or the fact that a party was willing to participate in conciliation proceedings; (ii) views expressed or suggestions made by a party in the conciliation in respect of a possible settlement of the dispute; (iii) proposals made by the conciliator, etc. Arbitral tribunals, courts and other governmental authorities are precluded from ordering disclosure of such information, except to the extent required by law or for the purposes of implementing or enforcing a settlement agreement.


5.      Clause 73 of the Bill: Conciliator acting as arbitrator

Part II of the ACA makes no provisions precluding a conciliator from acting as arbitrator in subsequent arbitral proceedings arising out of the same or related contract. Clause 73 of the Bill provides that a conciliator shall not act as arbitrator in respect of a dispute that was or is the subject of the conciliation proceedings or in respect of another dispute that has arisen from the same contract or legal relationship, or any related contract or legal relationship. The parties may by agreement exclude the operation of this provision.

6.      Clause 74 of the Bill: Enforcement of Settlement Agreement

Part II of the ACA makes no provisions in relation to the manner in which a settlement agreement reached after conciliation may be enforced. Clause 74 of the Bill provides that if the parties conclude an agreement settling a dispute, that settlement is binding and enforceable on the parties as if same were an arbitral award.

7.      Clause 76 of the Bill: Civil Immunity for Conciliators

As with judges and arbitrators, conciliators should also have a qualified immunity from civil suits in order to carry out their professional obligation in an unbiased, independent and impartial manner. In view this suggestion clause 76 was introduced into the Bill.

PART III:

MISCELLANEOUS


1.      Interpretations


(1) “Commercial” – section 57 of the ACA defines “commercial” to mean “all relationships of a commercial nature, including any trade transaction for the supply or exchange of goods or services … etc
Clause 78 of the Bill incorporates the words “whether or not of a contractual nature” into the definition of “commercial” in section 57 of the ACA.

(2) “Interstate arbitration” – the other significant addition to section 57 of the ACA is the definition of interstate arbitration.”.


2.      Section 58 of the ACA and clause 79 of the Bill: Short title and application

Provisions have been included to define the scope of application of the Act. The new Federal Arbitration and Conciliation Act will be applicable in all states of the Federation but only in relation to interstate and international arbitrations as defined in clause 78. However, in the Federal Capital Territory the new legislation will be applicable to all types of arbitration, i.e. domestic intrastate, domestic interstate and international arbitrations.



Yinka Olaiya

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