On May 26, 2023, the erstwhile President of the Federal Republic of Nigeria, President Muhammadu Buhari GCFR assented to the Arbitration and Mediation Act, 2023 (the “AMA” or “Act”) which has now repealed the Arbitration and Conciliation Act 1988 (the “ACA”).

The Act, which incorporates elements of the revised UNCITRAL Model Law of 2006, seeks to promote the resolution of disputes by an impartial tribunal without the unnecessary delay or expense that plagued the resolution of disputes Under the Arbitration and Conciliation Act.

The Act introduced several novel provisions which modify the existing arbitration framework.
Novel provisions of the Act are as follows:

Creation of a review mechanism for arbitral awards
A significant innovation of the Act is its provision for the creation of an “Award Review Tribunal” (the “ART”), an opt-in mechanism that gives the parties the option to specify in their agreement that arbitral awards may be reviewed by a second arbitral tribunal if a party seeks to make application based on section 55(3) of the Act (grounds for application for setting aside an award).

The ART, constituted in the same way as the tribunal in the original arbitration, shall endeavor to give its decision within 60 days from the date of its constitution, and during this time any enforcement proceedings must be stayed pending the decision of the ART.

Different considerations for stay of court proceedings
The Act retains old section 4 (although in a modified form) and deletes section 5 under the ACA, which left the decision to stay proceedings to the court’s discretion and required the applicant to demonstrate its willingness to proceed with the arbitration. The Act now mandates the courts to stay proceedings commenced in breach of the arbitration agreement unless the court finds that the agreement is void, inoperative or incapable of being performed.

While this pro-arbitration approach has the potential to increase the attractiveness of Nigeria as a desirable arbitral seat, it is believed that the deletion of section 5 of the ACA gives recalcitrant defendants a shield to hid behind in insisting in arbitration, and then balking at every step of the arbitration to frustrate the claimant.

The use of accessible electronic communication
The repealed ACA mandates all arbitration agreement to be in writing taking the form of; “… a document signed by the parties; or in an exchange of letters, telex, telegrams or other means of communication which provide a record of the arbitration agreement; or in an exchange of points of claim an of defense in which the existence of an arbitration agreement is alleged by one party and denied by another”

The new AMA however, in addition to the above, introduces, ‘electronic communication’ to satisfying the writing requirement. It provides that; the requirement for an arbitration agreement to be in writing can now be satisfied by an “electronic communication” that is accessible to be usable for subsequent reference.

Implying that, if an electronic communication is readily accessible and can be used for future reference, it fulfills the criteria that an arbitration agreement must be in writing. ‘Electronic communication’ as used in the Act is defined as any communication that the parties make by means of data messages, that is, any information generated, sent, received, or stored by electronic, magnetic, optical, or similar means, including electronic data interchange (EDI), electronic mail, telegram, telex, or telecopy.  The above definition thus recognizes the use of emails, text message correspondences, social media chats etc. as means to satisfy the mandatory requirement of a written arbitration agreement.

Whilst the ACA may have presumed the inclusion of electronic means of communication under its provision for, “…other means of communication which provide a record of the arbitration agreement”, the uncertain definition of, “other means of communication” – is an ambiguity the AMA has by its specific provision, laid to rest.

Third-party gunding in arbitration
In contrast to the repealed ACA, the new Arbitration and Mediation Act explicitly acknowledges and recognizes the concept of third-party funding. Third-party funding in arbitration refers to a practice where an entity or individual, (third Party), provides financial support to one of the parties involved in an arbitration proceeding.

The funder’s role is to finance some, or all the costs associated with the arbitration in exchange for a share of the potential award or settlement. The terms of the third-party funding agreement determine the extent of the funder’s obligations, which may include covering the counter-party’s costs and providing security for the opponent’s costs if ordered by the Arbitral Tribunal.

The new Act stipulates that the torts of Maintenance and Champerty do not apply in relation to Third-Party funding of arbitrations seated in Nigeria and related to proceedings in any court within Nigeria.  The Act also specifically provides that an arbitral tribunal shall fix the costs of arbitration in the final award and such costs include the cost of “Third-Party funding”.

Reduction in default number of arbitrators
In cases where the parties do not specify the number of arbitrators in their agreement, there are different provisions in the repealed ACA and the new AMA. Under the repealed ACA, if the parties failed to specify the number of arbitrators, the default provision stated that three (3) arbitrators would be designated to hear the case.

However, the new AMA has introduced a change in this regard. According to the new Act, if there is no agreement between the parties regarding the number of arbitrators, the default provision now designates a sole arbitrator to handle the arbitration proceedings.

This recognises that a sole arbitrator can be more cost-effective compared to 3 arbitrators. This can be particularly advantageous for parties with limited financial resources or when the dispute involves relatively lower stakes. With a single arbitrator, the arbitration process can be streamlined and expedited. Decision-making can be quicker and scheduling easier as there is no need for deliberations or reaching a consensus among multiple arbitrators.

Whilst the inclusion of provisions for the designation of sole arbitrator may appear to simplify and streamline the process, it is crucial not to overlook the issue of justice and fairness that a three-member panel of arbitrators is more likely to achieve compared to a single arbitrator; however this may be mitigated by the provisions for the review of the award under Section 56 AMA.

Emergency arbitrator
This is a novel provision in the AMA. It permits the appointment of an emergency arbitrator in cases where a party seeks urgent and immediate relief. Furthermore, it allows for the conduct of emergency arbitration proceedings through various means of communication, including video conferencing, telephone, and similar methods.

According to the new Act, if a party requires urgent relief in relation to a dispute, they have the option to apply for the appointment of an emergency arbitrator. This application can be made to an arbitral institution designated by the parties, or if no such designation exists, to the court. The application can be submitted either concurrently with or after the filing of a notice of arbitration, but before the formation of the arbitral tribunal. The emergency arbitrator shall be appointed within two business days after the date the application is received.

To be continued tomorrow