Emmanuel Dike:‘Notion that it is not easy to enforce arbitral award
Emmanuel Dike is the principal partner of Jasmine Advocates. He is a Lawyer, arbitrator and adjudicator; including being trained in dispute adjudication board and construction claims in Fédération Internationale Des Ingénieurs-Conseils (FIDIC) contracts, which means the International Federation of Consulting Engineers and other Alternative Dispute Resolution (ADR) methods. Dike has been exposed to various aspects of construction contracts including standard forms.He has also conducted dozens of construction arbitration and international adjudication cases; including acting as dispute board adjudicator appointed by an international institution based in London for a complex international engineering and construction dispute.Dike also acts as counsel in construction and engineering disputes in arbitration and litigation. He is former General Counsel, Regional Centre for International Commercial Arbitration Lagos; Chairman, Board of Trustees; Society of Construction Law Nigeria (affiliated to Society of Construction Law UK); Secretary–General, Society of Construction Industry Arbitrators as well as member, Infrastructure Policy Commission among others.
The efficency and effectiveness of a country’s arbitration system determines the level of confidence international investors would have in such economy. Sadly, arbitration centres in Nigeria and the rest of African do not enjoy the same level of patronage as their counterparts in Europe, Asia and America, irrespective of the fact that most of the disputes emanate from African soil. Construction law expert and renowned arbitrator, Emmanuel Dike in this interview with Assistant Editor, Law and Foreign Affairs, JOSEPH ONYEKWERE explains that it is a demarketing strategy by international competitiors to weave the narration that Nigeria is not arbitration-friendly. He also talks about the role of lawyers in the construction industry.
The area of construction law is uncommon in Nigeria. What is it all about?
Construction law deals with built environment basically. By built environment we mean building construction, road construction and civil works generally; be it engineering or core construction works. That is what construction law relates to. It also looks at the legal aspect of built environment – what is the nature of contracts in those areas, the terminologies and nuances as well as industry practices. That’s basically what construction law is all about.
Do lawyers in construction industry play any role in fashioning out the national building code?
The National building code is a technical document produced by core professionals in the construction industry such as architects, engineers, quantity surveyors, those who are really in charge of construction projects because it deals with industry practice and standards that are obtainable in the industry. The lawyers’ role in the building code is to put the draft together but the basic contents are industry standards. So it is not necessarily core area for lawyers.
The building code is few years on and it is already under review. What necessitated that?
The first edition that is under review was supposed to have been enacted into law through the National Assembly and adapted by states, but it did not go far in the sense that the promoters couldn’t get it through the legislative process. In the interim, we have some challenges in the building industry. There were several incidents resulting in the collapse of buildings and we also had issues relating to quality of materials as well as issues relating to standards and measurements used in building industry. Some of them were compromised. There was the need to plug the loopholes that were being exploited by unscrupulous builders and contractors.
So that is why it is now under review. We are of the hope that by the time the review is done with, all the loopholes would have been plugged, particularly, the area of supervisions. Wherever you go, you notice that quacks are engaged as building contractors and there is no way of regulating what they do. This is because clients who build are at liberty to engage whosever they wished. Sometimes, they find it difficult to engage professionals, reason being that they believe the cost would be too high for them to bear. So, they try to circumvent the services of professionals. And they do that at great costs too. When an unqualified person is supervising a building project, you will have issues relating to structure. Some of these people will not engage a structural engineer to calculate the cost and the weight and other measurements that the structure is supposed to carry. At times, we have wet lands, marshy areas, and all those have their own different designs. But when those are not taken into consideration, then it will be a disaster waiting to happen. So those are the issues that the new building code is trying to address.
Is there any statutory role for construction lawyers in a building project?
It is the same role that lawyers play generally in other areas. There is no statute compelling those in the construction industry to make use of the services of lawyers, but it is essential that they use lawyers, in the sense that lawyers are experts in drafting and negotiating contracts. If you don’t engage lawyers to do it for you, you will have a problem from the onset, from the negotiation of the contract. You will have problem all the way to the drafting of contract. And when a contract is poorly negotiated, drafted and poorly implemented, that is the beginning of the issue of abandoned project. From the negotiation table, salient issues are left out and when this happens, a party to the contract might feel shortchanged. And when he feels shortchanged, he will not be able to meet up with his obligations anymore. That is how the problem begins. And when this happens, it results in either the project being delayed or funds not being released or project abandoned completely and there is huge waste of capital and human resources. It results ultimately in economic waste in the country, whether it is government or private projects. So the use of lawyers is very essential in preparation, negotiation and the implementation of contractual documents, even in putting together the bidding documents.
Do you have a body that oversees the activity of lawyers in construction industry?
Not necessarily, but there is a body that any lawyer who is interested can join – the society of construction law in Nigeria. It is a body that is affiliated to over 40 similar bodies in the world. There are societies of construction law in over 40 countries of the world. Nigeria is fortunate to have one. Its work is basically to promote knowledge, disseminate information in the area of construction law and help local practitioners meet up with the international best practices as well as to update their knowledge. It prepares them to be able to compete with other construction lawyers all over the world. Mind you, it is a business and you cannot practise as an island, you must look at what others are doing all over the world because when it comes to the issue of competence, you would also be reckoned with as somebody that has something to offer.
In your view, how often do clients engage lawyers in construction projects, whether government or private sectors?
They don’t engage lawyers at such and that is the bane of the industry practice. If they engage lawyers from the outset, industry disputes would be minimized. Though it is very difficult to have a project from the beginning to the completion without any dispute arising, but the frequency would be minimized if lawyers are engaged in drafting, negotiations and in implementations of the contract because the contents of the contract need to be interpreted for the workmen to understand what they are supposed to do and what they are not supposed to do. Most times, they do what they are not supposed to do and leave what they are supposed to do. That is why you have a lot of disputes arising in construction works. It is one of the sectors you have the highest number of disputes.
Is it globally or locally?
You did mention that there are over 40 countries in the world with construction law societies. To what extent do they involve lawyers in the construction of projects in those other jurisdictions?
Every jurisdiction develops at its own pace. Why they probably have fewer disputes elsewhere is because they have been able to work lawyers into the scheme of construction projects. Here, we have not been able to achieve that because most times, the client and his engineers sit together and award a contract to a contractor without recourse to lawyers. So that is part of the problem we are talking about. So if they award a contract, which is a legal document without involving lawyers, you will see that it might be flawed either in drafting or in implementation. So that is the beginning. And again, you have this bulky document called construction document. It contains several obligations and duties. If you don’t have a legal mind to guide the parties, it is a potential source of disagreement.
Are lawyers not involved in making those documents?
Most times no, because they are standard form documents prepared by users in the industry and they have been there over the years. What they do is to fill up the dotted line, the gaps and issue them out. They continue regurgitating old documents. Even the ones that have flaws, the flaws are repeated over and over again. And they keep on experiencing the same problem over and over again without knowing the cause and without knowing the source, they will not address the cause. That is why you have frequent disputes in construction industry. The frequency is very high.
Which country of the world has minimal construction conflict as a result of their capacity to engage lawyers in the process?
Most developed countries have minimal disputes in the construction industry because they have been able to work lawyers into the process. In some of those countries, there are lawyers who have distinct practice in the construction industry. They do nothing outside construction law and they developed it to a very high standard. In those places, they are able to checkmate these disputes before they arise because they are using professionals. Lawyers are able to look into the future and advise that if you go this way, these are the likely consequences and if any standard form document has flaw, the lawyer that is engaged from the outset would correct it before it metamorphosis into something that can no longer be managed.
Why should someone engage construction lawyers, since a lot of builders and multinationals insert arbitration clause in their contractual agreements?
The arbitration clauses that are usually inserted into the construction contracts are all archaic. They have not bothered to review those arbitration clauses because the arbitration clauses in those standard form contracts are as old as those standard forms. And they have not been able to deem it fit to update them with the modern trends in arbitration world. Most times, they are not properly drafted, the clauses are faulty from the beginning. When a dispute arises, it becomes difficult to actually proceed with arbitration because the clauses are pathologically defective from the onset. So the solution is when you have a lawyer who is looking at the contract, who is already current with the modern trends in arbitration world, he will know the kind of arbitration clause to insert in the contract so that the owner of the project, the contractor, subcontractors, the consultants, financiers or funders would be protected.
There are several parties in construction industry. The arbitration clause they normally insert in those contracts takes care of usually the project owner and the main contractor. The subcontractors and the other contractors under them don’t benefit. The consultant, the financier, the insurance company and other parties do not benefit. The arbitration clause in the standard contract form I mentioned earlier covers only two principal parties. So there is nothing you can do. You cannot over-stretch it. That is why I said that it is usually defective from the onset. There is no trained legal mind that is organizing the bits and pieces and putting them together as contractual document.
Now that you said the arbitration clauses are archaic, how current is Nigeria’s arbitration law?
Nigeria’s arbitration law is not old per se, it is just about 30 years old. There are several provisions in Nigeria’s Arbitration and Conciliation Act that have not yet been pronounced on by the courts. And since the promulgation of the Arbitration and Conciliation Act in 1988, there has not been a single amendment to the Act. Although some people are saying that there are some areas of the Act that needs to be looked at the second time, laws are meant to be dynamic. Laws are not static. There is nothing wrong in having a second look at some of the provisions that have proven to be difficult and challenging to practitioners. By and large, the entire Arbitration Act cannot be said to be old or archaic or to say that the Act is not arbitration-friendly. One thing you must bear in mind is that it has its root from the United Nations Commission on International Trade Law (UNCITRAL) Model Law on International Commercial Arbitration. In essence, it is a law that was prepared by the United Nations and given to countries to implement. In other words, to either adopt or adapt, depending on the local circumstances.
In our own case, did we adopt or adapt?
We adapted the UNCITRAL model law. About 90 percent of what is in the UNCITRAL model law, is also in our own Arbitration Act. It is just less than ten percent that were inserted different from the UNCITRAL model law and that would not make the Nigerian law impracticable. It ought not to attract the kind of negative criticism that it is attracting, that Nigeria is not arbitration-friendly, that is not true. A whole lot of countries did not adopt or adapt the UNCITRAL law, and yet, nobody has said that those countries are not arbitration-friendly. One thing we have to know about arbitration or dispute resolution is that it is a business. It is susceptible to business competitions. And if you agree that it is a business and also susceptible, the question would be, who are you competing with? You must know your competitors and you must know when your competitors are demarketing you. The issue is that Nigerian competitors in Arbitration business are demarketing Nigerian Arbitration laws. Unfortunately, some Nigerians practitioners are joining to say that Nigerian arbitration laws are not friendly. It is not true.
Are there no basis for such views, especially when the enforcement of arbitrary awards are usually problematic?
The enforcement of arbitrary award is not a problem with the arbitration law. When you conclude an arbitration, the arbitration Act has almost concluded its own work. It is left to the court because it is only the courts that can enforce arbitrary awards. An individual cannot enforce arbitrary awards. The courts belong to the states and it is only the states that have instruments of coercion. It is only the state that can force anyone to do something against his will. So when an unsuccessful party in an arbitration is disobeying the contents of the arbitration award, the successful person needs the instrument of coercion to force the unsuccessful party to obey. And that is the reason the successful party goes to the state court for enforcement. If the judicial system by its own design is not able to deliver a quick decision, how is that the problem of the Arbitration Act?
Arbitration is considered as one of the alternative dispute resolution mechanisms, which is being encouraged to avoid litigation. Therefore, has returning to courts for enforcement not defeated the purpose at the end?
It is only the courts that have instruments of coercion. Mind you, arbitration is consensual. Nobody forces anyone to go to arbitration. Parties voluntarily agree to go to arbitration and they sign a contract and agreed to go to arbitration to settle their disputes.
You talked about demarketing, but if you have an inefficient judicial system that cannot deliver to a minimal international standard, why do you think your competitors in your own language would not demarket you?
Judicial system anywhere in the world has its own procedures and Nigeria is not an exception. Currently, Nigerian courts are very much conscious of arbitration clauses in contracts. If you look at recent decisions coming out of Nigerian courts, relating to arbitration, you would realize that Nigeria has moved away from what it used to be before. A lot of judges undergo arbitration training; a lot of judges attend arbitration seminars and are already conscious that arbitration matters are usually given a kind of attention that meets expectation for the clauses in the first place.
Apart from the fact that decisions these days come out quicker than before, it is very rare in Nigeria today for any court to refuse enforcement of arbitral award. The notion that it is not easy to enforce arbitral award or that Nigerian courts are not arbitration-friendly, is not true. Apart from some borderline cases, particularly awards that are delivered abroad and now sought to be enforced in Nigeria, others have no problem. The same challenge that Nigerian courts have in enforcing foreign arbitral awards is the same challenge that foreign courts have in enforcing arbitral awards coming from other jurisdictions.
In your own view what more do we need to do to make Nigeria arbitration hub in Africa?
We have done as much as we can and the much we have done is enough to make Nigeria the hub of international arbitration in Africa. The only problem the Nigerian arbitration environment has, and it is endemic, is perception. Wrong perception by both local and foreign practitioners. I have said it before that arbitration is a business and you are in competition with others. When you are in competition, your competitors are not going to surrender their chances to you. You have to fight for it. If your competitor is going to have advantage over you by discouraging you from making use of what you have or by discouraging you from being proud of what you have, if he sells a dummy to you and you buy it, that will be your own problem.
Anywhere in the world, there are policies guiding arbitrations. The best policies are expressed in legislations. If Nigeria’s policy has already been expressed in Arbitration and Conciliation Act, which is a product of the United Nations and some people are busy condemning the entire Act, does it not stand to reason that they have condemned the United Nations model law on Arbitration? It is only a few provisions of that law that were added to by Nigeria. For the New York Convention that we called the enforcement of foreign arbitral award of 1958, Nigeria is also a party to that convention and Nigeria has domesticated it since 1958. These are the parameters to judge any country, whether it is arbitral friendship or not. Another major law in arbitration is what we call the Washington Convention.
The long title to it is the International Centre for the Settlement of Investment Disputes (ICSID). Nigeria is not only a party to it, but has domesticated it. Nigeria has a lot of bilateral investment treaties that have arbitration clauses, which allow a foreign investor to initiate arbitration proceedings against Nigeria in case of a default in contract performance. That is where an individual can initiate proceedings against a state. So Nigeria has gone to that level of allowing itself to be proceeded against by foreign nationals. Nigeria has National Investment Promotion Act, which is like an offer to the whole world that they should come to Nigeria and do business and that if Nigeria defaults, take us to arbitration. That is what the law is saying.
With all these drawbacks, how do you see the future of arbitration in Nigeria?
The future is bright. That is why we try to ensure that people are not only trained in arbitration, people understands the reason for arbitration. It is not a money making venture. It is beyond that, it is a business tool such that a complete businessman who does not see arbitration clause in a business is not willing to proceed in that contract. So practitioners need to know that it is not just only a money making venture, but an entire transaction that one needs to support his client in business. That would be the beginning of that change in perception. Again, people need to take time and look at the judgments that comes from Nigerian courts that relates to arbitration and be able to pinpoint which one have Nigerian courts refused enforcement of its award.
They should pinpoint which of those judgments that Nigerian courts refused the appointment of an arbitrator and the one they have refused to support the arbitral process as in granting subpoena, that is to compel a witness to come and give evidence or doing any other thing necessary for the progress of an arbitration. So it is not enough to make blanket statement that Nigeria is not arbitration friendly. Even in Nigerian arbitration law, can we actually identify those sections that are troublesome. Those things that should interest you is: one of the yardsticks of gauging the friendliness or otherwise of an arbitration law is the amount of court interventions that are provided in that arbitration law.
What I mean by court interventions is how many times parties ar required to go to court in the life of an arbitral process. The policy of the UNCITRAL model of Arbitration is to have minimal court interventions in laws of arbitration governed by the UNCITRAL arbitration Act. And that is what Nigeria is benefiting from. It is minimal in the sense that court interventions are not more than 20. But take time to look at the UK Arbitration Act. Count the number of court interventions in that Act. They are much more than what we have in Nigeria.