Many parties involved in commercial dealings have demonstrated a clear preference for arbitration as a means of resolving disputes that arise during commercial transactions.Footnote 1 There are several reasons for choosing arbitration over litigation. Examples include simplicity, privacy and expertise.Footnote 2 Arguably, however, the most practical reason for choosing arbitration is to avoid the courts – with all the attendant uncertainties that come with litigation. This is because arbitral decisions are final and binding on the parties.Footnote 3 One such uncertainty of litigation is how courts may resolve jurisdictional issues and how long such a determination may last. The possibility of the court's involvement in arbitration cannot be discounted and it may be necessary to take practical measures that discourage parties from unnecessarily seeking or insisting on judicial intervention. In Nigeria, for example, a recent directive from the highest judicial office mandated lower courts to discourage a breach of arbitration clauses.Footnote 4 This directive illustrates the tendency of parties to seek judicial intervention in Nigerian arbitration matters despite the emergence of arbitration as a major means of resolving disputes.Footnote 5 Jurisdictional questions inevitably arise when parties take a litigious step in Nigeria.
Jurisdictional issues in Nigeria are complex. One such complexity in the Nigerian court system is determining which court should exercise jurisdiction over a dispute. It is important first to understand the rather complicated court structure in Nigeria vis-à-vis jurisdiction. Nigeria is a federation that comprises 36 states, each of which has a State High Court.Footnote 6 The Federal Capital Territory (FCT) also has a High Court.Footnote 7 Nigeria has a Federal High Court with various divisions across the Federation.Footnote 8 The State High Courts have unlimited jurisdiction subject to the exclusive jurisdictions of the Federal High Court and, since 2010, the National Industrial Court.Footnote 9 The High Courts are otherwise courts of coordinate jurisdiction.
Under the Nigerian judicial system, it can be challenging to determine which of the High Courts should have jurisdiction over a dispute because jurisdiction rules are technical and rather complex.Footnote 10 Such an impasse often adversely affects litigants who suffer the consequences of “inelegant drafting” and “interest-based interpretations”.Footnote 11 Associated Discount House Limited v Amalgamated Trustees Limited Footnote 12 is illustrative. In this case, the respondent challenged the jurisdiction of the Federal High Court over a banker/customer dispute. The Federal High Court upheld the respondent's jurisdictional challenge, declined jurisdiction with respect to the dispute and redirected the parties to the Lagos State High Court. Here again, the respondent challenged the jurisdiction of the State High Court. The jurisdictional challenge was dismissed. The respondent then appealed to the Court of Appeal. The Court of Appeal allowed the appeal, deciding that the State High Court did not have jurisdiction. The appellant then appealed to the Supreme Court, which ruled that the State High Court had jurisdiction over the dispute and sent the matter back to the Lagos State High Court for trial after nearly a decade of litigation that did not concern the substance of the case. In Oladipo v Nigeria Customs Service Board,Footnote 13 the Court of Appeal also observed that the appellant's grievance was not addressed in either the State High Court or the Federal High Court for more than half a decade due to a jurisdictional challenge.Footnote 14 Some delays have lasted up to two decades.Footnote 15 Such delays highlight the benefits of arbitration. Party autonomy and the potential to expedite dispute resolution underpin arbitration.Footnote 16
This article is based on three major arguments. First, the impasse that arises from the jurisdictional tussle between the Federal and the State High Courts can be resolved to facilitate court intervention in arbitration by interpreting section 251(1) of the Constitution of the Federal Republic of Nigeria (the Constitution) alongside section 57 of the Arbitration and Conciliation Act (the ACA). In this context, the Nigerian legislature has conferred additional jurisdiction on the Federal High Court to intervene in arbitration irrespective of the subject matter of the underlying dispute. Thus, where jurisdiction over the underlying dispute is in doubt, litigants should apply to the Federal High Court to intervene in all cases. Second, for employment-related disputes over which the National Industrial Court has exclusive jurisdiction, it should not intervene to enforce the arbitration agreement by appointing arbitrators where the parties are unable to appoint. Litigants should seek the National Industrial Court's intervention in appointing arbitrators by instituting a claim before the National Industrial Court and then, by mutual agreement, request the National Industrial Court to appoint arbitrators. Third, the confusion as to whether court interventions in arbitrator appointments in Nigeria can be appealed should be cleared by applying Skye Bank Limited v Iwu. Footnote 17 Based on this Supreme Court decision, litigants have the right to appeal all final first instance decisions of the High Courts.
There is a foundational necessity to examine the issue of jurisdiction concerning the court's intervention in arbitrator appointment where parties are unable to do so. This article provides a perspective which seems to have escaped any court decision or scholarly commentary. The overarching argument is that section 251(1) of the Constitution read alongside section 57 of the ACA provides additional jurisdiction for the Federal High Court to intervene in arbitration notwithstanding the subject matter of the underlying dispute.Footnote 18 If the courts accept this argument, it would mean that the confusion as to which of the High Courts would have jurisdiction can be eliminated by approaching the Federal High Court. This approach will also facilitate access to justice when parties find themselves in the remit of litigation. This article is also important because of its implications for international businesses sometimes conducted through multinational companies. Subject to any exemptions by the government, as provided by section 78 of the Companies and Allied Matters Act 2020, foreign companies are required to incorporate companies as separate entities if they intend to carry on business in Nigeria. Carrying on such Nigerian business may give rise to disputes which will be resolved through domestic arbitration. Jurisdictional uncertainties are even more complicated for such companies which often lack prior experience with respect to doing business in Nigeria.
ARBITRATOR APPOINTMENTS AND ACCESS TO THE COURTS
Parties can avoid navigating the landmine of first determining which of the High Courts has jurisdiction to resolve their disputes by choosing arbitration. This advantage is, however, obviated when the parties cannot agree on choice of arbitrator(s) or settle for a third party other than the courts to make the choice for them. In this case, the parties’ only recourse will be to seek the courts’ assistance to help constitute the arbitral tribunal, known as the default procedure.Footnote 19 It is critical to determine which of the High Courts the parties should approach to assist in the appointment of arbitrators.
Certain court decisions indicate that, pursuant to the ACA, either the Federal High Court or the High Court can exercise jurisdiction to intervene in the appointment of arbitrators irrespective of the underlying dispute.Footnote 20 Such decisions conflict with some of the other decisions and scholarly views that are premised on the superiority of the Constitution over the ACA.Footnote 21 They argue the ACA cannot extend the Federal, FCT and State High Courts’ jurisdictions to intervene in the appointment of arbitrators irrespective of the subject matter of the dispute.
The emergence of the National Industrial Court as a court of coordinate jurisdiction with the Federal, FCT and State High Courts in 2010 has further complicated the jurisdiction to intervene in the appointment of arbitrators vis-à-vis labour/employment disputes.Footnote 22 Given the extensive jurisdiction that the Nigerian Constitution vests in the National Industrial Court, it should have jurisdiction to appoint arbitrators in labour/employment disputes. In three recent decisions examined in this article, the parties had all unsuccessfully requested the National Industrial Court to appoint arbitrators.Footnote 23 This amounted to a waste of time. More time and resources would have been wasted if the National Industrial Court exercised jurisdiction, but the Court of Appeal overturned the National Industrial Court's decision. Furthermore, even more time and resources would have been wasted if a party challenged an award based on an alleged irregularity in the appointment of arbitrators because the National Industrial Court lacked jurisdiction.
The question of appealing the decisions of intervening courts is a constant thread that runs through judicial intervention in the appointment of arbitrators. Therefore, it is also necessary to consider whether the decision of the Federal or State High Courts appointing arbitrators can be appealed. There are conflicting judicial decisions and scholarly views in this area. The Supreme Court's recent decision in Skye Bank Plc v Iwu,Footnote 24 however, supports this article's argument that parties can appeal decisions of the High Courts that concern the appointment of arbitrators.
The courts and judicial officers as appointing authority versus the default appointment procedure
There is a need to understand party autonomy vis-à-vis judicial officers appointing arbitrators under Nigerian law. Parties have full autonomy in deciding the composition of the arbitral tribunal. Thus, sections 6 and 7 of the ACA only contain provisions that apply where the parties have failed to reach an agreement. Thus, in constituting the arbitral tribunal, reference will always be made first to the terms agreed by the parties. Their agreement (for example on sole arbitrator, multiple arbitrators, specified qualifications etc.) must be given full effect. The court can only intervene and appoint arbitrators in one or more of the following limited exceptions: the parties have failed to agree on a sole arbitrator;Footnote 25 a party has failed to appoint its nominated arbitrator;Footnote 26 the parties’ nominated arbitrators have failed to agree on a presiding arbitrator;Footnote 27 the appointing authority specified in the parties’ agreement have failed to appoint the arbitrator;Footnote 28 or where the parties fail or are unable to replace the arbitrator under section 11 of the ACA to fill a vacancy as a result of the arbitrator's termination or revocation of appointment, removal or withdrawal from office.Footnote 29
The primacy of party autonomy with regard to the appointment of arbitrators can be illustrated through Backbone Connectivity Network Nigeria Limited and Others v Backbone Technology Network Incorporated.Footnote 30 The Court of Appeal decided that it is only after a party has failed to cooperate in the appointment process and, consequently, a party applies to the court to appoint an arbitrator, that the court can intervene and appoint arbitrators. Thus, the court can neither order the parties to appoint arbitrators where there is no application before the court in that respect nor can the court on its own motion appoint arbitrators.
A party cannot appoint arbitrators upon default of the other party except where the agreement so provides.Footnote 31 A party must have been notified to appoint or concur in the appointment of an arbitrator prior to the court exercising jurisdiction to appoint an arbitrator upon default of the party.Footnote 32 Only parties to an arbitration agreement have legal standing to apply to the court to appoint an arbitrator.Footnote 33 Considering the “list procedure”, there are detailed guidelines on the appointment of sole arbitratorsFootnote 34 and multi-member arbitral tribunals.Footnote 35
Judicial officers usually appoint arbitrators in two capacities: where the arbitration agreement names a judicial office holder, in which case he is constituted an appointing authority; and where the intervention jurisdiction of the court is invoked. It is necessary to draw a distinction between a judicial officer as appointing authority by agreement of the parties and appointment of an arbitrator by the court in default of the parties. In the former, the judicial officer performs a personal and not a judicial function, and as such, the judicial process need not determine the procedure for appointment.Footnote 36 In such a case, the judicial officer acts as appointing authority by agreement of the parties in the same manner as any qualified office holder could act as appointing authority if the parties agree. The situation is different when the judicial officer exercises the default appointment powers under section 7(2)(a) and (b) of the ACA. Where the parties have agreed that a judicial officer should appoint the arbitrator, they merely need to ask the judicial officer to do so. The default mode of appointment by the courts is activated only when the judicial officer has failed or is unable to appoint the arbitrator pursuant to the parties’ agreement. The court does not exercise judicial powers where the judicial officer is constituted as appointing authority based on the parties’ agreement. Thus, the question of jurisdiction does not arise. Celtel Nigeria BV v Econet Wireless Limited Footnote 37 illustrates the distinction between the judge acting as appointing authority and the default appointment procedure. The arbitration agreement specified the Chief Judge (CJ) of the Federal High Court as appointing authority. Econet applied to Ukeje CJ to appoint an arbitrator. Ukeje CJ declined to appoint any arbitrator. As a result, Econet applied to the Lagos State High Court to appoint an arbitrator in default of the parties. Whilst this application was pending at the Lagos State High Court, Econet applied to Mustapha CJ, who had succeeded Ukeje CJ, at the Federal High Court. Mustapha CJ then appointed arbitrators. The Court of Appeal noted that the action of Mustapha CJ was proper in view of the arbitration agreement, notwithstanding the pending application at the Lagos High Court for judicial intervention. Mustapha CJ, as the successor of Ukeje CJ, could therefore consider a fresh request for the appointment of arbitrators. As the court observed: “It is only after a decision is reached under Section 7(3) of the ACA that the point of no return is reached. … That is why there is no right of appeal from the decision of the appointing authority in Section 7 of the ACA”.Footnote 38
The jurisdictional issues addressed in this article arise only when the parties invoke the default appointment jurisdiction of the courts. Jurisdictional issues do not arise when the parties agree that a judicial officer should appoint the arbitrator. Regarding international arbitration, the courts cannot intervene to appoint arbitrators if the parties fail to do so. Where the parties fail to designate an appointing authority, the Secretary-General of the Permanent Court of Arbitration at The Hague is automatically constituted as appointing authority.Footnote 39
SUBJECT MATTER JURISDICTION IN ARBITRATOR APPOINTMENTS
The ACA defines “Court” to mean either the State High Court or the Federal High Court or the FCT High Court.Footnote 40 The Nigerian Constitution, pursuant to which the ACA itself was enacted, created the various courts and specified their jurisdictions.Footnote 41 The question is whether the parties can approach any of the High Courts mentioned in the ACA to seek judicial intervention in the arbitral tribunal constituting process or whether they must approach only the High Court (ie, Federal or State) exercising jurisdiction in the subject matter area of their dispute.
There is considerable force in the argument that although the ACA defines a court to mean either of the Federal or State High Courts or the High Court of the Federal Capital Territory, the High Court to which an application for appointment of an arbitrator in default of the parties’ selection should be made is the High Court that would have had jurisdiction over the dispute but for the arbitration clause.Footnote 42 This argument is predicated on the fact that the ACA is inferior to the Constitution. Thus, the ACA cannot amend the constitutional delimitation of the court's jurisdiction.Footnote 43 The argument may be supported by certain High Court decisionsFootnote 44 and recent decisions of the Court of Appeal in Chevron USA INC v Brittania-U Nigeria Limited Footnote 45 and Federal University of Technology Akure v BMA Ventures Nigeria Limited. Footnote 46 There are, however, certain other decisions to the effect that Nigerian High Courts have coordinate jurisdiction to intervene in aid of arbitration.Footnote 47
Apparently, courts and scholars have not considered the effect of the Supreme Court's decision in Magbagbeola v Sanni. Footnote 48 This case is critical to understanding relevant case law and how it should be interpreted in light of the current Nigerian arbitration regime and the Nigerian Constitution.Footnote 49 In that case, the parties had entered into a partnership agreement to protect their interests in Commerce Lords Nigeria Limited, of which they were promoters. Commerce Lords Nigeria Limited was in receivership. A dispute then arose between the parties. The respondent, relying on the arbitration clause in the partnership agreement, approached the Lagos State High Court to appoint an arbitrator. The appellant objected to the Lagos State High Court's jurisdiction to appoint an arbitrator, claiming that the dispute involved the running of a company (an item which was within the exclusive jurisdiction of the Federal High Court). The Lagos High Court and the Court of Appeal dismissed the objection. Both courts drew a distinction between the receivership pending at the Federal High Court and the Lagos State High Court dispute, which merely sought to determine the rights of the parties under the partnership agreement of which the arbitration clause formed a part. The underlying dispute was predicated on a breach of the partnership agreement and could not be subsumed under companies’ proceedings as the appellant claimed. The appellant was dissatisfied with the decision of the two courts. The appellant further appealed to the Supreme Court, which affirmed the findings of both lower courts that the underlying dispute did not concern the way in which Commerce Lords Nigeria Limited operated – a matter over which the Federal High Court has exclusive jurisdiction. The underlying dispute, rather, concerned the interests of both parties in considering their partnership agreement on the way in which to share proceeds from Commerce Lords Nigeria Limited. Thus, the Supreme Court decided that the Lagos High Court had jurisdiction to appoint an arbitrator.
Magbagbeola v Sanni, however, did not clear the confusion arising from conflicting decisions of the lower courts because all the courts determined that the underlying dispute was founded on a partnership deed and not the management of an incorporated entity under the Companies and Allied Matters Act as erroneously canvassed by the appellant. The Lagos High Court before which the application to appoint an arbitrator was brought had underlying jurisdiction over the substantive claims. Therefore, Magbagbeola v Sanni should not support any argument that the Federal or State High Courts can intervene in arbitration irrespective of the subject matter of the underlying dispute. This is because the reason for a court's decision is anchored to the facts.Footnote 50 Thus, the Supreme Court's pronouncement (per Katsina-Alu JSC) on the competence of both lower courts to appoint an arbitrator was obiter.
Nevertheless, the Supreme Court's pronouncement in Magbagbeola v Sanni can be justified by separating the parties’ dispute from the agreement to arbitrate. Clearly, the agreement to arbitrate is separable from the parties’ contract.Footnote 51 Thus, the right of action in cases where judicial intervention is sought in the appointment of arbitrators is simply based on the default of a party in appointing an arbitrator as prescribed by the ACA and not the cause of action underlying the dispute. Either of the High Courts should have jurisdiction as prescribed by the ACA. The State High Courts can exercise jurisdiction based on both the ACA and the fact that simple contracts fall within their exclusive jurisdiction.Footnote 52 The Federal High Court can exercise jurisdiction based on the ACA itself and section 251(1) of the Constitution:
“Notwithstanding anything to the contrary contained in the Constitution and in addition to such other jurisdiction as may be conferred upon it by an Act of National Assembly the Federal High Court shall have and exercise jurisdiction to the exclusion of any other court in civil causes and matters.” (Emphasis added)
Thus, the ACA confers additional jurisdiction on the Federal High Court with respect to the enforcement of the contract to arbitrate. Consequently, the Federal High Court's jurisdiction to intervene in arbitration is not limited by subject matter jurisdiction or the subject matter of the substantive action. A combined reading of section 57 of the ACA and section 251(1) of the Constitution supports this argument. If the law is that jurisdiction to intervene is limited to only the court with subject matter jurisdiction over the substantive dispute, then only the State High Courts are limited in their intervention jurisdiction to constitute arbitral tribunals.Footnote 53 The Nigerian Court of Appeal's decisions in Chevron USA INC v Brittania-U Nigeria Limited Footnote 54 and Federal University of Technology Akure v BMA Ventures Nigeria Limited Footnote 55 are, therefore, inaccurate because in both cases the Court of Appeal decided that the Federal High Court did not have jurisdiction to enforce arbitral awards predicated on simple contract. A harmonious and progressive interpretation of the relevant statutory provisions does not support such appellate decisions.
The need to consider party autonomy vis-à-vis access to the courts is underscored by the increasing importance of the National Industrial Court. As earlier noted, the Federal High Court, State High Courts and the National Industrial Court are all courts of coordinate jurisdiction. In principle, therefore, no court is superior to the other court and is subject to its jurisdictional delineations.
APPOINTMENT OF ARBITRATORS VIS-À-VIS THE JURISDICTION OF THE NATIONAL INDUSTRIAL COURT
The National Industrial Court has exclusive jurisdiction to determine several matters, including “industrial relations and other matters arising from the workplace … matters incidental thereto or connected therewith.”Footnote 56 In principle, this jurisdiction does not conflict with the exclusive subject matter jurisdiction of the Federal High Court and the general jurisdiction of the State High Courts.Footnote 57 By the Constitution, applications for judicial intervention in arbitration should be made to the National Industrial Court in disputes relating to labour/employment matters.Footnote 58 However, the National Industrial Court is not contemplated in sections 7(2) and 57(1) of the ACA, which provide for judicial intervention in arbitrator appointments and specify the courts that can intervene. In Ravelli v Digitsteel Integrated Services Limited,Footnote 59 counsel for the applicant unsuccessfully argued that the ACA was impliedly amended to include the National Industrial Court as one of the courts that can intervene in the appointment of arbitrators.
Jurisdictional delineations considering the ACA and the Constitution do not provide a definitive solution to challenges in the area of arbitration. Section 57(1) of the ACA lists the courts that can exercise intervention jurisdiction in arbitration. The National Industrial Court is omitted. In this regard, it should be noted that the ACA, promulgated in 1988, pre-dated the establishment of the National Industrial Court as a court of coordinate jurisdiction with the Federal and State High Courts. The National Industrial Court was vested with exclusive jurisdiction over labour and employment matters in 2010.Footnote 60
The earlier decision of the National Industrial Court in Gregory v West African Oil Field Services Ltd Footnote 61 arguably strengthened the view that the National Industrial Court could intervene in arbitration to appoint arbitrators. The claimant was employed as Chief Operating Officer of the respondent company (West African Oil Field Services). His employment was terminated by a letter dated 22 December 2011. Relying on section 254(c)(1)(a) and (d) of the Constitution, the claimant had obtained an interim injunction by an ex parte application restraining his employers from effecting the termination of his employment. The respondent applied to the National Industrial Court to discharge the interim injunction citing an arbitration clause requiring disputes arising from the employment contract to be arbitrated in London in accordance with the International Chamber of Commerce (ICC) Arbitration Rules. The claimant argued that the arbitration clause would oust the exclusive jurisdiction of the National Industrial Court over labour/employment disputes. The National Industrial Court discharged the interim injunction. Upholding the arbitration clause in the employment contract, Adejumo J stated:
“Once the court comes to the conclusion that parties have agreed to refer disputes to arbitration, the court in line with the well established notion that parties are bound to honour their contractual obligations should enforce the arbitration agreement. This Court does not share the view that by inserting an arbitration clause in the CSA, the parties have agreed to oust the jurisdiction of this court under section 254(c)(1) as contended by the claimant/respondent's counsel.”Footnote 62
Notwithstanding this decision, section 57(1) of the ACA, which only lists the Federal and State High Courts as courts exercising intervention jurisdiction in arbitration, was recently interpreted to exempt the National Industrial Court from exercising jurisdiction to intervene in arbitration to appoint arbitrators in default of the parties. This interpretation is evident in three cases: Ravelli v Digitsteel Integrated Services Limited,Footnote 63 Prakash v Orleans Invest Holdings Footnote 64 and Ajilore v KLM Airlines. Footnote 65
In Ravelli v Digitsteel Integrated Services Limited,Footnote 66 the applicant filed originating motion at the National Industrial Court seeking the appointment of an arbitrator to resolve a dispute with his erstwhile employers. He relied in part on article 22 of his employment contract dated 17 August 2012 (arbitration clause) and section 7(2)(b) of the Act (default appointment provision). When the motion came up for argument on 28 March 2017, Kanyip J, on the Court's own motion, raised the issue of the National Industrial Court's jurisdiction to appoint an arbitrator pursuant to the ACA and asked the parties to address him on the point. Kanyip J then ruled the following: that the ACA applies only to commercial disputes. Employment and labour disputes fall outside the ambit of the ACA;Footnote 67 the fact that the ConstitutionFootnote 68 expressly grants exclusive jurisdiction to the National Industrial Court over trade disputes under the Trade Disputes Act,Footnote 69 which expressly excludes the ACA from application to trade disputes,Footnote 70 strengthens the view that the Act was not meant to be applied to labour/employment disputes; case law authorities clarify that the ACA applies only to commercial disputes. Labour/employment disputes are not commercial disputes;Footnote 71 and that the ACA expressly listed the Federal, State and FCT High Courts as courts exercising jurisdiction under the Act and leaves out the National Industrial Court.
Kanyip J rejected the argument of the claimant. The claimant had argued that, considering the extensive jurisdiction which the Constitution conferred on the National Industrial Court with respect to labour/employment matters, the National Industrial Court should be included wherever the Federal and State High Courts are mentioned in the ACA to ensure the National Industrial Court has jurisdiction to intervene in arbitration concerning labour/employment matters and thus appoint arbitrators. Kanyip J emphasized that “the Arbitration and Conciliation Act itself recognizes the fact that it does not cover all issues”.Footnote 72 For example, issues that concern a violation of the Constitution or any statute cannot be submitted to arbitration tribunals.Footnote 73 Kanyip J further observed that the ACA focused solely on commercial disputes and, therefore, the jurisdiction which the Constitution conferred on the National Industrial Court did not apply to the case in question.Footnote 74 This explains why Kanyip J did not apply the National Industrial Court Act, 2006 section 54(2)(a) and (b) that allows construing any enactment that mentions a High Court, as including the NIC. For this rule of construction to apply, section 54(2)(a)(ii) requires the enactment to be consistent with the NIC Act. Reference to “High Court” in the ACA relates to commercial disputes and is thus incompatible with the NIC Act that envisages labour and employment disputes.
Kanyip J essentially declared that the arbitration clause in employment contracts could not be enforced in Nigeria. In view of the National Industrial Court's extensive jurisdiction over labour/employment matters under the Constitution, the claimant could not have approached the Federal or State High Courts to appoint the arbitrator. His only option would be to institute an action at the National Industrial Court, making the arbitration clause redundant. On the applicant's inability to proceed with the arbitration, Kanyip J stated that “the applicant foisted on himself the position of helplessness that he complains of …” because he could have instituted an action against the respondent.Footnote 75 This, however, contradicts the purpose of arbitration agreements, which is to take dispute resolution outside the purview of the courts based on party autonomy.
Bassi J adopted the reasoning of Kanyip J in Prakash v Orleans Invest Holdings Footnote 76 and Ajilore v KLM Airlines.Footnote 77 Ajilore v KLM was also an application for judicial intervention of the National Industrial Court in the appointment of arbitrators. Here, the employment contract had specified that the sole arbitrator would be the employer's (defendant/respondent's) general manager. The employee (claimant) objected to this and applied to the National Industrial Court to instead appoint an arbitrator pursuant to the Act. Bassi J declined to appoint an arbitrator, adopting the position of Kanyip J, and decided that the court could not make any orders that would give effect to the Act.Footnote 78 The application was struck out. Interestingly, however, Bassi J was willing to apply order 29(1) of the National Industrial Court of Nigeria Rules 2017 to refer the matter to an arbitrator if the parties had agreed on this point and the application was made under the Rules rather than the ACA.Footnote 79 This approach indicates that the National Industrial Court is not averse to settlement of employment disputes by arbitration. The arbitration in the National Industrial Court must be by agreement of the parties while the suit is pending in this court and subject to the court having ordered the arbitration.
Although Bassi J did not consider if it was fair for an employment contract to stipulate that the employer's general manager should be the arbitrator, Ajilore v KLM Airlines demonstrates the possible unfairness in subjecting an employee to his own employer's agent as a sole arbitrator despite the likelihood of conflicting interests.Footnote 80 This unfairness is complicated by the reluctance of the court to appoint an arbitrator. Thus, in Prakash v Orleans Invest Holdings,Footnote 81 Bassi J, further adopting the reasoning of Kanyip J on the inapplicability of the Act to labour/employment matters, refused to stay proceedings under the ACA to require the parties to proceed to arbitration. Bassi J, rather, assumed jurisdiction to determine the dispute, notwithstanding the arbitration clause.
Clearly, the National Industrial Court is reluctant to appoint arbitrators under the ACA. This court would rather exercise jurisdiction to determine the dispute.Footnote 82 Where the parties agree after an action has been filed at the National Industrial Court that the matter be referred to arbitration and make an application to the Court in this regard, the judge will then consider referring the dispute to arbitration.Footnote 83
In all the cases analysed, the arbitral tribunal, rather than the National Industrial Court, would have determined the employment claims on the basis of an arbitration clause entered into at a time when the employee was subordinate to the employer. The question of imbalance of bargaining power invariably arises. There is merit in the approach of Bassi J, requiring the parties to agree on a resolution by arbitration when the dispute has already arisen and is before the National Industrial Court. An arbitration clause in an employment contract which is usually on a take-it-or-leave-it basis is potentially unfair from the employee's perspective. The ability of the employee to opt out of the arbitration and retain his job should be a relevant factor in determining the enforceability of the arbitration clause.Footnote 84 In Faber v Menard, Inc,Footnote 85 an employee successfully argued that an arbitration clause in his employment agreement was procedurally unconscionable because of his weak bargaining power and financial standing compared to his employer's. The United States Court of Appeals (Eighth Circuit) decided that the arbitration clause was unenforceable. This decision was partly because the employee was told that he must either agree to participate in the arbitration programme or be replaced.
The weak bargaining power of employees is particularly important in the Nigerian context. In principle, one of the advantages of arbitration is lower expenses. However, this is not always the case, and in Nigeria employees may find arbitration expensive. In fact, litigation is often a cheaper option for employees because the cost of filing relevant documents is very minimal.Footnote 86 Any costs awarded against the employee are also very minimal. On the other hand, employees (especially low- and mid-level) will find arbitrators’ fees prohibitive, and possible costs will be significant. There is, therefore, much to recommend in the argument that employees should not be required to pay the arbitrator(s) fees and other arbitration expenses to facilitate the enforcement of arbitration agreements with respect to employment contracts.Footnote 87 Nevertheless, such an approach raises a different issue of power balance during proceedings if one party pays the arbitrator's fees.
THE FINALITY OF THE COURT'S ARBITRATOR APPOINTMENT DECISION IN THE ARBITRATION ACT
Apart from the controversy concerning which of the High Courts has jurisdiction to intervene to assist in the appointment of arbitrators, there is also controversy as to whether a party dissatisfied with the court's appointment can appeal the decision appointing the arbitrator.Footnote 88 Under section 7(4) of the ACA, the decision of the Federal and State High Courts on court-appointed arbitrators is final and not subject to appeal. In Ogunwole v Syrian Arab Republic, the respondent was a tenant of the appellant.Footnote 89 The tenant, upon vacation of the property, demanded a refund of the unused rent as provided for in the tenancy agreement. The appellant only refunded a part of the outstanding sum, claiming the difference had been used to restore the premises to a tenantable position. The respondent then gave notice of arbitration in accordance with the tenancy agreement, appointing an arbitrator. The appellant failed to appoint an arbitrator, and the respondent thus applied to the court under section 7(2) of the ACA for a court-appointed arbitrator. The respondent's application was granted, and the court appointed Ajomo arbitrator. The appellant then appealed to the Court of Appeal, which dismissed the appeal, citing sections 7 and 34 of the ACA under which no appeal could be entertained with respect to the court's appointment of arbitrators.Footnote 90 Scholars, legal practitioners and commentators have seriously debated the finality of the court's decision in appointing an arbitrator. In justifying the restriction of appeals, for example, it has been argued that a party can challenge the court-appointed arbitrator under section 8(3) of the ACA.Footnote 91 The rationale behind this argument is that, rather than appeal the decision of the court in appointing an arbitrator, it is better to challenge the arbitrator before the arbitral tribunal. Furthermore, since this option of a challenge is available, the decision of the court in appointing an arbitrator is not final and is thus not affected by section 241 of the Constitution that guarantees a right to appeal final decisions of the High Courts. This argument is insightful, but section 8(3) of the ACA only provides limited grounds for challenging an arbitrator. These grounds may be juxtaposed with the myriad of reasons for which the decision of a court may be appealed, including the grounds of procedure adopted by the court. Besides, it is unfair and undermines legal certainty to allow a party who either failed to raise objections to the appointment of an arbitrator during the court proceedings or whose objections have already been dismissed by a competent court to raise such an objection at the arbitral tribunal.
Some other scholars have argued that the statutory provision that restricts appeals was made during the Nigerian military era when decrees were supreme. Thus, it is doubtful that the provision would be valid unless the Constitution is amended to provide for such exceptions.Footnote 92 This view is supported by Nigerian Agip Oil v Kemmer,Footnote 93 where the Court of Appeal decided that the decision of a High Court appointing an arbitrator is appealable considering section 241 of the Constitution, which provides that litigants are entitled to appeal the decisions of the Federal and State High Courts. However, the effect of conflicting decisions of the Nigerian Court of Appeal remains challenging.Footnote 94 Thus, case law is unclear as to whether parties can appeal decisions concerning the appointment of arbitrators. Similar issues were earlier raised with respect to whether decisions of the National Industrial Court could be appealed to the Court of Appeal. Some earlier decisions of the Court of Appeal indicate that all decisions of the National Industrial Court could be appealed.Footnote 95 There are also later decisions of the same Court of Appeal that not all decisions of the National Industrial Court could be appealed, except criminal or fundamental rights decisions.Footnote 96 Because of the conflicting decisions, the law on the right to appeal National Industrial Court decisions was rather unclear until the parties in Skye Bank Plc v Iwu requested the Court of Appeal to state a case for the Supreme Court's guidance.Footnote 97 The Supreme Court ruled that all first instance decisions of the National Industrial Court could be appealed. According to Eko JSC, in that case, the decisions of the National Industrial Court should not be final and conclusive so as to prevent an appeal. In other words, “the right to appeal against the decision of a first instance Court or tribunal is a basic Constitutional right”.Footnote 98 Considering section 241(1) of the Constitution which provides a right to appeal, the correct position of the law was stated in Nigerian Agip Oil v Kemmer,Footnote 99 and that there is a right to appeal the decision of the High Court in appointing an arbitrator. If such issues arise again, the Court of Appeal could state a case for the Supreme Court's directions or be guided by the Supreme Court's attitude on appeals as seen in Skye Bank Plc v Iwu.Footnote 100 This approach is consistent with constitutional provisions that guarantee access to the courts. Although arbitration clauses should discourage litigation, there should also be a contextual consideration of circumstances in which parties will suffer injustice if they do not have a right to appeal. Such injustice is complicated by the peculiarities of Nigeria, where litigants are sometimes unable to access any court due to jurisdictional conflicts between the Federal High Court, State High Courts and the National Industrial Court.Footnote 101
Generally, legal principles that concern the appointment of arbitrators are straightforward. In Nigeria, however, complexities can arise when courts need to appoint arbitrators. Thus, the High Courts have jurisdiction to appoint arbitrators where the parties fail to do so but there is no legal certainty as to which High Court has jurisdiction: State High Court, Federal High Court or the National Industrial Court. The rules on whether the Federal, FCT and State High Courts in Nigeria have jurisdiction under section 57 of the ACA, irrespective of the subject matter of the underlying dispute, are unclear and riddled with conflicting authorities. The prudent course would be to apply for the appointment of arbitrators in either the Federal High Court or the State High Court that ordinarily exercises jurisdiction over the underlying dispute. However, determining which High Court has subject matter jurisdiction can be a complex and uncertain process. Where it is unclear which High Court should exercise subject matter jurisdiction over the dispute, the Federal High Court should prima facie have jurisdiction to appoint arbitrators, since the Nigerian Constitution read alongside the ACA has vested the Federal High Court with additional jurisdiction.Footnote 102 With regard to labour/employment disputes, clearly, none of the High Courts can exercise jurisdiction to intervene in the appointment of arbitrators.Footnote 103 Based on case law analysis, the National Industrial Court is unlikely to enforce the arbitration clause in an employment contract by appointing an arbitrator. Nevertheless, the decision of the National Industrial Court in Ajilore v KLM strongly suggests that the National Industrial Court is not averse to submission agreements.Footnote 104 In such a case, the appropriate course is to institute an action at the National Industrial Court and the parties can agree to refer the matter to arbitration as directed by the National Industrial Court. On this basis, the National Industrial Court can appoint an arbitrator pursuant to order 29(1) of the National Industrial Court of Nigeria Rules 2017 and not under the ACA, which the National Industrial Court has clearly ruled does not apply to labour/employment disputes.
There is considerable legal uncertainty as to whether litigants can appeal any decision of the High Courts concerning the appointment of arbitrators.Footnote 105 Until there is a clear resolution of this issue, Skye Bank Plc v Iwu is instructive and should provide guidance to discourage any curtailment of the right to appeal.Footnote 106 In this context of judicial intervention in arbitrator appointments, the prospect of parties having difficulty in accessing the courts due to jurisdictional conflicts over which they lack control is unfair and undermines arbitration.
CONFLICTS OF INTEREST