‘Why it’s quicker to enforce rights through arbitration’
Rashida Abdulai is a Senior Associate and Solicitor-Advocate within the Hogan Lovells International Arbitration Practice. She obtained an LL.M from the New York University and an LL.B from the Kings College, London. A key member of Hogan Lovells’ Africa practice, Rashida has represented multinational companies in disputes arising from their operations across the continent. She shares her thoughts with ROBERT EGBE on the state of arbitration in Africa and how Nigeria can become an arbitral hub on the continent.
As an international arbitration expert, what is your opinion on the evolution of arbitration and Alternative Dispute Resolution (ADR) in Africa and Nigeria in particular?
There are a few key things to take into consideration when you’re trying to create an environment where arbitration can flourish. Perhaps the most important of those is creating an arbitration-friendly legal regime within the country. That includes both the laws or legal framework, and judicial support of arbitration.
Here in Nigeria, modern arbitration laws have been put in place which reflect international standards and provide the legal framework for arbitration. The next important step is ensuring that there is increased acceptance and knowledge of arbitration and how it works within the judicial system, to ensure that when parties need to use the courts to either enforce their award or seek assistance throughout the course of the arbitration proceedings, they are able to get that assistance in an effective and efficient manner.
We have seen the growth of arbitration institutions in Nigeria recently, such as the Lagos Court of Arbitration and the Lagos Chamber of Commerce International Arbitration Centre, both of which have their own institutional arbitration rules which are up to international standards. The Lagos Court of Arbitration has amazing facilities and I’ve had the pleasure to visit the building a few times. It actually rivals and surpass some of the facilities I’ve seen in other arbitration centres around the world. It’s an amazing facility and one that Lagos should be very proud of.
Another thing that I’m seeing more and more is arbitration expertise in the form of legal practitioners and arbitrators on the continent, and I think Nigeria is one of the countries that leads the way. There are Nigerian law firms with teams of arbitration specialists now, and there are individual lawyers with an international reputation in arbitration, lawyers who sit on the boards of some of the largest arbitration institutions in the world. So, the building blocks are in place, it’s just a matter of further developing each of these aspects to make sure the environment is truly arbitration-friendly and encourage people to seat their arbitrations here in Nigeria.
What can Nigeria do to become a more attractive arbitral seat for the African sub region?
There are a few countries that are seeking to develop themselves as hubs of arbitration in their respective regions. Historically, one of the oldest arbitration institutions in Africa is the Cairo Regional Centre for International Arbitration in Egypt and in many ways that may be seen as a hub for the region. But more recently, we’re seeing a proliferation of arbitration centres in the hopes of creating further hubs for the region. So, there’s a bit of competition! There are centres in Mauritius, Kenya, Rwanda, South Africa and in Nigeria to name just a few, all vying for that position as the regional hub.
But, given the size of the market we’re talking about – Africa is a huge continent with many countries in it and lots of businesses operating here who will need to use their services – I think it’s less a question of trying to develop one hub than realizing that there is enough demand for all of these countries to have thriving arbitration centres. I would say operating an arbitration centre in Nigeria for businesses operating in Nigeria and in neighboring countries to the extent that they also want to use the court, is great. Nigeria in itself has got a lot of business, trade and activity going on and trying to service that, as the first step, will be quite a challenge.
What, in your view, should be the basis of Nigeria’s arbitration policy?
The important thing is to think about why parties use arbitration: it’s because they are looking for more cost-effective, quicker, more flexible way of resolving their disputes. So, the key issues are around those three points; how can we make sure that arbitration is more cost-effective, provides for efficient resolution of disputes and is flexible for the parties? For us to ensure those things, the legal framework for arbitration needs to preserve party autonomy, allowing them to create the process that they would like for their arbitration. The judiciary and state courts have to support arbitration in terms of making sure that when the parties do need to use the court system, their cases do not get held up or unduly delayed, which would then mean that they’ve lost the benefit of the case being resolved slightly faster in arbitration. In relation to cost-effectiveness, that also means ensuring that there are arbitration institutions here on the ground, there are facilities, there are arbitration experts here in Nigeria who are able to assist them, such that they don’t have to look to London or to Paris for lawyers to help them with their case. They don’t need to travel to find a suitable hearing venue, everything is here and ready to go. I think things are already in place in most of these areas, it’s just a matter of further developing them to make sure that they fully support arbitration.
Despite arbitration’s obvious advantages, litigation remains the most common method of resolving commercial disputes in Nigeria and Africa generally. Why do you think this is the case?
I think it’s the case everywhere. Litigation is firmly established, everybody understands that they have the option to enforce their rights in court should things go wrong. Arbitration is essentially a private arrangement usually between two business entities where one or both of them prefer not to use the court system, and instead have a private dispute resolution process with arbitrators of their choice. Usually, that is because the two companies are from different jurisdictions, so there would be a question of, ‘okay, if we have to go to court, whose court? The court in my jurisdiction or in yours?’ And, so, to overcome that issue, arbitration allows them to provide for a neutral venue to resolve their dispute. But, if you’re talking about two companies in the same jurisdiction, you don’t have that issue. They may decide that litigation is fine and they don’t need to resort to arbitration.
Another reason why I think people opt for arbitration is the cost and time element: it might be that in some jurisdictions it is quicker for them to resolve their disputes through arbitration than litigation. But that’s not always the case. In the United Kingdom, the commercial courts are very efficient and you can usually get your commercial case heard quite quickly. In Sierra Leone they’ve recently instituted a new commercial court which hears cases on a fast track basis, so, again that might be suitable for businesses operating in Sierra Leone who have recourse to that court. I would say arbitration is not intended to replace litigation as such; it is seen more as an alternative which may suit some people better in certain situations.
Usually, litigation and arbitration are regarded as mutually exclusive dispute resolution methods, is it possible to combine both to develop an effective strategy?
I don’t know what the benefit of that would be. What I have seen is courts encouraging the parties to settle their disputes through Alternative Dispute Resolution (ADR). This is known to take pressure off the courts system, because of the sheer volume of cases which would otherwise need to be heard. Where I’ve seen ADR used most successfully is when parties are encouraged to resolve their disputes through mediation, which is a consensual process with no decision maker. The mediator is there to facilitate discussions between the parties and to help them reach their own settlement. Because there’s no decision-maker, it’s very possible that the parties may not agree, and if they don’t agree they then need to go to a decision-maker, whether an arbitrator or a judge in a court. So, litigation or arbitration would then be the next step to provide the parties with a binding decision that they have to respect.
Also, given that one of the key drivers for arbitration is speed, if you were to give parties the right to litigate after they’ve gone through the arbitration process, it completely negates the benefits of arbitration.
Arbitration seems to be the trend these days in Nigeria and across Africa. Why do you think its gaining popularity now?
I think this is because arbitration has gained recognition as a more efficient way of being able to enforce your rights. If you are in business and somebody has not paid your invoice and you have an option of trying to enforce your contract in court knowing that this may take a period of years – and I’ve heard in some instances, potentially even 10 years in Nigeria- when somebody tells you that you can instead opt for arbitration whereby you will choose your tribunal and you will determine the process they follow and get your award within a year, of course you are going to opt for arbitration. It has given people more choice and allows them to focus on the profitable activities that keep them in business. This means they can employ more people, they can continue to flourish, and they can contribute more to the economy. So, for me it’s very clear why governments are picking up on this and saying, yes, resolving business disputes this way makes sense.
What common mistakes do parties make in drafting arbitration clauses for domestic or international arbitration?
They mostly stem from the fact that drafting arbitration clauses is usually something that is done at the eleventh hour, after the parties have really thrashed out the commercial terms, negotiated hard on things like price and quantity, and then start to think about the ‘boilerplate’ provisions. People don’t often enter into agreements thinking about what will happen if it all goes wrong, they always hope that things will go as planned. But, of course, they do go wrong sometimes, that is inevitable. So, it is important to really think about your dispute resolution clause. Leaving it till the eleventh hour and not giving it proper attention can lead to more problems.
For an arbitration agreement to be effective, there are certain things that parties have to include in the agreement to make it clear that they want to give up their right to go to court completely and ensure that all of their disputes are resolved through arbitration. If the arbitration clause is not drafted clearly to reflect this, the whole thing will be invalid and the parties will be forced to go to court. So, making sure that the arbitration clause actually works is important but alongside that are issues like, where should the arbitration be seated? For example, if both business are operating in the same country, why would you choose a seat in a foreign country, which both parties would have to pay an exorbitant amount of money to travel to in order for the case to be heard? Also something that parties don’t necessarily think about is, once you have the award, your decision which says that the other party needs to pay you, where do you actually want to enforce it, where are that party’s asset located? If their assets are located in a country that is not a party to the New York Convention, which is the convention that allows parties to have their award recognised in any country that is signed up, then the real issue is going to be whether you are going to be able to get your money at the end of the day. So, making sure that you draft your arbitration clause with these sorts of issues in mind is important.
It is useful to have a legal adviser at this point but, at the very least, most arbitration institutions, including the Lagos Court of Arbitration, the Kigali International Arbitration Centre and the London Court of International Arbitration, have model arbitration clauses available on their websites which highlight the things you need to think about including in the clause. The model clauses are free of charge and available on every reputable arbitral institution’s website.
Is there a best method for appointing an arbitral tribunal?
Yes, I would say that the constitution of the tribunal is one of the most important things for parties to consider when they are commencing arbitration. These are the people who are going to decide your dispute, so some of the key considerations, I think, when choosing an arbitrator to sit on that panel, are their experience and expertise. If it is a really technical legal dispute, then you may want someone who has sufficient years of relevant legal experience. If it’s a more technical engineering type dispute, you may want someone with more engineering knowledge rather than legal knowledge by virtue of their experience in the industry. If you are in an industry that has specialist knowledge attached to it, say for example the oil and gas, then you may want someone with experience in that industry as well. You may also want to think about someone who understands the business culture and context in which you operate so that they get where you are coming from. All of this is just to make sure that you have a tribunal that can decide your dispute most efficiently and most in line with the parties’ expectations.
Do ethics rules apply in international arbitration?
Yes, the way that it applies is the same as in domestic litigation or arbitration, in the sense that the lawyers must adhere to their professional conduct regulations. Even if you, as a Nigerian lawyer, are actually conducting an international arbitration in London, you are still bound by your professional obligations as a Nigerian lawyer and those include all the ethical considerations. You should not, no matter where you practice in the world, act in contravention of those.
Let’s say two Nigerian firms take their dispute to the UK for instance, what rules of ethics would apply, Nigeria’s or the UK’s?
It would depend on the lawyers they choose to instruct to assist them. If they choose English lawyers based in London, then the English lawyers will be bound by English rules. If they instruct Nigerian lawyers, which is permissible for arbitration in London, then the Nigerian lawyers will be bound by their professional obligations under the Nigerian regulations. As a lawyer you carry your professional obligations around with you, you have to continue to uphold the profession in your home jurisdiction and that includes adhering to the professional conducts regulations that apply to you when working abroad.
It is often said that a majority of arbitrations involving African parties take place outside the continent. If this is true, why is that that the case?
I can’t say whether or not it’s true for certain. I think that a lot of this is anecdotal, I don’t think there is any empirical evidence or data that we can point to, but I have seen multinational companies that have Nigerian entities choosing to seat their arbitrations in jurisdictions other than Nigeria and there may be a number of reasons for this. I think a key reason is what I mentioned earlier, the fact that parties want to seat their arbitration in a jurisdiction that is arbitration-friendly, in terms of the arbitration laws that apply and the judicial assistance available to help them throughout the arbitration proceedings.
So, if you got a really efficient judicial system and a legal framework for arbitration that has been tried and tested and is reliable and certain, of course parties are going to want to use it because at the end of the day all they care about is getting an award which is enforceable, which did not cost them an arm and a leg to obtain and which did not take many years to be rendered.