The Need for Urgent Legislative Intervention.[1]

Summary of Article:

Arbitration is probably the oldest method of dispute resolution still in common use today. Arbitration as a process begins with an agreement, made either when a contract is made, or after a dispute has arisen, that certain matters which are or may be in contention between the parties will be resolved by submitting them to arbitration and not (at least in the first instance) to the courts, and that the parties will honour the valid award of the arbitrator in respect of matters referred to him in accordance with the arbitration agreement. Should a party fail to honour the award, the other party may seek relief from the courts.

It is believed that amongst the prominent features of arbitration (as opposed to litigation) are that it is cost effective and more expeditious, thus making arbitration more attractive than litigation. However, today, arbitration (especially international arbitration) has been clothed, like litigation, with protracted delays that sometimes renders the enforcement of arbitral awards fruitless vis-a-vis the limitation period provided under our statutes of limitation in force. Today, some arbitral proceedings do take longer periods to conclude than litigation. Therefore, the much boasted cost effectiveness and expeditiousness of arbitration seem therefore to have been defeated.

An arbitral award which is a product of a delayed arbitration process may not be admitted by the court for enforcement, if it has exceeded the time limit for its enforcement as stipulated by the statutes of limitation. This article examines the provisions of the statutes of limitation as it relates to the time limit within which to apply to the courts for the enforcement of arbitral awards, and the clog in the wheel of reaping the fruits of arbitral awards caused by the unduly delayed arbitration process.

The relevant provision which is considered in this article is section 8(1)(d) of the Limitation Law. Section 8(1)(d) of the Limitation Law of Lagos State (with similar provisions in the Limitation Laws of other States of the Federation) provides that every application to enforce an arbitral award must be brought within six years from the date the cause of action accrued. The Law, therefore, provides for a limitation period of six years within which an application for the enforcement of an arbitral award must be brought. There is thus no ambiguity in the time frame within which an action to enforce an arbitral award must be brought.

There is, however, a serious concern in Nigeria with the judicial interpretation and application of the provisions of the Limitation Law. The questions that arise are: when will the six-year period start to run? Is it from the date of the accrual of the original cause of action, or from the date of the arbitral award?

The implication is that a party cannot successfully bring an action for the enforcement of an arbitral award outside the statutory six years limit. In Nigeria, there is a serious concern with the judicial interpretation and application of the provisions of the Limitation Law, resulting in difficulty making a determination as to when time begins to run, for the purpose of computing the “six years from the date the cause of action accrued.”

The apex court in Nigeria has been invited to interpret this provision of the Limitation Law at various occasions, and, in one of those occasions, a full panel of the apex court sat to address this issue and reached a verdict which, in our opinion, is not arbitration friendly. The Court of Appeal, Lagos division on the other hand, recently reached a decision which radically departs from the earlier decisions reached by the Supreme Court and is considered more arbitration friendly.

This article examines the facts of those cases and the resulting decisions of the courts. It also examines the effect of the Supreme Court pronouncement on the Scott vs. Avery clause which is expected to be inserted in every arbitration agreement to postpone time from running until when an arbitral award is made.

Finally, the article discusses the current position in England and the need for a legislative intervention to resolve the issue of interpretation and application of the current Limitation Law as it relates to actions to enforce arbitration awards in Nigeria and makes some arbitration friendly recommendations that aim at encouraging arbitration as a viable medium for resolving commercial disputes.

[1] Article published in the Lagos Court of Arbitration’s Dispute Resolution Journal, Vol. 1 No. 1, November 2014 pp. 59-72.

– Frederick Adefarati and Cajetan Osisioma