Arbitration and the Nigerian Constitution
Since 1988 the legislation typically invoked in Nigeria as the framework legislation concerning commercial arbitration has been the federal Arbitration and Conciliation Act 1988 – although many states continue to have legacy arbitration legislation from Nigeria’s colonial era on their statute books. The introduction and enactment of the Lagos State Arbitration Law of 2009, as an alternative to the federal legislation, and that state’s argument that it has the necessary competence under the Nigerian Constitution of 1999 has ignited a serious constitutional debate about legislative competence over arbitration – especially arbitration concerning transactions or disputes with connections to more than one state or beyond Nigeria.
The purpose of this brief essay is to summarise a generally overlooked line of argument, based on a conceptual appreciation of arbitration and extant Nigerian judicial authority, that the 1999 Constitution is consistent with the conclusion that both the federal and states’ legislatures have competence to enact arbitration legislation in respect of transactions or disputes with connections to more than one state or beyond Nigeria.
The matter of constitutional legislative competence over arbitration has been the subject of an ongoing fierce and quite impressively stimulating academic debate. On the other hand, when presented with a recent opportunity to address or, in light of a previous decision, to revisit the issue the Nigerian Court of Appeal chose in the particular circumstances to exercise judicial economy saying that it would “refuse to be dragged down into a snake pit”; Stabilini Visinoni Limited v Mallinson & Partners Limited [2014] 12 NWLR (part 1420) 134, 175.
The constitutional debate centres around whether the current Nigerian Constitution of 1999 clearly determines which legislature, as between the federal legislature and states’ legislatures, has the legislative competence to enact a framework arbitration legislation – especially as it relates to interstate and international commercial activities and disputes arising out of them.
The two legislative lists, the Exclusive and Concurrent Lists, through which the Constitution primarily sets out the respective legislative competences of the federal and states’ legislatures do not expressly mention arbitration. This has led to the question of whether legislative competence over arbitration is addressed in the constitution at all or whether it can be said to have been addressed as part of or incidental to another heading that is expressly mentioned. In the extant debate, the provisions of the 1999 Constitution which are usually invoked as capable of being treated as providing for legislative competence over arbitration are contained in items 62, 62(a) and 68 of the 1999 Constitution as set out below for ease of reference:
62
“Trade and commerce, and in particular –
(a) trade and commerce between Nigeria and other countries … and trade and commerce between the states”
68
“Any matter incidental or supplementary to any matter mentioned elsewhere in this list.”
Naturally, viewpoints and opinions as to whether these provisions cover the question of legislative competence over arbitration are polarised. The prevalent and most common interpretation and invocation of the provisions in relation to legislative competence over arbitration holds that in light of item 68, arbitration is incidental or supplementary to trade and commerce mentioned in item 62. Accordingly, the argument goes on, the federal legislature has exclusive competence in respect of arbitration concerning international and interstate commerce (the latter being sometimes confusingly referred to as “inter-state arbitration”). Further, according to this line of argument, states’ legislatures would have legislative competence to enact arbitration legislation in respect of purely “intra-state arbitration” (i.e. an arbitration with connections solely to the concerned state) – as this would be a residual matter which, not being addressed in the constitution, falls within the legislative competence of the states.
On the other hand, it has been argued quite forcefully to the contrary that the provisions of items 62 and 68 of the Exclusive List of the 1999 Constitution cannot be invoked to determine legislative competence over arbitration in that they do not expressly or clearly address the matter. It is thus contended under this line of argument that the federal legislature does not even have legislative competence over arbitration at all; that as arbitration is not mentioned in the 1999 Constitution, it is entirely a residual matter left for the legislative competence of states’ legislatures to the exclusion of the federal legislature.
At this point it is important to make the clarification that, under each of the lines of argument summarised so far, it is accepted that legislative competence to implement Nigeria’s international obligations concerning arbitration lies with the federal legislature. This is for example and in particular in relation to Nigeria’s commitments in respect of the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. It is also not in issue that the federal legislature has competence to enact arbitration legislation for the Federal Capital Territory or that states’ legislatures have competence to enact arbitration legislation concerning transactions and disputes with connections solely to the concerned state.
As things stand at present, the position of the courts in relation to the ongoing constitutional debate about legislative competence over arbitration is not entirely clear. In Stabilini, the Court of Appeal seemed to implicitly favour a middle course. Whilst the court decided the matter before it on the basis that the parties’ actions and the circumstances of the particular case dictated that the extant federal Arbitration and Conciliation Act 1988 should be applied, the court seemed to recognise that it could be open to parties to arbitration (in Lagos) to choose to invoke the Lagos State Law instead. The decision in Stabilini sits very uneasily with an older decision of the same Court of Appeal (albeit a different judicial division) in Compagnie Generale de Geophysique v Dr Jackson D Etuk [2004] 1 NWLR (part 853) 20. In the older case, the Court of Appeal held that by the Arbitration and Conciliation Act of 1988 the federal legislature has “covered the whole field of arbitration” and that ‘inconsistent’ provisions of state legislation on arbitration are null and void.
The doctrine of “covering the field” invoked by the court in the Etuk case also has some support in the academic literature. However, if the decision in Etuk and the “covering the field approach” were correct, the Court of Appeal in Stabilini could simply have held that the Lagos State Law of 2009 is null and void to the extent of inconsistency with the 1988 federal legislation. The Stabilini court did no such thing! Rather the court in fact commended the Lagos State legislation for making it possible for parties to arbitration within Lagos to choose either that law itself or another law – including of course the 1988 federal legislation. The court said this approach “makes sense because arbitration is a subject area that can be said to be ‘without borders’”.
In a recent contribution to the ongoing debate ((2016) 19(1) International Arbitration Law Review), it has been demonstrated that the “covering the field” approach is entirely inappropriate in the context of legislative competence over arbitration in Nigeria. More, specifically it was also demonstrated that the invocation of the doctrine by the Court of Appeal in Etuk did not even comply with the parameters for the invocation of the doctrine as laid down by the Supreme Court in cases such as, among others, Attorney-General of Ogun State v Attorney-General of the Federation (1982) 1–2 SC 13. More significantly the contribution demonstrated, in terms summarised below, that extant Supreme Court authority on the interpretation of the phrase “trade and commerce” in the equivalent exclusive legislative list of Nigeria’s previous 1979 Constitution and other related provisions as well as general doctrine support the conclusion that both the federal and state legislatures have competence to enact arbitration legislation concerning inter-state and international transactions.
In the first place, on a purely conceptual level, arbitration is actually part of and encompassed within the phrase “trade and commerce” and it is surprising that the debate has mostly focused on whether arbitration is “incidental” to trade and commerce. Arbitration itself is big business and is widely so regarded; it is not merely a dispute resolution mechanism but indeed a veritable business sector that many countries and cities wish to encourage and develop for revenue generation purposes. Recently, it was announced that the Bahamas planned to become an arbitration centre in “a bid to tap into a possible lucrative business sector for the country.” In similar vein, a commentator recently noted that “London, for example, handles in any given year international arbitrations with a combined value of £40-£50 billion ….” Once arbitration is seen as the big business that it is, apart from being merely a dispute resolution mechanism, it is not altogether difficult to see arbitration as within “trade and commerce” and thus within the legislative competence of the federal legislature to the extent constitutionally provided for.
The approach of regarding arbitration as within the phrase “trade and commerce” in the Nigerian Constitution is consistent with the decision of the Nigerian Supreme Court directly on that phrase in Attorney-General of Ogun State v Aberuagba & Ors, (1985) 1 NWLR (part 3) 395. In Aberuagba, the Supreme Court noted that the mere fact that an item is not specifically included in the Exclusive Legislative List does not automatically mean that the federal government has no legislative power on the matter. It was clear that all the members of the court considered that the phrase “trade and commerce”, as such, has a wide and embracing meaning. Eso JSC, borrowing from the American Supreme Court, observed that to restrict the word “commerce” merely to buying and selling would be to “restrict a general term, applicable to many objects, to one of its significations.”
In light of the conceptual consideration of arbitration as a business sector in its own right as well as the embracing approach to the interpretation of “trade and commerce” by the Supreme Court, it is entirely appropriate to conclude that arbitration is encompassed within the phrase “trade and commerce” in item 62 of the exclusive legislative list of the 1999 Constitution. It follows at the least that the federal legislature has legislative competence over arbitration at least as it concerns interstate or international trade and commerce.
As far as states’ legislatures are concerned, once again both the Aberuagba case and general doctrine provide insights consistent with the conclusion that states’ legislatures also have legislative competence over arbitration concerning interstate or international transaction disputes. Even whilst holding that the federal legislature has exclusive competence in respect of international and interstate trade and commerce, the Aberuagba case acknowledged that the federal legislature did not have completely exclusive power over trade and commerce and that state and even local governments “have their respective shares to control trade and commerce.” Further, the court also held, in light of item H paras 18 and 19 of the Concurrent List of the 1979 Constitution, that a state legislature has competence to enact laws concerning trade and commerce within its borders; and that a state legislature has competence to enact laws for the industrial and commercial development of the state.
In light of the immediately foregoing, it would follow that to the extent that a state’s law on arbitration concerns trade and commerce within its borders, and/or has as one of its objectives the industrial and commercial development of the state, such a law would ordinarily be within the constitutional legislative competence of the state. On the other hand if such a state law were to also concern matters of interstate or international trade and commerce the question would still arise if this is not straying into an area of exclusive competence of the federal legislature. To address this particular difficulty, some supporters of the Lagos Law have invoked the common law doctrine of “pith and substance” (particularly associated with Canada).
Incidentally, a criticism of the Lagos invocation of the doctrine of pith and substance is that the approach did not clearly establish the state’s constitutional legislative competence over arbitration in the first place. As it happens, that criticism has been met in this essay and in the more detailed journal article in tracing a state’s power to enact arbitration legislation to its powers in respect of trade and commerce and for the industrial and commercial development of the state. Nevertheless, there is even so a need to address the matter of potential straying into an area of federal legislative competence. In this respect an extension of the pith and substance argument, by considering and invoking a further principle called “the concurrency principle” (also particularly associated with Canada), together with constitutional interpretation principles laid down by the Nigerian Supreme Court, as well as the private nature of and party autonomy principles underlying arbitration, provide a sound doctrinal basis for accepting that both the Nigerian federal and states’ legislatures can have coexisting legislative competences over arbitration – even in relation to interstate and international disputes.
The concurrency principle is to the effect that where constitutional powers of the federal and state authorities overlap, the features of a law passed by one of them relating to its area of competence may be as important as those which touch upon the other’s areas of competence. In such case, it would not be possible to allocate legislative competence exclusively to either government. In other words, each of the legislatures concerned would be within its constitutional authority to enact such legislation. In respect of arbitration legislation in particular, this should not really pose a problem in a federal structure since separate federal and state legislation both extending to interstate commerce arbitration and international arbitration can coexist without conflict – even if they contain provisions differing in particular respects. As the Supreme Court has acknowledged, the mere existence of differing provisions does not alone ipso facto create inconsistency; see Attorney-General of Ogun State v Attorney-General of the Federation, especially per Fatayi-Williams CJN and Idigbe JSC.
In relation to constitution interpretation principles, the Supreme Court reiterated in Aberuagba that the fundamental principle is that such interpretation as would serve the interest of the Constitution and would best carry out its objectives and purpose should be preferred and that relevant provisions must be read together, not disjointly. On the private nature of arbitration and the principle of party autonomy, it is widely accepted that the parties should have the freedom to determine the law applicable to their arbitration not only in terms of substantive law but also in respect of the overarching lex arbitri. In that respect an approach which widens and enhances such choice is to be preferred to an approach which restricts choice. In the Nigerian context, the approach which enhances choice is that which allows a federal arbitration regime to exist side by side with state regimes, leaving informed parties with the ability to select the most suitable for their purposes. This much seemed to be acknowledged by the Court of Appeal in Stabilini and was commended as “making sense”. It is also the approach followed by the court of first instance in Etuk and, it is submitted, a far superior approach to the “covering the field” approach later invoked by the Court of Appeal in the same case.
As proposals for new arbitration legislation are still going through parliamentary processes, it is considered that a future federal arbitration legislation should not repeal or jeopardise state arbitration legislation. Rather, it should follow the approach of the Lagos State legislation which was commended by the Court of Appeal in providing that parties to arbitration arising out of an interstate or international transaction have the choice to select as between the federal legislation and an appropriate state arbitration legislation. It is submitted that this is the approach most suitable for advancing the causes of attracting trade and investment to Nigeria generally, of attracting arbitration business to Nigeria and specific Nigerian states, and for advancing the long pursued goal of presenting Nigeria as an arbitration friendly jurisdiction and viable arbitration centre.