Nigeria has the highest number of technology hubs in the entire African continent. If this is not impressive, nothing else is! And with the rapid increase in this number, these companies are going into more partnerships and contracts amongst themselves and other types of companies, with a view to keeping up with global trends, penetrating bigger markets and top-notch service delivery. These technology businesses in Nigeria have a few factors in common such as complexity and use of high technology, use of proprietary and confidential information, operating in a rapidly growing competitive market and government regulations. These factors make Nigerian technology businesses prone to legal disputes.
As Max Lucado, American author and Pastor rightly put it – Conflict is inevitable but combat is optional. This is why tech companies in Nigeria should embrace Arbitration once these impending legal disputes arise.
This article seeks to bring to light the relevant provisions of the Arbitration and Conciliation (ACA) Act Cap. A18 LFN 2004 (being the principal arbitration law in Nigeria) and the Lagos State Arbitration Law 2009 (being the principal arbitration law for Lagos state), with a view to determining if these provisions adequately provide coverage for these tech disputes or not.
WHAT IS ARBITRATION?
Arbitration is an alternative dispute resolution(ADR) mechanism which allows parties to resolve their dispute outside of courts, i.e., without recourse to litigation. It is a settlement technique in which a neutral third party (usually referred to as an arbiter) reviews the case of disputants and decides on the basis of their claims.
PRINCIPLES OF ARBITRATION IN NIGERIA
The following are principles governing the arbitral and conciliation process in Nigeria:
- An arbitration agreement must be in writing: Section 1 of the ACA and section 3(3) of the Lagos State Arbitration Law provides that every arbitration agreement shall be in writing. The rationale underpinning this rule of law that arbitration agreements be in writing, provides the foundation for the tribunal’s jurisdiction and the extent of the jurisdiction must be clear to the parties, appointed arbitrator or tribunal.
- An arbitration agreement is irrevocable: Parties are bound by the arbitration agreement and it is deemed irrevocable. Thus a party cannot unilaterally revoke an arbitration agreement Section 2 of the ACA provides that an arbitration agreement shall be irrevocable except by agreement of parties or by leave of the court or judge1.
- Party autonomy: Parties have the substantial autonomy and control to decide how the arbitral process should be conducted – from the place of the arbitration2, the law to govern the arbitral process, the language to be used in the process3 and most importantly, the number of arbitrators or arbitral tribunal to act as third party4.
- Parties must be treated equally and given full opportunity to present their case: The principle of audi alterem partem is strongly encouraged in the arbitral process as expressed under section 14 of the ACA. This is to ensure transparency and justice in the arbitral process.
- Confidentiality of the arbitral process: The arbitration process is formal, private, confidential and friendly. Parties as well as arbitrators are mandated to keep confidential all matters relating to the proceeding. This confidentiality often times extends to the settlement agreement usually referred to as an award.
- The arbitral award is binding and enforceable: Section 31 of the ACA provides that the arbitral award is binding and enforceable in court.
BENEFITS OF ARBITRATION TO NIGERIAN TECH COMPANIES
- Access to Expert Arbitrators: The lack of an expert decision maker in litigation is the principal reason why arbitration is better suited to resolve complex , technical or scientific disputes in Nigeria.5 In Arbitration, Nigerian tech companies have the liberty of nominating qualified arbitrators to represent them in arbitral proceedings. Parties can also decide and agree on the qualifications they desire the arbitrator(s) to possess. These arbitrators do not even have to be lawyers. Parties may also agree to the number of arbitrators and the manner of their selection. In the alternative, parties can surrender this right to nominate arbitrators to an arbitration institution to nominate these arbitrators or the arbitration panel. And usually, these arbitration institutions provide parties with a list of qualified arbitrators for the parties to consider. These arbitration panels usually comprise of individuals who have experience of not only arbitration and the relevant legal and regulatory framework, but also possess scientific and technological expertise required to understand and resolve the dispute. When arbitrators in high-tech disputes are experienced and exhibit suitable skills, they are thus the better decider than the judges in courts.6Thus, it is settled that an experienced arbitrator of tech disputes would be better equipped than most judges in our Nigerian courts to give a case the attention it needs, in order to arrive at just and reliable decision.
- Speedy Process: One thing is sure about litigation in Nigeria, it will waste your time. Often times, counsel in Nigerian courts focus on technicalities and not the actual reason the dispute was brought before the court in the first place. And as previously mentioned, one of the characteristics of tech companies is their operation in fast and rapidly growing environments. Tech companies do not have the luxury of time to ‘fight’ over a product or service that may become obsolete or unimportant in the next year or two. Players in fast-paced technology markets cannot afford to have progress stalled for lengthy and expensive litigation.7 The distractions and uncertainties surrounding lengthy legal battles can disrupt any business, but they affect tech companies even more intensely, given the pressure to outperform the competition and get products to the market first.8
- Confidentiality: This is one of the key attributes of arbitration which tech companies would find alluring. Every matter taken to public courts are handled in public, with documents and exhibits accessible to the public as well. Preserving the confidentiality of trade secrets and other confidential or proprietary business information is critical for technology-based companies. The privacy or confidentiality of a dispute might even be effective in preserving the brand and integrity of one or both parties. Arbitration is a private process that usually involves just parties, arbitrators and perhaps witnesses. It is not an open show for all to witness unlike litigation. As earlier stated, confidentiality extends to the settlement agreement i.e. the award, except where disclosure is necessary for the purpose of implementation and enforcement.9 Parties usually agree on the terms of confidentiality applicable to documents and information disclosed during the proceedings, and those terms are frequently embodied in a protective order issued by the arbitrator.10
- Maintenance of Business Ties/Relationship: Keeping the dispute away from the eyes and unsolicited opinions of the general public can also help in maintaining the business relationship between parties or companies. So parties do not cause a huge gap between themselves, whereby the public imposes a rivalry on them with supporters on each side even. Parties can still maintain a relationship even if the award is granted in favour of one of the parties.
- Reduction of Cost: Businesses can be disrupted and suffer huge losses as a result of distractions caused by litigations and legal battles. Arbitration is ordinarily expensive. However, for tech companies, arbitration when compared to litigation, is definitely the cheaper option . For example Apple and Samsung smartphone were engaged in a patent dispute with 50 litigations in 12 countries. However, due to cost and time involved, both parties voluntarily agreed to dismiss all non-US cases. Both parties had spent more on litigations than on research and development.11
- Ease in Resolving International Disputes: For international disputes, one of the biggest constraints would be the matter being litigated in the foreign party’s country. If the trial court is in the other party’s home country, which will provide a sort of domestic advantage to that company; and also if the domestic court has little or no experience in international transactions or on the subject matter of the dispute. Additionally, when a company is subject to unfamiliar foreign laws, or forced to follow alien rules and customs, or it has to conduct litigation in a foreign language that people involved in the law suit may not understand, it is always advisable to opt for international arbitration as the arbitral panel can choose the language of the arbitral process.12
A major advantage of international arbitration is that foreign arbitral awards can be enforced around the world under the 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention).
CHALLENGES NIGERIAN TECH COMPANIES MAY FACE IN ARBITRATION
- Irrevocability of an Arbitration Agreement: A party cannot unilaterally revoke an arbitration agreement. However, section 4 of the ACA also gives a party the authority to approach the court to stay proceedings. And certain recalcitrant parties, notwithstanding the express agreement to resolve dispute by arbitration, often abuse section 4 by approaching the court for all manners of ‘preservative orders’. This is usually done in defiance and disrespect for the parties agreement.
- Delay in Enforceability of Award: Enforcement of awards in Nigeria can sometimes be difficult because of the slow process of Nigerian courts. The losing party at arbitration might attempt to use the courts as a tool to frustrate the winning party from reaping the benefits of arbitration.13 The enforcement proceedings in Mutual Life & General Insurance Ltd v. Iheme14 took a period of thirteen(13) years to get to the Court of Appeal from the High Court, while the enforcement proceedings in NNPC v KLIFCO Nigeria15 Limited took eleven years to get to the Supreme Court.
- Limitation period for commencement of enforcement proceedings: In Murmansk State Steamship Line v Kano Oil Millers Limited16 and in City Engineering Nigeria Limited v Federal Housing Authority17, the Nigerian Supreme Court held that the time limit for bringing an action for recognition and enforcement of foreign or domestic awards is six (6) years. That is, six years commencing from the date of accrual of the cause of action resulting in the arbitral award for which enforcement is sought.18Nigerian courts ordinarily should not put their fingers in arbitration matters especially where the award is not illegal.
- Insecurity challenges of picking Nigeria as ‘place’ of arbitration: As earlier stated, party autonomy is one of the principles of arbitration. However, the unfortunate incidences in Nigeria have continued to foist a fait accompli to this autonomy. As the security of the members of the tribunal, parties and others connected to a reference will prompt arbitrators and parties to consider choosing other countries as the place of jurisdiction. This alone might place on the parties shoulders a heavy financial burden.19
Nigerian tech companies have brought forward solutions to some of the country’s most prominent issues, and upgraded our general attitude to living as a result. These advancements and the showcase of unused and imaginative innovation based items, products and administrations will deliver more commercial contracts.
From the benefits and challenges highlighted above, the good obviously outweighs the bad. And compared to litigation still, arbitration is the best route to be explored by Nigerian tech companies. But this is not all, Nigerian courts are working tirelessly to ensure that persons explore alternative means of resolving dispute, and also trying to not interfere in arbitral matters. Thus Nigerian tech companies and their counterparts partners, and clients, in expecting legal disputes, must plan to address these conflicts and disputes by exploring a conflict resolution mechanism that serves their uncommon needs. For reasons mentioned in this article, arbitration meets those needs most specifically and proficiently.
- 4, Lagos State Arbitration Law 2009
- 16, Arbitration and Conciliation Act, 2004 ; S. 33 Lagos State Arbitration Law 2009
- 18, Arbitration and Conciliation Act, 2004 ; S. 36 Lagos State Arbitration Law 2009
- 7, Arbitration and Conciliation Act, 2004; S. 7 & 8 Lagos State Arbitration Law 2009
- Bender Jr., Raymond G. “An Ideal Way to Resolve High-Tech Industry Disputes.” AAA Dispute Resolution Journal, vol. 65, no. 4, Nov. 2010-Jan. 2011, adr.org, http://www.raybenderpllc.com/images/High-Tech-Arbitration-Article.pdf. Accessed 13th September, 2021.
- Mazalov, V. and J. Tokareva. “Arbitration procedures with multiple arbitrators” European Journal of Operational Research, vol. 217 no. 1, 198-203., 2011, Science Direct https://doi.org/10.1016/j.ejor.2011.09.014. accessed 13th September, 2021
- Taif University, Saudi Arabia., et al. “Arbitration or Litigation: International High-Tech Business Disputes Resolutions.” American Journal of Social Sciences and Humanities, vol. 4, no. 1, 68-74, 2019, Online Science Publishing, onlinesciencepublishing.com. Accessed 15th September, 2021.
- Alba, B.A.,. “Cross-border Patent Disputes: Unified Patent Court or International Commercial Arbitration?” Utrecht Journal of International and European Law, vol. 32 no. (82): 44–58, 2016 Urios, https://doi.org/10.5334/ujiel.262 accessed 15th September, 2021
- Bender Jr., Supra
- David Perkins, “Protective Orders in International Arbitration”, 33 ASA Bulletin Vol 2, 274 – 292, 2015, https://www.wipo.int/amc/en/docs/asabulletinvol332015.pdf accessed 11th October, 2021
- Charles Cooper, “Apple v. Samsung: 50 suits, 10 countries — and counting”(2012), CNET, https://www.cnet.com/news/apple-v-samsung-50-suits-10-countries-and-counting/, accessed 15th September 2021.
- 17 (1) UNCITRAL Arbitration Rules
- “Arbitration in Nigeria: Overview and Challenges”, Folashade Alli & Associates faa-law.com/arbitration-in-nigeria-overview-and-challenges/, accessed 10th October, 2021
- (2010) LPELR – 24698 (CA)
- (2011) 10 NWLR (Pt. 125) 209
- (1974) ANLR 893 ; (1974) LPELR – 1927 (SC)
- (1997) 9 NWLR (Pt. 520) 224
- Dorothy Udeme Ufot, “The Challenges of Arbitrating in Africa: the Nigerian Experience” Lexology lexology.com/commentary/arbitration-adr/nigeria/dorothy-ufotoco/the-challenges-of-arbitrating-in-africa-the-nigerian-experience accessed 10th October, 2021
- Tolulope Aderemi, “Arbitration in Emerging Markets: Current Challenges” Mondaq mondaq.com/nigeria/arbitration-dispute-resolution/233848/arbitration-in-emerging-markets-current-challenges accessed 10th October, 2021
Written by Muizzat Adams
Muizzat Adams is an Associate with Marcus-Okoko & Co., and specializes in Corporate Governance, Oil & Gas Law, and Arbitration