It is a policy of Nigerian courts to enforce arbitration agreements where the parties clearly intended to submit their dispute to arbitration.
In Mekwunye v. Imoukhuede (2019) 13 NWLR (Pt. 1690) 439, the Supreme Court of Nigeria kept with this well-established trend by upholding a ‘pathological’ arbitration clause. The court accepted that an initially poorly drafted ad hoc arbitration clause, which ostensibly referred to a non-existent appointing authority, could be treated as valid.
The dispute stemmed from the parties’ tenancy relationship. Their deed of lease contained an arbitration clause, under which the parties agreed to refer disputes to a sole arbitrator appointed by the President, Chartered Institute of Arbitration, London, Nigeria Chapter.
A dispute arose between the parties, following which the appellant activated the arbitration clause by writing to the Chairman, Chartered Institute of Arbitrators (U.K.), Nigeria Branch, to appoint an arbitrator. The Nigerian Branch Chairman made the appointment as requested.
The respondent challenged the arbitrator’s appointment but withdrew the challenge at the preliminary meeting. The proceedings continued and the arbitrator made a final award in the appellant’s favour.
The appellant applied to the trial court for the award’s enforcement. The respondent resisted the enforcement application and invited the court to set aside the award. Respondent’s contention, among other grounds, was that “there is no body/organization known as THE CHARTERED INSTITUTE OF ARBITRATION (LONDON) NIGERIAN CHAPTER and as such, there cannot be a referral for arbitration to a non-existent body.”
The High Court dismissed the challenge. It found that the Parties’ intention was to refer their disputes to arbitration and that the intended appointing authority was the Chairman of the Chartered Institute of Arbitrators, Nigeria Branch.
Aggrieved, the respondent appealed to the Court of Appeal, which overturned the High Court’s decision for the following reasons:
“There is nothing from the processes […] to support the conclusion reached by the lower court that the Chairman of the Chartered Institute of Arbitrators (United Kingdom) Nigeria Branch is the same person as the president of the chartered institute of arbitrators London – Nigeria Chapter […] It follows therefore that since there is in effect no body/organization known as the Chartered Institute of Arbitration (London) Nigerian chapter, the clause itself is unenforceable.”
Dissatisfied with the Court of Appeal’s decision, the appellant appealed to the Supreme Court.
Regarding the arbitration clause’s validity, the Supreme Court rejected the Court of Appeal’s conclusion. The court, through the Honourable Justice Kekere-Ekun, held:
“[…] the learned trial judge sought to give effect to the intention of the parties as manifested by their agreement to submit [their dispute] to arbitration. Despite the error in nomenclature, there was nothing before the court to suggest that the respondent was misled or that he was in doubt as to who the appointing authority was. […] having regard to the fact that Nigeria is an arbitration-friendy jurisdiction, I am of the considered view that the approach of the trial court in giving effect to the intention of the parties, notwithstanding the defective clause, is the correct approach.”
In his contributory judgment, the Honourable Justice Eko added:
“I agree with the appellant that the reference to Chartered Institute of Arbitrators (London) Nigeria Chapter […] should not defeat or invalidate the arbitration proceedings since the parties had, anyway, manifestly shown their intention to submit to arbitration. The court of justice is more interested in the substance than mere form.”
The Supreme Court, therefore, reversed the Court of Appeal’s decision.
The Supreme Court’s decision illustrates the policy of Nigerian court’s to enforce arbitration agreements that raise difficulties concerning the arbitral tribunal’s constitution, provided that the parties’ intention to refer their dispute to arbitration is unequivocal.
So-called ‘pathological clauses’ are arbitration clauses that fail to fulfil their essential functions. Former ICC Secretary-General, Frédéric Eisemann, identified four essential functions of an arbitration clause:
- to produce mandatory consequences between the parties;
- to exclude the intervention of state courts in the settlement of disputes, at least before the tribunal’s issuance of the award;
- to give the arbitrators powers to resolve the disputes likely to arise between the parties; and
- to allow an efficient and quick procedure that will result in an enforceable award.
In the case at hand, the arbitration clause was tainted by its reference to a non-existing appointing authority. However, the Supreme Court could easily cure the dysfunction. Having ensured that the parties had unequivocally intended to refer their dispute to arbitration, the court held that the arbitration clause was enforceable.
The judgment is consistent with the approach of Nigerian courts, tending to uphold an arbitration clause’s validity. This approach is reflected in the case of Sino-Africa Agricultural & Ind. Co. Ltd. v. Ministry of Finance Incorporated (2014) 10 NWLR (Pt. 1416) 515, where the Court of Appeal held:
“It needs to be echoed that parties generally should not be encouraged to circumvent arbitration agreements since both parties manifested their respective intention in the contract […] to refer the matter to arbitration […] Therefore, arbitration agreements are enforceable even if vague, so long as the parties’ intention to arbitrate […] is evinced therein.”