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06 September 2018
A satisfactory concluded dispute resolution mechanism, at least for award creditors, is the successful enforcement of an arbitral tribunal's decision. Where a judgment or arbitral award is made but the successful party cannot enforce it, the creditor has succeeded only in obtaining a pyrrhic judgment or award. In this case, the creditor will be considered only a judgment or award creditor, leaving it without the much-needed value of the award or judgment.
Unfortunately, award debtors routinely employ every conceivable strategy to circumvent the enforcement of an award against them. One such strategy is to argue that the time limit for enforcing an award or judgment has lapsed, thus rendering the award unenforceable.
As the issue of time limits for enforcing arbitral awards has long plagued award creditors, the relevant statutory provisions and judicial decisions in this regard must be evaluated in order to ascertain the ways in which the unsavoury outcome of the statutes of limitation can be avoided.
There are two types of time limit in enforcement proceedings in Nigeria: the contractual time limit and the statutory time limit.
Contractual time limits are usually set by the parties in an arbitration agreement to commence arbitral proceedings or enforce arbitral awards (where a party does not voluntarily comply). However, such contractual arrangements are subject to the statutory provisions on time limits.
Numerous statutes define the limitation period applicable to the enforcement of arbitral awards, including as follows:
So when does time begin for the purpose of enforcing an arbitral award? Further, when does an award creditor lose its right to enforce an arbitral award in view of the various statutory provisions on limitation?
The leading judgment in City Engineering Nig Ltd v Federal Housing Authority,(5) as handed down by the Supreme Court (comprising a reconvened full panel of seven justices)(6) and read by Justice Ogundare, began as follows:
The principal question that calls for determination in this appeal is: When does the statutory period of limitation start to run for the purpose of the enforcement of an arbitration award; is it at the date of the accrual of the original cause to action or is it at the date of the arbitral award?
In construing the six-year period provided for by the Limitation Law of Lagos State, the Supreme Court concluded as follows:
The statutory period of limitation of six years began to run from 12/12/80(7) and appellant's application to enforce the award was statute-barred when it was brought in 1988. The appellant has itself to blame for the catastrophe that has befallen it. Notwithstanding that there was some delay in the arbitration proceedings arising from various applications made by both sides, the arbitrator gave his award in November 1985,(8) a date still within the statutory period of limitation. For unexplained reasons, the appellant waited another three years before applying to enforce the award in its favour, by which time limitation period had set in.
The Supreme Court decision in City Engineering does not appear to be arbitration friendly and differs significantly from the English position, which is that time should be calculated from the date of the award.(9) This is because delays occasioned as a result of lengthy arbitral proceedings and subsequent appeals against a refusal of the court to set aside an award may deny the successful party the ability to enforce the award. The appeals process in Nigeria – from the first-instance court to the Supreme Court (except for some political, constitutional or designated fast-track cases) – takes approximately eight to 12 years. So what hope does the unanimous decision of the full panel of the Supreme Court in City Engineering give to award creditors that obtain a successful award more than six years after the accrual of the cause of action?
True position in Limitation Law of Lagos State
City Engineering refers to arbitration generally, and not necessarily arbitration governed by the Arbitration and Conciliation Act. The way in which the Supreme Court framed the issue in the appeal for determination supports this view.
However, in arriving at its judgment, the court was conscious of the conditions imposed by Section 8(1)(d) of the Limitation Law of Lagos State, which excludes arbitration agreements made under seal or governed by the Arbitration and Conciliation Act.
To avoid the limitation scenario which occurred in City Engineering, parties are expected to meet one of the following conditions provided for in the Limitation Law of Lagos State:
As regards point one above, where the agreement is under seal, the applicable limitation period is 12 years from the date of the accrual of the cause of action by virtue of Section 12(1)(b) of the Limitation Law of Lagos State. Under the FJREA, the limitation period for the registration of foreign arbitral awards in Nigeria would have been six years from the award's publication. However, as the minister of justice has not made a proclamation extending Part 1 of the act to relevant foreign countries, the time is limited to 12 months,(10) as is the case with arbitral awards obtained in England, Northern Ireland or Scotland under the REJA.(11)
As regards point two above, it is unclear which limitation period applies to arbitrations governed by the Arbitration and Conciliation Act, as the Limitation Law of Lagos State is silent in this regard. However, the term 'judgment' in Section 12(2) of the Limitation Law(12) arguably includes arbitral awards made under the Arbitration and Conciliation Act.(13) In such cases, the limitation period for arbitral awards made under the Arbitration and Conciliation Act is 12 years from the date on which they become enforceable.
Frozen time – Lagos State Arbitration Law
Nothing that under Section 8(1)(d) of the Limitation Law of Lagos State, arbitral awards made pursuant to "arbitration under other enactments other than the Arbitration and Conciliation Act" are subject to the six-year limitation period from the accrual of the action, the Lagos State Arbitration Law provides that the period between the commencement of the arbitration and the date of the award must be excluded from the determination of the limitation period for the enforcement of the award.(14) The limitation period stipulated in the Lagos State Arbitration Law applies to all arbitration within Lagos State, except where the parties have agreed to be governed by another arbitration law.(15)
The fact that arbitration under the Lagos State Arbitration Law is not covered by the Arbitration and Conciliation Act does not mean that the law contravenes Section 8 of the Limitation Law of Lagos State. This is because under Section 4(a) of the Lagos State Arbitration Law, the limitation period set out in that law does not apply to actions for which a limitation period for enforcement is fixed by another enactment. This means that where an arbitration is governed by any statute that stipulates a limitation period for the enforcement of the award, the limitation period in the Limitation Law of Lagos State does not apply.
Frozen time argument
There has recently been a move away from the stringent position taken by the Supreme Court in City Engineering, which has given award creditors some hope.
In Sifax Nigeria Limited v Migfo Nig Ltd,(16) the Court of Appeal categorically stated that the "computation of time during the pendency of an action shall remain frozen from the filing of the action until it is determined or abates". In effect, the period between the commencement of the arbitration and the date of the award will be excluded from the determination of the six-year limitation period under Section 8(1)(d) of the Limitation Law of Lagos State.
Although the Court of Appeal's decision, as proffered by Justice Oseji, was appealed to the Supreme Court, the latter(17), in a 16 February 2018 judgment, aligned itself with the Court of Appeal, which had held as follows:
Contention that time should not run during the pendency of an action in court for the purpose of Limitation Law would, in my modest opinion, unwittingly permit the Legislature, to take over control of the time-table of litigation indirectly or by subtle means, to wrongly/technically dictate the pace cases are heard in court under the cloak of limitation enactment. This will create the alarming scenario in which pending cases caught by the effluxion of time and objection to their determination on the merit on account of lapse of time so upheld would meet undeserved grief. Or it may create the dangerous repercussion of stampeding the court to operate on full throttle to grapple with time in the course of which justice may be sacrificed on the altar of neck-breaking speed or indecent haste which will drain the adjudication of the dispute of the patience, fairness, diligence, or balanced/even handed justice which it is wont to have, which will be a sad day for the administration of justice.
Sifax subtly gives credence to Section 35(5) of the Lagos State Arbitration Law, as it implies that had the decision existed and been approved by the Supreme Court before it determined the appeal in City Engineering, the court might have held that the appellant was within the time limit for enforcing the arbitral award.(18) This is particularly so as the cause of action arose in 1980 – the same year in which the action was instituted. Time would have been frozen between 1980 and 1985 when the arbitration was concluded and would have been reactivated only after 1985.
Following the Supreme Court's decision in Sifax, City Engineering may cease to be the law. However, it is anticipated that when an issue of limitation of action for the enforcement of an arbitral award comes before the Supreme Court, it will seize the opportunity to formally deviate from its earlier decision in City Engineering.
Instituting preservative action
A claimant may file an action in court in defiance of an arbitration agreement where:
The claimant may then seek an order to stay proceedings pending arbitration, thus preserving its right of action.
There is a possibility that this strategy may be opposed on the grounds that it is an abuse of process, particularly where the defendant does not request a stay of the proceedings pending arbitration. However, the Arbitration and Conciliation Act does not stipulate that the party that may apply for such a stay must be the defendant. Rather, Section 5 states that "any party to the arbitration agreement may… apply to the court to stay the proceedings".(19)
Commencing enforcement within 12 months from date of award
Where a foreign arbitral award is not under seal, it may be registered as a domestic judgment under the FJREA or the REJA within 12 months from its publication. Judgments from commonwealth countries are enforceable in Nigeria pursuant to the REJA. There is no need for a reciprocal agreement between Nigeria and the commonwealth country where the award sought to be enforced was issued.(20)
The FJREA applies to awards from non-commonwealth countries, as it was enacted to:
make provision for the enforcement in Nigeria of judgments given in foreign countries which accord reciprocal treatment to judgment(s) given in Nigeria, for facilitating the enforcement in foreign countries of judgments given in Nigeria.
Applying for recognition in another jurisdiction first
The focus of the various enabling laws on the enforcement of foreign awards or judgments is the awards or judgments of foreign courts or arbitral tribunals. It is therefore arguable that where a judgment creditor perceives that the limitation period for registration of the award has lapsed in Nigeria, it could attempt to gain recognition in another jurisdiction where the action is not statute-barred (eg, England) and obtain the judgment of that court. The judgment creditor could then apply to a Nigerian court to register the foreign court judgment in Nigeria. This approach will likely be met with stiff opposition and requires a definite position of the court with regard to whether an award can be subjected to recognition in more than one jurisdiction. It could also raise the question of whether Nigeria's public policy is nebulous.
Once a foreign arbitral award has been recognised and enforced by the court, the award will be treated as a judgment of the registering court and enforced in a similar manner. Arguably, the limitation period for the enforcement of the now-recognised judgment is 12 years from the day on which the judgment of the registering court becomes enforceable.(23)
The enforcement of an arbitral award can sometimes be a nightmare for award creditors. However, employing one of the above strategies in the right context should help to deter award debtors from delaying proceedings with the belief that time will be a grave factor from the date of the cause of action's accrual.
It is also hoped that in cases where it becomes clear that time is no longer a grave factor, award creditors will look to settling an award, particularly where interest accrues continually with the attendant delayed post-award proceedings.
(6) The Supreme Court of five justices had previously heard the appeal. However, when it realised that it had given two conflicting decisions on limitation, it abolished the hearing and reconvened with seven justices to unify its decision. In Murmansk State Steamship Line v Kano Oil Millers ((1874) 12 SC 1; (1974) NSCC590), the Supreme Court had held that the statutory period of limitation should run from the date of the breach of the charterparty in 1964, when the cause of action had accrued, and not from 1996, when the award had been made. This was also the decision in Obembe v Wemabod Estates Ltd ((1977) 5 SC 115). However, in Kano State Urban Development Board v Fanz Construction Co Ltd ((1990) 4 NWLR (Pt 142) 1), the Supreme Court had held that an award by an arbitrator constitutes an independent cause of action.
(9) In Turner v Midland Rly Co ((1911) 1KB 832) it was held that the six-year time limit for the enforcement of an arbitral award commences on the date of the award and not the date on which the claim arose, as the award itself gives rise to another cause of action. This was also the decision in Agromet Moto Import Ltd v Maulden Engineering Co (Beds ) Ltd ((1985) 2 All ER 436).
However, section 3(1) of this Act had subjected the coming into force of the provisions of Part 1 of the Act which contains section 4(1) of the Act extending the period of registration to six years, to an Order to be made by the Minister of Justice directing the extension of Part 1 of the Act to relevant foreign countries. Section 9 of the new 1990 Act had also unequivocally preserved the effect of the 1958 Reciprocal Enforcement of Judgments Ordinance pending the promulgation of the Order envisaged under section 3(1) of the 1990 Act by the Minister of Justice.
(13) This argument could be deduced from the Supreme Court judgment in City Engineering v FHA, particularly with reference to Section 8(1)(d) of the Limitation Law on Pages 234 and 235 of the report. Justice Ogundare may have mixed up the intent of Section 8(1)(d) when he said on Page 235 that "it is generally accepted for the purpose of these proceedings that the arbitration agreement of 17/12/74 was not under seal nor was it under any enactment other than the Arbitration Law". The bold could have been intended to read "and was under an enactment other than the Arbitration Law".
(21) Section 2 of the FJREA defines 'judgments' as including arbitral awards and authorises the Nigerian courts (with jurisdiction to hear a dispute) to register and enforce foreign judgments from countries which accord reciprocal treatment to Nigerian judgments.
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