Arbitral Review Tribunals: Novel Concept One Step Closer to Becoming a Reality

Enacted in May 2023, the updated Nigerian Arbitration and Mediation Act ("Act") included what is widely viewed as a novel concept in international arbitration: the use of Award Review Tribunals ("ARTs"). This feature, as described in Section 56 of the Act, allows parties the option to have an issued final award reviewed by an additional arbitral tribunal, subject to the expressed grounds for review allowed under Section 55(3) of the Act. In essence, this allows a tribunal of the parties' choosing to stand in place of the national courts of Nigeria for purposes of applications to set aside awards. While theoretical discussions of ARTs have taken place in a variety of fora for some years, this is the first instance of a national legislative framework for arbitration incorporating their use in practice.

The Act predetermines that the ART mechanism would become available under the auspices of the Lagos Chamber of Commerce International Arbitration Centre ("LACIAC"). A further development process is intended to take place whereby the LACIAC would create a purpose-built framework of applicable rules and procedures for establishing and empowering ARTs. In October of this year, the LACIAC published a draft of the proposed LACIAC Award Review Proceedings Rules ("Review Rules") for a brief period of consultation, providing a preview of the likely eventual operation of ARTs.

ARTs Designed to Apply Section 55 Standards for Set-aside

The proposed Review Rules are meant to work in concert with Section 55 of the Act, which sets out the relevant grounds a party may apply to set aside an arbitral award in the courts of Nigeria. As with the previous 1988 Act, the grounds for a set-aside challenge broadly reflect those grounds contained in the UNCITRAL Model Law, such as invalidity of the arbitration agreement and lack of jurisdiction of the tribunal.

However, Section 55(5) introduces a more onerous test than was previously used. Importantly, it is no longer sufficient for a party simply to show that one of the grounds for setting aside an award is present; it must now additionally show that the ground "has caused or will cause substantial injustice to the applicant." This wording mirrors the test for challenging an award on the basis of "serious irregularity" under Section 68 of the English Arbitration Act 1996, which has proven to be a high threshold. This is likely to result in fewer successful applications for set-aside, whether parties use either courts or an ART.

Further, Section 55(2) expressly prevents a court from setting aside an arbitral award for "an error on the face of the award", essentially preventing a court from overturning an award on the basis of an error of law. Section 55 also no longer includes "misconduct of the arbitrator" as a ground for setting aside an arbitral award. This deletion intends to address frequent applications generically complaining of "arbitrator misconduct," which are often used as a guerilla tactic and accompanied by injunctions to restrain and delay arbitral proceedings and/or enforcement.

Are the Proposed Review Rules Consistent with the Act?

The proposed Review Rules are broadly consistent with the approach described in Section 55 of the Act and do not contradict its key reforms. The Review Rules are intentionally tethered to the applicable arbitration law, such that the Act's narrowed and higher-threshold grounds for setting aside would govern the Award Review Tribunal’s remit in the same way they would a domestic court. The LACIAC Rules do not create any grounds for the setting aside of awards. Instead, they require that any grounds asserted "must be permissible under the law governing the underlying arbitration." As such, they direct an ART to interpret those grounds under the applicable procedural law, as guided by decisions of the courts. This design makes the Rules structurally consistent with the framework foreseen under the Act.

Nonetheless, the Review Rules do not specify that they are only applicable in cases where Section 55 would be the applicable standard of review. In other words, the current draft does not specify that an ART formed under the Review Rules is limited to reviewing awards resulting from Nigeria-seated arbitrations. This opens the possibility that the LACIAC's ART mechanism could be used in non-Nigerian seated cases where the ART is asked to apply set-aside standards from courts in other jurisdictions. While this may be an unlikely scenario, especially as both parties must consent to the use of an ART for its findings to be valid, such a scenario is not impossible based on the current drafting of the proposed Review Rules.

A New Global Trend?

The LACIAC's proposed Review Rules execute the novel concept of empowering an ART to review arbitral awards in the place of domestic courts, in concert with wider reforms to Nigerian arbitration law via the 2023 Act. The ART feature is one of a number of efforts to curtail frivolous applications for set-aside, with the aim of easing pressure on the domestic review courts' limited time. It is also intended to allow much greater procedural speed and efficiency for parties seeking to set aside or enforce awards. Should ARTs be enacted in their currently proposed form, eyes around the world will be watching with interest to see both the uptake and success of the Review Rules. This creative solution may offer a glimpse into the future of enforcement of arbitral awards in many similar jurisdictions.