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Challenge and Enforcement of Maritime Arbitration Awards by Dr Fabian Ajogwu, SAN
Introduction
Maritime is an adjective that describes activities relating to sea navigation or commerce . Arbitration is a means of settling dispute which is an alternative to courtroom litigation. It is thus defined as the reference of a dispute between not less than two parties for determination, after hearing both sides in a judicial manner, by a person or persons other than a court of competent jurisdiction .
Maritime Arbitration is thus settlement of maritime disputes by arbitration. Thus the Arbitration and Conciliation Act (ACA) in section 57 (1) provides that the range of relationships for which arbitration may be employed to resolve disputes that arise under them include transaction for the supply or exchange of goods or services, distribution agreement, commercial representation or agency, factoring, leasing, construction of works, constructing, engineering licensing, investment, financing, banking, insurance, exploitation, agreement or concession, joint venture and other forms of industrial or business cooperation, carriage of goods or passengers by air, sea , rail, or road.
The major maritime activity that often leads to disputes to be resolved by arbitration is carriage of goods by sea . The other maritime activities under which disputes can be settled by arbitration include the financing, building, construction, sale, acquisition, repairs of ships, the deployment of ships, fishing, salvage, charter parties , damage to goods and liability therefore, damages to the ship, lay days and demurrage including damages resulting from late entry to port or late access to the wharf, force majeure, maritime insurance .
It is notable that the procedure and rules for maritime arbitration are in substance similar to those of arbitration in other areas of commerce. I will in my presentation detail the legal regime and procedure for maritime arbitration. I will also underline the issues that may lead to challenge of a maritime arbitration awards and the features of the enforcement procedure for maritime awards.
Legal Framework for Maritime Arbitration in Nigeria
The laws that relate to maritime arbitration in Nigeria are as follows - The Arbitration and Conciliation Act (ACA) ; - The Admiralty Jurisdiction Act ; - The Admiralty Jurisdiction Rules 2011; - The Federal High Court Act ; and - Case law .
Provisions of the ACA – which is the main statute on the subject - arbitration are contained in the scanty, thirty-five-section part I and two-section part IV of the Act. Expectedly therefore, it does not contain sufficient provisions on the powers of the arbitral tribunal and procedure for arbitration. The position in English law is similar. Thus, Mustill and Boyd said: First, the statutes say little about the powers of the arbitrator, and nothing at all about the conduct of the reference. This is left to the individual contract, construed in the first instance by the arbitrator and in some cases of controversy, by the Court.
Luckily, arbitration law is flexible. The ACA provides therefore that the arbitral proceedings shall be in accordance with the procedure contained in the Arbitration Rules set out in the first schedule thereto. Where the said Rules contain no provision in respect of any matter related or connected to any particular arbitral proceedings, the arbitral tribunal may conduct the proceedings in such manner as it considers appropriate so as to ensure fair hearing. The power conferred on the tribunal in this respect includes the power to determine admissibility, relevance, materiality and weight of any evidence placed before it .
There are other laws that contain provisions relevant to arbitration. For instance, the Evidence Act does not apply to arbitration . There is therefore no strict application of the rules of evidence. The absence of a similar provision in the Evidence Act 2011 raises the question of whether it is the intention of the lawmaker that the Evidence Act is henceforth applicable to arbitration.
In a bid to cover some of the loopholes existing in Nigeria’s arbitration laws, the Lagos State Government in 2009 enacted the Lagos State Arbitration Law . The Law applies to all arbitrations within the state except where the parties have expressly agreed that another arbitration law shall apply . The importance of this law is in the fact that Lagos being Nigeria’s commercial nerve-center (it can be referred to as the maritime capital of Nigeria) a lot of transactions are done in Lagos. Therefore, it is important to have a law that meets the demand of our ever changing commercial environment. This law should also be amended as the need arises.
The view is taken that State Arbitration Laws, including the Lagos State Arbitration Law cannot regulate the resolution of maritime disputes. This is because Item 36 of the exclusive legislative list in the Constitution of the Federal Republic of Nigeria 1999 (as amended) lists Maritime as an item within the exclusive legislative competence of the National Assembly. That being the case, it is respectfully submitted that the Lagos State House of Assembly cannot legislate on Maritime Arbitration, and the Lagos State Arbitration Law, 2009 cannot apply to maritime arbitration within the State. It must be kept in mind that arbitration draws its basis from the consent of parties, and to that extent is largely party preference determinant.
Maritime Arbitrators’ Associations
There are many maritime arbitrators associations operating in various countries. It is important to mention them because of the important roles that they have been playing in the promotion of maritime arbitration. The Associations in this field of arbitration include: - Maritime Arbitrators Association of Nigeria (MAAN) - Houston Maritime Arbitrators Association (HMAA) - London Maritime Arbitrators Association (LMAA) - Mediterranean Maritime Arbitrators Association (MMAA) - American Maritime Arbitrators Association (AMA) - Society of Maritime Arbitrators New York (SMA New York) - Singapore Maritime Arbitrators Association (SMAA) - German Maritime Arbitrators Association (GMAA) - Vancouver Maritime Arbitrators Association (VMAA) - China Maritime Arbitration Commission (CMAC) - Association of Maritime Arbitrators Canada (AMAC) - Spanish Maritime Arbitrators Association - Transport and Maritime Rotterdam-Amsterdam (TAMARA) - Chambre Arbitrale Maritime, Paris,
Given that the major maritime arbitration center in the world is London and this is Nigeria, I will say a few words on the activities of the maritime arbitrators associations in these two centres.
The London Maritime Arbitrators Association (LMAA)
This Association is at the heart of the maritime arbitration system in London. The LMAA enforces standards and rules of maritime arbitration to be observed by members and maritime operators who submit to arbitration under the LMAA’s rules. The LMAA also offers advice on maritime arbitration . It recommends members for appointment or appoints members as arbitrators when requested to do so. The rules that govern maritime arbitration in London are contained in the LMAA Terms 2012, which was passed in January 2012, to replace the Terms of 2006. The Terms provide for appointment, jurisdiction and powers of the arbitrator, preliminary meetings, procedure, hearing, adjournment and award among other provisions.
Maritime Arbitrators Association of Nigeria
The Maritime Arbitrators Association of Nigeria (MAAN) is the association of maritime arbitrators in Nigeria established in 2005 under Part C of the Companies and Allied Matters Act. It performs functions that are similar to those of the LMAA and more, including enlightenment and promotion of maritime arbitration as the major option for the resolution of maritime disputes locally and internationally.
It is commendable that MAAN has two separate rules (both developed in 2006) for the arbitration of large claims and small claims respectively. The small claims are claims for money not exceeding N2,000,000 (two million naira) while claims for money that exceeds that amount will be heard under the large claims scheme. This approach alone shows MAAN’s exemplary seriousness and would ensure that almost all maritime disputes can be arbitrated under its rules. This will ensure that maritime operators embrace maritime arbitration as a reliable means of resolving maritime disputes.
Maritime Arbitration Awards
Following the appointment of arbitrators there would be a hearing in accordance with the relevant rules. Thereafter, an award will be delivered. A maritime award is the decision of an arbitrator(s) in the settlement of dispute . It is analogous to a judgment in a court of law in its admiralty jurisdiction . The award may be interim or final . A maritime arbitration award is final and binding on the parties.
Formal requirements of a maritime arbitral award
To be binding and final, a maritime award must be: - Signed; - Have on its face the reason(s) on which it is based; - Dated; and - Have on its face the place of arbitration, which shall be deemed to be the place where the award was made . - The parties to the maritime arbitral proceedings and recitals that is, the background should also be stated .
Substantive Requirements of a Maritime Arbitral Award
The substantive requirements of a maritime arbitral award, which are necessary for it to be enforceable, are:
- Cogency: The maritime arbitral award should in fact be an adjudication of the matter in dispute, and not merely an expression of opinion;
- Completeness: The award must address all the issues submitted before the panel and state the reliefs (if any) granted to the parties or either of them ;
- Certainty: That is, the award must be precise and certain in relation to the matters submitted to the arbitral tribunal; and
- Finality: The award must not be provisional, but must dispose of all the issues without leaving any to be decided by a third party .
An award that satisfies all the conditions discussed here is said to be final and there cannot be an appeal against the findings of the arbitral tribunal. Thus the matters disposed of by the tribunal cannot be litigated or arbitrated on again. Such matters are considered res judicata. In Cummings v Heard , the Plaintiff commenced an action on the same cause of action over which an award has been made claiming a higher sum than was awarded. It was held that he was estopped from making a second claim .
Challenge of Maritime Arbitral Awards
The finality of an arbitral award has been referred to above. However, a party may have recourse to the court for the purpose of challenging or impeaching an arbitral award. The relevant provisions of the law are sections 29 (1) – (3) and 30 of the ACA. They provide as follows:
29. (1) A party who is aggrieved by an arbitral award may within three months- (a) From the date of the award; or (b) In a case falling within section 28 of this Act, from the date of the request for additional award is disposed of by the arbitral tribunal, by way of an application for setting aside, request the court to set aside the award in accordance with subsection (2) of this section.
(2) The court may set aside an arbitral award if the party making the application furnishes proof that the award contains decisions on maters which are beyond the scope of submission to arbitration so however that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters not submitted may be set aside.
(3) The court before which an application is brought under subsection (1) of this section may, at the request of a party where appropriate, suspend proceedings for such period as it may determine to afford the arbitral tribunal an opportunity to resume the arbitral proceedings or take such other action to eliminate the grounds for setting aside of the award.
30. (1) Where an arbitrator has misconducted himself, or where the arbitral proceedings, or award, has been improperly procured, the court may on application of a party set aside the award.
In Bill Construction Co. Ltd. v. Imani & Sons Ltd. , it was held that the respondent’s objection to the registration of the award made in favour of the appellant was not made within the 3 months allowed by section 29 of the ACA. The 3 grounds for setting aside a maritime arbitral award are as follows:
Lack of Jurisdiction
A maritime arbitration award may be challenged on the ground that there was no valid arbitration agreement, that the matter submitted for arbitration does not fall within the arbitration agreement that the decision is on a matter not submitted to arbitration, that the arbitral tribunal was not properly constituted or that the matter arbitrated upon is not arbitrable. Thus, theft of the anchor of a ship is not arbitrable. With respect to the setting aside of a maritime arbitral award on the ground that the matter submitted to arbitration does not fall within the arbitration agreement, the proviso to section 29 (2) should be noted. By that proviso, if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decisions on matters not submitted may be set aside, while the decision on matters submitted to arbitration remains valid.
Procedural ground
Challenge of maritime arbitral awards mostly occurs in international maritime arbitrations . Procedural grounds include matters such as improper notice of the appointment of an arbitrator(s). Further procedural grounds are contained in section 48 of the ACA. It provides that:
48. The court may set aside an arbitral award- (a)If the party making the application furnishes proof- (i) that a party to the arbitration agreement was under some incapacity,
(ii) That the arbitration agreement is not valid under the law which the parties have indicated should be applied, or failing such indication, that the arbitration agreement is not valid under the laws of Nigeria,
(iii) That he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present his case, or
(iv) That the award deals with a dispute not contemplated by or not falling within the terms of the submission to arbitration, or
(v) That the award contains decisions on matters which are beyond the scope of submission to arbitration, so however that if the decisions on matters submitted to arbitration can be separated from those not submitted, only that part of the award which contains decision on matters not submitted to arbitration may be set aside, or
(vi) That the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the agreement of the parties, unless such agreement was in conflict with a provision of this Act from which the parties cannot derogate, or
(vii) Where there is no agreement between the parties under subparagraph (vi) of this paragraph, that the composition of the arbitral tribunal or the arbitral procedure was not in accordance with this Act, or
(b) if the court finds- (i) that the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Nigeria; or
(ii) that the award is against public policy of Nigeria.
Misconduct of the Arbitrator
This goes beyond the personal character of the arbitrator and includes mishandling of the arbitration as is likely to lead to substantial miscarriage of justice . Acts that could amount to misconduct of an arbitrator include the following: - Failure of the arbitrator to give the parties notice of the time and place of meeting; - Receipt of affidavits by the arbitrator where the agreement required evidence to be taken orally; - Refusal of the arbitrator to hear the evidence of a material witness; - Denial of the parties’ rights to examine their witnesses personally; - Failure of the arbitrator to have foreign documents translated; - Failure by an arbitral tribunal of two or more arbitrators to act together; and - Failure to act fairly towards the parties .
Misconduct, which has been held in Baker Marine (Nig.) Ltd. Chevron (Nig.) Ltd. , to be of wide import, also includes failure on the part of the arbitrator to comply with the terms of the arbitration agreement. An award will also be set aside on the application of a party to the arbitration agreement where the arbitrator has been deceived or material evidence has been fraudulently concealed .
It should also be noted that an error of law, which is not material and does not have substantial effect on the decision handed down, would not be ground for setting aside the award . In a similar vein, although it is the rule that an arbitral tribunal must consider all the issues submitted to it, the non-consideration of minor issues that do not lead to injustice cannot ground the setting aside of the arbitral award.
Legal Effect of a Successful Challenge
Where an application to set aside an award succeeds, the arbitration is rendered a nullity and the authority of the arbitral tribunal, which made the award, is terminated .
Enforcement of Maritime Arbitral Awards
If the party against whom a final and binding award is made carries it out, that puts an end to the matter. However, in some cases the losing party may refuse to carry out the terms of an award. In that case, the winning party may enforce the award by either of two ways.
Action at law
The winning party may bring an action at common law to enforce the maritime arbitral award . This is also known as action on the award.
Summary Enforcement
This is provided for in section 31 of the ACA as follows:
(1) An arbitral award shall be recognised as binding and subject to this section and section 32 of this Act, shall, upon application in writing to the court, be enforced by the court.
(2) The party relying on an award or applying for its enforcement shall supply- (a) the duly authenticated original award or duly certified copy thereof; (b) the original arbitration agreement or a duly certified copy thereof.
(3) An award may, by leave of the court or a judge, be enforced in the same manner as a judgment or order to the same effect.
Section 51 of the ACA contains similar provision for the enforcement of foreign arbitral awards. Except that if the award or arbitration agreement is not made in English, the application for enforcement should be accompanied by a duly authenticated copy of its translation into English language. The application under these sections should be by either motion ex parte or motion on notice. If the application is brought by a motion ex parte, the court may order that the other party be put on notice.
Opposition to Recognition or Enforcement of Maritime Arbitral Award
A party to a maritime arbitration agreement may apply to the court to refuse recognition or enforcement of the award . Section 32 does not stipulate grounds for an application to refuse recognition or enforcement of award. It has been argued - correctly in my opinion – that an application for the refusal of recognition or enforcement of an award can be founded on any of the grounds for challenging an arbitral award . In addition to those grounds however, further grounds are listed in section 52 (2) of the ACA, which deals with international arbitration and could be relied on for an application to the court to refuse recognition or enforcement of maritime arbitral awards. The additional grounds are:
(i) that a party to the arbitration agreement was under some incapacity, or
(ii) that the arbitration agreement is not valid under the law which the parties have indicated should be applied, or failing such indication, that the arbitration agreement is not valid under the law of the country where the award was made, or (ii) that he was not given proper notice of the appointment of an arbitrator or of the arbitral proceedings or was otherwise not able to present his case, or …
(vi) that the composition of the arbitral tribunal, or the arbitral procedure, was not in accordance with the agreement of the parties, or
(vii) where there is no agreement between the parties under sub-paragraph (vi) …, that the composition of the arbitral tribunal , or the arbitral procedure, was not in accordance with the law of the country where the arbitration took place, or
(viii) that the award has not yet become binding on the parties or has been set aside or suspended by a court of the country in which, or under the law of which, the award was made; or
(b) if the court finds-
(i) that the subject-matter of the dispute is not capable of settlement by arbitration under the laws of Nigeria, or
(ii) that the recognition or enforcement of the award is against public policy of Nigeria.
Challenge and Enforcement of International Maritime Arbitration Award
It might easily have been assumed that the discussion above revolved on what may be referred to as challenge and enforcement of domestic arbitration awards. It does go beyond that as an award resulting from arbitral proceedings between Nigerian companies and foreign entities even if it is held in Nigeria is a foreign maritime arbitral award. Indeed, I discussed the provisions of Part IV of the ACA, which deals with foreign arbitration. However, challenge and enforcement of foreign is generally governed by international conventions.
The relevant international conventions on this subject do not contain provisions on the challenge or enforcement of international maritime arbitral awards. The International Convention for the Unification of Certain Rules relating to Maritime Liens and Mortgages, which was adopted in Brussels on May 27, 1967 merely encourage parties to the convention to embrace arbitration as a means of resolving disputes concerning the interpretation and application of the convention, while the International Convention on Certain Rules Concerning Civil Jurisdiction in Matters of Collision, adopted at Brussels on May 10, 1952 preserves the parties right to resolve disputes by arbitration. Also, The United Nations Convention on the Carriage of Goods by Sea of March 30, 1978 ("Hamburg Rules") provides for resort to arbitration . Both the European Convention on International Commercial Arbitration of April 21, 1961 ("Geneva Convention") and the United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards of June 10, 1958 ("New York Convention") contain detailed provisions on arbitration, the latter on enforcement of arbitral awards. Yet neither of them contains specific rules regarding maritime arbitral issues .
Conclusion
Unlike other jurisdictions, once an arbitral award is successfully challenged, the court in Nigeria has no power to vary the award or reconsider it. Everything returns to the status quo and the parties are left with the option of commencing fresh arbitration proceedings. The provision of section 30 (2), which provides that the court may remove an arbitrator who misconducts himself would apply if the misconduct is observed and application is brought before the end of the arbitral proceedings and before an award is handed down.
It should be noted that a maritime arbitral tribunal lacks the power to order the arrest of a ship . This is because that power is reposed in the court. That notwithstanding, the advantages of resolving disputes through arbitration are enormous. It is imperative that a law on maritime arbitration be enacted as the existing laws are too general to adequately meet the needs of maritime arbitration in Nigeria.
The tendency to view laws that require the court to order stay of its proceedings pending arbitration as ouster clauses is wrong. So is the attitude of treating laws that prohibit ouster clauses as also prohibiting arbitration clauses. In Owners of M. V. Lupex v. Nigeria Overseas Chartering and Shipping Ltd. , the Supreme Court granted a stay of proceedings over a suit commenced in breach of charter party agreement that required arbitration in London under English Law.
I have in the course of this presentation highlighted the need to amend and harmonise the laws and rules, local and international on maritime arbitration. In the interim, the vacuum in the legal regime will have to be managed by parties choosing the law and rule that meet the facts of their case as well as on the discretion of arbitrators. Here lies the all important importance of the role of the Maritime Arbitrators Association of Nigeria.
References
Adedoyin Rhodes-Vivour, Arbitration in the Resolution of Maritime Disputes, a paper delivered at the 11th Maritime Seminar for Judges held at Sheraton Hotels and Towers, Abuja from 1st- 3rd June 2010
Admiralty Jurisdiction Act
Admiralty Jurisdiction Rules, 2011.
Arbitration and Conciliation Act
Black’s Law Dictionary, 7th Edition
Domke, Commercial Arbitration, 3rd Edn.,
Evidence Act 2011
Ezejiofor, The Law of Arbitration in Nigeria, Ikeja: Longman Nigeria Plc, 1997
Fabian Ajogwu, Commercial Arbitration in Nigeria: Law & Practice, Lagos: Centre for Commercial Law Development, 2009
Fabrizio Marrella, Unity and Diversity in International Arbitration: The Case of Maritime Arbitration, 20 Am. U. Int'l L. Rev., 2005.
Halsbury’s Laws of England, 3rd edition, volume 2
http://en.wikipedia.org/wiki/Maritime, accessed April 10, 2012
Mustill & Boyd, Commercial Arbitration, Butterworths, London, 1989
Oditah, Emerging Trends in the Enforcement of Maritime Arbitration Awards and ADR Settlements, A paper presented at the _IMASA/MAA_ Seminar on Promoting Maritime Administration and Alternative Dispute Resolution in the West and Central African Sub-Region held at Lagos on 28 April 2010
Orojo and Ajomo, Law and Practice of Arbitration and Conciliation in Nigeria, Lagos: Mbeyi, 1999
Redfern and Hunter, Law and Practice of International Commercial Arbitration, 2nd Ed. 1991