Introduction
Competence to determine jurisdiction: court versus tribunal
Injunction in support of arbitration
Comment
A tiered dispute resolution clause usually mandates parties to attempt alternative dispute resolution (ADR) such as structured negotiations and mediation before invoking arbitration. This typically allows parties approximately 30-120 days to settle amicably. But a recurrent challenge is how to maintain status quo during this period before an arbitral tribunal is constituted. Thus, parties often need interim injunctions from the courts to protect the subject matter. Hence, the question is: can the courts grant injunctions during this period in support of a proposed arbitration when the "conditions precedent" have not been fulfilled?
This article analyses the courts' decisions on a tribunal's power to rule on its own jurisdiction and whether ADR in tiered dispute resolution clauses is a condition precedent to commencing arbitration. It is concluded that the power to determine validity or immaturity of arbitration belongs to the tribunal. It is also concluded that ADR should not be deemed a condition precedent to arbitration, especially in urgent cases.
Competence to determine jurisdiction: court versus tribunal
Arbitral tribunal's power
The issue of who has primary jurisdiction to determine an arbitral tribunal's jurisdiction has been settled in favour of the tribunal. First, section 19(3) of the Lagos State Arbitration Law (AL) and section 12(3) of the Arbitration and Conciliation Act (ACA) grant parties the right to challenge a tribunal's jurisdiction before the tribunal itself. Section 19(4) of the AL and section 12(4) of the ACA also allow tribunals to rule on an objection as a threshold issue, for instance, before the case on merit.
Second, the courts have also upheld these statutory provisions. In Mobil Producing Nigeria Unlimited v Suffolk Petroleum Services Limited(1) the Court of Appeal held that:(2)
Section 12(1) of the Arbitration and Conciliation Act is clear and unambiguous that an arbitral tribunal is competent to rule on questions pertaining to its own jurisdiction and on any objections, including the prematurity of the invocation of its jurisdiction.
Similarly, the Court of Appeal in Magnum International Limited v Enercon Nigeria Limited(3) held:
[I]t is the arbitration tribunal and not the Court that should determine the main and primary complaint and challenge to the validity or existence of the arbitration agreement.
This means a party must first challenge a tribunal's jurisdiction before the tribunal itself. Until the tribunal exercises its primary jurisdiction, the courts cannot activate their supervisory jurisdiction on the same issue.
Are negotiations or mediation conditions precedent?
Until recently, the English courts deemed a tiered arbitration clause as a condition precedent to commencing an arbitration. However, this approach was widely criticised. A different conclusion was recently reached in Nwa and another v NVF and others:(4) the court held that arbitration clauses must be read along "the commercial background and the reader's understanding of the purpose for which the agreement was made". Relatedly, the English court also held that non-compliance with the agreement to mediate a dispute before arbitration is not a condition precedent to filing an arbitration. The court held that it is a matter of admissibility which only the arbitral tribunal can decide. Notably, the court in Sierra Leone v SL Mining Limited(5) reached a similar conclusion.
In line with the English decisions above, it can be posited that an agreement to negotiate or mediate a dispute before arbitration is not a condition to arbitration. Therefore, non-compliance with this provision does not affect the tribunal's power to determine whether arbitration has been properly invoked.
Further, a party must first challenge a request for arbitration issued in breach of an agreement to negotiate or mediate before the tribunal. As shown above, an arbitral tribunal has the power to determine its own jurisdiction. So, it is not open to a party or the court to decide that a request for arbitration is in breach of the arbitration agreement. Therefore, whether right or wrong: a request for arbitration starts a dispute resolution process, which the tribunal may later hold has not been properly invoked. Until the tribunal decides, a court has no power to hold that an arbitration is immature.
Injunction in support of arbitration
Now, the question is, should the court grant injunctions in support of arbitrations invoked in breach of an agreement to negotiate or mediate? Section 21 of the AL allows the High Court of Lagos State to grant interim measures in support of arbitration. Even though there are controversies about section 34 of the ACA regarding the power of the court to support arbitration, section 13 of the High Court Law of Lagos State and section 13(1) of the Federal High Court Act also empowers courts to grant injunctions "in all cases in which it appears to the court to be just or convenient so to do".
Yet, none of these statutes empower courts to decide whether an arbitration to be supported by interim measures has been validly commenced. While section 32 of the AL deems arbitral proceedings to have been commenced upon issuance of a notice of arbitration, the courts – as shown above – have no original jurisdiction to examine the validity of a notice of arbitration. Therefore, the courts must defer the power to rule on the validity of arbitration to the tribunal. This means the court will have to presume there is a valid arbitration until the arbitral tribunal decides otherwise.
Even when an arbitration has been commenced before or during negotiations/mediation or before the expiry of a contractual time before arbitration, the courts must still consider whether an applicant has made an urgent case for interim measures in support of arbitration. An omission to negotiate or mediate a dispute is an admissibility issue to be determined by the arbitral tribunal.
In line with the English authorities above, such an omission should not affect the validity of the arbitration itself. Agreement to mediate or negotiate a dispute should not be a condition precedent to arbitration. They are issues of admissibility that only the tribunal is competent to decide.
For further information on this topic please contact Muyiwa Ogungbenro or Similoluwa Adeyemi at Olajide Oyewole LLP by telephone (+234 1 279 3670) or email ([email protected] or [email protected]). TheOlajide Oyewole LLP website can be accessed at www.dlapiperafrica.com.
Endnotes
(2) See Dangote Farms Limited v Plexux Cotton Limited (2018) LPELR-46581(CA); and Miden Systems Limited v BBC Chartering & Logistic Gmbh & Company (2019) LPELR-48929(CA).