The state of the investment climate in Nigeria is causing a lot of anxiety. The reasons are not far-fetched, as it is, due to the high volume of petroleum exports, Nigeria is the largest trading partner in Sub-Saharan Africa, and equally seen as a potential investment hub. In order to maintain long lasting economic growth and development, it is pertinent that Nigeria improves her International Investment Legal framework to secure substantial amounts of foreign Investments. This is necessary because, foreign investments thrive and survive where dependable dispute resolution mechanism is seen as an integral part of the entire investment climate, balancing any tension created between the host states and foreign investors. Nigeria with a high investment potential requires an investment-friendly environment to promote economic development and effective utilization of her abundant resources.
The main objective of this study is to revisit ways to improve the current legal frameworks for resolution of investor-state dispute in a bid to attract foreign investments to Nigeria focusing on International investment arbitration as a means for settlement of investment disputes within the context of Nigerian Law.
Why International Investment Arbitration?
International Investment Arbitration is aimed at facilitating legal protection of Foreign Direct Investment which is guaranteed by a network of investment laws and international investment agreements (IIAs), it is seen as a critical element in creating a friendly investment climate.2 These laws and agreements form a legal protection for foreign investors and provide a direct means for redress against states for breaches of their obligation under these frameworks. With International Investment Arbitration, private persons can claim directly against sovereign states, such claims are usually instituted before the International Centre for settlement of investment Disputes(ICSID) or before an ad hoc tribunals and other arbitral forum that may be agreed upon by the parties. The claims can equally be classified as treaty based investment arbitration, legislation based investment arbitration or contract based investment arbitration.
BITs in Nigeria
Nigeria has currently signed 29 BIT’s with 15 in force.3 Five of the BITs exclusively provide for ICSID arbitration4 while the others provide for both ICSID and adhoc UNCITRAL arbitrations. The provision of these BITs are mainly classified into procedural rights provisions and substantive protections. On the one hand, the procedural provision include the cooling off period5, access to local courts and arbitration, whilst the substantive provision contain clauses such as Expropriation, Protection and Security, Fair and Equitable treatment(FET), Most Favoured Nation (MFN) and Umbrella Clause.
The BITs currently in force have similar provisions with very few minor differences. The most recent BIT in Nigeria is the Nigeria-Morocco BIT which was signed on the 3rd of December 20166, although it is yet to come into force, However it is seen as a welcome development with the ability to provide a more balanced form of intra-African investor protection treaty. Ground-breaking provisions included in the BIT are Articles 14, 24 and 26. Article 14 focuses on impact assessment which investors must comply with. The imposition of such obligations on investors is a marked deviation from the more traditional BITs such as the Netherlands-Nigeria BIT and the Nigeria-United Kingdom BIT. While Article 24 centres on Corporate Social Responsibility. Additionally, Article 26 contains innovative practical provisions on dispute settlement. It establishes a joint committee to pre-assess investor claims. The major hurdle with Article 26 however is that it lacks clarity. This is because the establishment of a joint committee is not explicit. This raises the question as to whether the joint committee will be an adhoc committee or have a permanent composition. Furthermore, the article is also silent on the legal implication of the assessments carried out by the joint committee and if at all the negotiations are to be legally binding. Other key areas are found in Articles 17, 18 and 19. It should be highlighted that these obligations are currently in line with the 2008 Supplementary Act of the Economic Community of West African States whose objective is standardising investment protections within the economic bloc.7
Challenges of Investment Arbitration in Nigeria and the Way Forward
There is clear evidence that BITs play a very minor role in attracting foreign direct investment (FDI) in a country.8 However, it is pertinent that the Investment climate is favourable. The challenges in Investment in Nigeria dates back to the creation of the first generations of Nigeria investment laws. In developed countries, these laws are created by experts and technocrats who usually conduct intensive studies and research in order to propose guidelines. Nigeria, on the other hand enacted her Investment Laws during the military era and it can be argued that experts where not consulted before such enactments. Even though, some of such laws have been amended, the emerging stage of democracy appears to pose a challenge when technical issues such as investment are raised.
Another challenge is in negotiation, executing and ratification of investment treaties between Nigeria and other state parties. Some developed States take advantage of the weaker states during negotiation. Experts have suggested that emerging markets should get proper legal advice and their negotiation team should equally be composed of those who possess the required experience and expertise in foreign investment and transnational transaction.
Furthermore, it is also troubling that the arbitration provisions provided for in the Nigerian Bilateral Investment Treaties appear to reveal that the arbitration will be determined in non-Nigerian institutions of arbitration.9 This position is equally troubling considering that the claims arising from the BITs are in relation to investments actually been done in Nigeria. Various arbitration cases have been entangled in controversy regarding the transparency of the arbitral awards delivered by the arbitral tribunals, thereby bringing the international arbitration process as lacking transparency. It is clear that there are arbitration institutions in Nigeria10 and equally well experienced arbitrators who are competent enough to undertake similar roles performed by foreign arbitrators. Even though proponents resorting to foreign arbitration in Nigeria’s BITs have suggested arbitration in Nigeria has its challenges, which justifies the need to rely on foreign institutions of arbitration, it can be argued that these supposed challenges are gradually easing out and have been undertaken by advancement in Nigeria’s arbitration development.
From the ongoing, Nigeria has certainly taken progressive steps in the Morocco-Nigeria BIT. However, there are still options available that Nigeria may consider in future in order to ensure a balanced contractual obligations in order to improve the Country’s investor climate. To this end, the proposed national arbitration policy is seen as a welcome development in providing an opportunity for Nigeria to develop legislative policies that will set Nigeria as the seat of arbitration when disputes arise from Nigeria’s BITs or other commercial transactions and this will in turn promote investment and equally improve Arbitration practice.
1Emo Idornigie-Pearce. Law Lecturer/Doctoral Researcher, Canterbury Christ Church University, United Kingdom
2Recent reports and statistics released by leading institutions like the LCIA show an increase in the number of international arbitrations involving Nigerian parties. The report show that there has been an increase in the number of parties from Africa, with Nigerian parties taking the lead (for example, in the LCIA 2019 Annual Casework Report, not only did Nigeria account for amongst the highest number of African parties, casework data show statistical rises in the number of parties from Nigeria, from 2.8% in 2018 to 4.4% in 2019)
3UNCTAD Investment Policy Hub <http://investmentpolicyhub.unctad.org/IIA/CountryBits/153> accessed on 9th June 2020
4France, Germany, Korea, Netherlands and the United Kingdom exclusively provide for ICSID Arbitration
5Cooling off periods are usually three to six months. However Netherlands-Nigeria BIT has no cooling off period
6Reciprocal Investment Promotion and Protection Agreement between the Government of the Kingdom of Morocco and the Government of the Federal Republic of Nigeria signed at Abuja on 3rd December 2016.
7Supplementary Act A/SA3/12/08 adopting community rules on investment and the modalities for their implementation with ECOWAS. See <http://investmentpolicyhub.unctad.org/Download/TreatyFile/3266> accessed on 9 June 2020
8Lisa E. Sachs and Karl P. Sauvant “BITS, DTTs and FDI flows: An overview” in The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows, Karl Sauvant and Lisa Sachs (eds.), (Oxford: Oxford University Press, 2009). Such as the International Centre for the Settlement of Disputes (ICSID) and International Chamber of Commerce (ICC)
9Such as the International Centre for the Settlement of Disputes (ICSID) and International Chamber of Commerce (ICC)
10Such as the Nigerian Institute of Chartered Arbitrators (NICArb), Chartered Institute of Arbitrators UK (Nigeria Branch) Lagos Regional Centre for International Commercial Arbitration (LRCICA), Lagos Court of Arbitration (LCA), Lagos Chamber of Commerce International Arbitration Centre (LACIAC), and International Centre for Arbitration and Mediation Abuja (ICAMA). All these Arbitration bodies are dedicated to the common goal of the promotion of arbitration in Nigeria.
1. Houthoff Buruma, Investment Arbitration: The role of Bilateral Investment Treaties – In-House Counsel Practical Guide, 15, Vol. 2, 2012, Available at: <http://www.houthoff.com/uploads/tx_hhpublications/Brochure_Arbitration_2012> accessed 13 July 2020
2. Lisa E. Sachs and Karl P. Sauvant “BITS, DTTs and FDI flows: An overview” in The Effect of Treaties on Foreign Direct Investment: Bilateral Investment Treaties, Double Taxation Treaties and Investment Flows, Karl Sauvant and Lisa Sachs (eds.), (Oxford: Oxford University Press, 2009).
Mbah, Alpheus, and Legal Framework for International Investment Arbitration in Nigeria – A Critique (2019) Available at: SSRN: <https://ssrn.com/abstract=3440618> accessed 10 July 2020
Paul Obo Idornigie, Transparency in Investor-State Dispute Settlement
Available at: <http://www.paulidornigie.org/wp-content/uploads/2018/12/Transparency-in-ISDS-June-2017.pdf>