Comparative Analysis: Belgian and Nigerian Courts on Admission of Third Party Challenge Against Arbitral Awards
On 5 June 2017, I attended a conference in Nairobi on the development of arbitration in Africa. On this occasion, Mr Seyilayo Ojo (Senior Partner at S. O. & C. Legal in Lagos, Nigeria), who participated in a panel on the topic of “Arbitration as a Catalyst for Economic Growth on the Continent“, mentioned the so-called “FIRS” judgment rendered a couple of years ago by a Nigerian court which allowed a third party to challenge an arbitration award*.
This issue has been a hot topic for Belgian practitioners after the Belgian Constitutional Court also recently ruled that third parties should be entitled to lodge third party opposition (tierce opposition) against arbitral awards (we previously discussed this decision on this blog on 7 March 2017 and 28 March 2017). I therefore thought that it would be interesting to draw a comparative analysis between the judgment rendered by the Nigerian court and the judgment rendered by the Belgian Constitutional Court.
The Nigerian case relates to a dispute between Statoil (Nigeria) Limited (Statoil) and Texaco Nigeria Outer Shelf Limited (Texaco) on the one side and the Nigerian Federal Inland Revenue Service (FIRS) and the Nigerian National Petroleum Corporation (NNPC) on the other side.
A couple of years ago, Statoil and Texaco both initiated arbitration proceedings against the NNPC, concerning the payment of a petroleum tax. The FIRS (Nigeria’s internal revenue service) subsequently filed a motion before the Nigerian courts challenging the validity of the arbitration agreement between Statoil, Texaco and the NNPC on the ground that the purpose of the arbitration was to avoid certain tax obligations. The FIRS was not itself a party to this agreement and was thus a third party.
In a judgment of 13 June 2014, the Abuja Court of Appeal (the Court) found that FIRS had locus standi to challenge the validity of the arbitration agreement, even though it was not a party to that agreement. The Court’s rationale was based on the fact that FIRS would lose tax revenue if the claimants were to succeed in their arbitration claim. Essentially, the Court was of the opinion that if an arbitral award infringes Constitutional law or powers, then a party must be able to seek a remedy, even if it is not a party to the arbitration agreement itself.
This decision in the Nigerian case is in some respects analogous to the decision that was reached by the Belgian Constitutional Court on 16 February 2017, where third parties were held to be entitled to lodge a third party opposition against an arbitral award.
One way in which these two cases are comparable is that both argue that not allowing a third party to challenge an arbitration award would amount to a breach of Constitutional law. In the Nigerian case, the Court was of the opinion that if an arbitral award infringes Nigerian Constitutional law or powers, then a person must be able to seek a remedy, even if not party to the arbitration agreement itself. In the Belgian case, the third party opposition against arbitral awards was held to be admissible because the Constitutional Court considered that the difference of treatment between third parties to arbitral proceedings and third parties to judicial proceedings was not justified. Essentially, the legal provision that allowed third parties to challenge the validity of judgments rendered by civil or criminal courts by means of third party opposition but did not offer the same possibility to third parties to arbitral proceedings, was in violation of the Belgian Constitution.
Another way in which these two cases are comparable is that the decisions made in both of them contradict elements of the relevant national law on arbitration. For example, with the Nigerian case, the decision contradicts Section 34 of Nigeria’s Arbitration and Conciliation Act 2004, which provides that: “a Court shall not intervene [in arbitral proceedings] in any matter governed by this Act except where so provided in this Act“. The decision also conflicts with two previous decisions in which injunctions seeking to restrain arbitral proceedings had been overturned and where it was held that it was not within the power of the courts under Nigeria’s Arbitration and Conciliation Act to restrain arbitral proceedings with an ex-parte injunction. In addition, the decision of the Belgian Constitutional Court conflicts with the previous reading of Article 1122 of the Belgian Judicial Code, which was that third party opposition can only be filed in judicial proceedings but not in arbitration proceedings.
A third parallel is that the decisions in both of these cases have sparked legal uncertainty. The decision in the Nigerian case diverges from former precedents. Furthermore, the decision of the Belgian Constitutional Court has caused some controversy, which needs to be resolved. For example, the Belgian law maker will need to come up with some sort of creative solution and cannot simply replicate Article 1122 of the Belgian Judicial Code in the arbitral context, as this would go against some of the fundamental principles of arbitration law (see my previous article of 28 March 2017).
Overall, both the Nigerian decision and the Belgian decision set new directions for the future of arbitration proceedings in those two countries whilst simultaneously creating an unpredictable environment.
* Many thanks to Seyilayo Ojo for sending me a copy of the FIRS judgment.