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Arbitration clauses in NigerianleasesPontian N. Okoli aa Barrister and Solicitor of the Supreme Court ofNigeriaPublished online: 09 Mar 2011.

To cite this article: Pontian N. Okoli (2011) Arbitration clauses in Nigerian leases,Commonwealth Law Bulletin, 37:1, 135-143, DOI: 10.1080/03050718.2010.524292

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Commonwealth Law Bulletin

Vol. 37, No. 1, March 2011, 135–143

ISSN 0305-0718 print/ISSN 1750-5976 online© 2011 Commonwealth SecretariatDOI: 10.1080/03050718.2010.524292http://www.informaworld.com

Arbitration clauses in Nigerian leases

Pontian N. Okoli

Barrister and Solicitor of the Supreme Court of Nigeria

Taylor and FrancisRCLB_A_524292.sgm10.1080/03050718.2010.524292Commonwealth Law Bulletin0365-0718 (print)/1750-5976 (online)Original Article2010Taylor & Francis364000000December 2010PontianOkolipontian19@yahoo.com

This article undertakes a detailed examination of the practical desirability andlegal validity of arbitration clauses under the Nigerian legal regime. Thisinvolves navigating through provisions of the relevant Rent Control andRecovery of Premises Law. Areas of incompatibility (including thosebordering on jurisdiction, penal provisions and enforcement of awards)between the latter law and arbitration clauses are then discussed. Finally,recommendations are made to the effect that the Rent Control and Recovery ofPremises Law should be amended.

Introduction

The practice of arbitration has been gaining ascendancy in Nigerian legal circles,not just because of the current realities of global expedience, but also because ofthe traditional benefits of arbitration, namely, speed, availability and flexibility.

It must be in the light of the foregoing that leases

1

are now being sighted on thearbitration radar. It is a fact that court cases arising from landlord–tenants disputessometimes last for several years.

African Petroleum v Owodunni

2

is now an apho-rism for how incredibly prolonged landlord–tenant litigation can be. That caselasted for over 12 years. We can immediately imagine the cost and underlyingrigidity.

The efforts to lubricate the machineries of leases are understandable andplausible. Housing is one of the trinity basics of life: food, clothing and shelter. InNigeria, as well as in most parts of Africa, decent and affordable housing exists inwant rather than in availability. The Land Use Act, more than 30 years afterpromulgation, attracts more dissenting voices than unison. Various Rent Controland Recovery of Premises Laws are either not enforced or incapable of being prac-tically enforced.

Thus we shall discover in this study that the grey areas of landlord–tenant lawconstitute the Achilles heel of arbitration clauses as far as their applicability isconcerned.

As the value of property in Nigeria – especially upmarket metropolitan Lagos,highbrow Abuja or oil-rich port Harcourt – spins out of control, the financial

*Email: pontian19@yahoo.com

1

In this article, leases and landlord–tenant agreements will be used interchangeably forconvenience without restricting oneself to the interpretation of a lease as a term of threeyears and above.

2

[1991] 11–12 SC 71.

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P.N. Okoli

rewards of real estate have flung the property business into mainstream commercialpractice. Participants in this niche must test the depth one leg at a time and thereasons for this approach are what this article brings to the fore.

Nature of alternative dispute resolution (ADR)

3

A long line of decided cases supporting the reality of customary arbitration is nowetched in Nigerian jurisprudence.

4

The nature of ADR in Nigeria today, when not manifested in customary arbi-tration, most certainly finds its ancestry in western conceptualisation. Indeed, it hasbeen noted that the origin of ADR has been traced to the United States of America

where the system developed out of the search, as far back as the early 1920s, for amore efficient judicial system as alternative to litigation … since its emergence in thelate 1890s, ADR has found converts among litigation users in many common lawcountries and also in Civil Law systems worldwide.

5

The western influence on the current legal regime in Nigeria is also obvious in thefact that the Arbitration and Conciliation Act

6

was actually modelled afterthe United Nations Commission on International Trade Law (UNCITRAL Law)1985.

7

As such, the Nigerian legal regime on arbitration comprises the followingmain sources: the Arbitration and Conciliation Act, the UNCITRAL Law and theUNCITRAL Arbitration Rules.

For the purposes of this work, suffice it to note that arbitration is a method ofdispute resolution involving one or more neutral third parties who are usuallyagreed to by the disputing parties and whose decision is binding.

8

An arbitrationclause is a contractual provision mandating arbitration – and thereby avoiding liti-gation – of disputes about the contracting parties’ rights, duties and liabilities.

9

Extant landlord–tenant law

In Nigeria, various states of the Federation have their laws governing the legal rela-tionship between landlords and tenants. The Nigerian Constitution neither providesfor it in the Exclusive Legislative List nor in the Concurrent List.

10

As such, it iswithin the province of states to legislate on this matter.

The Nigerian experience is that Lagos State tends to force the pace for moststates in terms of legislative enactments. Using the landlord–tenant law of LagosState is therefore a natural calling. The cardinal law governing the relationship

3

Scholars are still divided as to whether ADR should include arbitration. This author takesthe view that it should.

4

For example,

Okpuruwu v Okpokam

(1998) 4 NWLR (Pt 90) 580 (CA).

5

MA Rufai, ‘Alternative Dispute Resolution’

Compendium of the 2002–2003 Workshopsin the Alpha Juris Workshop Series

(Juriscope Press, Port Harcourt 2005) 95.

6

Laws of the Federation (LFN) 2004 cap A18.

7

This is also the case in a number of countries. For example, the Commercial ArbitrationAct of Canada is also based on the UNCITRAL Model Law.

8

BA Garner (ed),

Black’s Law Dictionary

(8th edn) (West Group, Minnesota) 112.

9

(n 8) 113.

10

Constitution of the Federal Republic of Nigeria (CFRN) 1999 Sch 2 Pt 1 and Pt 2.

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between landlords and tenants is the Rent Control and Recovery of ResidentialPremises Law (RCRRPL).

11

The Rent Control Tribunal Law, which complementsthe RCRRPL, is essentially a law to provide for the establishment of Rent Tribunalsfor the determination and control of standard rent of residential premises. Thus,with the Rent Tribunals (Abolition and Transfer of Functions) Law 2000, RentTribunals have become extinct whilst Magistrates’ Courts and High Courts havetaken over.

It should be stated at the outset that the law appears to lean in favour of thetenant. This is as a result of the mischief the law was designed to remedy. Lagos,being a metropolis with the attendant consequence of accommodation being inshort supply, soon became a fertile ground for shylock landlords. Exorbitant rentswere charged and security of tenancy was uncertain. It is for this reason that the lawmade it unlawful for a landlord to accept any rent in ‘respect of any accommodationto which this law applies which is in excess of the standard rent prescribed for thetype of accommodation’.

12

Pursuant to the powers of the Governor under the Law,Lagos State was divided into various zones with the vast majority of areas beingaffected by the law as regards standard rent. It is submitted that any part of LagosState not governed by the law ought to be governed by general principles ofcommon law.

Other provisions bordering on advance rent

13

and the Court allowing the tenantto seek alternative accommodation clearly show the leaning of the law in favour ofthe tenant,

14

and security of tenancy.

15

When a landlord wishes to recover possession of premises, it would usuallyfollow a valid notice. The validity of a notice means compliance with the expressterms in a lease. However, where there is no express stipulation as to the notice tobe given by either party to determine the tenancy, the following notice shall begiven:

(a) In the case of a tenancy at will or a weekly tenancy, a week’s notice;

16

(b) In the case of a monthly tenancy, a month’s notice;(c) In the case of a yearly tenancy, half a year’s notice.

There is an important proviso that in the case of a monthly tenancy, where a tenantis in arrears of rent for three months, the court shall (at the instance of the landlord)

11

The Rent Tribunals (Abolition and Transfer of Functions) Law 2007 was enacted toamend the Rent Control and Recovery of Residential Premises Law by abolishing all RentTribunals in Lagos State, and transferring all their functions, powers and jurisdiction toMagistrates’ Courts or the appropriate High Courts. Thus, even though the RCRRPL wasrepealed by the 2007 law, the same enactment saved the RCRRPL by a combined readingof sections 1–6. This also implies that the other provisions of the Rent Control TribunalLaw, Laws of Lagos State of Nigeria (LLSN) 2005 cap R 7 which is complementary to theRCRRPL are saved,

mutatis mutandis

.

12

RCRRPL s 3 (1).

13

n12 s 4.

14

S 23.

15

S 12.

16

In fact, a week’s notice in the case of a tenancy at will is a generous legislative help.Otherwise, as the Supreme Court held in

Odutola v Papersack & Anor

(2006) 11–12 SC66, a tenant at will occupies the estate of the landlord at the pleasure of the landlord.

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P.N. Okoli

make an order for possession and arrears of rent.

17

The nature of a tenancy in theabsence of any evidence to the contrary, is determined by reference to the timewhen the rent is paid or demanded.

18

The validity of notice is an important aspect of the strict legal regime on tenan-cies. An invalid notice cannot serve as a basis for a determination of a term oftenancy. The cardinal points of how long-drawn-out a landlord–tenant disputecould be in respect of validity of notices are delineated by

African Petroleum vOwodunni

,

19

a case which still found itself in the Supreme Court after 12 years oflegal tussle.

The aforementioned notices may be given at any time prior to the term oftenancy, but they shall be ineffective if the time between the giving of the noticeand the time the notice is to be determined is less than the prescribed period.

20

It isupon the expiration of a valid notice that the landlord may apply to the court for theissue of a writ or to enter a plaint.

Determination of jurisdiction

Jurisdiction is a threshold issue in Nigerian jurisprudence. The import of this is thatno matter how impeccably proceedings are undertaken, they would be useless if itturns out that the court never had jurisdiction to entertain the matter. It is for thisreason that the question of jurisdiction may be raised even for the first time at theapex court.

Basically, the Magistrates’ Courts and High Courts are vested with jurisdictionas regards landlord-tenant relationship. The jurisdiction is set in motion by theapplication of a landlord or tenant or any interested person to determine issuesappertaining to leases and rent.

21

Indeed, it would appear that the rationale behindoriginally vesting Rent Tribunals with jurisdiction was to reduce the length of timespent in the regular courts.

22

While it may be possible for the Magistrate’s Court to be the wrong forum, it isnever possible for the High Court to be devoid of jurisdiction. In

Mang v Ibe

23

theappellant/tenant’s contention was that the landlord commenced his action to recoverpossession and arrears of rent in the High Court rather than in the Magistrate’sCourt. The contention was rejected as the Magistrate’s Court law, which confersjurisdiction on matters relating to recovery of possession in the Magistrate’s Court,

17

RCRRPL s 14. Thus, some streetwise landlords prefer to take advantage of this provisionby not accepting rent for three months.

18

S 14 (2).

19

African Petroleum

(n 2) 71.

20

RCRRPL s 15.

21

RCRRPL s 7 (1). This primacy of jurisdiction is protected by the CFRN 1999 s 6 (5) (k)which provides for ‘such other courts as may be authorised by law to exercise jurisdictionat first instance or on appeal on matters with respect to which a House of Assembly maymake laws’.

22

Perhaps, the reality that the tribunals had no visa to El Dorado necessitated recourse toMagistrates’ Courts and High Courts. Currently, the upper limit for claims in themagistrates’ courts is N1m. Any party insisting on proceedings in the magistrates’ courtswould have to abandon any excess.

23

[2000] 14 NWLR (Pt 688) 591 (CA).

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cannot supersede the Constitution which confers unlimited jurisdiction in the HighCourt.

The next consideration is the effect of an arbitration clause in a lease, in theface of the express position of the law as regards jurisdiction. The answer to this isfar beyond academic speculation. An arbitration clause does not oust the jurisdic-tion of the court. In

Confidence Inc Ltd v Trustees of OSCE

,

24

the Court of Appealheld that the incorporation or inclusion of an arbitration clause in an agreementdoes not generate the heat of an ouster of jurisdiction of the court. It merely post-pones the right of either of the contracting parties to resort to litigation in courtwhenever the other contracting party elects to submit the dispute under theircontract to arbitration.

It is elementary that ousting the jurisdiction of the courts would contravene theNigerian Constitution which provides that judicial powers shall extend to allmatters between persons, or between government or authority and to any person inNigeria, to all actions and proceedings thereto, for the determination of any ques-tion as to the civil rights and obligations of that person.

25

The effect of the foregoing is that where parties to a lease make provision forarbitration, any aggrieved party must first seek the remedy available in the arbitra-tion. However, before a court can refuse jurisdiction, the arbitration clause must bemandatory, precise and unequivocal. The arbitration clause should contain themandatory ‘shall’ and not the permissive and discretionary ‘may’. Where a plaintiffjumps arbitration and commences an action in a court, a defendant may take stepsto stay proceedings of the court.

26

Arbitration clauses vis-à-vis offences under the RCRRPL

It would be generally permissible to insert an arbitration clause in a lease. However,a hard look should be taken at the RCRRPL. This is essentially civil legislation, butit also makes provisions bordering on criminality. The law provides for offencesand penalties. For example, any person who demolishes, alters or modifies a build-ing to which the RCRRPL applies and without the approval of the court is ‘guiltyof an offence and is liable to a fine of twenty thousand naira or to three monthsimprisonment’.

27

Section 33 (2) (i) provides that any person who in respect of any accommoda-tion to which this law applies:

(a) Attempts to quit or forcibly ejects a tenant;(b) Harasses or molests a tenant by action or words, with a view to ejecting

such tenant;(c) Wilfully damages any dwelling houses; or

(ii) Any person who in respect of any accommodation to which this lawapplies:

24

[1999] CLR 2 (1) (CA).

25

CFRN 1999 s 6 (6) (b).

26

Bebeji Oil Allied Prod. Ltd v Pancosta Ltd

[2007] 31 WRN 13 (CA).

27

RCRRPL s 33(1).

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P.N. Okoli

(a) Harasses or molests a landlord in respect of an accommodation let by himby action or words;

(b) Wilfully damages any dwelling house; or(c) Does any act or thing whatsoever calculated to stultify the provisions of this

law or fails to comply with the requirement or any order made by the courtis guilty of an offence and is liable to a fine of 50,000 naira or to threemonths imprisonment.

Section 7 provides that any person who has been out of possession, under a warrantof possession, and unlawfully retakes possession of the premises after possessionhas been given to the landlord, is guilty of an offence and is liable to a fine of50,000 naira or to six months imprisonment.

The aforementioned penal provisions obviously gravitate towards criminaljurisdiction. Are arbitrators capable of assuming criminal powers? No. A criminaloffence is an offence against the State – an injury to the State of collective commu-nity. Traditionally, arbitrators are impotent in criminal matters because suchmatters are generally not arbitrable.

This implies that the aforementioned penal provisions are outside the scope ofarbitration. A perfunctory consideration of the said penal provisions would seem tosuggest that their criminal essence is obvious. This may be so in the case of wilfullydamaging a dwelling house. But the import of harassment is not almost as obvious.

It is true that an arbitration tribunal has the power to rule on questions borderingon its own jurisdiction – and such a decision would usually be final and binding.

28

However it has been noted that an arbitration panel cannot rule that it has jurisdic-tion on an issue which it cannot validly have jurisdiction in law, otherwise it wouldact

ultra vires

. For example, in an agreement, there may be a slight dispute as towhich issues in the agreement the arbitrators may handle. It is on such issues thatthe arbitrator has the competence to determine its competence.

The competence of a court to adjudicate on a matter is a legal and constitu-tional prerequisite, so the issue of jurisdiction cannot be waived by the parties orby the court.

29

It is in the present connection that a distinction is usually drawnbetween two types of jurisdiction – jurisdiction as a matter of procedure and juris-diction as a matter of substantive law. Whilst a litigant can waive the former, it hasbeen held that ‘no litigant can confer jurisdiction on the court where the constitu-tion or a statute or any provision of the common law says that the court shall haveno jurisdiction’.

30

Thus it would be unlawful for an arbitral tribunal to rule that it has jurisdictionto decide on questions bordering on offences such as those already mentioned inthe RCRRPL. In fact, it is the Attorney General of the Federation or state that hasthe power to determine which prosecutions are in the public interest.

It was earlier noted that the subject matter of an arbitration vis-à-vis thedispute must be one which is arbitrable under the law. Indeed, ‘if the arbitrationagreement covers matters incapable of being settled by arbitration under the law

28

Arbitration and Conciliation Act s 12. See also,

Kano State Urban Development Board vFanz Construction Co Ltd

[1990] 4 NWLR (Pt 142) 172 (SC).

29

Oke v Oke

[2006] 17 NWLR (Pt 1008) 229 (CA).

30

Per Augie JCA in

Oke v Oke

(n 29) 230.

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of the agreement, or under the law of the place of arbitration, the agreement isineffective since it will be unenforceable’.

31

In such a case, even where the awardis made, enforcement will be refused.

It is now beyond question that there is more to the criminal law of Nigeria thancan be found in the Criminal Code or the Penal Code. Professor Okonkwo’s state-ment that there are ‘many other enactments creating offences’

32

is certainly farmore obvious today than it was several decades ago. Several such enactments creat-ing offences are scattered in the laws of the Federation and of the states and havethe same criminal essence in each offence.

33

It is in the light of the foregoing thatthe following observation is apt: ‘A criminal matter does not admit of settlementby arbitration. Neither will a matrimonial matter of general interest, or a statusmatter such as the winding up of a company, or bankruptcy’.34

Enforcement of arbitral award

In Ndah v Chianuokwu35 the Court of Appeal held per Fabiyi, JCA:

Where parties willingly submit their dispute to a body (be it an arbitration, or arbitra-tors, or other person or body of persons), who are invested with judicial authority tohear and determine the dispute, by an order of court or by a provision of a statute, andsuch a decision is reached, a court of law will enforce such a decision.

In that case, the respondents refused to abide by the arbitral award, and the appel-lant filed an action against them at the High Court claiming a declaration to enforcethe arbitral decision. The High Court dismissed his claim and he appealed to theCourt of Appeal. He contended that the award made was binding on both parties.The Court of Appeal unanimously allowed the appeal.

In leases, one would be eager to find out if an arbitrator can make an award forpossession or payment of rent. There is nothing in the RCRRPL that suggests thatan arbitration clause cannot be made. Suppose that after an award for possessionhas been made, the award is complied with, the matter ends there. Otherwise, theaward needs to be enforced – which powers the arbitrators lack. Such an award,being a domestic one, will be registered in the High Court so that the award forpossession, for example, can be enforced. It will be enforced in a like manner as ajudgment of a court.36 Such an award is final, binding and operates as an estoppel.37

It used to be thought that ‘it is first necessary to convert the award into a judgement

31JO Orojo and MA Ajomo, Law Practice of Arbitration and Conciliation in Nigeria(Mbiyi and Associates Nigeria, Lagos 1999) 41.32CO Okonkwo, Okonkwo and Naish: Criminal Law in Nigeria (Sweet & Maxwell,London 1980) 13.33The Criminal Code apparently contemplates that states may enact laws with criminalprovisions. The Criminal Code Act LFN 2004 cap C38 s 12A provides that ‘where byprovision of any law of a State the doing of any act or the making of any omission isconstituted an offence, those provisions shall apply to every person who is at the State atthe time of his doing the act or making the omission’.34Orojo and Ajomo (n 31) 41.35[2006] 17NWLR (Pt 1007) 77 (CA).36The Court has no power to alter an award; it can only set it aside or remit it to thearbitrator. See Commerce Assurance Ltd v Alli [1992] CLR 4 (a) 3 (SC).37Oparaji v Ohanu [1999] 9NWLR (Pt 618) 290 (CA).

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142 P.N. Okoli

or order of court; and only then can the successful party levy execution’.38

However, in Nigeria it is not necessary – in fact, it is wrong – to convert an awardinto a court judgment. Thus, the Supreme Court, in Ras Pal Gazi Construction CoLtd v Federal Capital Development Authority39 held that ‘an arbitrator award underthe provisions of section 4 (2) of the Arbitration and Conciliation Act is as bindingbetween the parties, and when filed in court should for all purposes have the forceand effect as a judgement’. To be sure, the emphasis was that the award should beenforced, not converted, to the court’s judgment.

The party relying on an award or applying for its enforcement shall supply:

(a) The duly authenticated original award or duly certified copy;(b) The original arbitration agreement or a duly certified copy.40

Error of law on the face of the record and error of competence ab initio

The question of how an arbitrator interpreted the law to reach its decision goes tono issue. That is, the test whether the arbitrator interpreted the law rightly orwrongly is entirely subjective – and this subjectivism is entirely within the facultyof the arbitrator.

This is in furtherance of the accepted legal reality that the parties accept thearbitrator for better or for worse.41 The court does not place itself above the arbi-trator as an examiner would examine scripts to mark answers right or wrong. Asthe court explained in Baker Marine (Nig) Ltd v Chevron (Nig) Ltd.42 what thecourt has to do is to look at the award and determine whether on the state of the lawas understood by the arbitrator and stated on the face of the award, the arbitratorcomplied with the law as he himself rightly or wrongly perceived it.

The import of the foregoing is that where an award is made in respect of a lease,there cannot be an application to set aside the award on the basis of what award wasmade but perhaps, as to how the arbitrator reached a decision.

Where, on the other hand, the arbitrator laboured under an erroneous impressionof his competence where the law keeps jurisdiction sacred, perhaps due to reasonsbordering on public policy, arbitral proceedings would be void ab initio. Thiswould clearly apply to the penal provisions we examined earlier. It is for this reasonthat the plea of autrefois convict or autre fois acquit will not avail someone unless

38Quoted in A Babalola, Enforcement of Judgments (Afe Babalola, Ibadan 2003) 331. It isquite surprising that the learned author does not go ahead to criticise that position asconflicting with Nigerian Law. Also, see the Arbitration and Conciliation Act s 31 (3).39[2001] 10 NWLR (Pt 722) 559 (SC).40In an earlier judgment in Commerce Assurance Ltd v Alli (n 36) 2, the Supreme Courtstated that there are two alternative methods of enforcement of an award open to theapplicant namely: 1. By application directly to enforce the award or 2. By application toenter judgement in terms of the award and so to enforce the judgement by one or more ofthe usual forms of execution. Apparently, this vague duality of enforcement cannot besupported by the Arbitration and Conciliation Act s 31 (3) which provides that ‘an awardmay, by leave of the court or a judge, be enforced in the same manner as a judgement ororder to the same effect’. Arbitration and Conciliation Act s 48(II) (i) and s 52(b) (i).41Taylor Woodrow (Nig) Ltd v Suddentsche Etna-Werk [1993] CLR 5 (SC).42[2000] 12 NWLR (Pt 651) 393 (CA).

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Commonwealth Law Bulletin 143

he shows that he has been tried by any ‘court of competent jurisdiction or tribunalfor a criminal offence and either convicted or acquitted’.43

Indeed, one of the many grounds for setting aside an award is if the court findsthat the subject matter of the dispute is not capable of settlement by arbitrationunder the laws of Nigeria.44 In Shell Trustees (Nig) Ltd v Imani & Sons,45 the Courtof Appeal held, per Muntaka Coomasie, JCA, that ‘incompetence and irregularityare two different things. If a court or tribunal is incompetent to do anything,anything that it does no matter how correct or regular cannot be valid’.

Conclusion

In the course of this article, I have tried to place the increasing attractiveness ofarbitration clauses in perspective. The soft spots of the landlord–tenant law vis-à-vis arbitration were brought to the fore: namely, the criminal aspects, the illegalityaspects, the fluid nature of these two, and the fact that the competence of courts inthis area of the law is arguably etched in subjectivism. Thus, it may be expostulatedthat the desirability of arbitration clauses in leases is doubtful in the light of thecurrent legal regime, and should take a back seat.

If the essence of arbitration clauses is partly to circumvent delay in judicialproceedings, then it is not a risk worth taking under the extant landlord-tenant law.A party could raise any of the issues discussed which would eclipse any expectationof a quick resolution.

AcknowledgementsThanks are due to ’Yomi Audifferen Esq and Charles Nwabulu Esq for their helpfulcomments.

Notes on contributorPontian N. Okoli is a barrister and solicitor of the Supreme Court of Nigeria. He holds anLLB, BL and has been published locally and internationally. He works in the law firm ofCity Partners, 13 Sumbo Jibowu, SW Ikoyi, Lagos. Mr Okoli is a member of the Associa-tion of Professional Negotiators and Mediators.

43CFRN 1999 s 36(9) (emphasis added).44Arbitration and Conciliation Act s 48 (II) (i) and s 52 (b) (i).45[2000] CLR 6 (b) 2 (CA).

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