One of the disturbing challenges of the growth of arbitration in Nigeria is the seeming undue interference with valid arbitration reference is various form. These trend has re-occurred most recently, notably with the Crestar decision by the Lagos division of the Court of Appeal granting anti-arbitration injunction against an international commercial arbitration proceedings with a seat in London and the other several decisions with respect to “tax related matters”. Without prejudices to the binding effect of these decisions until set aside, these pronouncement no doubt have created some uncertainty in the perception for the continues use of arbitration by local and international businesses. This is perhaps another clarion call for the countries arbitration laws to be tinkered with some certainty. This article will attempt to consider these concerns from arbitrability stand point.

Arbitrability is one of the issues where the contractual and the jurisdictional natures of International Commercial Arbitration meet head on. It simple involves the question of what types of issues can and cannot be submitted to arbitration. However the issue of arbitrability varies from jurisdiction to jurisdiction, each states decides which matters may or may not be resolved by arbitration in accordance with its own political, social and economic policy.  This is a restriction to party autonomy in arbitration (which is a private proceeding with public consequences) and it is justified to the extent that arbitrability is a manifestation of national and international public policy.  Thus, some disputes are exclusively reserved for national court’s determination whose proceedings are generally held in public. A pertinent question which has raised diverse opinion is; Does this ipso facto invalidate the arbitration agreement entered by the parties?  Opinion differ, but the writer is of the view that it does, as the arbitration agreements covering those matters considered non-arbitrable will, in general, not be considered valid, will not establish the jurisdiction of the tribunal and the subsequent award may not be enforced. These issue will be x-rayed vide judicial decision anon.

Some international conventions have given a context of what arbitrability entails. The New York Convention of 1958 provides for the law of arbitrability only from the perspective of enforcement. It requires the enforcing court to look to its own law to determine whether the dispute is arbitrable. Article V(2)(a) provides…….. the subject matter of the difference is not capable of settlement by arbitration under the law of that country. Similarly Section 48(b)(I) of the ACA provides that the court may set aside an award if the court finds that the subject matter of the dispute is not capable of settlement by arbitration under the Nigeria Law.

Conversely, it is pertinent to state that there is no codified law to my best of the writers knowledge on arbitrability in Nigeria,  unlike in other jurisdictions such as neighboring Ghana. However, the exclusive jurisdiction of the Federal High Court pursuant to the provisions of Section 251 of the Constitution provides for exclusive subject matter jurisdiction for tax related matters. Therefore construing section 48(b)(i) and 52(2)(b)(i) of the Act will enabling a finding by the court that the subject matter of the dispute is not capable of settlement by arbitration under Nigeria law.

Remarkably now, is the Court of Appeal’s decision in SNEPCO & 3 ORS v FIRS & ANOR in CA/A/208/2012 delivered on the 31st day of August, 2016. The Court of Appeal affirmed the decision of Adamu Bello .J. (Rtd) of the Federal High Court, Abuja Division agreeing with the Tax authorities (FIRS) as plaintiff’s that the outcome of an arbitration proceedings between the NNPC and the IOC on the some tax liability made pursuant to contractual obligations in a Production Sharing Contract (PSC) were not arbitrability because of the Section 251 of the Constitution. The trial court held thus:-  “ it is not therefore intended by the constitution of the FRN that issues of taxation or tax matters should go to arbitration. I hold that the claim of the claimants (defendant herein submitted to arbitration having been founded to relate to tax disputes arising out of the operation of the PSC between the 1st defendant and the 2nd -5th defendants is not one referable to arbitration. The subject matter is one within the exclusive jurisdiction of this court granted by the constitution.

 The troubling issue here is not whether or not taxation issues are arbitrable, rather the parties who has the requisite competence to raise same. This decision was considered unassailable by the Court of Appeal. Although the appellant’s contention inter alia was that the dispute before the tribunal were largely contractual and all also the  FIRS not being privy to that contract and not a party to the ongoing arbitration lacks the  requisite locus standi, to challenge same. The Court of Appeal in rebuffing this contention held per Yahaya JCA thus:-

 “ I have myself re-considered all the relevant processes……… which is on the nature of the claim before the tribunal, the respondent is to lift tax oil and make payments of PPT pursuant to the tax returns prepared by the appellants. This is similar to relief (g) sought (page 118 of the record the reliefs, before the tribunal) . Clause 2.4, 7.1 (h), 15.2 (a) and Annex B, Article III paragraph 2(a) and 2 (b) (page 75 of the record), deal with the payable petroleum Profit Tax (PPT), the deductible tax to be determined in accordance with the PPT Act, including signature bonuses loan interest and sole cost, the timing of capital allowances and the method for estimating same, are to be determined in accordance with the PPT Act. ……… It is the FIRS that  has the exclusive preserve of assessing, collecting, accounting and enforcing payment of taxes due to the government of Nigeria or any of its agencies from persons, including companies and enterprises chargeable with tax…. It is the FIRS that has the power to administer tax legislation including the Petroleum Profit Tax Act, Deep Offshore Act, Companies Income Tax Act 1990 and personal Income Tax Act 1993……., and it is FIRS that has the statutory power and function of administering same, if there is any proceeding in which assessment, levying, payment timing and returns are to be determined according to the Petroleum Profit Tax the duties, obligations and responsibilities of the 1st respondent are called to question, and surely it must have an interest, a locus standi, in that proceeding. Its obligations and duties are in danger of being adversely affected since it is not a party to the proceedings at the tribunal and therefore it has the right to go to court to protest the infringement of its interests and duties. I am therefore in full agreement with the trial court, that he had considered the relevant material before him and had come to the right conclusion that the 1st respondent had the locus standi to institute the action at the trial court.

 It is settled law that reliefs determine jurisdiction, More so, it is trite law that Locus Standi is corollary to jurisdiction. The court’s decision in the SNEPCO Case was premised on the relief sought by FIRS in juxtaposition with that of the appellant at the tribunal, thus coming to a conclusion that the reliefs being similar in nature the outcome at the arbitration will certainly impact on FIRS core functions, thereby acceded to their claim to alter the arbitration proceedings and by extension the reference and its eventual outcome.

This supports the writer’s earlier position that arbitrability goes to the validity of the agreement abi nitio, contrary to some other positions.

Category of arbitrability is not closed in Nigeria, Public Policy considerations has expanded the scope. The combined interpretation of Section 35, 48(b)(ii) and 52(2)(b)(ii) of the Act Support this view. More so, Section 34(2)(b) of the Model Law equally makes reference to public policy.

Unlike in Nigeria, in the United State is a trail blazer with a deliberate policy consideration in favour of arbitration, the US Supreme Court has effectively established a presumption of arbitrability and placed the burden on the party resisting same to prove that congress intended to preclude parties to commercial contracts from waiving the judicial forum by agreeing to arbitrate disputes. Statutory provisions also support this position as any doubts concerning the scope of arbitrable issues be resolved in favour of arbitration. In Mitsubishi v Soler, 473 US 614, 105 SCt 3346, 3355 et seq (1985), the US Supreme Court held that in an international arbitration context the ambit of arbitration may be wider that in a national context. Though the case only dealt with US law, the decision describes what is now the prevailing view. The case also evidences a second general trend: the increase in the types of disputes which can be referred to international arbitration. While originally arbitration was limited to claims arising directly out of contract, gradually more and more claims based on statutes, for example regulating important parts of the National Economy in the public interest have become arbitrable. In Mitsubishi v Soler the court declared antitrust disputes to be arbitrable which in America Safety Equipment Corp v J.P Maguire & Co were still held not to be arbitrable in a domestic context.

Finally, in view of the SNEPCO decision dismissing the appeal and upholding the lack of jurisdiction of the arbitral tribunal on the ground that the dispute has tax implications, the scope and effectiveness of an arbitration clause in Nigerian PSCs is currently unclear as a claim before a court may be met with an objection based on the existence of an arbitration clause, thus as any breaches which will result in overlifting of crude oil Appeal has been held to be a ‘tax’ dispute and non arbitrable.  The Orojo Committee report, which is being currently reviewed, perhaps should give some attention to these issues raised (if it has not been considered). We hope that in the coming years the courts should have a more progressive approach towards the use of arbitration in contractual agreements.