NEWSROOM

Effect of COVID-19 Pandemic on Nigeria’s Dispute Resolution Practices

 

EMMANUEL EKPENYONG FCIArb. (UK)

 

What areas of law have you been predominantly working on over the past 12 months?

 

London, UK, August 6, 2021 – McapMediaWire – During this period, we advised various clients on the effect of force majeure caused by the COVID-19 pandemic lockdown (“the lockdown”) on existing commercial obligations. We also advised our foreign clients on the legal framework of business opportunities which the COVID-19 pandemic (“the pandemic”) has sprang up in Nigeria.

Our clients benefit from our experience on ways to renegotiate terms of their contracts which have insulated them from litigation risks and prevent them from running at a loss as a result of the shutdown of their businesses during the lockdown period that inhibited them from carrying on business and fulfilling their obligations under such contracts.

Litigants are now more willing to settle out of court. We have negotiated with counsels of adverse parties who commenced various litigations against our clients and reached amicable settlement with them. The terms of settlement were adopted by the parties and entered as consent judgment.

Ailing businesses are looking for ways to inject fresh capital. This has led to a growth of our debt collection portfolio. International clients retain our services to collect business, hospital and school debts against Nigerians and Nigerian businesses. We have also collaborated with our foreign partners to recover outstanding debts for Nigerians and Nigerian businesses against foreign debtors abroad.

Inevitably, the pandemic has led to many foreign businesses rebuilding by seeking new markets abroad, including the huge Nigerian market. We advised firms – especially in Europe and Asia – on the most suitable business entities to form and the permits and certifications they require in order to carry on business in Nigeria. We have registered more trademarks, patents, designs and franchise within this period.

How do you determine which method of litigation or dispute resolution is most suitable on a case-by-case basis?

Business disputes are inevitable. Dispute may arise from the interpretation of the provisions of a contract, ascertaining the obligations of the parties, failure to fulfil obligations under the contract, or even breach of the contract itself. In order for the parties to settle their dispute and possibly continue their business relationship, it is important to ascertain when to litigate a matter at conventional courts or employ other disputes resolution mechanisms such as negotiation, mediation and arbitration or a blend of the mechanisms.

In recent times, both legal practitioners and judicial officers have come to appreciate the role which mediation play in the dispute resolution process. For instance, in franchise law, mediation is increasingly becoming popular. Parties agree to settle their franchise disputes by mediation by including mediation provisions in their contracts. Mediation offers both parties the opportunity to resolve their conflict in a non-adversarial way so as to maintain their relationship in future.

As a result of the acrimony and the delay in resolving commercial disputes by litigation, it is better for disputes in sectors such as construction, maritime, telecommunications, manufacturing, oil and gas, finance, where time is of essence to be resolved by arbitration.

What strategies, techniques or conflict management tools can be employed in order to achieve consistent results?

Conflicts can either arise as a result of scarce resources, personal and cultural differences, underperformance, unrealistic expectations, stress, ambiguous work roles, poor communication amongst other human factors.

Conflicts must be timeously managed so as not to impact negatively on an organisation and result in poor results. The management of any organisation should employ the following good conflict resolution techniques:

Proper communication: Every organisation should encourage proper communication across different cadres of its set-up. There should be increased dialogue among groups and sharing of information. This will help the group know more about each other, eliminate suspicion and encourage teamwork.

Prompt resolution of conflicts: Management must endeavour to immediately address conflicts because postponing conflict resolution would escalate the issue and affect performance. However, the issues resulting in the conflict should not be addressed too quickly without careful consideration as management’s decisions will directly affect the demeanour and performance of staff.

Emphasis organisational goals: Management should emphasise organisation goals and objectives which should prevent conflicts. If larger goals are emphasised, employees are more likely to see the big picture and work together to achieve corporate goals.

Impartiality: Management must be impartial and be seen to be impartial. Situations should be accessed from all sides for the purpose of arriving at a fair and reasonable solution.

What measures can a company enact to help minimise the cost, damage and disruption of litigation to their business?

The main aim of any business is for profits and not to engage in endless litigations. This is because litigation is time consuming, distracting, expensive and sometimes may be costlier than the amount in dispute. Time spent preparing staff as witnesses takes away business time. The company pays its counsel from its scarce resources to represent the company in court. Disputes can also dampen staff morale and ruin the company’s business reputation. This is why a company should observe the following measures to avoid and minimise the risk and cost of litigation:

Retain the services of a company secretary: In the 21st century, a company secretary is no longer a mere clerical officer but an important member of the board who advises the company on modern due diligence matters, corporate and governance issues and ensures that the company’s practices are in line with extant legislations and international best practices. This will reduce the company’s exposure to litigation.

Proper documentation: A company should engage the services of a solicitor to ensure that all its agreements with other companies, its staff, suppliers, business partners, etc., are properly documented and franked. Variations to the original agreement should be properly documented, approved and executed. Having an agreement which clearly sets out rights, obligations and dispute resolution clause of partnership or business relationship when it breaks down can minimise the cost of resolving disputes.

Proper communication: In order to avoid conflicts which may result in litigation, a company should ensure its clients, customers or associates are well informed about their activities and send timely updates. This could be by informing them about increase in cost, budgets and scheduling. Respecting its customers and keeping them well informed can go a long way to make a company avoid litigation.

Effective customer care service: A company should maintain an effective customer care service which will pacify and attempt to resolve disputes between the company and its customers or business partners. If actions are taken promptly to deal with conflicts as they arise, a company would be able to prevent such conflicts from developing into a major problem. It is not advisable to ignore a problem or complaint hoping that it will go away by itself.

Study profile of potential partners: A company should do proper study and search on their potential clients, customers, employees and suppliers. The company should ensure that they know the individuals or companies which they want to do business with. Some individuals and organisations have a tendency to attract trouble. Businesses should avoid companies or individuals with such profiles.

Being objective: Persons in management positions should think and act objectively for both the short and long time gain of the company. They should, put themselves in the shoes of others and identify the motivation for litigation against the company and negotiate towards an amicable settlement. They should be able to determine if it is simply animosity or the other party has a genuine reason for commencing litigation against the company.

How has COVID-19 impacted the litigation & dispute resolution landscape?

Courts across the globe have rapidly adapted to COVID-19 protocols. The have found new ways to hear cases before them. As restrictions are relaxed in Nigeria, litigants are now faced with a significantly altered dispute resolution landscape. In order to decongest the courts and maintain social distancing, access to courtrooms in most States of the Federation is restricted to one counsel per litigant. The counsels must maintain social distancing in their sitting arrangement.

Many courts now conduct fully virtual hearings, in which the Judge and some parties are present in the courtroom while others attend virtually. The courts provide parties, the public and the media with login details for virtual hearings. This is a drastic change from the requirement that parties and counsels must be physically present at court proceedings.

Electronic processes have been widely adopted and used as a means of filing and serving processes of court. Before now only the National Industrial Act and its rules make provision for this technology. However, the High Courts of some states started test running electronic filing system in their jurisdiction, but the COVID-19 restriction has sped up the process. Electronic filing and service is now an integral part of the justice delivery system in many jurisdictions in Nigeria.

There has been an increased awareness in settling commercial disputes amicably. Financial pressure caused by the pandemic has made many litigants to be more willing to settle disputes to avoid long and expensive court proceedings. Settlements are currently being achieved through virtual meetings, mediation and informal discussions between counsels and the litigants.

Nevertheless, in spite of the increased use of technology in court proceedings, in many jurisdictions, courts are yet to embrace this innovation. This has increased the backlog of cases in those jurisdictions and made litigants to believe more in ADR mechanisms, especially, mediation and arbitration to promptly resolve their disputes.

What new challenges have emerged as a result of COVID-19 and what steps should companies take to remediate these risks?

The pandemic has tested the resilience of most businesses and challenged their financial, operational and commercial framework. In order to survive the rough tides, companies should be ready to adapt to the current strains and market conditions caused by the pandemic. As the situation evolves, companies should expect to see a shift in focus and a reprioritisation of operational and conduct risks as they come to terms with the harsh reality of managing their dispersed workforces. In order to grapple with these challenges, companies must be ready to engage in the following:

Conduct readiness assessments: A readiness assessment is a good place to start when companies don’t know what their business continuity programme should be. Industry and role readiness templates as well as pandemic-specific templates allow a company to evaluate their business continuity programme against a best practice standard and identify where gaps may exist. These readiness libraries break down standards and best practices into actionable pieces so that companies can track progress and adherence.

Have a risk management plan: Companies should complete a risk assessment on their core business processes to identify and prioritise any new risks or gaps in their existing controls for new scenarios like pandemics, recession, and geopolitical conditions risks.

Conduct business impact analysis: Not all risks within processes or functions within a company should be treated the same way. A business impact analysis allows companies to identify which parts of the business are most critical to its operations.

Have a management policy: As the pandemic lingers and new information arises, policies will need to be revisited, updated and communicated. For example, reviewing and revising a work-from-home policy will be effective only if dissemination of that revised policy is made with governance tracking for adoption across the company. Ascertain staff redundancy benefits: As the pandemic lingers and revenue dwindles, some companies may have to terminate the employment of redundant staff. It is therefore important for the company to ascertain the severance package for its redundant staff so that it does not expose itself to the risk of litigation and other labour related issues.

Have there been any recent regulatory changes or interesting developments?

One of the key provisions is the recently passed Bank and Other Financial Institution Act, (“the BOFIA 2020 Act”) which makes bank staff personally liable for contraventions of the terms of a banking license. This will improve compliance and reduce recklessness by forcing bank management to be more vigilant. The new regulation hopes to avoid events like the toxic asset crisis of 2009, which many people believed that Nigerian banks contributed towards.

These changes have far-reaching implications in the areas of monitoring, and enforcement of safer lending practices. For example, the BOFIA 2020 Act provides that loans in excess of three million naira without collateral will require the Central Bank of Nigeria (“the CBN”) approval. Many small and medium businesses that rely heavily on revenue-based financing will now face an extra hurdle which will further slow allocation of credit in Nigeria’s economy. The increased powers given to the CBN potentially mean that the regulatory bank could become more obstructive in coming weeks.

The BOFIA 2020 Act even gives the CBN authority over the opening or shutting down of bank branches. The law gives immunity to the CBN which limits the redress banks can seek if they feel they have a case concerning any action taken by the regulator. On one hand, the new legislation will certainly make the sector more robust, due to the higher penalties for recklessness. However, the range of things requiring CBN approval may stifle growth, and make banks slower to respond to changes in the banking industry and Nigerian economy.

The BOFIA 2020 Act provides opportunities for Fintech investors to support meaningful innovation in financial services that improves the lives of people. Generally, certain aspects of the Act will be advantageous to local Fintechs, partly because a slight barrier was incorporated to ensure foreign Fintechs localise their operations, giving a degree of protection to home-grown players, and also because the CBN’s powers have been broadened, to the extent of having to sanction even some of the most rudimentary moves by banks.

Furthermore, the Companies and Allied Matters Act, 2020 introduces some new provisions for the purpose of entrenching the ease of doing business in Nigeria and to ensure that the practice of business entities meets international standards and modern corporate governance principles. The new provisions will indeed improve the management and productivity of Nigerian businesses in the coming years.

Are you noticing any trends in industry-specific litigation?

As a result of the numerous problems in resolving international commercial disputes through litigation in domestic courts, in the last few years, international arbitration has grown to become the preferred dispute resolution mechanism for disputes arising from international contracts and investments agreements. In particular, international arbitration has been used to resolve an increasing number of technology and IP disputes. In order to keep up with the explosion of technology investments overseas, companies have spent considerable time drafting arbitration clauses to protect the confidentiality and proprietary nature of the technology and IP they share with foreign partners, manufacturers, and distributors.

Financial market pressures are forcing companies to rely more heavily on ADR mechanisms in an attempt to limit litigation exposure while expanding business interests globally. Companies have become more sophisticated in utilising international arbitration, particularly in emerging markets. This additional corporate sophistication has provided a suitable ground for accelerated competition among various arbitration institutions.

This has led to the development of a variety of driving trends in international arbitration, including new expectations of parties to arbitrations and new competition-driven features offered by international arbitration institutions. Companies choose international arbitration over pursuing judgment in domestic courts for a variety of reasons such as the elimination of perceived bias by domestic courts.

However, a primary and perhaps underappreciated advantage is the flexibility offered by international arbitration. Parties can choose the applicable law, the seat of arbitration, the arbitration institution, the arbitrators, the jurisdictional scope, and the general procedure and conduct of the arbitration, all of which can provide efficiency advantages over domestic courts as well as important legal and tactical advantages customized to the subject matter of the dispute.

A majority of parties who have been involved in international arbitration in the past, however, believe that any negative impact of choosing a particular governing law can be limited by carefully drafting either the original contract or a subsequent agreement to enter into arbitrations with this in mind, businesses can draft an arbitration clause that allows for negotiation of the choice of law provision in order to gain contractual advantages elsewhere in a particular agreement. This flexibility, therefore, increases stability and predictability when resolving disputes internationally.

Have there been any noteworthy case studies or examples of new case law precedent in the past year?

Enforcement of money judgment in Nigeria is regulated by the provisions of the Sheriffs and Civil Process Act, CAP S LFN 2004 (“the SCPA”) and the Judgments Enforcement Rules, a subsidiary legislation to the SCPA. The SCPA sets out, amongst other things, the various methods by which successful litigants may enforce money judgments. These are by writ of fieri facias, (“writ of fifa”) garnishee proceedings, a charging order, a writ of sequestration or an order of committal on judgment debtor summons. However, writ of fifa and garnishee proceedings are the most commonly used method.

One major obstacle often faced by judgment creditors seeking to enforce judgments against governments and their agencies is the requirement under the SCPA that a judgment creditor must obtain consent of the Attorney General of the Federation or Attorney General of a State as the case may be, before such judgments can be enforced by garnishee proceedings.

Interestingly, in CBN v Interstella Communications Ltd (2017) All FWLR (Pt 930) 442, the court provided some clarification on the requirement for the consent of the Attorney General. The court stated that the rationale behind this decision is that seeking the Attorney General’s consent is to avoid any embarrassment to the government that may arise from making attachment orders against public funds in the custody of a public officer which has been appropriated for a purpose without notice to the government.

This means a judgment creditor does not require the consent of the Attorney General to attach and secure private funds in the hand of a public officer. It is the owner of the funds that determines whether the holder of the funds is a public officer and not the status of the person who is in custody of the funds.

Looking beyond COVID-19, how is the current litigation & dispute resolution landscape comprised in your jurisdiction?

The year 2020 was undoubtedly a challenging year for many businesses and individuals. The pandemic made parties to a dispute more interested in employing ADR mechanisms to resolve their disputes.

Mediation involves the appointment of a neutral middleman to facilitate a discussion between the parties and their legal representatives. It offers parties the chance to put their respective positions privately to each other in a confidential and conciliatory manner away from the public, so that the mediator can try to settle the dispute. Often, the mediator has a more specialist background befitting of the technical dispute than a Judge at conventional courts.

Parties are bound by the Civil Procedure Rules (“CPR”) to consider taking part in ADR as a way of resolving a dispute and this obligation continues even after court proceedings have begun. This is why mediation is offered at the Multi-door Court House attached to some courts in Nigeria. The social distance protocol occasioned by the pandemic has led both litigation and ADR mechanism practitioners to consider virtual proceedings as a veritable platform to conduct hearings to meet the end of justice.

Virtual mediation will become the mainstay of resolving disputes even when things return to normal. This is because virtual mediations have led to improved efficiencies and prevents parties from needing to travel long hours to attend proceedings. This reduces stress and anxiety for participants. Whilst there was a general reluctance to engage in anything “virtual” in the pre-COVID era, there will be a marked change in how dispute resolution is dealt with in a post-COVID world.

How do judicial shortages pose a threat to the court system?

Lack of or inadequate infrastructures such as deteriorating and ill-equipped physical facilities in some courts severely undermine fair and speedy administration of justice in Nigeria. Justice can hardly be speedy when Judges lack adequate facilities to enable them to function effectively and efficiently. In most cases, the court facilities are overcrowded, badly equipped, and under-funded.

Some litigants do not understand English, the language of the court in Nigeria. Most courts have few interpreters to interpret court proceedings to the litigants. In some cases the interpreters are poorly trained. Court libraries are inadequate. There are few functional computers, photocopiers, or other modern equipment. Judges may even have to supply their own paper and pen to record proceedings in longhand. If litigants need a transcript of proceedings, they would have to pay for the transcript themselves. This encourages corruption which impugns the justice system in many ways.

Also, records of court proceedings and judgments are not stored in satisfactory conditions. This makes them susceptible to damage or intentional destruction by unscrupulous court staff. Absence of modern facilities provides an enabling environment for corrupt and unethical court staff to tamper with evidence and even court records.

Parties are limited in the kinds of technological and visual aids available throughout litigation. The courtrooms are not equipped to handle audio, slide and other visual presentations that assist fact-finding in understanding a case in order to reach a just decision. Where a litigant is unable to present technical evidence because of inadequate infrastructure, he is significantly disadvantaged and left to suffer his fate.

Also, inadequate facilities, especially erratic power supply, contribute to delays as court proceedings are often interrupted or adjourned due to power outages. All these erode public confidence in the court system. This is why the Chief Judge of the 36 states and the Chief Justice of the Federation have taken various steps and made practice directions to address these anomalies in Nigeria’s judicial system.

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