THE CHARTERED INSTITUTE OF THE CHARTERED INSTITUTE OF ARBITRATORS, NIGERIA.ARBITRATORS, NIGERIA.

NON LAWYERS IN ARBITRATION: A SUCCESS STORY

By

Engr. (Chief) Olumuyiwa A. Ajibola FNSE, FAEng.

(Past President, NSE 2010/2011)

4th November, 2015

INTRODUCTIONINTRODUCTION

Arbitration has been used in the construction industry for years because of the need to resolve disputes speedily so as to save time, cost and possibly the project. Furthermore, professionals within the industry act as arbitrators due to their specialist knowledge. In fact, several first generation ‘arbitration lawyers’ were trained by Quantity Surveyors.

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTSCONSTRUCTION CONTRACTSThe inflow of foreign investments into Nigeria and the government’s privatization initiative have generated a flurry of construction activities. Consequently, the scope of construction contracts has been expanding. We now have new concepts such as Design and Build, Build Operate and Transfer (BOT); Contracts with procurement terms, in addition to the ‘old’:

Unit price ContractLump sum Contract Cost plus Contract Incentive ContractsPercentage of construction ContractsTurnkey a.k.a. Engineering, Procurement and Construction

A typical Construction Contract would include the following dramatis personae, all of whom are potential participants in any arbitral proceedings.

The Employer The Architect for Building Projects or the Engineer for Civil Engineering ProjectsCivil/Structural EngineerQuantity SurveyorMechanical/Electrical Engineer Main ContractorSub Contractor

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTS (Contd.)CONSTRUCTION CONTRACTS (Contd.)

These dramatis personae are in fact parties to at least three (3) contracts:

The Employer has a contract with its Consultant, either Architect or the Engineer depending on the type of project The Employer has a contract with the Main Contractor The Main Contractor will sign a contract with the Sub Contractor

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTS (Contd.)CONSTRUCTION CONTRACTS (Contd.)

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTS (Contd.)CONSTRUCTION CONTRACTS (Contd.)

•The usual practice in the Construction Industry is to adopt /adapt Standard Form Contracts.

•The Royal Institute of British Architects (RIBA), the Institution of Civil Engineers (ICE UK)-NEC 3, the International Federation of Consulting Engineers (FIDIC); all have general conditions of contract which are products of the past experiences of the players in the Industry.

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTS (Contd.)CONSTRUCTION CONTRACTS (Contd.)

FIDIC’s Standard Forms of Contracts:

FIDIC Conditions of Contract for Plant, Design and Build -The Yellow Book

FIDIC Conditions of Contract for Design, Build and Operate (DOB) Projects

FIDIC Short Form of Contract -The Green Book FIDIC Conditions of Contract for EPC/Turnkey Projects. The

Silver Book FIDIC Conditions of Sub-contract for Construction for Building

and Engineering Works designed by the Employer FIDIC Conditions of Contract for Construction -The Red Book

OVERVIEW OF THE STRUCTURE OF OVERVIEW OF THE STRUCTURE OF CONSTRUCTION CONTRACTS (Contd.)CONSTRUCTION CONTRACTS (Contd.)

“It is not unusual that disputes may arise among parties to various contract agreements arising from the Ministry’s development initiatives. It is my belief that arbitration will be handy in the resolution of such disputes” (Mr. George Ossi, Permanent Secretary, Federal Ministry of Lands, Housing and Urban Development, Guardian Newspaper, June 29 2015)

DISPUTESDISPUTES WITHIN THEWITHIN THECONSTRUCTION INDUSTRY CONSTRUCTION INDUSTRY

From the structure of Construction Contracts, the risk of disputes arising is relatively high.

The nature and timing of the disputes vary … some occur before, during and even long after the project has been completed and handed over

The construction industry recognizes a post construction ‘defects liability period’.

Types of disputes that can arise from a typical construction contract:

Technical, Contractual Combination of both

DISPUTESDISPUTES WITHIN THEWITHIN THECONSTRUCTION INDUSTRY (Contd.)CONSTRUCTION INDUSTRY (Contd.)

General areas of disputes :

• Quality; compliance with design/specification; quality of materials and workmanship

• Costs; variation in quantities due to site conditions, specifications may change, variation of design, fluctuation in material prices, agreeing the real cost of the project

• Time /Delay; slip in project schedule, delay in payment of due invoices, these are threats to the delivery of the project.

• Subcontractor’s performance/suppliers of specialized items

• Disputes as to consultants’ instructions to the main contractor and /or instructions given to the sub contractor by the main contractor.

HOW WERE THESE DISPUTES RESOLVED HOW WERE THESE DISPUTES RESOLVED BY NON LAWYERS? BY NON LAWYERS?

i. The Industry depended on the integrity and experience of the professionals, as embedded in their stringent professional training.

ii. Technical dispute - could be resolved on the site in order to avoid delay.

iii. Hybrid (partly technical, partly contractual)- the parties would accept the decision of the experienced Consultant or very Senior Engineer.

iv. Practical commercial decisions were taken within a reasonable period of time and with relatively simple proceedings.

HOW WERE THESE DISPUTES RESOLVED HOW WERE THESE DISPUTES RESOLVED BY NON LAWYERS?(Contd.)BY NON LAWYERS?(Contd.)

v. Standard form of contracts adopted by the parties would include a dispute resolution in an Arbitration Clause, which would usually refer the matter to an experienced and respected Member of the Industry appointed by the President of the Nigerian Institute of Architects, the Nigerian Institute of Quantity Surveyors or the Nigerian Society of Engineers here in Nigeria in an arbitration.

• RIBA Standard Form Contract: Clause 35 Clause 35.1 Clause 35.2

• Dispute Resolution under FIDIC General Conditions of Contract

HOW WERE THESE DISPUTES RESOLVED HOW WERE THESE DISPUTES RESOLVED BY LAWYERS AND NON LAWYERS? BY LAWYERS AND NON LAWYERS?

As the industry expanded and contracts became more complex, knowledge of at least the rudiments of arbitration law became a prerequisite for the non-lawyer arbitrator.

Hence non-lawyers attended courses organized by institutions or Counsel was appointed to guide them during arbitral proceedings. The rationale was that such guidance would improve the decisions of the non-lawyer arbitrator.

The non-technical aspects of construction disputes cannot be wished away and they have become important enough for the technical arbitrator to seek legal advice in order to render a reasoned award that would be difficult to set aside.

DEFINITION OF ARBITRATION DEFINITION OF ARBITRATION

Arbitration has been described as

“a procedure for the settlement of dispute under which the parties agree to be bound by the decision of an arbitrator whose decision is in general final and legally binding on both parties. The process derives its force primarily from the agreement of the parties and in addition from the state as supervisor and enforcer of the legal process” (Law and Practice of Arbitration and Conciliation in Nigeria, Orojo &Ajomo)

A Typical Modern Arbitration SessionA Typical Modern Arbitration Session

A Typical Modern Court SessionA Typical Modern Court Session

The Arbitration and Conciliation Act The Arbitration and Conciliation Act CAP A18, LFN 2004. CAP A18, LFN 2004.

In Nigeria the relevant law is the Arbitration and Conciliation Act CAP A18, LFN 2004. The Act states the prerequisites of a valid arbitration agreement:

It must be in writingThe arbitration agreement must state the place where the arbitration is to take placeIt must state the law applicableIt must stipulate the number of, and the method of appointing the arbitrators.

I was appointed by the president of the Nigerian Society of Engineers in 2006 to preside over an arbitral matter involving a Mobile Telephone Network Operator and a Contractor. The Contractor was employed to build a number of base stations for the network without specification from the Employer.

The claimant completed some of the stations and claimed they were put to use by the Respondent. A dispute arose as to whether the base stations were functional at the Unilateral Termination of the Contract by the Respondent, whether the Respondent was justified to assert that it had used the money due to the Claimant to undertake the remedial works required to make the base stations functional.

The dispute was hybrid… the Counsel to the Tribunal assisted me with the contractual part and I determined the technical aspect.

Justice Lateef Lawal –Akapo gave an “order of specific performance for the amounts contained in the final award dated June 27 2007 and additional award dated August 24 2007. The order was made under the hand of Olumuyiwa Ajibola…”

An example of a success story … non lawyer and lawyer collaboration!

NOTABLE EXAMPLENOTABLE EXAMPLE

NON-LAWYERS IN NON-LAWYERS IN ARBITRATION ARBITRATION I will now return to the title of this paper Non LAWYERS IN ARBITRATION- A SUCCESS STORY.

One wonders whether this is a statement or a question or is it a combination of both! Any evaluation of the success or otherwise of arbitration in any industry has to be evaluated against the purpose of arbitration generally.

The initial appeal of arbitration to all and sundry was that it was a simpler, quicker and cheaper alternative to litigation. It was successful in that commercial decisions could be made quickly and cheaply. The construction industry enjoyed this success.

However, today’s arbitral process has become expensive and time consuming. In 2006, the Queen Mary Survey on Arbitration listed expense and time as the disadvantages of arbitration.

It is lamentable that arbitration has strayed far from its origins. It has been argued that its early success has been eroded by “lawyers rushing in where angels fear to tread”.

The participation of lawyers has resulted in a plethora of detailed laws, rules, guidelines, pleadings, written submissions, adjournments that arbitration has almost become litigation.

This corrosion has spilled over into the construction industry – the new dispute resolution clause in the FIDIC Conditions of Contract (Clause 20) has turned what used to be a speedy and simple procedure for handling disputes (Clause 67) into a multi-tier process that a party can use to frustrate speedy resolution of the dispute.

The previous procedure involved the Consultant Engineer acting as an impartial arbiter on the dispute and his decision was binding on the parties. This procedure worked successfully until lawyers and the World Bank began to question whether The Engineer (as a party paid by the employer) could realistically be impartial!

My submission (see I am using legal terms) is that arbitration has been used successfully in the construction industry in as much as decisions were taken quickly and inexpensively by experienced professionals within the industry who had sound knowledge of the construction process and technology. This saved time, costs and the project.

NON-LAWYERS IN ARBITRATION NON-LAWYERS IN ARBITRATION (Contd.) (Contd.)

The other threats to the success of arbitration in the construction industry come from the limitations imposed by the Arbitration and Conciliation Act CAP 18 LFN 2004 and by the very nature of arbitration itself. Arbitration operates by and with the consent of the parties.

However, a typical construction project involves several parties performing diverse roles. There is no provision within the Act for consolidation of different arbitral proceedings arising from the same contract- this can only be done with the consent of the parties and with the same arbitrator(s) presiding – a party could refuse to agree.

Furthermore, contractual relationships within the project are rather more complex than the current law accommodates. For instance there is no privity of contract between the Employer and the sub contractor working on the project.

NON-LAWYERS IN ARBITRATION NON-LAWYERS IN ARBITRATION (Contd.) (Contd.)

CONCLUSIONIn conclusion, Distinguished Ladies and Gentlemen, being a chip of the old school myself, I tend to prefer seeing the Art of Arbitration remaining in the domain of non lawyers i.e., restricted to the professionals operating in the industry where the dispute has arisen, since each industry operates with its knowledge base, interrelationship culture and ethics.

Nevertheless, my latter days experience has taught me that due to the fear of each party not to lose its case at the Tribunal, recourse to legal representation is fast gaining grounds. This undoubtedly adds a measure of legality to the proceedings.

However, with the involvement of competent legal counsel guiding the Arbitrator, the proceedings could become a success story. The non lawyer in my opinion remains the conscience of the Profession or Industry he or she is representing for the resolution of the dispute, while the lawyer ensures that the proceedings would stand the test of (legal) time as the saying goes, making the combination a “win –win success story.”

‘I rest my case’, if I may use that terminology!

THANK YOU FOR YOUR ATTENTION!