Nigeria: Litigation Practice Area Review 2016
By Babatunde Irukera, SimmonsCooper Partners
In recent years there has been an unprecedented increase in litigation involving companies with respect to labour disputes. The expansion of the jurisdiction of the National Industrial Court by Nigeria’s Constitution and its affirmation by Nigeria’s Court of Appeal has seen more granular attention to all aspects of labour relations. Significantly, the success of Nigeria’s privatisation and commercialisation continues to be subject of legal controversy with varying outcomes in contractual disputes in different courts. In what can be considered a big triumph for intellectual property, the Court of Appeal decided that there is a presumption that the protection afforded well-known marks specified under TRIPS would be upheld in Nigeria. In bringing foreign defendants within Nigeria’s jurisdiction, the Court of Appeal also decided that the applicable standard of review in requesting leave to serve is to show the existence of a good cause of action.
In addition, there was a marked increase in regulatory investigations and hearings. The introduction of comprehensive Economic and Consumer Protection Regulations in civil aviation shows great potential for litigation and or regulatory action against companies in this sector. With the greater number of commercial transactions in Nigeria occurring in Lagos, the introduction of a new set of High Court Civil Procedure Rules with a bias for alternative dispute resolution will have an impact on the direction of commercial litigation in Nigeria.
Generally, labour and employment disputes and contract litigation continued to occupy the top rung of Nigerian commercial litigation, a trend that is true regardless of company size.
Legal Framework For Resolving Commercial Disputes
Nigeria’s legal system has striking similarities with the English legal system and those of other common law jurisdictions. This is mainly a result of the colonial history. Laws that were in force in England as at 1 January 1900 are applicable in Nigeria as modified by local statutes. Consequently, Nigerian law on subjects such as intellectual property and business associations reflects features of equivalent English statutes. Essentially however, Nigerian law is derived from various sources which include the Constitution of the Federal Republic of Nigeria 1999, legislation, the statutes of general application (ie, English law), case law/judicial precedent, customary law developed from traditional norms and practices, and shariah law applicable in some northern states.
The Nigerian court system consists of the Supreme Court of Nigeria, the Court of Appeal, the Federal High Court and State High Courts, the National Industrial Court, the Customary Court of Appeal of States, the Sharia Court of Appeal of States, the Magistrate/District Courts and other specialised courts and tribunals.
Under the Constitution, the Federal High Court has jurisdiction in matters connected with the revenue of the Government of the Federation, admiralty, civil aviation, banking, foreign exchange and other currency and monetary or fiscal matters. Each of the 36 states of the federation and the Federal Capital Territory also has a High Court that has jurisdiction to hear and determine both civil and criminal proceedings in all matters not within the exclusive jurisdiction of other courts. Most contractual disputes would originate at the High Court. By a 2011 amendment to the Constitution, the National Industrial Court (NIC) previously established under an Act of the National Assembly now has exclusive jurisdiction in employment disputes
In addition to the courts established under the Constitution, the federal or state legislature has jurisdiction to create other courts or tribunals. An example of a specialised court created under this power is the Investments and Securities Tribunal (IST). The IST exercises jurisdiction in securities-related matters, including disputes between issuers and investors and the Securities and Exchange Commission. There are also magistrates’ courts created by state legislation with jurisdiction in civil and criminal matters specified in the relevant legislation.
Appeals lie from the courts of first instance – usually the High Courts (Federal, State and Federal Capital Territory) and the NIC – to the Court of Appeal and thereafter to the Supreme Court, which is the apex court in Nigeria. Judgments capable of execution such as for specific performance, damages and injunctions can be enforced through the issue of a writ of execution; garnishee proceedings; or even committal proceedings where there is unabated disobedience. Any judgment of a court in one state is enforceable in any state of the federation upon registration of the judgment in the enforcing state’s court. Foreign judgments can be enforced in Nigeria upon registration on the basis of reciprocity provided under the Foreign Judgment (Reciprocal Enforcements) Act. This is based on the principle of reciprocity of treatment. An application to register a foreign judgment must be made within six years of the date of the judgment or any appeal in relation to that judgment.
Evidence and Standard of Proof
Generally, the law does not prescribe an unattainably high evidentiary standard for a claimant in civil proceedings. The burden of proving any fact is on the party who asserts the existence of the fact. The court determines the case on the balance of probabilities, that is, on the weight of the totality of evidence adduced by each party in the course of the proceedings.
The law recognises the rights and liability of a foreign entity to sue or be sued in its name or in the name of its agent within jurisdiction. Generally therefore, Nigerian courts assume jurisdiction in matters instituted by or against foreign entities provided the underlying cause of action has sufficient minimum contact with Nigeria. Examples include where wrongful conduct is committed within the jurisdiction; and cases of breach of contracts entered or meant to be performed in Nigeria or where the potential defendant is resident within the jurisdiction.
Except when a foreign entity is in a position where it could be regarded as having its office within the territory of Nigerian courts, extraterritorial service of judicial processes on such party is permissible only with the Court’s permission.
Developments In Legal And Procedural Framework For Commercial Litigation
The Courts’ Civil Procedure Rules (CPR) regulate commercial cases occurring in the High Courts. Since the introduction of frontloading in 2004 in the Lagos CPR, other states have adopted a similar approach to presenting new cases. This is equally obtainable in the Federal High Court, the National Industrial Court, as well as special tribunals like the Tax Appeal Tribunal and the Investment and Securities Tribunal. This has significantly shortened the time span of litigation in these courts and tribunals.
In Lagos, the CPR that commenced on 1 January 2013, provide for mandatory pre-case alternative dispute resolution mechanisms. It is mandatory to attempt settlement before commencement of action by filing a pre-action protocol form along with the originating processes. The Lagos CPR also make provisions to ensure diligent prosecution or defence of cases ranging from imposing stiffer cost for default to compelling the service of process within five days of filing.
In the sphere of employment and industrial disputes, almost every conceivable employment and trade issue has been brought within the exclusive jurisdiction of the NIC by virtue of an amendment to the Constitution. The litigation process has been significantly shortened as civil appeals only lie to the Court of Appeal in fundamental human rights claims and terminate there.
Tax disputes have become increasingly important since the enactment of the Federal Inland Revenue Service (Establishment) Act. The Tax Appeal Tribunal was established to adjudicate disputes and controversies arising out of the various tax laws. Securities disputes originate at the Investment and Securities Tribunal. Following the government’s bail-out of banks and the establishment of the Asset Management Corporation of Nigeria (AMCON), the recovery of toxic assets has become vital. The chief judge of the Federal High Court issued the AMCON Practice Direction of 2013 to facilitate quick and efficient handling of AMCON debt recovery cases. This includes ADR mechanism and departure from the Federal High Court Rules and other time-saving measures.
Notable Disputes and Decisions
The enforceability of contracts, especially against the government, has been the focus of some high-profile cases. In the civil aviation sector, for instance, the Federal Airports Authority of Nigeria has defended suits relating to its termination of some concessions. Nigeria’s Supreme Court nullified a concluded sale of the government’s interest because of irregularities in the bidding process in Aluminum Smelting Company of Nigeria (ALSCON). Also, in recent years, Famfa Oil Limited successfully challenged the expropriation of a large portion of its interest in an oil asset – OML 127 – by the NNPC.
In the sphere of employment disputes, the expanded jurisdiction of the NIC has been tested at appellate level. In a decision involving a former Human Resources executive of Coca-Cola Nigeria, the Court of Appeal, unanimously affirmed the exclusive jurisdiction of the NIC in all employment disputes. Additionally, the Court of Appeal has held that the standard for leave to serve foreign defendants is to show the existence of a cause of action. It rejected the argument that a good arguable case standard needed to be demonstrated by a claimant before a court could allow service on a foreign defendant.
The cashless policy initiative of the Central Bank of Nigeria is a grey area for Nigeria’s legal system. The resolution of disputes for these transactions would continue to generate debate. The introduction of electronic evidence in Nigeria’s Evidence Act could not have come at a better time.
The power sector reform and sale process could be a source of another round of legal challenges. The introduction of the Transfer Pricing Regulations is likely to be a hotly contested issue for tax litigation. Because of the almost colossal impact of the NIC, corporations would be more circumspect in the frequency and quality of legal advice and support involved in documenting their workforce.