“JUDICIAL REVIEW OF ARBITRAL AWARDS”
C.A. Candide-Johnson Esq., S.A.N., FCI Arb

The origin and object of arbitration is the commercial necessity for quick, confidential, autonomous and flexible dispute resolution, without the inherent complexities and technicalities associated with court proceedings. In a jurisdiction where litigation is notoriously inefficient and determinations often incompetent, the value of arbitration in decongesting the national courts is also critical. These objects are lost unless some degree of finality can be guaranteed for arbitral awards.

From time immemorial merchants did what they could to exclude the Common law from their disputes, by resorting to voluntary arbitration.  This right was built on the fundamental principle of freedom of contract. The rationale being: “if parties of full capacity agree to settle their dispute privately, in matters in which they are more knowledgeable than the judges, what business has the judges to usurp their freedom and responsibility?” As late as the end of the 18th century, arbitration was regarded as final and not subject to the review of the courts. By the turn of the 19th century "the principle of judicial supervision clearly emerged". Unfortunately the 19th century courts were as handicapped as 21st century Nigerian courts to deliver a fair and efficient product. Lord Parker identified two principal reasons as "the natural desire of the courts to keep all adjudications within their sphere", and "the fear of the growth of a new system of law". The soundest warrant was offered by Professor Schmitthof, who suggests that the true reason was the courts' concern that arbiters should strictly discharge their jurisdiction, because that must be presumed to have been the parties' intention. Lord Campbell’s explanation in Scott v Avery (1855 25 LJ Ex 308, 313) indicates that the earliest origins of judicial hostility to arbitration may have been more temporal.

"There was no disguising the fact that, as formerly, the emoluments of the judges depended mainly, or almost entirely, upon fees, and as they had no fixed salaries, there was great competition to get as much as possible of litigation into Westminster Hall, and a great scramble in Westminster Hall for the division of the spoil * * * [T]hey had great jealousy of arbitrations whereby Westminster Hall was robbed of those cases which came not into Kings Bench, nor the Common Pleas, nor the Exchequer. Therefore they said that the courts ought not to be ousted of their jurisdiction, and that it was contrary to the policy of the law to do so."

"The expertise of City of London arbitrators ... suggests that these considerations"  -  the application of "sound ideas of business, convenience and sense to the language of the contract"  -  "are best left to them and the proposition that ... a matter of law ... is better left to the courts is one the correctness of which is open on the record. If ... supervision of the courts is sometimes required, I cannot but think that, otherwise than in exceptional cases by leave, decision by the commercial judge should end the matter" (p.88).

In Kano State Urban Development Board -v- FANZ Limited (1986) Apkata JCA (ahtw) in the Court of Appeal, betrayed this unfriendly attitude when he referred to "foolhardy" references to arbitration and "rough and ready decisions" by arbitrators.

In the United States also, commentators agree that arbitration has been viewed by the judiciary with suspicion on the ground that it threatened to "erode judicial authority". In the 1915 maritime case of US Asphalt Refining v Trinidad Lake Petroleum (222 F 1006, 1008, SDNY 1915), English and United States precedent was cited by a federal court in New York to invalidate a charter party arbitration agreement subject to decision by laymen because, in part, "the legal mind must assign some reason in order to decide anything with spiritual quiet…"

Again in that jurisdiction, modern conditions have produced a strong public policy in favor of arbitration, especially in the commercial context where resolution of disputes may well depend more on custom and practice than on esoteric or complex legal analysis. Maritime arbitration is perhaps the best example of the success of private dispute resolution in a sophisticated commercial setting, and judicial decisions now uniformly recognize the huge benefit of such alternative dispute resolution. In Mitsubishi Motors v Soler, 473 US 626, 626-27, 1985), the US Supreme Court noted,

"We are well past the time when judicial suspicion…of the competence of arbitral tribunals inhibited the development of arbitration as an alternative means of dispute resolution".

"The very refinements and complexities of our court machinery often make it cumbersome and dilatory when applied to controversies involving simple issues of fact or law. This is especially true in the case when the issue of fact turns upon expert knowledge as to the nature or quality of merchandise or the damage consequent upon the failure to perform a contract for its delivery…which can be better determined by a layman having training and experience in a particular trade or business than by a judge and jury who have not had that training and experience."

1. The award was "procured by corruption, fraud or undue means".
2. "Evident partiality or corruption in the arbitrators, or either of them."
3. "The arbitrators were guilty of misconduct in refusing to postpone the hearing, upon sufficient cause shown, or in refusing to hear evidence pertinent and material to the controversy, or any other misbehavior by which the rights of any party have been prejudiced."
4. The "arbitrators exceeded their powers, or so imperfectly executed them that a mutual, final, and definite award upon the subject matter submitted was not made".

It is important to note, that unlike judicial proceedings where a trial judge's application of the law is generally fully reviewable by an appellate court, the FAA does not explicitly include, as a basis for vacating an award, the requirement that the arbitrators misapplied or ignored the law. Notwithstanding the philosophy of restrictive intervention manifested in statute, the courts in the United States have not uniformly been restrained. The judicial doctrine of "manifest disregard of the law" has survived over the years as a common law basis for attacking an award, even though the phrase "manifest disregard of the law" is not contained in the statute. The doctrine originated in the US Supreme Court's 1874 decision in US v Farragut (22 Wall 406). The arbitration agreement included a provision that "all questions of law" in dispute were to be "concluded" by the award. In its decision, the Supreme Court distinguished between an arbitrator's "findings of fact" and "concrete positions of law, unmixed with facts". It held that, like any lower court opinion, an arbitral award could be set aside for "manifest mistake of law" as well as for other reasons such as fraud or that the arbitrators had exceeded their power.  Manifest disregard of the law means that there is a well defined, explicit and clearly applicable law which the arbitrator knew yet either refused to apply it or disregarded it altogether.

In Wilko v Swan, (1953) the US Supreme Court relied on Farragut to strike down a stock purchase agreement requiring stockbroker misrepresentation claims to be arbitrated. The court held that the arbitration provision violated the Securities Act of 1933 because, under the FAA, "the power to vacate an arbitration award is limited", and Congress would never have intended to permit "waiver of judicial trial and review" of Securities Act claims. 

In 1989 that Court changed its mind. In Rodriguez v Shearson/American Express (490 US 484, 1989), the court held that agreements to arbitrate securities claims did not violate the Securities Act but were, instead, consistent with the court's "current strong endorsement of the federal statutes favoring this method [arbitration] of resolving disputes". In the interim, the Supreme Court had decided the 1985 case of Mitsubishi Motors v Solar Chrysler/Plymouth (473, US 630, 1985) involving the enforceability of arbitration agreements in the anti-trust and unfair competition context. The court upheld the validity of such agreements but noted that federal courts could refuse to enforce anti-trust arbitral awards that were "contrary to public policy". Justice Stevens dissented, echoing the judicial hostility of the past by describing arbitration as "despotic decision-making" which, though perhaps acceptable for "approximately correct resolution" of disputes in the commercial setting between private parties, was "simply unacceptable where every error [of law] might have devastating consequences for important businesses in our national economy and might undermine their ability to compete in world markets".

Yet, notwithstanding this knowledge and that the Arbitration & Conciliation Act 1998   (“The Act”) appears to limit judicial review, the proliferation of instances in which our lower courts have found it necessary to invoke this supervisory jurisdiction has given dangerous courage to unmeritorious losers about their chances for review.

Sections 29 (1) (a) and (b) of the Act impose time limitation on the invocation of the court’s jurisdiction to set aside an award. An aggrieved party must act within three months either from the date of the award or from the date a request for an additional award is disposed of by the tribunal. The main ground upon which the court may set aside an award is where there is proof of an ultra- vires exercise of jurisdiction. Section 30 of the Act provides that an award may be set aside if the arbitrator is guilty of misconduct, or where the arbitral proceedings, or award, have been improperly procured. In Taylor Woodrow Ltd. –v- Suddeutsche Etna-Werk Gmbh (1993) 24 NSCC (pt.1) 415 at 423, the Supreme Court of Nigeria, per Ogundare JSC outlined instances that will constitute misconduct and relied wholesale on a list supplied by Halsbury’s Laws of England.

It is an extensive “shopping list” for the looser but a limited one, nonetheless. It is open to the courts to set standards by which these instances will be available and signal whether their approach is liberal or restrictive. My personal impression is that without a strong and rational statement from the Supreme Court of Nigeria, increasingly very little restraint is being demonstrated by courts. This encourages mischievous challenges to awards and arbitration is becoming merely the first step in protracted litigation. This is neither desirable nor proper but reversing or controlling this trend requires uncommon understanding of business, a rare judicial courage and scarce lucidity of expression from the Nigerian bench.

The rules are strict and narrow, because the courts must treat a reference to arbitration as an agreement by the parties to leave for better or for worse, matters both of law and fact to the judgment of the arbitrator and to consider his award final unless there is something upon the face of it which is inconsistent. Therefore if the award is good on its face, neither party should be able to object either upon the law or the facts simply because the award is not in his favor, or that he is not bound by the award because he withdrew from the arbitration before the award was made. Commerce Assurance Ltd v Alli 1986 3 NWLR pt 29 at 407.

It is not misconduct to reach an erroneous decision whether his error is one of law or fact and whether or not his findings of fact are supported by evidence. Neither does a misconstruction of a clause in an agreement specifically referred for his decision amount to misconduct. Where the question is one of construction (which is a question of law) the arbitrator's decision cannot be set aside only because the court would itself have come to a different conclusion. An arbitrator's mistake of law is not a ground for setting aside an award. Leontaritis v Nig Textile Mills Ltd 1967 NCLR 114, but where inadmissible evidence goes to the root of the award it will be set aside. Pfizer Foods v Fowora 1973 NCLR 296. Where the arbitrator was erroneous as to the legal effect of an admissible document which is regular on the face of it, such error cannot be a ground for setting aside the award.  K.S.U.D.B. V F.A.N.Z. LTD. 1990 4 NWLR pt 142 p 42. Where it is impossible to say from what is shown on the face of the award what mistake if any, an arbitrator has made, or that he has tied himself down, on the face of the award with some special legal proposition which is unusual, the award will not be disturbed. Taylor Woodrow (Nig) Ltd. case (supra)

The appropriate standard of review of arbitral awards is one which preserves the autonomy of the forum chosen by the parties and minimizes judicial intervention.  This is consistent with the world-wide trend toward restricting the scope of judicial intervention in commercial arbitration.

It is necessary for any court that is called upon to review an award (being the product of voluntary submission and sanctified thereby) to keep in mind that the goal should be to balance the need for limited judicial review to ensure fairness and predictability in law-based awards with the utility and cost-efficiencies of final awards that are, in fact, "final".

This is the challenge for Nigerian courts. In the writer’s opinion, it is not sufficient to parrot without analysis or circumspection the recommendation in Halsbury's laws of England. In our circumstances and culture a more restricted right to intervene should be outlined in order to promote this valuable means of ADR.  Judicial response should be characterized by deference to the chosen forum, and parties ought to be compelled to abide by a system that they chose voluntarily and to be driven from the courts thereafter. It behooves the Supreme Court to identify the limited rational basis for judicial review and to make it clear that frivolous challenges will not be tolerated.