BusinessDay 14 Dec 2017

Thursday 14 December 2017
C002D5556
BUSINESS DAY
25
INDUSTRYFILE
Experts call for more international commercial arbitration in Africa
Local and international experts in
arbitration have said that Nigeria and
other African countries must do all
that is necessary to make the region
Arbitration-Friendly, as against ‘appearing
to be Arbitration-Friendly’.
Speaking at a Roundtable in Lagos recently,
Professor Emanuel Gillard, Head of International
Arbitration at Shearman & Sterling LLP and
others stated that there was need to ensure efficient
laws and adequate infrastructure for Arbitration
Centres to boost the level international
commercial arbitration on the continent.
He said, “There are lots of African parties
involved in arbitration globally, yet a good
number of these are conducted outside the region.
I would like to see this position change.”
Gillard who spoke exclusively to Business-
Day after the event said, “I think that at the moment
no country has emerged as an originating
centre more than the northern part of Africa. A
good example is the Cairo Regional Centre For
International Commercial Arbitration, which
has been able to handle a decent number of
arbitrations.”
He further disclosed that the jury was still out
as to what country has the most regional or even
global arbitration cases in Sub-Sahara Africa.
“Because to be recognised for this, you will
need good infrastructure. Efficient arbitration
Centres require great infrastructure and as I
said earlier during the sessions, Nigeria does
have a wonderful arbitration centre here – this
includes, great locations, venue and rooms for
conducting arbitration in each of this room.
There is however need to effectively market
the centre to prospective users,” Gillard said.
“An arbitrator can sit here in this building
and apply the laws of whatever countries the
PERSPECTIVE With AYODELE ONI
In exercising some of the powers conferred
on him by the Electric Power
Sector Reform Act 2005 (“EPSRA”),
the Minister of Power, Mr. Babatunde
Fashola declared four (4) categories of
customers eligible to buy power directly from
the generation companies (“GenCos”) and
other licensees, other than the electricity distribution
companies(“DisCos”). By virtue of
this policy and the Regulations subsequently
issued by the Nigerian Electricity Regulatory
Commission (“NERC”), the entities who qualify
as eligible customers are authorised to source
power directly from GenCos, thereby skipping
the typical intermediary role of the discos in the
power sector value chain. Although, the DisCos
still do have crucial roles to play.
The inception of this policy has triggered
reviews for and against the current regime on
the side of the eligible customers, the DisCos and
the GenCos alike. Contrary to the backslash the
policy has received from the DisCos, the writer
is of the view that the Nigerian Electricity Supply
Industry (“NESI”) stands to derive significant
benefits from its operation. This article therefore
seeks to evaluate the effect of the policy and the
subsequent guidelines in the development and
improvement of the NESI and to express a view
as to whether the DisCos can validly declare
force majeure merely because of the stae of
policy and law on eligibility.
parties have chosen – such as English law,
French law, Chinese law or any other arbitration
laws.
He reiterated the need for legislations that
are not only arbitration-friendly but attractive
to foreign investors; and also enforceable. Gillard
frowned at situations where parties who
do business within a jurisdiction (i.e. Africa),
ultimately chose other jurisdictions as seats of
arbitration, stating that this should be discouraged
with investment-friendly and arbitrationfriendly
laws and policies.
Gillard continued, “Judges also need to
realise that arbitration is an important part of
economic activity and frankly one of the most
efficient ways to resolving disputes, commercial
or otherwise. There is no competition between
the court and the arbitrators – as the court
maintains a supervisory role at the end of the
entire process. The old picture that portrays
competition between the court and arbitration
is outdated, which is why courts in countries
around the world now support arbitration.”
Speaking on the theme, ‘International Arbitration
in Nigeria: Current Practice Under The
New York Convention’, Funke Adekoya, SAN
who was a speaker at the event disclosed that
Article III of the New York Convention allows
the country of enforcement to establish rules
of procedure for recognition and enforcement
of Convention awards.; noting that, Nigerian
courts take procedural requirements seriously;
as it is a common position of the courts that
procedural rules aid the proceedings of the
court and are meant to be obeyed.
“It is therefore important that a party requiring
the recognition and enforcement of a foreign
arbitral award to be aware of the national
procedural rules that will apply to its award.”
Adewale Atake, Dispute Resolution Partner
at Templars in his presentation, stated that
Nigerian courts have not fared badly in the
development of International Commercial
Arbitration.
According to him, a calm review of the
provisions of Sections 4(1) and 5 of the Arbitration
and Conciliation Act (ACA) reveals
that the problem is more of a legislative than
a judicial one.
“If Nigeria must be regarded as pro-arbitration
comparative to other more liberal jurisdictions
like France, there is need to make some
legislative reforms to the ACA. Particularly, Section
5 (2), which places the burden on the party
seeking to enforce the arbitration agreement
to demonstrate its willingness to arbitrate the
dispute, before the court can refer the parties
to arbitration, should be amended.
“In my view, the burden should be statutorily
placed on the party who has rushed to
court in breach of the arbitration agreement
to demonstrate why he should not be held
bound by the arbitration agreement he freely
entered into.
Atake stated further that such an approach,
would be more consistent with Article II (3) of
the Convention which places an obligation on
courts of contracting states to enforce arbitration
agreements and refer parties to arbitration,
save where the agreement is “null and void,
inoperative or in capable of being performed.
The eligible customer regime- can the distribution
companies validly declare force majeure?
Legislative & Policy Background
Section 100 of the EPSRA defines an eligible
customer as “a customer that is eligible, pursu-
ant to a directive or directives issued by the Minister
under section 27, to purchase power from
a licensee other than a distribution licensee”.
The minister invoked the eligible customer
regime, following the declaration of the Eligible
Customer Status “ECS” for the electricity market,
pursuant to Section 27 of the EPSRA. This status
permits certain classes of consumers of power to
approach power generation companies directly
for the purpose of purchasing power. To give further
clarity to the EPSRA and the declaration of
eligibility by the minister, NERC recently issued
a comprehensive guideline on the procedure
and operation of the eligibility regime. Under
the guidelines, the classes of customers that may
apply for an eligible customer status include:
A customer or group of end-use customers
registered with NERC whose consumption of
electricity is no less than 2MWhr/h. The endusers
under this category are also connected to
a metered 11kV or 33kV delivery point on the
distribution network, subject to a distribution
use of system agreement for the delivery of
electrical energy;
A customer or a group of end-use customers
connected to a metered 132kV or 330kV delivery
point on the transmission network under a transmission
use of system agreement;
A customer or a group of end-use customers,
whose consumption is in excess of 2MWhr/h
over the course of one month, that is connected
directly to a metered 33kV delivery point on the
transmission network under a transmission use
of system agreement, and has entered into a
bilateral agreement for the construction, installation
and operation of the distribution system
used to connect the customer to the 33KV delivery
point, with the distribution licensee licensed
to operate in the location where the customer
and the 33kv delivery point is located; and
A customer or a group of end-use customers
whose consumption is more than 2MWhr/h over
a period of one month and directly connected to
the metering facility of a Generating company,
and has entered into a bilateral agreement for the
construction and operation of a distribution line
with the distribution licensee licensed to operate
in the location.
The Force Majeure Argument
It would appear that some of the electricity
distribution companies (DisCos), or indeed,
their Investors, relying on Clause 7 of the Performance
Agreements, have begun to declare
Force Majeure pursuant to the Performance
Agreements. This is in reaction to the minister of
power’s declaration of the criteria for customer
eligibility and the subsequent issuance of Regulations
in that respect. The only force majeure
head under the Performance Agreement that
the declaration of eligibility and the issuance
of the Regulations can potentially fall under, is
Political Force Majeure under Clause 7.4.4 of the
Performance Agreements.
Specifically, Clause 7.4.4 stipulates that Political
Force Majeure includes any Change in Law
or Change in Tax (as defined in the Performance
Agreement) that renders any material obligation
of Bureau of Public Enterprise (the “BPE”) under
the Performance Agreement unenforceable,
invalid or void; makes it unlawful for the DisCos
or Investors to make or receive any material
payment, to perform any material obligation or
to enjoy or enforce any material right under any
consents or the Performance Agreement; materially
restricts or limits on the ability of the DisCos
or Investors to repatriate any dividends or return
of capital, which remain in place for more than
180 days; or causes the DisCoS to incur any taxes
materially in excess of those the Company would
have incurred under the laws in effect on the date
of the Performance Agreement.
The declaration of eligibility and the subsequent
issuance of the Regulations neither
constitute Change in Law nor Change in Tax as
specified in the Performance Agreements. Rather,
the declaration has only created the much
needed competition in the Nigerian electricity
supply industry, necessary to drive dedicated
performance and ensure stable power supply.
Continues on page 26