It is essential to note that the Nigerian gas sector is growing in a lot of relevant ways; in statute and in practice. It is foundational to the projected growth and significant in that it has placed Nigeria on a path of steady growth and international acclaim. The results of what is happening now may only be appreciated in years to come. The complexities in the gas sector can sometimes be overreaching. Globalization and trade has further opened up the world to new frontiers which affect not just the parties, but the economies of countries, the business standings of diverse stakeholders and in a broader concept, the quality of life of millions of people. Dispute, misunderstandings and conflicts in such circumstances are bound to happen and as such, the world evolved strategies to address those challenges.
The increasing need for timely, efficient and effective dispute resolution mechanism has allowed Arbitration, with its flexibility, confidentiality and cross border enforcement to evolve as a preferred choice for resolving gas disputes in the international community. It is a common fixture in gas contracts and it is generally agreed by practitioners as more practical, considerate to facts, evidence and the circumstances especially with a view of ensuring that business partners still continue to transact with each other with the assurances that they will not be enemies after the resolution of their disputes.
The world of gas arbitration is exciting but also not static. International Arbitration has expanded in scope, allowing for continuous innovation and trends to emerge, shaping how disputes are resolved and impacting the interests of all stakeholders with interest in the next set of law students in institutions, the environment and benefits. Technology development and advancement has imprinted itself also on gas arbitration. The element of neutrality has led to mass appreciation and adoption of international arbitration which has been used as a method of resolving disputes between states, individuals, and corporations in almost every international transaction involving commerce, investment. Arbitration can be national (domestic) or international, and in gas cases, arbitration can be triggered for price variations and interpretation of the entire contract.
In Nigeria, oil and gas deals have attracted significant interest being the lifeblood of the country’s economy. Conflicts, legislations and regulations have over the years laid the foundation for the evolution of what is currently applicable in the arbitration scene in Nigeria, and as a result of the global nature of gas deals and its intricacies, Nigeria has equally strived to catch up with applicable international standards by promoting arbitration as an integral dispute resolution method in gas transactions. With the swift changing and complex nature of gas transactions, the volatility in the price exchange, there is a need for arbitration to meet up with the realities.
- Technology’s transformative touch
It’s now almost cliché to say that technology is playing an increasingly important role in every human endeavor, but the extent that is achieved daily is what makes us all recognize the transformative touch of technology. The inculcation of technology by the International Chamber of Commerce in its arbitration proceedings have advanced the processes for fair, effective and efficient international arbitration. The essence of practicality is felt more in the variety of resources, including sample procedural language relating to technology tools and solutions bridging the language barrier, items to consider for virtual hearings and when choosing an online case management platform, and the report factoring in front loading the bulky documents necessary for trial.
Virtual hearings took a new direction after the COVID-19 pandemic, this unexpected development enabled hearings to be conducted digitally and remotely and sometimes in a hybrid session, with the parties choosing which is most suited for their unique circumstances or sometimes upon the recommendation of the arbitrator. In recent days, a lot of arbitration cases are held in different jurisdictions and countries, the urgency requirements often makes it more practical for emergency sessions to be held virtually thereby reducing travel time for parties and arbitrators, cost effective for clients and importantly speedy resolution of challenges facing transactions.
With improving computers are even likened to arbitrators in processing and communicating information, online reports, virtual hearings, e-filings of documents, and digital document management platforms have contributed significantly to the advancement of the use of technology in arbitration and the use of advanced software to enable arbitrators effectively analyze the volume of documents they receive. The idea of “Software as a fourth party” in the arbitration space has started catching up, with concerns reverberating about data privacy, security and if arbitrators will shirk their duties to software’s, it opens room for new reasons for conflict in the space, and the knowledge that such conflict will lead to growth. The fact however is that, all these have enabled us evolve, learn some more and grow in leaps and bounds. Arbitration processes in gas disputes have particularly benefitted from the streamlining processes and enhancing efficiency.
Blockchain, smart contracts and other emerging technologies are equally anticipated to impact significantly the future of gas arbitrations. These platforms encourage efficient sharing of necessary and verifiable documents in the sector, and enforcement of agreements with specificity. Artificial intelligence (AI) especially generative AI are increasingly playing a role in contributing to timeously analyzing the complexities of gas documents. Though taken with a lot of caution considering that it is still evolving and developing, the prospects equally provide an opportunity for more to be developed, and also contribute to the advancement of gas arbitration.
- Third-Party funding: Leveling the playing field
Third-party funding of gas arbitration is a point that has drawn varied reactions. The proper parties in a dispute have always been between those who have a claim or will be affected in some way by the judgment. Third party funders however have been the twist to an otherwise agelong process of law, where persons who do not have an interest in a matter, can provide funding for the litigation and benefit from any award that accrues subsequently or bear the loss.
Third party funding is described generally as where a financier who has no legal rights or interest in a dispute pays for the litigation and expenses to level the playing field for smaller entities who could otherwise not be able to financially afford the cost of litigation. Some of the proponents have argued that this is a leveler in providing access to justice especially when the opponents are well-funded. However, concerns about potential ethical implications and conflicts of interest that may arise when a third-party funds arbitration proceedings have been argued. The concern of such funding compromising the hallowed practice of only interested parties settling their matters and the integrity of the arbitration process, leading to frivolous or speculative claims being pursued solely for financial gains is disconcerting and may undermine the credibility of the arbitration process. In Nigeria, the addition of third party funders in S. 61 of the Arbitration and Mediation Act of 2023 which provides that:
“The torts of maintenance and champerty, including being a common barrator, do not apply in relation to Third-Party Funding of arbitration and this section applies to arbitrations seated in Nigeria and to arbitration related proceedings in any court within Nigeria.”
This provision has raised similar concerns and fears, and the need to inform the tribunal of the presence of third party funders has continued to pose interesting questions. The implications however, that persons providing financial support for arbitration cases are allowed to do so without facing legal consequences or been viewed as interlopers in a case that doesn’t concern them. The reality however is that disputes carry costs, and despite best efforts to reduce the additional burden of arbitration, the cost of venues, the fees for the arbitrator and the price for representation are still too high for some clients. With the funders also getting a share of the arbitral award depending on the terms agreed upon on the contract, the motive might not be for settling the dispute amicably, but trying to win to gain the arbitral award.
While funding gas arbitration by third parties might be beneficial for resource allocation and access to justice, it needs to be guided effectively to avoid any ethical or procedural issues. To guarantee that third-party funding fulfils its intended purpose while upholding the values of fairness and equity, transparency, accountability, and measures to maintain the integrity and impartiality of the arbitration process are crucial.
- Specialized gas arbitration rules
The confidence arbitration receives amongst other alternate dispute resolution methods is the assurances of the technical expertise, expedited procedures, confidentiality and the advantage of enforcement of arbitral awards globally. Arbitration often arises from agreements and price variations, as such versatility has been an integral factor of arbitration especially in gas agreements. Considering that global actors participate in the gas sector, the fear of bias, insufficient technical knowledge, and the need for equity has contributed in no small measure to the evolution of the various rules and procedures in different jurisdictions governing arbitration, and the choice of rules often depends on multiple factors such as the nature of the dispute, the preferences of the parties involved, and the jurisdiction where the arbitration takes place. Some of the diverse rules of arbitration.
With the level of specialization required to fully appreciate the complexities of gas deals, a lot of organizations have developed processes and procedures to ensure that the complexities are provided for, and the jurisprudential differences of the state are utilized. Some however like the International Chamber of Commerce (ICC) Rules are among the most widely used for international commercial arbitration. The ICC Rules arguably the oldest and most respected arbitral institutions globally, and its rules provide a comprehensive framework that is widely recognized and accepted by parties from diverse legal systems and cultural backgrounds. It provides a comprehensive framework for conducting arbitrations, covering aspects such as the appointment of arbitrators, conduct of proceedings, and enforcement of awards. The United Nations Commission on International Trade Law (UNCITRAL) Arbitration Rules has also been relied upon for their flexibility in international transactions. These rules are frequently used in both international and domestic arbitrations. They provide a flexible framework that parties can adapt to suit their specific needs.
Other countries have equally developed their own dispute resolution rules for arbitrations within their jurisdictions, such as the American Arbitration Association (AAA) and International Centre for Dispute Resolution (ICDR) Rules, London Court of International Arbitration (LCIA) Rules, and the World Banks International Centre for Settlement of Investment Disputes (ICSID) Rules which were tailored for investment treaty arbitrations between states and foreign investors and are administered by the World Bank Group to provide a specialized framework for resolving investment disputes.
However, the choice of rules ultimately depends on the specific needs and preferences of the parties involved in the dispute, the unique challenges of the gas sector, specialized technical expertise to understand the complexities of gas projects, expedited procedures, confidentiality and technology inculcation.
In Nigeria, the advancements are slowly building roots. There however remains a lot to be done especially in upskilling the man power necessary to arbitrate in international panels especially, and this can only be done through hands-on experience of our professionals in the field. The lack of trust in the Nigerian justice system, may also hinder the advancement of arbitration in Nigeria to global levels, and will require a lot of effort to build the trust necessary to ensure that the Nigerian Arbitration and Mediation Rules grow to global scales.
Conclusion
In navigating the dynamic terrain of Nigerian gas arbitration, it is clear that the sector is undergoing growth, driven by new legislation, emerging trends and evolving practices. The Nigerian gas industry is integral to the country’s economic growth and international reputation though it faces a multitude of challenges and opportunities in dispute resolution.
The economy is constantly changing due to trade and globalization, hence effective and efficient dispute resolution procedures are required. With its adaptability, privacy, and ability to be enforced internationally, arbitration has become the go-to option for multinational communities looking to settle conflicts involving gas. Because of its pragmatism and careful examination of the facts, evidence, and situations, it guarantees that business partners may resolve conflicts while maintaining their business relationships.
The emergence of technology has brought about a significant transformation in arbitration procedures, providing digital document management platforms, e-filings, and virtual hearings. Although these developments improve productivity and simplify procedures, they also bring with them new difficulties, especially in terms of data security and privacy.
The possibility of third-party funding to level the playing field for smaller firms and improve access to justice has come to light. But cautious monitoring and oversight are required due to worries about conflicts of interest and ethical ramifications.
A thorough framework for settling disputes in the gas industry is provided by specialised gas arbitration rules, such as those provided by the United Nations Commission on International Trade Law (UNCITRAL) and the International Chamber of Commerce (ICC). These regulations guarantee the impartiality, efficiency, and confidentiality of the resolution of gas disputes, together with the knowledge of arbitrators and accelerated processes.
The Nigerian gas arbitration has made progress, but there are still issues to be resolved, such as the need to upskill specialists, foster confidence in the legal system, and fix inadequate infrastructure. Nevertheless, Nigeria’s gas industry is well-positioned for future expansion and global recognition provided that ongoing efforts are made to advance arbitration as the preferred means of resolving disputes and adjust to new developments.
In conclusion, there are opportunities as well as obstacles in the developing field of gas arbitration in Nigeria. Through the increase in local expertise, use of new technologies, more transparency, and adherence to the values of justice and equity, Nigeria has the potential to establish itself as a major force in the global gas market.
Written by Dapo Akinosun
Dapo Akinosun, is the Founding Partner at SimmonsCooper Partners and a specialist in Gas law. He is a Senior Advocate of Nigeria (SAN), Arbitrator and co-author along with Dr David Ige of the only Nigeria book on gas- “Understanding Natural Gas: A Nigerian Perspective”
