INTRODUCTION
Despite innovative statutory provisions in the Nigerian legal landscape for construction, risks which could be commercial, legal, or project-driven – continue to be prevalent owing to the lack of regulatory expertise; ambiguity in contractual requirements; poorly defined project scope; combative contracting culture; lack of sophistication of the project team;poor risk planning and performance; management of resources; and costs and disruption in the supply chain to mention a few.
Though this paper does not claim to be exhaustive in the discussion on Construction Law and adjudication, it offers comprehensive insights into the dispute resolution mechanisms available to prospective parties. It equally highlights the various laws that govern construction while bringing to the spotlight the trends that have been adopted in the resolution of disputes emerging from construction in Nigeria.
DISPUTE RESOLUTION MECHANISMS AVAILABLE IN CONSTRUCTION LAW
Given that there is no specific law on how construction disputes should be resolved in Nigeria, the parties through their project documents usually provide for a dispute resolution mechanism to be adopted in the event of a dispute. No doubt, the parties resort to Arbitration as the principal means of dispute resolution in construction projects because it is quicker, and as well, gives room for the disputing parties to select subject matter experts as the arbitrators.
At the International level, construction contracts involving international counterparties typically provide for institutional arbitration under the International Chamber of Commerce Rules, the London Court of International Arbitration Rules, and the Rules of the Chartered Institute of Arbitrators (UK). Worthy of mention is that construction contracts involving only Nigerian parties provide for ad hoc arbitration under the UNCITRAL(United Nations Commission on International Trade Law)Model Law on International Commercial Arbitration or the Nigerian Arbitration and Mediation Act. In instances where contracts involving Nigerian parties stipulate institutional arbitration, the parties typically opt for Nigerian arbitration institutions such as the Chartered Institute of Arbitrators (UK) Nigerian Branch or the Lagos Regional Centre for International Commercial Arbitration.
Moving on, where the parties agree to submit their disputes to Nigerian Courts, the jurisdiction is determined by the High Court of the State where the asset is located. Where the Federal government or any of its agencies is a party to the proceedings or where the dispute relates to the executive, administrative, or managerial action or inaction of the Federal government (other than a simple breach of contract), the Federal High Court would have jurisdiction.
There are various forms of dispute resolution mechanisms available in Construction Law. They include:
Contractors who are working in local, regional, and international markets will realize that DAB is contained in each of the FIDIC Red, Yellow, Silver, and Gold Books. Utilizing DABs can add value to a project in terms of real-life dispute avoidance. Factoring in the cost of a DAB at the outset should be seen as a proactive step towards dispute avoidance, rather than the alternative negative step of waiting for an issue to manifest itself into a fully blown dispute necessitating formal, costly, and lengthy arbitration proceedings.
WHY ADJUDICATION?
Arbitration may have, arguably, begun to lose its attraction due to large costs, increases in the length of proceedings, often prolonged in the event of a challenge, etc. As a result, this new ADR model known as ‘Adjudication’ is being employed by parties to resolve construction disputes.
Considered as a swift, formal, and confidential process, adjudication involves a designated adjudicator settling construction-related disputes by issuing an interim binding decision. This decision remains in effect until the dispute is ultimately resolved through litigation, arbitration, or, in certain instances, a mutually agreed-upon settlement. It is a method of resolving construction disputes without involving a prolonged legal process. Instead, both parties meet with an adjudicator who acts as a judge in the case. Once both sides have laid out their side of the dispute, the adjudicator helps them reach an agreement.
Notwithstanding its seeming complexity, largely due to the unavailability of a statutory framework, adjudication is still a preferable option for parties to resolve construction disputes targeted at providing an interim cash-flow remedy during the cycle of the project.
Benefits of adjudication include flexibility for the parties; shorter timelines and speedy resolution of the dispute; lower costs; and inquisitorial powers of the adjudicator; and specialist arbiters. Yet, due to the lack of adequate information, adjudication has not been as popular in Nigeria as litigation and arbitration.
LEGAL FRAMEWORK FOR CONSTRUCTION AND ADJUDICATION IN NIGERIA
The legislative framework for construction in Nigeria comprises primarily urban and regional planning laws and regulations on the standard of designs and construction. Interestingly, these legal frameworks specify the designs and building standards thatthe owners/developers, architects, and building contractors must comply with when undertaking construction works. For emphasis, they are:
Other Federal and State legislations regulating the professionals engaged in the construction industry include the Builders Registration Act, Engineers Registration Act 2019, Quantity Surveyors Act, and Architects Registration Act.
Furthermore, while the Nigerian Urban and Regional Planning Act 1992 is aimed at introducing a sustainable utilization of the country’s land mass for the insurance and preservation of physical development of every part of Nigeria; the Nigeria Oil and Gas Industry Content Development Act 2010, provides minimum local content requirements for the Nigerian oil and gas industry, including in respect of construction contracts and projects in the industry.
As noted earlier, there is no statutory legislation governing adjudication in Nigeria as of date. Hence, its utilization as a dispute resolution model is primarily contractual. It is often found in international construction contracts (albeit for projects in Nigeria) modeled on International standard forms of construction contracts, such as the International Federation of Consulting Engineers (FIDIC) standard form of contracts.
The General Conditions of Contract for the Procurement of Works, 2011 (the “GCC”) prepared by the Nigerian Bureau of Public Procurement also provides for adjudication as a means of resolving construction disputes arising from state-fundedprojects. Essentially, the GCC provides that a party who is dissatisfied with a decision made by the Engineer shall refer such decision to the Adjudicator within 14 days of the notification of the Engineer’s decision. The adjudicator who is to be jointly appointed by the parties or the designated appointing authority shall give an interim written decision within 28 days of notification of a dispute. Thus, the decision shall become final and binding except the adjudicator’s decision is referred to arbitration within 28 days of the decision.
Interestingly, the Lagos Chamber of Commerce International Arbitration Centre on 9th December 2020 introduced its Adjudication Rules, which provides a framework for resolving disputes arising from construction contracts. As with most adjudication rules, except where the parties agree to accept the adjudicator’s decision as final for all purposes, the decision is only binding in the interim until the dispute is finally determined by arbitration or litigation.
CONCLUSION
The regime of construction law and adjudication in Nigeria reflects a dynamic environment shaped by various risks, legislative frameworks, and evolving trends. Disputes arising from the Nigerian construction industry stem from multifaceted sources, including political, commercial, and legal risks. While traditional dispute resolution methods such as litigation and arbitration remain prevalent, an alternative such as adjunction is noteworthy. Adjudication, viewed as a quicker, more formalprocess, offers benefits such as flexibility, shorter timelines, and lower costs. However, its utilization is still gaining recognition, largely due to a lack of awareness among stakeholders.
The absence of specific statutory legislation on adjudication underscores its contractual nature, primarily found in international construction contracts and standard forms. The Nigerian construction industry’s growth, as evidenced by significant contributions to the GDP, underscores the importance of effective dispute-resolution mechanisms. Recent trends indicate a shift towards adjudication, exemplified by notable settlements in major construction disputes. As the industry continues to evolve, stakeholders are encouraged to explore collaborative and preventive strategies while remaining informed about the diverse dispute resolution options available.
Joseph Siyaidon is the Team Lead of the Arbitration, Maritime Construction and Energy Disputes Practice Group at Stren & Blan Partners while Stanley Umezuruike is an Associate in the firm’s Arbitration, Maritime Construction and Energy Disputes Practice Group.