Both
local and foreign businesses in Lagos potentially face multiple legal
challenges. Dr Bob Arnot, national programme manager of the J4Aprogramme
in Nigeria, explains the difficulties, as well as J4A’s interventions connected
to commercial and other types of dispute resolution.
Does the Nigerian legal system inhibit local
and foreign business start-ups?
and foreign business start-ups?
First, it can be complicated. In Nigeria, it
can be difficult to register or set up a company because there are many
overlapping laws and agencies which regulate businesses and investment, which
sometimes contradict each other. This makes it harder to create a new start-up.
can be difficult to register or set up a company because there are many
overlapping laws and agencies which regulate businesses and investment, which
sometimes contradict each other. This makes it harder to create a new start-up.
It’s expensive
The cost of doing business is made more
expensive by lots of different tax laws, which mean that there is a
multiplicity of taxes in various disguises.
expensive by lots of different tax laws, which mean that there is a
multiplicity of taxes in various disguises.
New areas of commerce are not covered
It’s also tricky to invest in new, emerging
areas of commerce, like online business or franchising, as there’s no legal
framework to regulate, control or protect these activities.
areas of commerce, like online business or franchising, as there’s no legal
framework to regulate, control or protect these activities.
It’s slow
What’s more, Nigeria’s legal and judicial
system is sluggish. In 2012, it took an average of 583 days to conclude a
commercial case in a court in Lagos, the commercial capital. When a case goes
on appeal, it takes even longer. Nigeria’s Supreme Court is still dealing with
appeals filed in 2005. Such delays tie down capital and discourage businesses
from investing.
system is sluggish. In 2012, it took an average of 583 days to conclude a
commercial case in a court in Lagos, the commercial capital. When a case goes
on appeal, it takes even longer. Nigeria’s Supreme Court is still dealing with
appeals filed in 2005. Such delays tie down capital and discourage businesses
from investing.
Individuals try to use land as security when
borrowing funds – but it’s difficult
borrowing funds – but it’s difficult
Land is generally the most common form of
security offered as collateral in Nigeria. However, the country’s Land Use Act has created a bureaucracy that’s meant long waiting times for land
registrations and documentation to be approved, and produced an environment
that encouraged corruption. This makes it more difficult to use land as
collateral, makes it harder to borrow money and thus deters investment. Local
businesses have particularly struggled. It’s harder for them to access credit,
due to the lack of legal alternatives that can be used as security instead of land.
security offered as collateral in Nigeria. However, the country’s Land Use Act has created a bureaucracy that’s meant long waiting times for land
registrations and documentation to be approved, and produced an environment
that encouraged corruption. This makes it more difficult to use land as
collateral, makes it harder to borrow money and thus deters investment. Local
businesses have particularly struggled. It’s harder for them to access credit,
due to the lack of legal alternatives that can be used as security instead of land.
For example, there is no legal regulation on
using moveable property (personal assets, like a car) as security when
borrowing money. This makes it harder for smaller companies and especially
women to access credit and get their businesses off the ground.
using moveable property (personal assets, like a car) as security when
borrowing money. This makes it harder for smaller companies and especially
women to access credit and get their businesses off the ground.
Will reform of Nigeria’s legal system only
help foreign companies?
help foreign companies?
Nigeria’s legislative gaps are damaging for
foreign and local businesses, so improving them should help everyone. For
instance, two of the laws that are currently under review are designed to
support small businesses. The Cooperative Societies Law encourages people to
pool their resources through cooperative societies. Members of these societies
have access to credit facilities which can then be used to start small
businesses. The Sales by Auction Law regulates the process of auctioning
property used as security for loans, protecting lenders and the financial
system.
foreign and local businesses, so improving them should help everyone. For
instance, two of the laws that are currently under review are designed to
support small businesses. The Cooperative Societies Law encourages people to
pool their resources through cooperative societies. Members of these societies
have access to credit facilities which can then be used to start small
businesses. The Sales by Auction Law regulates the process of auctioning
property used as security for loans, protecting lenders and the financial
system.
The role of Alternative Dispute Resolution
(ADR)
(ADR)
Speeding up the resolution of commercial
disputes is generally important to stimulate economic activity. This need not
take place solely in the court room. Encouraging people to settle disputes
outside the courtroom has helped local small businesses like the Gandun Albasa
General Furniture Association, a small trade association with about 55 members
in Kano, northern Nigeria. After learning more about alternatives to
litigation, they were able to resolve a dispute involving N17m (£68,000) in
record time.
disputes is generally important to stimulate economic activity. This need not
take place solely in the court room. Encouraging people to settle disputes
outside the courtroom has helped local small businesses like the Gandun Albasa
General Furniture Association, a small trade association with about 55 members
in Kano, northern Nigeria. After learning more about alternatives to
litigation, they were able to resolve a dispute involving N17m (£68,000) in
record time.
A nimble system of ‘fast-track’ courts within
Nigeria’s larger court system
Nigeria’s larger court system
From the outset, the J4A programme has been
assisting the establishment of ‘fast-track courts’ in Lagos, which aim to
settle disputes more rapidly for both local and foreign businesses.
assisting the establishment of ‘fast-track courts’ in Lagos, which aim to
settle disputes more rapidly for both local and foreign businesses.
The model started in Lagos because it’s the
commercial capital of Nigeria, and the state government is keen to encourage
more investment.
commercial capital of Nigeria, and the state government is keen to encourage
more investment.
The fast-track courts are based on a model
that already exists in Ghana, Australia and the UK. The courts and judges
operate within Nigeria’s existing High Court but only handle certain cases that
qualify to be fast-tracked. To qualify, a case should involve at least N100m
(£328,833); include foreign businesses or investors; or relate to mortgages.
that already exists in Ghana, Australia and the UK. The courts and judges
operate within Nigeria’s existing High Court but only handle certain cases that
qualify to be fast-tracked. To qualify, a case should involve at least N100m
(£328,833); include foreign businesses or investors; or relate to mortgages.
In Lagos state, there are about 55 high
courts, ten of which have been designated fast-track commercial courts. The
remaining 45 courts handle other types of cases, such as criminal, land, and
family disputes.
courts, ten of which have been designated fast-track commercial courts. The
remaining 45 courts handle other types of cases, such as criminal, land, and
family disputes.
A fast-track case must be wrapped up within
nine months
nine months
The fast-track courts apply the same rules as
the other courts. However, when they’re dealing with fast-track cases, there
are extra provisions in the rules. For instance, a fast-track case must be
concluded within nine months. But there is no such time standard for other
types of cases. The idea is to simplify and reduce the time between the filing
of a lawsuit, and the final court judgment.
the other courts. However, when they’re dealing with fast-track cases, there
are extra provisions in the rules. For instance, a fast-track case must be
concluded within nine months. But there is no such time standard for other
types of cases. The idea is to simplify and reduce the time between the filing
of a lawsuit, and the final court judgment.
The fast-track courts focus on commercial
disputes, to avoid distractions. But eventually, the system should expand to
include other cases, so that every court will apply similar rules.
disputes, to avoid distractions. But eventually, the system should expand to
include other cases, so that every court will apply similar rules.
Many people were initially unsure that the
new courts would be a good idea
new courts would be a good idea
Before the new fast-track courts were
established, some judges were worried that they would divert attention and
resources from the other courts. Lawyers were concerned that their control over
cases would be eroded: for example, defence lawyers often want to delay the
final judgment. Defendants argued that they would lose their rights to a fair
hearing, because of the time limit on each case.
established, some judges were worried that they would divert attention and
resources from the other courts. Lawyers were concerned that their control over
cases would be eroded: for example, defence lawyers often want to delay the
final judgment. Defendants argued that they would lose their rights to a fair
hearing, because of the time limit on each case.
To deal with these fears, we took care to
explain the benefits of the new system to everyone involved. We trained the
judges, making sure they knew that the fast-track courts were a pilot which
could be tested and replicated to all other courts only if they were
successful. We made sure that lawyers realised that they could boost their
earnings by working in the fast-track system, as they would be able to take on
more cases. And to litigants, we related the benefits of resolving their cases
quickly.
explain the benefits of the new system to everyone involved. We trained the
judges, making sure they knew that the fast-track courts were a pilot which
could be tested and replicated to all other courts only if they were
successful. We made sure that lawyers realised that they could boost their
earnings by working in the fast-track system, as they would be able to take on
more cases. And to litigants, we related the benefits of resolving their cases
quickly.
There were still delays in the new courts at
first – until we discovered the cause
first – until we discovered the cause
After the new fast-track courts were set up,
we found that some judgments were still taking too long. We realised that these
delays were happening because the judges hadn’t had any specialist training on
a variety of complex topics being discussed in their courts. To make sure they
felt equipped to manage these cases, the judges were giving long adjournments
so they had time to read up on the subject matter. This was particularly true
in complex financial cases and tax litigation.
we found that some judgments were still taking too long. We realised that these
delays were happening because the judges hadn’t had any specialist training on
a variety of complex topics being discussed in their courts. To make sure they
felt equipped to manage these cases, the judges were giving long adjournments
so they had time to read up on the subject matter. This was particularly true
in complex financial cases and tax litigation.
When judges have confidence and knowledge,
cases run smoothly
cases run smoothly
To deal with this, we organised monthly
seminars to train the judges on the difficult commercial cases they were
encountering, run by seasoned law experts. This gave the judges the knowledge and
confidence to handle complex technical cases. There are now plans to extend
these seminars beyond the fast-track courts.
seminars to train the judges on the difficult commercial cases they were
encountering, run by seasoned law experts. This gave the judges the knowledge and
confidence to handle complex technical cases. There are now plans to extend
these seminars beyond the fast-track courts.
What about justice options for Nigeria’s
poor?
poor?
We are also working in a variety of other
settings to improve access to justice for all Nigerians. We have supported the
court-connected multi-door courthouses, which provide options of arbitration,
mediation and early neutral evaluation; we work to improve the service delivery
provided by the lower courts and have undertaken pilot projects in
magistrate’s, customary and sharia courts; we have supported ‘citizen’s
mediation centres’ where smaller cases (predominantly landlord and tenant
cases) may be resolved. We have also worked with a range of business membership
organisations (for example, chambers of commerce and trade associations) to
improve their mediation practices so that the disputes that arise between their
members need never go to court.
settings to improve access to justice for all Nigerians. We have supported the
court-connected multi-door courthouses, which provide options of arbitration,
mediation and early neutral evaluation; we work to improve the service delivery
provided by the lower courts and have undertaken pilot projects in
magistrate’s, customary and sharia courts; we have supported ‘citizen’s
mediation centres’ where smaller cases (predominantly landlord and tenant
cases) may be resolved. We have also worked with a range of business membership
organisations (for example, chambers of commerce and trade associations) to
improve their mediation practices so that the disputes that arise between their
members need never go to court.
Our ultimate objective is to strengthen the
provision of a wide range of legal services so that the inability to settle
commercial disputes (of whatever size) need not be a constraint on commercial
activity. If disputes can be settled quickly and cheaply without breaking the
economic relationship between the parties, then this will help sustain economic
activity, growth and development.
provision of a wide range of legal services so that the inability to settle
commercial disputes (of whatever size) need not be a constraint on commercial
activity. If disputes can be settled quickly and cheaply without breaking the
economic relationship between the parties, then this will help sustain economic
activity, growth and development.
DrArnot will be speaking about the rule of
law, access to justice and sustainable development in Nigeria at the Global Law Summit in London on 23 February 2015.
law, access to justice and sustainable development in Nigeria at the Global Law Summit in London on 23 February 2015.
J4A is a GBP 50 million programme financed by
the UK government’s Department for International Development (DFID) and managed
by the British Council. Find out more our work in justice, security and conflict resolution.
the UK government’s Department for International Development (DFID) and managed
by the British Council. Find out more our work in justice, security and conflict resolution.
