Seat versus venue of arbitration: settling the conflict

Author: Damilola Raji
Kenna Partners Associate

Introduction

Disputes are an indispensable phenomenon in commercial relationships and arbitration, undoubtedly, is one of the oldest methods of resolving disputes. The flexibility in arbitration allows parties to determine the procedural rules that should be applicable where parties eventually go into arbitration. Consequently, the flexibility of arbitration reserved the rights for parties to determine the ‘venue’ and ‘seat’ of the arbitration. These two fundamental concepts have been the subject of several controversies in Arbitration. I shall proceed to consider the differences and nexus between ‘venue’ and ‘seat’ of arbitration.

Meaning of ‘seat’ and ‘venue’ in arbitration

In simple terms, the ‘seat’ of arbitration is the legal domicile or home of international arbitration. It provides for the nation’s Arbitration Law that would govern the arbitration. On the other hand, the ‘venue’ or ‘place’ of arbitration refers to the specific geographical location for the purpose of the arbitration proceedings. It is worthy to add that the reference to ‘venue’ or ‘seat” in arbitration clauses also does not affect the law of contract guiding the entire agreement.

Conflicts between the ‘seat’ and ‘venue’ of arbitration

The differences between the ‘seat’ and ‘venue/ place’ of arbitration although ostensibly the definitions provided above, have been subjected to several controversies. The fundamental principles that guide the Arbitral Panel and the Courts in resolving this conflict are the provisions of the arbitration clauses. Thus, the ‘seat’ of the arbitration would necessarily imply the laws of the nation that would guide the arbitration procedure while the venue determines the physical location of the arbitration. In Nigeria, although the Arbitration and Conciliation Act Cap A18 LFN 2004 does not explicitly address the meaning of ‘venue’ or ‘seat’ of arbitration, the Supreme Court in NNPC v Lutin Inv Ltd (2006) 2 NWLR (PT.965) 506 interpreted the usage of ‘place’ to also mean the venue of arbitration. ‘Venue’ and ‘place’ of arbitration (used interchangeably) refers to the location where the tribunal holds it meetings, conduct proceedings, hear testimonies, take evidence and performs other procedural undertakings. This should be clearly distilled from the “seat” which refers to the laws that would be applied to evaluate the evidence, regulate the enforcement of the award, and regulate an application to set aside the award among other procedural Laws to guide the arbitration. Thus, parties can state that the ‘venue’ or ‘place’ for an arbitration to be in Egypt while the ‘seat’ is stated to be Nigeria. Consequently, the Arbitral Tribunal would hear proceedings in Egypt and perform other procedural activities in Egypt while the laws that would guide the arbitration is the Nigerian Arbitration Law.

The metamorphosis from ‘venue’ to ‘seat’ and from ‘seat’ to ‘venue’

A party should be cautious when selecting the ‘venue’ or ‘seat’ of an arbitration. Although the differences between the ‘venue’ and ‘seat’ have been elucidated above, there are instances where the ‘venue’ of arbitration is implied as the ‘seat’ of the arbitration and vice versa. The arbitration clause is the bedrock that determines the ‘venue’ or ‘seat’ of the arbitration. Consequently, where the arbitration clause merely provides for the ‘venue’ of the arbitration and fails to provide for the ‘seat’ of the arbitration, the Courts have held that the implication from such lacuna is that the parties intended the ‘venue’ of arbitration as the ‘seat’ of the arbitration. In the Process & Industrial Developments Ltd v Nigeria [2019] EWHC 2241 (Comm), the Tribunal held that the arbitration clause stated that the venue of the arbitration “shall be” London, which invariably meant the “seat” of the arbitration was also London. The Tribunal rejected the argument of the Nigerian Government that the reference to the venue should be strictly applied to the venue and not the law. The Tribunal’s reasoning was that since the parties had chosen London as the “venue” of the aNigeriarbitration, the parties had also intended London to also be the “seat”. The Tribunal added that the selection of the hearing venue is typically decided by the arbitrators (where parties fail to state this), further indicating that the parties intended to refer to the legal seat. Similarly, where parties solely provide for the “seat” of arbitration and fail to provide for the “venue” of arbitration, the Tribunal may also imply from the circumstances that parties intended the “seat” to also be the “venue” of the arbitration.

Conclusion and Recommendations

The ‘seat’ and ‘venue’ of arbitration are significant factors in every arbitral proceeding. Parties are advised to adequately provide for the ‘seat’ and ‘venue’ of arbitration separately while drafting the arbitration clauses. I recommend that parties ensure at all times to sufficiently provide for both the ‘seat’ and ‘venue’ of arbitration. The benefits of stating in clear terms the legal seat and the venue of arbitration helps to prevent needless procedural objections and disputes.

About the Author

Damilola Raji is an Associate at Kenna Partners a law firm that specialises in the provision of legal representative and legal advisory services to clients in Nigerian and several foreign clients. He provides legal representative services on several high profile litigation and dispute resolution cases. He also provides advisory services on the oil & gas industry, corporate finance and the Nigerian capital markets. He is a graduate of Obafemi Awolowo University where he obtained his LLB (Hons) and completed the Nigerian Law School with a first class degree. He is very passionate about arbitration.



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