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Review of Expert Determination in Nigeria: Case Study of Statoil Nigeria Ltd v. Star Deep Water Petroleum Ltd & Ors

Introduction

Alternative Dispute Resolution (ADR) in Nigeria has come to stay. It has grown exponentially in the last twenty years following the enactment of the Arbitration and Conciliation Act (ACA) into our municipal laws. In line with this developing trend, our jurisprudence not only encourages and promotes ADR, the Courts have incorporated ADR into their rules of practice and procedure2. In the course of this essay therefore we shall be taking a dive into Expert determination as a veritable form of ADR.

Expert Determination

Expert determination is the least known form of ADR in Nigeria, and is usually lost among the throng of the more prominent, more readily available alternatives to litigation. In fact, because there is hardly any case law on the subject, Expert determination's status as a form of ADR invites inquiry, hence the purpose of this paper.

The lack of familiarity and common usage of Expert determination in Nigeria's jurisprudence was underscored by the Court of Appeal in Statoil Nigeria Limited v. Star Deep Water Petroleum Ltd (SDWP Ltd) & 3 Ors.3 where the court remarked that the issue of expert determination in an equity redetermination of a unitized oilfield is a novel and highly technical concept in Nigeria4.

Expert determination is more common to commercial agreements with highly technical terms and procedures. In some cases, even where there are arbitration agreements, parties could agree to refer the performance or non-performance of certain very technical aspects of a project or transaction to a qualified expert, who assumes the role of adjudicator. Parties who refer their dispute to Expert determination agree that the determination of the dispute by the expert will be final and binding on them.

It is worthy of note that Expert determination is a proceeding in and of itself, separate to whatever dispute resolving mechanism the dispute resolution clause in the agreement stipulates. Essentially, if a conventional dispute resolution clause in an agreement covers broadly all disputes that may arise between parties to an agreement, then an Expert determination clause becomes a sub set within any other dispute resolution mechanism, for specific purposes, thereby focusing primarily on disputes that arise from the defined technical aspects, to the exclusion of the dispute resolution clause.

While the expert's decision in Expert determination may be binding on the parties, the only authority capable of giving such a decision legal effect is the provision in the agreement stipulating that the result of the expert determination procedure, that is, the expert's decision will be final and binding on the parties.

The Case of Statoil Nigeria Ltd v. Star Deep Water Petroleum Ltd

In Statoil Nigeria Ltd v. SDWP Ltd, Statoil was dissatisfied with the Expert Determination in the Equity Re-Determination exercise under the Agbami Unit Agreement (AUA) between it and other parties to the suit, who were its partners in the Agbami unitized oilfield. As a result, it initiated arbitration proceedings and thereafter commenced action at the Federal High Court, seeking to restrain the other parties to the agreement, from giving effect to the Expert decision. At the end of hearing, the Federal High Court dismissed the suit. Dissatisfied, Statoil appealed to the Court of Appeal which also dismissed the appeal.

Meanwhile, at the end of hearing of the arbitration, the Arbitral Tribunal delivered its Award and dismissed Statoil's claim, thereby upholding the decision of the Expert. Statoil then brought another action before the Federal High Court seeking to set aside the Award. At the end of hearing, the Court delivered its judgment in this second action refusing to set aside the Award. In the judgment, the court found that by the provisions of the AUA, the decision of the Expert was final and binding on the parties and will not be subject to arbitration or appeal in any court of law. However, the Court held that since the parties submitted the matter to arbitration, the court would appraise the complaints against the Award to determine their merit. Being aggrieved by this decision, Statoil appealed to the Court of Appeal which also dismissed the appeal.

The issues raised and canvassed in the several cases of Statoil v. SDWP Ltd query the propriety of the parties' recourse to Expert determination and the procedure adopted by the Expert. In that case, the parties referred the dispute to an independent Expert for determination. An issue that arose was whether the Expert made a pendulum decision during the equity redetermination process, and whether the procedure adopted by the Expert in making the decision was proper. In this regard, there is a school of thought that once the matter is in the hands of the Expert, he may be asked to consider submissions from each licence group or from each of the parties and may be asked either to choose one of the submissions (a pendulum determination) or reach his own decision. The former again is intended to prevent parties from taking too extreme a position but really only works where only two submissions are made. A variation on this is to ask the Expert to carry out his own work, and then choose whichever of the parties' submission is closest to it. Having completed his work and reached a decision, the Expert may be asked to calculate the Tract Participations or this may be done by the operator5.

In negotiating the Expert procedures a number of issues commonly arise. These matters include: the matters that can be referred to an Expert; who can request a referral; how the Expert is selected; what data they have access to; and what procedure the Expert should follow. The parties will be concerned with the fairness of the procedure and that any referral will be carried out within a limited period of time and with a minimum of expense.

Conclusion

So, the question that readily comes to mind at this point is whether expert determination is final and binding as to make it an attractive form of dispute resolution among all others? In Statoil v. SDWP Ltd, the provision for the finality and binding authority of the Expert's decision was noted by the Federal High Court in its judgment refusing to set aside the Award but the court proceeded to appraise the issues raised against the Expert determination on the ground that the parties submitted to arbitration.

In the light of the decisions in Statoil cases under reference, it would seem that the efficacy of Expert Determination as an effective form of dispute resolution is largely dependent on the terms of the agreement between the parties. More importantly, the parties have to be willing to abide by the decision of the Expert, especially as it seems that arbitration has become the first rung in the litigation ladder. Be that as it may, the judgments of the Courts in the Statoil cases are encouraging pointers to the effect that the courts in Nigeria will uphold the findings of an Expert determination as final and binding provided that parties agree, and set out in very clear terms, the scope of reference and the fact that they agree that it should be final and binding. Anything else would be an exercise in futility as far as Expert determination is concerned.

Note: Uche Nwokedi & Co. acted for Star Deep Water Petroleum Ltd and Texaco Nigeria Outershelf Ltd in the matters under reference.


  1. The several citations of the different cases are: (Unreported) Suit No. FHC/L/CS/1452/13 Judgment delivered by the Honourable Justice I.N. Buba of the Federal High Court, Lagos Division on 21st January 2014 which was upheld by the Court of Appeal in (2015) 16 NWLR (Pt. 1485) 361; (Unreported) Suit No. FHC/L/CS/1452/13 Ruling delivered by the Honourable Justice I.N. Buba of the Federal High Court, Lagos Division on 24th February 2014 which was upheld by the Court of Appeal in (Unreported) Appeal No. CA/L/236A/2014 Judgment delivered on 22nd May 2015; (Unreported) Suit No. FHC/L/CS/100/2016 Judgment delivered by the Honourable Justice (Prof.) C.A. Obiozor of the Federal High Court, Lagos Division on 31st May 2016 which was upheld by the Court of Appeal in (Unreported) Appeal No. CA/L/1180/2017 Judgment delivered on 14th November 2018.
  2. See Order 18 Rules 1 and 2 of the Federal High Court (Civil Procedure) Rules 2019; Order 5 Rule 8, Order 27 Rules 1(2)(c), 2(l)(m) & 6(2) and Order 28 of the Lagos State High Court (Civil Procedure) Rules 2019; and Order 16 of the Court of Appeal Rules 2016.
  3. Other respondents were Petroleo Brasileiro Nigeria Ltd (Petrobras), Famfa Oil Ltd (Famfa) and Texaco Nigeria Outer Shelf Ltd (TNOS)
  4. See Statoil (Nig.) Ltd v. SDWP Ltd (2015) 16 NWLR (Pt. 1485) 361 at 405 paragraphs E-G Per Iyizoba JCA
  5. See the book, Upstream Oil and Gas Agreements with Precedents Edited by Martyn R. David