Arbitration vs Litigation for Oil, Gas & Infrastructure Disputes in Contemporary Nigeria: Which Option Should Sponsors, Lenders & Contractors Choose?

1. INTRODUCTION

The time has come in Nigeria for sponsors, lenders and Engineering Procurement and Construction (EPC) contraction operating in the country’s oil, gas and infrastructural sectors to be properly guided so as to make informed choice between litigation in Nigeria Courts or arbitration when commercial disputes occur. The question of choice of arbitration or litigation in Nigerian courts has been heightened since 2023 by the enactment of Arbitration and Mediation Act 2023 (AMA 2023) and also due to the operationalization of the Nigerian Upstream Petroleum Regulation Commission’s ADR Centre (NUPRCADRC). Therefore, this article seeks to present a structured dimension-by-dimension comparison and a direct decision framework to enable the project participants make informed choice forum between litigation and arbitration to resolve commercial dispute.

2. APPLICABLE METHODS TO BE DEPLOYED WHEN COMMERCIAL DISPUTES OCCUR IN OIL, GAS AND INFRASTRUCTURAL SECTORS BY ENGAGING PARTIES IN NIGERIA

The applicable methods are essentially the following:

i. ARBITRATION

Arbitration in the oil, gas and infrastructural sector essentially entails submitting a commercial dispute to a private tribunal of one or three arbitrators chosen by the parties, whose award is final and binding, subject only to limited grounds for setting aside. Nigeria’s Arbitration and Mediation Act 2023 now serves as the federal lex arbitri, replacing the 1988 Act and aligning Nigerian arbitration law more closely with the UNCITRAL Model Law. Nigeria is also a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, which means awards rendered in another contracting state are enforceable in Nigerian courts. Furthermore, Arbitration is the dominant dispute resolution mechanism in upstream petroleum agreements, production sharing contracts, gas sale and purchase agreements seeking to resolve commercial disputes and large-scale EPC/turnkey contracts. Institutional forums available to parties in Nigeria include the Lagos Court of Arbitration (LCA), the Regional Centre for International Commercial Arbitration Lagos (RCICAL), the International Centre for Arbitration and Mediation Abuja (ICAMA), and international institutions such as the ICC International Court of Arbitration. Parties may also choose ad hoc arbitration under UNCITRAL Rules.

The visible advantages of deploying arbitration in this sector are as follows:

• Proceedings are private, protecting commercially sensitive information about reserves, pricing and joint-venture relationships.
• Technical expertise. Parties may nominate arbitrators with petroleum engineering, quantity surveying or infrastructure finance backgrounds.
• Forum neutrality. Foreign sponsors and lenders can choose a neutral seat (Lagos, London, Paris, Singapore) and governing procedural law, reducing perceived home-court advantage.
• Cross-border enforceability. Awards are enforceable in over 170 New York Convention states, critical for sponsors holding assets in multiple jurisdictions.
• Awards are not subject to appeal on the merits; setting-aside applications under AMA 2023 are limited to procedural irregularity, incapacity, excess of jurisdiction and public-policy grounds.

It is noteworthy to underscore at this stage that a well-drafted arbitration clause needs to specify the seat, the governing substantive law, the number of arbitrators, the appointing authority, the institutional rules, and whether emergency-arbitrator provisions apply. Furthermore, the red flags that frequently arise in Nigerian oil and gas contracts include pathological clauses that name a non-existent institution, clauses that attempt to subject arbitral awards to full appellate review (undermining finality), and omitting the seat, which can trigger costly jurisdictional challenges. Lenders should ensure the clause covers disputes arising under related financing and security documents, not only the concession agreement itself.

ii. LITIGATION IN NIGERIAN COURTS

Litigation means resolving a dispute through Nigeria’s court system. The Federal High Court (FHC) has exclusive jurisdiction over matters connected with mines and minerals (including oil and gas), admiralty, federal revenue, and disputes involving the federal government or its agencies as enshrined in Section 251 of the 1999 Constitution of Federal Republic of Nigeria as Amended. Accordingly, the Federal High Court (FHC) in Nigeria is the appropriate court that has jurisdiction to entertain and determine disputes pertaining to oil, gas and infrastructural disputes which are anchored by sponsors, lenders and contractors in Nigeria. State High Courts on the other hand exercise jurisdiction on commercial disputes where the FHC does not have exclusive jurisdiction. The National Industrial Court (NICN) adjudicates employment and labour matters, which may arise in large-scale infrastructure projects involving workforce disputes based on jurisdictional power the enshrined provision of Sections 254C of the 1999 Constitution of Federal Republic of Nigeria as Amended.

Litigation remains the appropriate, and sometimes the only forum in several important scenarios relevant to dispute resolution for infrastructure projects and petroleum operations: Furthermore, litigation can be ignited in the following spheres, namely –

• Public-law and regulatory relief: Judicial review of NUPRC or other regulator decisions (licence revocations, sanctions, environmental enforcement orders) must be pursued in court because Arbitration tribunals lack the jurisdiction to quash administrative actions.
• Criminal or quasi-criminal allegations. Fraud, bribery and corruption matters are non-arbitrable and must proceed through the courts.
• Urgent interim relief. Courts possess broad, immediate powers to grant freezing (Mareva) injunctions, receivership orders and Anton Piller orders. While the AMA 2023 permits emergency arbitrator appointments and allows courts to grant interim measures in support of arbitration. However, the practical reality in 2026 is that Nigerian courts remain the faster route for asset-preservation relief.
• Enforcement against local assets. Where the counterparty’s only attachable assets are in Nigeria, a domestic court judgment can be executed through garnishee proceedings, sheriff seizure and receivers without the additional step of converting an arbitral award into a judgment.
• It is necessary to highlight at this stage that certain categories of disputes are simply not arbitrable under Nigerian law. These include disputes over the status of a company or partnership (winding-up petitions), criminal conduct, tax assessments, bankruptcy proceedings, and matters affecting the rights of third parties who are not signatories to the arbitration agreement. Under the Petroleum Industry Act 2021 (PIA 2021), regulatory decisions by the NUPRC or the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) are subject to administrative appeal processes and, ultimately, judicial review, not arbitration. Therefore, Sponsors, Lenders and contractors need to be abreast with the earlier highlighted categories of disputes that are non-arbitrable under the arbitration agreement.

ARBITRATION VS LITIGATION FOR OIL & GAS DISPUTES

In view of the above, the three headline takeaways from the comparison of arbitration and litigation in the Nigeria’s oil and gas sector are namely –

Enforceability abroad favours arbitration. The New York Convention gives arbitral awards a reach that Nigerian court judgments do not enjoy.

Urgent asset preservation favours litigation. Despite AMA 2023 emergency-arbitrator provisions, Nigerian courts remain the practical first choice for freezing orders.

Regulatory disputes require courts. No arbitration clause can override the FHC’s exclusive jurisdiction over oil and gas regulatory matters or judicial review of NUPRC decisions under PIA 2021.

4. IMPERATIVE HIGHLIGHTS

• The enforceability of arbitration awards in Nigeria has been materially strengthened by AMA 2023. A party seeking to enforce an arbitral award files the award, the arbitration agreement and a certified copy of the award at the Federal High Court. Recognition may only be refused on narrow grounds such as incapacity, invalid agreement, lack of proper notice, excess of tribunal jurisdiction, irregularity in tribunal composition, or conflict with Nigerian public policy. Succinctly put, AMA 2023 reduced the scope for public-policy challenges compared to the old regime, and Supreme Court decisions in the 2020–2026 period have reinforced the separability doctrine and the principle that courts should not review the merits of an award.
• For upstream petroleum disputes, NUPRC ADRC mediation outcomes that result in a settlement agreement can be recorded as consent awards and enforced similarly. In contrast, court judgments are enforceable domestically through standard execution mechanisms (garnishee, writ of fieri facias, receivership) but lack the cross-border portability of an arbitral award, a critical disadvantage for sponsors with assets or parent entities outside Nigeria.
• Interim relief is often the most time-sensitive element of an oil and gas dispute, a cargo may be about to leave port, a joint-venture partner may be dissipating assets, or a regulator may be poised to revoke a licence. AMA 2023 expressly recognises emergency arbitrator provisions and permits Nigerian courts to grant interim measures in support of arbitration proceedings (whether seated in Nigeria or abroad). However, the practical availability of emergency arbitrators in Nigerian institutional arbitration is still maturing. Industry observers expect that, in 2026, the fastest route to a freezing order or asset-preservation injunction in Nigeria remains a motion on notice (or ex parte, in urgent cases) before the Federal High Court.
• Sponsors and lenders should build a hybrid strategy by the inclusion of emergency-arbitrator clauses in contracts for international proceedings, while retaining the contractual right to seek interim relief from Nigerian courts without waiving the arbitration agreement.

5. COST AND FEES: Arbitration vs Litigation in Nigeria: A cost comparison of arbitration and litigation in Nigeria must account for both direct fees and the time-value impact of prolonged proceedings. The table below outlines the principal cost categories:

The net effect: for complex, high-value oil and gas disputes, arbitration often costs more upfront but delivers a final, enforceable outcome faster. Litigation’s lower filing fees are deceptive, the true cost is measured in years of counsel billing and opportunity cost of delayed recovery.

6. LIABILITY AND REMEDIES

• Both arbitration tribunals and Nigerian courts can award compensatory damages, interest and costs. Arbitrators may also grant declaratory relief and, in appropriate cases, specific performance, though the practical enforceability of specific-performance orders depends on the cooperation of the losing party or subsequent court enforcement. Limitation periods under Nigerian law (typically six years for simple contracts under the Limitation Act applicable in Lagos and equivalent state statutes) run identically regardless of forum, but the commencement of arbitration proceedings tolls the limitation clock from the date of the notice of arbitration or appointment request. Parties must check whether the arbitration clause shortens the limitation period, common in certain EPC standard forms, and ensure the notice of dispute is issued within time.

7. TIMING AND PROCEDURAL CONTROL

• Arbitration gives parties procedural control that is unavailable in litigation. Parties may agree on expedited timelines, bifurcate liability and quantum, limit document production (avoiding the broad discovery norms of Nigerian court practice), and schedule hearings to suit arbitrator and counsel availability. The AMA 2023 encourages tribunals to adopt case-management techniques and to render awards efficiently. By contrast, Federal High Court proceedings are subject to the court’s docket, adjournments, interlocutory applications and the appellate structure, from FHC to the Court of Appeal and, by leave, to the Supreme Court. A complex oil and gas case can take five to eight years to reach a final, unappealable judgment.
• Arbitral awards under AMA 2023 may be challenged only on limited grounds via a setting-aside application, and there is no appeal on the merits, a decisive advantage for parties seeking finality.

8. REGULATORY BURDEN AND SECTOR-SPECIFIC

    CONSIDERATIONS

The Petroleum Industry Act 2021 created a new regulatory architecture. The NUPRC regulates upstream operations and has established an ADR Centre (ADRC) to handle disputes between licensees, between licensees and host communities, and between operators and service providers in the upstream sector. The NUPRC ADRC offers mediation and conciliation as a first-line resolution process; outcomes that settle may be recorded as binding agreements. However, disputes involving the exercise of regulatory powers, licence grant, revocation, environmental compliance, penalty imposition, must be resolved through the administrative appeal process established under PIA 2021 and, ultimately, by judicial review before the Federal High Court.

Sponsors and contractors should map each potential dispute type at the contract-drafting stage to determine whether it falls within the NUPRC ADRC’s remit, requires arbitration, or will inevitably involve the courts.

9. THE ARBITRATION VS LITIGATION CALCULUS FOR OIL AND GAS

The enactment of AMA 2023 has led to visible development from 2024–2026 that need comparison between Arbitration and Litigation in Nigeria. Therefore, it is noteworthy to highlight the following –

• Arbitration and Mediation Act 2023 bedding-in. Litigation in courts are applying the AMA 2023’s tighter setting-aside grounds and pro-enforcement framework. Early indications suggest that Federal High Court judges are less inclined to entertain dilatory public-policy objections to arbitral awards than under the old 1988 Act.
• NUPRC ADRC operationalisation. The ADRC has moved from planning to active case intake for upstream petroleum disputes, providing a regulator-led ADR alternative that supplements (and in some cases precedes) contractual arbitration. The likely practical effect will be that upstream disputes increasingly pass through ADRC mediation before proceeding to arbitration.
• National Arbitration Policy momentum. The Federal Ministry of Justice’s National Arbitration Policy, which aims to position Nigeria as Africa’s arbitration hub, has driven institutional reforms and judicial training. Industry observers expect continued government support for arbitration-friendly judicial practice, reducing the historical risk of court interference with arbitral proceedings.

Together, these changes tilt the balance further toward arbitration for most commercial oil, gas and infrastructure disputes, while reinforcing the necessity of courts for regulatory, public-law and urgent-interim-relief matters.

10. DECISION FRAMEWORK: When to Arbitrate and When to Litigate Oil and Gas Disputes in Nigeria

The table below maps common priority scenarios to the recommended forum. Use it as a starting point; every dispute has unique facts that may alter the analysis.

11. CHOOSE ARBITRATION WHEN:

• The dispute is a commercial claim between contracting parties (not a regulatory or public-law matter).
• One or both parties are foreign and need cross-border enforcement under the New York Convention.
• Confidentiality of financial terms, reserve data or technical specifications is commercially critical.
• The dispute involves complex technical or engineering questions best decided by specialist arbitrators.
• You need finality, no appeal on the merits, to unlock project financing or insurance proceeds.
• The contract already contains a valid arbitration clause and commencing court proceedings risks a stay application.

12. CHOOSE LITIGATION WHEN:

• The dispute involves judicial review of a regulatory decision by the NUPRC, NMDPRA or another government agency.
• You need urgent interim relief (freezing order, receivership, injunction) and an emergency arbitrator is unavailable or impractical.
• The counterparty’s only attachable assets are in Nigeria and a direct court judgment simplifies execution.
• The subject matter is non-arbitrable (winding-up, criminal fraud, tax assessment).
• Third parties whose rights are affected are not bound by the arbitration agreement.
• You seek to establish judicial precedent on a novel point of Nigerian oil and gas law.

13. WHEN (AND WHY) TO ENGAGE A LAWYER FOR THIS DECISION

• Forum selection is not a decision to defer. Engage specialist dispute-resolution counsel at the following trigger points:
• Pre-dispute, contract drafting. Before signing a production sharing contract, EPC agreement, gas sale agreement or financing document, have counsel review and tailor the arbitration clause (seat, rules, emergency arbitrator, multi-contract consolidation, carve-outs for interim court relief).
• On receipt of a dispute notice or demand letter. Immediate legal advice preserves rights to interim relief, avoids waiver of the arbitration agreement by taking steps in court, and ensures limitation periods are observed.
• Before commencing proceedings. Counsel should assess arbitrability, identify the correct forum, map the counterparty’s assets for enforcement planning, and evaluate whether the NUPRC ADRC should be engaged first for upstream matters.
• When enforcement or execution is needed. Converting an arbitral award to a judgment in the Federal High Court, or executing a court judgment through garnishee or receivership, requires procedural expertise and knowledge of current practice directions.
• When regulatory action intersects with a commercial claim. Disputes that straddle the boundary between arbitrable commercial claims and non-arbitrable regulatory matters demand a hybrid strategy only experienced counsel can design.

Need Legal Advice?

This article was produced by Global Law Experts. For specialist advice on this topic, contact Theo Osanakpo at Dr. T.C Osanakpo & CO, a member of the Global Law Experts network.

Sources

Arbitration and Mediation Act, 2023, PLAC / National Assembly Record

Petroleum Industry Act, 2021, Official Gazette

Nigerian Upstream Petroleum Regulatory Commission (NUPRC), ADR Centre and Newsroom

UNCITRAL Model Law on International Commercial Arbitration

Sections 251(1) (P) and 254(C) of the Constitution of Federal Republic of Nigeria 1999 as Amended

Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention)

National Industrial Court of Nigeria, ADR / Published Judgments Portal