Fagbemi: Urges UN for P&ID International Arbitration Reform on Damages

• Nigeria's Attorney-General, Lateef Fagbemi, urged the UN to reform international arbitration rules to protect national sovereignty in investor-state disputes.
• The P&ID case, with its compound interest-based damages, highlighted the need for clearer rules on calculating awards to prevent crippling economic effects.
• Nigeria is reviewing its bilateral investment treaties and reforming its arbitration framework to enhance transparency and balance investor protection with national interests.
• Fagbemi advocates for systemic ISDS reform, including clearer treaty standards, stronger accountability, and a more balanced distribution of rights and obligations.
• The AGF emphasized incorporating public interest considerations like climate action and human rights into investment protection, alongside strengthening national judicial institutions and using alternative dispute resolution.

Fagbemi asserted that Nigeria AGF ISDS reform is no longer a discretionary choice but an essential undertaking to uphold the legitimacy of the entire international investment regime.

Nigeria's Attorney-General of the Federation and Minister of Justice, Lateef Fagbemi (SAN), has issued a strong appeal to the United Nations, advocating for a significant overhaul of international arbitration rules. Speaking at the Heads of Delegations Roundtable of the Chief Legal Advisors Forum 2026 in Singapore, Fagbemi emphasized the critical need to safeguard the sovereignty of nations involved in investor-state disputes (ISDS). His remarks, conveyed through a statement from his Special Adviser, Kamarudeen Ogundele, underscored that any reforms to the ISDS system should bolster, rather than bypass, domestic judicial systems, while simultaneously ensuring equitable and predictable outcomes for both investors and states.

Central to Fagbemi's push for Fagbemi P&ID international arbitration reform is Nigeria's challenging experience with Process and Industrial Developments Ltd. (P&ID). This high-profile case, he noted, vividly illustrates the urgent necessity for clearer guidelines regarding the calculation of damages within international arbitration. The AGF highlighted that the substantial award in the controversial P&ID case, which was predicated on compound interest, would have inflicted a devastating blow on Nigeria's economy had it been enforced, potentially amounting to billions of dollars.

The P&ID dispute serves as a stark example for Nigeria's Attorney-General, illustrating the inherent flaws in the current international investment dispute settlement framework, particularly concerning financial penalties. Fagbemi articulated a widespread concern among states regarding the lack of transparency in arbitral proceedings and the often-unpredictable nature of awards. He stressed that Nigeria is a staunch advocate for reforms that would enhance the openness of these proceedings, foster greater consistency in arbitral reasoning, and lead to more predictable results. These elements, he argued, are fundamental for cultivating both investor confidence and state trust.

Specifically, the AGF pointed to the current reliance on the discretion of individual arbitrators or tribunals for damages calculation as a significant problem. The P&ID case, where damages were computed using compound interest, exemplifies how such discretion can lead to economically crippling outcomes. This experience underscores Nigeria's firm stance that clearer, more standardized rules for determining damages are imperative to prevent similar situations and ensure that awards are not only fair but also sustainable for national economies.

In response to these systemic challenges, Nigeria has already initiated internal reforms to its arbitration framework, aiming to promote enhanced transparency. Furthermore, upon assuming office, Lateef Fagbemi established a dedicated committee of experts tasked with undertaking a comprehensive review of Nigeria's existing bilateral investment treaties (BITs) and its commitments under various multilateral treaties and conventions. This strategic review is designed to fortify the protection afforded to investments while simultaneously safeguarding the vital interests of the country and its taxpayers.

Fagbemi asserted that Nigeria AGF ISDS reform is no longer a discretionary choice but an essential undertaking to uphold the legitimacy of the entire international investment regime. He articulated Nigeria's support for comprehensive systemic reforms, which include the establishment of clearer treaty standards, the implementation of improved procedural safeguards, the creation of stronger accountability mechanisms, and a more equitable distribution of rights and obligations between investors and states. Many nations, including Nigeria, believe that incremental adjustments alone are insufficient to address the deep-seated structural imbalances prevalent in the current system, necessitating a more transformative approach.

Beyond the immediate focus on arbitration rules, Fagbemi also championed the increased utilization of alternative dispute resolution (ADR) mechanisms. He believes that ADR can effectively reduce costs, prevent the escalation of disputes, and foster greater cooperation between parties involved in international investment disagreements. Concurrently, he highlighted the critical importance of strengthening national judicial institutions, viewing this as a cornerstone for improving the rule of law domestically and thereby diminishing an over-reliance on external arbitration.

A pivotal aspect of Nigeria's proposed reforms involves the incorporation of public interest considerations into the ISDS framework. Fagbemi firmly stated that investment protection should not impede governments from regulating in the public interest. He enumerated several key areas where public interest must be prioritized, including climate action, environmental protection, human rights, community welfare, and sustainable development. This comprehensive vision aims to ensure that international investment agreements serve broader societal goals without compromising national sovereignty or the ability of states to govern effectively for their citizens.

Lawyers advising on international investments in Nigeria should note the AGF's strong push for ISDS reform, particularly concerning damages calculation and the ongoing review of Nigeria's bilateral investment treaties. This signals a potential shift in Nigeria's approach to investor protection and dispute resolution, requiring vigilance for changes in treaty standards, arbitration practices, and the incorporation of public interest considerations.

Source: Original reporting via The PUNCH