By Ben Adoga, Abuja
Nigeria has warned that weaknesses in the international investor-state dispute settlement (ISDS) system could expose countries to damaging financial liabilities, calling for reforms that protect national sovereignty while preserving legitimate investment interests.
Attorney-General of the Federation and Minister of Justice, Prince Lateef Fagbemi (SAN), raised the concern on Thursday at the Heads of Delegations Roundtable of the Chief Legal Advisors Forum (CLAF) 2026 in Singapore.
Fagbemi said Nigeria’s position was informed by its experience in the Process and Industrial Developments Ltd. (P&ID) arbitration, where the calculation of damages demonstrated the potentially severe consequences of weaknesses in the existing dispute-resolution framework.
He said Nigeria was advocating reforms that would strengthen domestic courts rather than allow international arbitration mechanisms to bypass national judicial institutions.
The Attorney-General said the global investment dispute system required greater transparency, consistency and predictability to protect both investors and taxpayers.
“States consistently express concern about the opacity of arbitral proceedings and the unpredictability of awards,” Fagbemi said.
He identified the determination of damages as one of the areas requiring urgent reform, citing the P&ID case as a major reason for Nigeria’s position.
According to him, the use of compound interest in calculating damages in the case could have resulted in a multibillion-dollar liability with potentially devastating consequences for Nigeria’s economy.
Fagbemi said the experience had strengthened Nigeria’s advocacy for clear and predictable rules governing the calculation of damages in international arbitration.
He said the country had already taken steps to improve its domestic arbitration framework through reforms to its Arbitration Act, particularly in the area of transparency.
The minister disclosed that he had also constituted a committee of experts to review Nigeria’s bilateral investment treaties and its obligations under multilateral treaties and conventions.
He said the review was intended to ensure that Nigeria could attract and protect investment without compromising national interests or exposing taxpayers to disproportionate risks.
Fagbemi argued that minor adjustments to the existing international framework would not be enough to address what he described as structural weaknesses in the system.
“Many states, Nigeria included, believe that incremental adjustments will not address the structural imbalances embedded in the current system,” he said.
He called for clearer treaty standards, stronger procedural safeguards, improved accountability and a more balanced allocation of rights and obligations between investors and states.
The Attorney-General also stressed the importance of strengthening national judicial institutions as part of the reform process.
“Strengthening national judicial institutions is central to building long-term rule-of-law capacity and reducing over-reliance on external arbitration,” he said.
Fagbemi further urged the international investment regime to accommodate public-interest considerations, including environmental protection, climate action, human rights, community welfare and sustainable development.
He maintained that investment protection should not prevent governments from introducing legitimate regulations in the public interest.
“Nigeria strongly supports reforms that ensure investment protections do not undermine legitimate public-interest regulation,” he said.
According to him, this principle is reflected in Nigeria’s 2016 Model Bilateral Investment Treaty, which is currently under review after 10 years.
Fagbemi said the reform of ISDS had become necessary to restore confidence in the international investment regime, adding that both capital-importing and capital-exporting countries stood to benefit from a more balanced system.
He also identified alternative dispute-resolution approaches as useful mechanisms for reducing costs, preventing escalation and encouraging parties to resolve investment disputes before they develop into prolonged arbitration proceedings.
The minister said Nigeria remained committed to working with other countries towards an international dispute-settlement framework that protects investment while respecting national sovereignty and legitimate public-interest regulation.
