How Arbitration Can Draw Foreign Investments Into the Entertainment Industry, By Justin Ige

…experience has shown that apart from piracy concerns, as valid as those are, likely investors are indeed concerned about the general legal framework for the industry, as investments are captured in rights, embedded in the music and films produced. These rights constitute the real value of any potential investment.

An efficient dispute resolution system well suited for any industry is an integral ingredient for its growth and prosperity. I am convinced that arbitration is more suitable for the Nigerian entertainment industry, over and above the regular public courts and as against other Alternative Dispute Resolution methods too. I am also convinced that in order to encourage much needed foreign investments, the entertainment industry needs to look towards arbitration and its gains.

The Nigerian entertainment industry was not always as lacking in foreign investment as is now the case. The upsurge of piracy in the late 1970s was responsible for chasing out the little foreign investments that was then present in the music industry. The Nigerian recording industry in the early seventies had foreign investments from multinational recording companies such as Philips, which later became Polygram; EMI, which later became Ivory; and Decca, which also became Afrodisia. However, notwithstanding international collaborations with pioneer film maker, Hubert Ogunde, the film industry did not enjoy foreign investments from any international/multinational studios, like the music industry did.

Piracy is still keeping foreign investments out, even today. However, there is no doubt that the Nigerian entertainment industry in recent years has seen an unprecedented boom. Our music and movies dominate Africa and continues to make its mark on the world stage. This is despite the lack of foreign investment. African countries with less popular music and film industries have more international presence and investments, for example, South Africa.

The reason for this lack is not farfetched. Investors don’t like uncertainty. They like to see structures, clear means though which they can safely predict return on their investments. I am not talking about the kind of investment an Akon would have made when he signed some Nigerian music acts, nor am I talking of isolated deals between a few Nigerians and some international companies. I am talking about foreign direct investments capable of positively affecting the industry as a whole. I am interested in foreign/multinational entertainment companies setting up shop in Nigeria like they once did, or acquiring substantial interests in Nigerian companies.

The Nigerian entertainment industry might be a bit of a ‘jungle’ but due to the huge opportunities available in the industry (amongst other reasons), international entertainment industry heavy weights are having interactions with the industry actors and considering investment opportunities. Jay Z has even been reported as having such considerations.

However, my experience has shown that apart from piracy concerns, as valid as those are, likely investors are indeed concerned about the general legal framework for the industry, as investments are captured in rights, embedded in the music and films produced. These rights constitute the real value of any potential investment.

As Nigerians continue to interact in several ways with the rights of potential foreign investors as these relate to international copyrighted works, the Nigerian legal framework continues to be put to test, particularly when disputes arise – as it is bound to happen in any human interaction. It has become clear to me that unless investors are assured of a quick, efficient, effective and competent dispute resolution system, they may remain shy of the Nigerian entertainment industry and continue to avoid a full plunge.

With arbitration, parties can control the pace and indeed set deadlines for dispute resolution proceedings. Entertainment disputes need to be resolved quickly because the industry churns out mostly music and film which tend to have significantly depreciated value or appeal to the consuming audience after only about a year, sometimes less, sometimes a little more. No investor wants to be bogged down litigating for several years while the value of his or her investment is being washed away by the gimmicks of lawyers.

Arbitration offers a more efficient and effective way to the rather effective tool of criminal prosecution/litigation, as commercial disputes are not better served by a system with an objective to punish or by a system almost certain to destroy relationships worth preserving.

Many of the Nigerian judges in public courts before whom entertainment disputes may come in civil litigations are barely equipped to handle entertainment disputes which can be of highly technical nature. Familiarity with international industry standards, practices and terms are necessary for competent adjudication. With arbitration however, parties to a dispute can take the care to appoint arbitrators who have the necessary competence.

Other Alternative Dispute Resolution methods may not be as suitable for resolving entertainment disputes in Nigeria because many of the players continue to demonstrate a lack of will to make concessions in disputes even when it makes all the sense in the world to make concessions. Such concessions are necessary for the success of other Alternative Dispute Resolution methods such as mediation, but dispensable in arbitration.

Interestingly, many entertainment contracts in Nigeria are increasingly beginning to have arbitration clauses. It will also be great to see parties to a dispute submit to arbitration even in the absence of arbitration clauses and hopefully, the use of arbitration will grow in the Nigerian entertainment industry and thus help to instill some more confidence in the industry and thereby encourage the much needed foreign investment.

Justin Ige is a music technologist, multi-instrumentalist, media and entertainment legal practitioner and member, Chartered Institute of Arbitration (UK).