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INTRODUCTION
Disputes often arise in interactions between private individuals or companies. Effectively resolving these disputes is crucial for maintaining healthy relationships and ensuring business continuity as lengthy litigation can stall progress and strain relationships. Arbitration as one of the alternative methods of resolving disputes in place of traditional litigation is one of the mechanisms gaining recognition and force in contemporary socio-economic and commercial environments both globally and internationally. In this article, commercial Arbitration in Nigeria and its effectiveness are examined.
2.0 What is Arbitration?
Arbitration is a procedure of settling disputes, where the parties to the disputes agree to submit such disputes to one or more independent persons called an arbitrator to make a binding decision, the decision made by an arbitrator is called an arbitral award. The agreement to arbitrate must be consensual and in writing either in the contract where the disputes arose called an arbitration clause, or the parties can subsequently agree in writing to submit such disputes to arbitration. It is a well-settled principle that an arbitration clause is severable and independent of the contract, this principle is known as the severability of arbitration clauses.
3.0 Benefits of Arbitration
- Privacy: The arbitral process and hearings are usually held in private and the parties decide what information to disclose to the public. Maintaining confidentiality is a crucial aspect for most parties to keep trade secrets or protect the integrity of the contract the dispute arose.
- Recognition and Enforcement of Awards: an arbitral award is binding on both parties and recognized by courts in different jurisdictions.
- Neutrality: parties choose the arbitrators and important elements such as the applicable law, language, and venue of the arbitration. This allows them to ensure that no party enjoys any advantage.
4.0 Institutional vs. Ad hoc Arbitration
Institutional Arbitration involves arbitration administered by a specific and specialized institution, usually following the rules of that same institution. The extent of institutional involvement differs between institutions. An example of an institutional arbitration centre is the Lagos Chamber of Commerce International Arbitration Centre.
In Ad hoc Arbitration, the parties and arbitrators independently determine the procedure, without the involvement of an arbitral institution. This allows for more flexibility, which may be especially useful where the proceedings are ‘unusual’ in some manner. What this means is that the parties choose the tribunal themselves, without reference to an arbitral institution, there is no supervision or support from any institution in relation to the conduct of the proceedings, and there is no review of the award by an arbitral institution. This does not mean that the parties cannot adopt existing rules and procedures instead of setting out tailor-made procedures.
5.0 Commercial and Investment Arbitration
Commercial arbitration is the use of arbitration to resolve a commercial dispute arising from a contract. Commercial arbitration will often be between legal entities, and individuals. Sometimes it will be between individuals but generally acting in a commercial capacity.
Investment arbitration, also known as investor-state arbitration or investor-state dispute settlement, generally takes place between a legal entity, an individual and a state. It usually arises out of a public instrument such as a bilateral investment treaty (that is a treaty between two countries as to investment between them) or a multilateral treaty (a treaty between more than two countries), such as the Energy Charter Treaty.
6.0 Arbitration in Nigeria
The use of Arbitration as an alternative means of settling commercial disputes in Nigeria is fast becoming the choice option for settling disputes. This rise is linked to the recent increase in the establishment of Multi Door courthouses in different States. Also, the rules and procedures of the various High Courts make provisions for litigants to use alternative means to settle disputes before litigation.
7.0 Applicable Arbitration Laws in Nigeria
In Nigeria, the principal national arbitration statute is the Arbitration and Mediation Act, 2023 which repealed the Arbitration and Conciliation Act (ACA), Chapter A18 Laws of the Federation. The preamble of AMA, states that the law provides a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and mediation, and make applicable, the convention on the recognition and enforcement of foreign arbitral awards, (New York Convention) to any contracting State arising out of international commercial arbitration. The Law applies to both domestic and international arbitrations.
However, since Nigeria is a federation with thirty-six States and a Federal Capital Territory, each Federated State also has an arbitration law, an example is the Lagos State Arbitration Law of 2009 (LSAL).
Other laws includes:
a. The UNCITRAL Model Law;
b. The UNCITRAL Arbitration Rules; and
c. The New York Convention, 1958
8.0 Arbitration Procedure in Nigeria
- Commencement of Arbitration – Arbitration proceedings must be initiated. Once disputes arise, the party seeking arbitration proceeding has the duty to set it in motion by “Notice of Arbitration” also known as declaration of disputes Initiating the Arbitral Proceedings. Arbitration commences on the date of a written communication containing a request for the dispute to be referred to arbitration.
- Appointment of Arbitrators– Parties can either appoint the arbitrator(s) based on the method agreed, or an appointment can be made by an institution or third party. The court can also appoint arbitrators where a dispute arises between the parties and one of the parties refuses to enter into arbitration or neglects to appoint an arbitrator.
- Preliminary Meeting– the initial meeting is an avenue for disputed parties to meet with the arbitrator to agree on certain initial points such as determining jurisdiction and powers of arbitrators, the mode of hearing whether oral or documentary; the number of witnesses, and the mode of presenting them; the fees and remuneration of the arbitrators; etc.
- Pre-Hearing Stage – The parties submit Statement of Claim and Defence to the arbitrator(s) at this stage. The Statement of Claim is submitted by the party that initiated the arbitration called the Claimant. Likewise, the Statement of Defence is to be filed by Defendant. Issues are joined and a date is fixed for hearing.
- Hearing– Hearing proceedings start based on the mode agreed by the parties, it could be documents only or witnesses and documents. Where a party fails to appear at the hearing, after adequate notice has been issued, the arbitral tribunal shall continue with the trial. After the hearing, a date for the pronouncement of the award is fixed by the arbitrators.
- Award – the arbitral award is the ruling of the arbitration tribunal. It determines the right of the parties with finality, appeals can only be made on limited grounds. See section 55 of the Arbitration and Mediation Act, 2023.
9.0 Pros of Arbitration in Nigeria
a. Arbitration arises from the agreement of the parties. Once an arbitration agreement is in place, one party cannot unilaterally revoke it and institute a court action.
b. An arbitral award is legally binding on the parties and enforceable by the court, regardless of the country in which it was made.
c. The recognition of arbitral agreements and awards in Nigeria appeals to international investors and businessmen. They may prefer arbitration over traditional litigation due to the nature of their businesses or individual bias against litigation.
d. Parties can choose their arbitrator(s) and experts with technical know-how relevant to their area of dispute. This expertise enhances the quality of decision-making.
e. In Arbitration, parties have flexibility in choosing rules and procedures tailored to their specific needs. Unlike litigation, where courts have strict rules, arbitration allows for a more customized approach.
f. Arbitral proceedings are typically faster than traditional litigation. Depending on the complexity of the issues, arbitration can be resolved within 6 months to 2 years.
g. Arbitration is less adversarial and private compared to public court proceedings. Parties can amicably resolve disputes, maintaining positive business relationships.
10.0 Cons of Arbitration in Nigeria
- Section 256(1)(a) of the Evidence Act, 2011 provides that arbitration proceedings in Nigeria are not subject to the provisions of the Evidence Act, 2011.
- Arbitration does not apply to criminal cases, election petition matters, certain matrimonial cases, interpretation of law or documents, or cases of urgency.
- Setting up the arbitration tribunal and paying arbitrators can be costly in the short run.
- The AMA streamlines the grounds for setting aside an arbitral award, excluding the “error on the face of the award” ground. Courts can set aside an award only on limited grounds related to arbitrability and public policy.
11.0 Conclusion
Arbitration is now the most favored method of resolving commercial disputes because of its advantages. Furthermore, the introduction of the AMA which incorporates global arbitration practices has given Arbitration a more international appeal in Nigeria, AMA has established a legal framework that enhances the transparency, speed, autonomy, and enforceability of arbitral awards and agreements.
REFERENCES
Types of Arbitration https://www.arbitrationanswered.com/commercial-vs-investment last Accessed on April 4th, 2024t varius vel pharetra vel. Ut consequat semper viverra nam libero justo laoreet sit. Mi quis hendrerit dolor magna eget. Nunc faucibus a pellentesque sit amet porttitor eget dolor morbi. Egestas dui id ornare arcu odio ut sem. Netus et malesuada fames ac turpis egestas maecenas. Nunc sed velit dignissim sodales ut eu sem integer. Aliquam eleifend mi in nulla posuere. Aliquet nec ullamcorper sit amet risus nullam.
David Ayo and Esther Randle, Arbitration in Nigeria https://www.mondaq.com/nigeria/arbitration–dispute-resolution/1221092/arbitration-process-in-nigerialast accessed April 3rd, 2024
Mbadugha, J. N.M, Principle and Practice of Commercial Arbitration, Lagos, University of Lagos Press & Bookshop Ltd., 2015
Non-Application of the Evidence Act in Arbitral Proceedings In Nigeria: Whither “Without Prejudice” Rule? By David Tarh-Akong Eyongndi nnd Adetoun Akwarandu (Mrs)
Oludayo Ayeni; Arbitration in Nigeria: A Closer Look. Africa Law Practice & Co
The Arbitration and Mediation Act, 2023
Tiwade Aderoju; The Nigerian Arbitration and Mediation Act 2023: A comparison with the Arbitration and Conciliation Act 2004 and global practices https://www.ibanet.org/the-nigerian-arbitration-and-mediation-act-2023 last accessed on April 4th, 2024