Arbitration is a private dispute resolution mechanism established for the settlement of disputes by a neutral third party (the Arbitrator) or panel of neutrals referred to as the Arbitral Tribunal.
Amongst the key features of the arbitration process is the parties’ agreement to arbitrate. The agreement to arbitrate is the foundation of any valid arbitration. It is the basic source of the tribunal’s power and authority to arbitrate the dispute between the parties. The contractual nature of the arbitration requires the consent of each party for an arbitration to happen. Without an arbitration agreement, there can be no arbitration.
Litigation is the widely known method of conflict resolutions; conflicts are inevitable in a business relationship or interpersonal relationship. In the Nigerian legal system, parties resorting to Litigation resolve conflicts, where an aggrieved party brings an action in court against the offending party. Likewise, we have Arbitration as a means of dispute resolution, it is preferred because it is cheaper, faster and it preserves the relationship between the parties after it is concluded.
The main advantage of arbitration is to avoid long and expensive litigation process. The process of arbitration in Nigeria is cheaper and it allows individuals to represent themselves easily although they are allowed to have legal representation.
Arbitration is classified under the Alternative Dispute Resolution, which includes:
- Reconciliation and
We will discuss briefly on the varying methods bearing in mind that arbitration is our focal point.
Mediation: Mediation is a process in which a neutral and impartial third party called the mediator is invited by the disputing parties to facilitate the resolution of the dispute. The mediator facilitates communication, promotes understanding, focuses the parties on their interests and uses creative problem-solving techniques to enable the parties to reach their own mutual settlement/agreement. Both parties jointly procure the mediator and the process is voluntary as the parties are not under an obligation to accept the suggestions of the mediator.
Negotiation: this is a problem-solving process in which the parties to a conflict or an imminent conflict voluntarily come together either personally or by their representatives to discuss their differences and attempt to reach a joint decision or resolution of the conflict, on their own and without the involvement of a third party.
Negotiation is different from other types of alternative dispute resolution mechanism as no third party is involved. It is the most private ADR technique. Also, it is less formal and technical since it involves only the parties to the dispute. There is no external interference that could complicate their issues. Again, unlike other alternatives, it can be used in both criminal litigation (plea bargaining) and civil litigation.
Conciliation: Conciliation has a lot of similarities to mediation. However, while mediation has no statutory protection, conciliation is statutorily protected and regulated by the Arbitration and Conciliation Act (ACA). Conciliation is a system of ADR where a third party known as the conciliator uses his best endeavours to bring the disputing parties to a voluntary settlement of their dispute.
The law that governs arbitration in Nigeria is The Arbitration and Conciliation Act 1988, which is applicable over the federation except for Lagos State that has its own law, The Lagos State Arbitration law, 2009 (LSAL).
It must be noted that not every dispute can be resolved through Arbitration. Therefore, there are arbitral matters, which can be settled by arbitration; and non-arbitral matters which cannot be settled through arbitration.
Arbitral matters include:
- Breach of contractual agreement
- Matrimonial causes ancillary matters e.g. division of property.
- Compensation for compulsory acquisition of land/ land disputes.
Non-arbitral matters include:
- Criminal matters in general except plea bargain
- Election petitions being a matter of public policy
- Matrimonial causes such as the dissolution of marriage, nullity of a void marriage etc
Procedure for Originating an Arbitration process
Where there exists an Arbitration clause in an agreement or an independent arbitration agreement, such an arbitration clause or arbitration agreement operates as a bar to litigation and precludes the parties from going to court until the arbitration has been concluded. Thus, where a party to such a dispute commences an action in court in breach of the arbitration agreement between the parties, the court may on an application of the other party, stay the proceedings in that case and refers the parties to arbitration.
Statutory arbitration clause:
Statutes establishing some bodies stipulate that disputes between the body and another party shall first be referred to arbitration. Such provision serves as a bar on the right of any of the parties to institute any action in court until the arbitration has been taken and concluded. For example, The United Nations Commission on International Trade Laws (UNCITRAL) Model Arbitration Clause for Contracts states that:
“Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules.
For an arbitration to be valid the following condition precedence must be followed:
- It must be in writing: The ACA and the LSAL both require that the arbitration agreement should be in writing. It is mandatory that an arbitration agreement is in writing as it is proof of parties’ intention to submit to arbitration. It is a writing contained in a document signed by the parties, or in an exchange of letters, other means of communication which provide a record of the arbitration agreement.
- Agreement to arbitrate: One of the important features of arbitration is that it shows that the parties have consented to resolve their dispute by arbitration. So where there is no voluntary agreement by the parties, then there is no valid arbitration.
- The scope of the arbitration: The arbitration agreement must determine the scope of the arbitral tribunal’s jurisdiction. That is the subject matter of the dispute must be determined.
- 4. Number of arbitrators to appoint: This will usually depend on the complexity of the dispute and value of the claims. In simple and small arbitrations, it is advisable to appoint a sole arbitrator unlike in complex and high-value arbitrations where having a panel of three arbitrators would be more appropriate.
- 5. Choice of arbitrator: The parties have the right to stipulate the procedure for appointing their arbitrators. An Arbitrator can be appointed by the parties, the court, or by an institution. Parties should be careful when specifying the qualifications of the arbitrator or the tribunal. Except in submission agreements that are for existing disputes, it is not advisable for parties to specify the name of the arbitrator in the arbitration agreement, as they do not know if the specified arbitrator will be available when disputes arise.
- The Location of the arbitration: The choice of the seat of the arbitration is an important consideration as it determines which national law that would govern the arbitration as well as the courts which would have the power to provide support to the proceedings.
- Confidentiality: While arbitration is essentially a private and confidential mechanism, many national laws including the ACA do not provide for the confidentiality of the proceedings and the award. Consequently, it is advisable for parties to regulate it in their arbitration agreement.
- Hearing: Hearing during arbitral proceedings are less formal and private unless the parties agree otherwise. The claimant files to state his points/statement of claim within the prescribed time. Where the defendant fails to submit his points/statement of defence, the tribunal shall proceed with the arbitration except where the party in default shows good cause for such default. Such default on the part of the defendant should, however not be treated by the tribunal as an admission of the claim of the claimant.
- Language: Language of the arbitration and Applicable arbitration law that would govern the proceedings.
- Arbitral Award: This is the decision of the arbitral tribunal. It determines the rights of the parties with finality. The award shall be in writing and should contain the following: the names of the parties; the reasons for the award unless the parties earlier agreed that no reason should be given by the arbitrator; the date the award was made; the place where it was made. The arbitrator or majority of the arbitrators must then sign it.
One of the advantages of arbitration is the independence enjoyed by the parties in deciding how they want their arbitration conducted. The parties can exercise this independence when drafting their arbitration agreement to ensure that they obtain the utmost benefit from the process.
It is pertinent that parties owe an obligation to themselves to ensure that they carefully modify their arbitration agreement to suit their needs while ensuring that the essential requirements of a valid arbitration agreement are satisfied. When all this is met they are assured of enjoying the benefits of speed and effectiveness associated with the arbitration process.
By Litigation, Arbitration & Disputes Resolution Section at Resolution Law Firm, Nigeria