COMMERCIAL ARBITRATION IN NIGERIA: AN INTRODUCTION[1]
BY
ADAEZE SAMUEL[2]
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| Source: Google |
1.
INTRODUCTION
Federal
Republic of Nigeria being a major commercial hub in West Africa utilizes both
domestic and international commercial arbitration in dispute resolution. Commercial activities in various sectors of
the economy have increased the need for faster dispute resolution mechanisms.
Arbitration is a mechanism for settling disputes. In a survey taken of Supreme
Court of Nigeria it takes an average of six years for contested cases to go
from filing to judgement[3].
Litigation is the most established form of dispute resolution in Nigeria. It has
proven to be time consuming and expensivewhich is not beneficial to parties of
a commercial dispute.
Domestic
arbitration is a procedure for settling dispute within a particular state or
country. Within domestic jurisdiction arbitration is a dispute resolution
mechanism. However in the international sphere arbitration is regarded as the
most preferred form of settling global commercial disputes between parties[4]. This
paper will introduce commercial arbitration, its features and advantages. It
will focus on the legal framework in Nigeria for international commercial
arbitration in a bid to shed light on its characteristics,.
2. NATURE OF ARBITRATION
Arbitration
is a binding form of alternative dispute resolution. Alternative dispute resolution
also known as ADR is the application of methods, procedures and skills designed
to achieve an agreement that is acceptable to all parties[5].Arbitration
is not officially defined in Arbitration and Conciliation Act or the Lagos
State Arbitration Law. Neither is defined in the UNICTRAL Model Law on
International Commercial Arbitration. This is to allow the term to be adjusted
to fit changing perspectives of what arbitration entails. However Article II.2
of Convention for the Recognition and Enforcement of Foreign Arbitral Awards
(the New York Convention) provides:
“Each Contracting State shall
recognize an agreement in writing under which the
parties undertake to submit to arbitration …”
Arbitration
has the following features;
·
it is a mechanism for
settling disputes as mentioned earlier,
·
it is consensual,
·
it is a private
procedure
·
it ends with a final
and binding determination of the rights and obligations of the parties.
Arbitration
is a mechanism for settling dispute
Nigerian
laws[6]
and institutional rules of arbitration[7]
encourage that if there is no dispute there can be no arbitration. However
where the parties settle their dispute during the arbitral proceeding. The
arbitral tribunal shall terminate the proceedings and if requested by parties
record the settlement as an arbitral award on agreed terms[8].
If the arbitral tribunal deems it improper to recording the settlement as an
award it can object to this.[9]
Arbitration
is consensual
Arbitration
is based on the consent of parties. This means parties must have consented to
arbitrate disputes that arise between them and the authority of the arbitral
tribunal is limited to what the parties have agreed on. It is a consensual
procedure based on the agreement of parties. A Court may set aside an award,
wholly or in part, if it finds that:
“the award contains
decisions on matters which are beyond the scope of the submission to
arbitration …”[10] Likewise a court can refuse to recognise or
enforce an award if it finds that it contains decisions on matters exceeding
the scope of the submission to arbitration.[11]
Most of the time arbitration agreements are arbitral clauses in the main
contract. This arbitral clause provides for the settlement of a dispute that
may occur in the future. When the dispute arises parties no longer are in
agreement that dispute should be settled through arbitration. These are all semi-consensual.
Two scenarios occur when parties do not agree to submit to arbitration. One the
claimant may turn to court but will be prevented from doing so by the
respondent and will be forced to proceed to arbitration. “Where a party initiates a court action in breach of an arbitration
clause, the court shall, on the request of a party, stay its proceedings and
refer the parties to arbitration – provided that the requesting party has not
filed its first statement on the substance of the dispute.”[12]On
the other hand the respondent may refuse to participate with an arbitration
commenced by the claimant in line with the arbitration agreement. Regardless of the arbitral tribunal can
continue proceedings and give an award based on evidence before it[13].
Arbitration
is a private proceeding
Arbitral
proceedings are not open to the public because they are not part of the court
system. Arbitral proceedings are private
and should not be presumed to be confidential. A cloak of confidentiality is
accorded to arbitral proceedings in Nigeria. The tribunal must ensure parties
are given full opportunity to present their case and are treated with equality.
Arbitration
ends with a final and binding determination of the rights and obligations of
the parties.
Arbitration
must end with final and binding award as specified by Arbitration rules. Any
procedure that doesn’t end with such a final determination of rights and
obligations of parties is not arbitration. An award shall be made in writing
and shall be final and binding on the parties.[14]
This is the most important feature of international commercial arbitration.
Article III of New York Convention[15]
requires its contracting states to
“recognize arbitral awards as binding and enforce them in accordance with the
rules of procedure of the territory where the award is relied upon...”.Nigeria
is one of such 156 states.
Parties
choose to settle their disputes with arbitration because of efficiency,
enforceability, even-handedness and expertise.
Commercial parties value certainty. Arbitral proceedings are more
efficient than litigation. It has lower costs and faster decisions than
litigation. Recently doubts have arisen to these traditional arguments in
favour of arbitration. It should be noted that the cost saved with the
commencement of litigation in court is quickly lost to inefficiency and delay.
It
is important to note commercial arbitration is popular because of the
comparative ease of enforcement of an award as compared to the enforcement of a
judgment of a foreign court.[16]
With litigation, unless there is a treaty between the State in which the
judgment was issued and the State in which enforcement is sought, the requested
court is under no international obligation to enforce the judgment.
In
arbitration parties choose constituted arbitral tribunal. It’s a norm that in a
panel of three arbitrators each party shall nominate an arbitrator. Both
arbitrators then choose a third presiding arbitration. This process instils
confidence in the parties because judgment from such tribunal will be easily
accepted. In litigation parties play no role in choosing the presiding judge.
Another
advantage of arbitration is that it allows parties to choose persons with
specialised knowledge to judge a dispute. As such a Civil Engineer can serve as
an arbitrator over a construction dispute. In litigation cases are assigned to
judges based on expediency and not on expertise.
3.
LEGAL
FRAMEWORK
The
New York Convention is the bedrock of international commercial arbitration. It provides
regulations for arbitration agreements and arbitral awards. The 156 States that
have ratified the Convention have committed themselves to recognizing arbitral
agreements and, when one of the parties requests it, referring the parties to
arbitration, even when the arbitration is to take place in a foreign country.
By
making such a commitment they have also agreed that their courts will not
exercise jurisdiction over the substance of the dispute so long as either party
insists upon the arbitration clause. The 156 states must recognise and enforce
an arbitral award in accordance of procedures of enforcing domestic arbitral
awards.
Harmonized
national laws sprung up after the introduction of UNICTRAL Model Law in
1985. The Arbitration and Conciliation
Act was passed as a Federal Law in 1988. The ACA provides a unified legal
framework for the fair and effective settlement of commercial disputes through
arbitration and conciliation.[17]
This Act applies both to domestic and international commercial arbitration. It
is modelled after UNICTRAL Model Law but has some modifications.[18]
Also the Lagos State Arbitration Law 2009 provides a law for the settlement of
disputes through arbitration.
CONCLUSION
Arbitration
can be seen as a consensual procedure which ends with a final and binding
award. It is a preferable form of dispute resolution for commercial arbitration
as it is efficient and enforceable. Commercial arbitration is not only encouraged
by Nigerian legislations but is making the country a reputable point of
arbitration in Nigeria.
[1]Delivered at Equity
Law Firm Meeting held at Faculty of Law,Lagos State University on the 3rd
day of March 2017.
[2] Arbitrator. Partner at Equity Law Firm.
[3] Lagos State Ministry of Justice.
[4]2015 International Arbitration Survey:Improvements and Innovations
in International Arbitration carried out by School of International Arbitration,
Queen Mary University of London in partnership with White& Case LLP.
[5] Alternative Dispute Resolution bySchool of Law,National Open
University of Nigeria.
[6] Long title of Arbitration and Conciliation Act 2004. Long title of
Lagos State Arbitration Law 2009.
[7] Lagos Court of Arbitration Model Clause.
[8] Section 25, Arbiration and Conciliation Act.Section 45 and Lagos
State Arbitration Law.
[9] Section 25(1), ACA.
[10] Section 48(a)(v) of the ACA. Section 55(2)(v) of the Lagos State
Arbitration Law.
[11] Section 52(2)(a)(v) of the ACA. Section 57(2)(e) of the Lagos State
Arbitration Law
[12]Section 4, ACA. Section 6 of the Lagos State Law
[13] Section 21, ACA. Section 41, Lagos State Arbitration Law.
[14]Article 32(2) of the Arbitration Rules in the First Schedule to the
ACA.
[15]Convention for the Recognition and Enforcement of Foreign Arbitral
Awards
[16]65% of the respondents to the 2015 Queen Mary International
Arbitration Survey identified enforceability of the award as the most important
feature of arbitration.
[17] Preamble, Arbitration and Conciliation Decree,1988 now cited as Cap
A18 2004 Law of the Federal Republic of Nigeria
[18] The ACA is listed on UNICTRAL’s official list as based on the Model
Law.
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