A case for Arbitration in the Resolution of Commercial disputes in Nigeria

In the wake of the Covid-19 pandemic and the wide-spread effect of ‘my lord, may I?’, court proceedings and litigation generally has suffered and is currently suffering a huge blow. Before now, the world had commenced the process of progressing from litigation to join the train of Alternative Dispute Resolution (“ADR”) mechanism, of which arbitration forms a part.

Generally, litigation involves the resolution of a dispute through a legal proceeding in a court for the determination of rights, while ADR refers to the means of settling disputes outside courtroom procedures and proceedings. ADR has been described commonly, as the future of dispute resolution and if there was any obvious effect of the COVID -19 pandemic, it is the launch of a new world- the future.

Arbitration as a form of ADR according to World Intellectual Property Organization (‘WIPO’), is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision in form of an award on the dispute. Arbitration is a private procedure and as such, it requires the agreement of parties for the process to be explored as a means of dispute resolution.

Although it is not as common as it should be in Nigeria, arbitration is widely accepted in international trade and commerce as a viable means of resolving a dispute. Commercial Arbitration is a means of resolving disputes arising from commercial transactions between parties by abiding by the decision (arbitration award) of the chosen arbitrator(s).

Arbitrations are mostly used for disputes in commercial transactions because of its very formal nature as compared with mediation and other forms of ADR. In recent times, most commercial contracts, even those drafted in Nigeria, now include arbitration clause which shows the intention of parties to explore the option of arbitration when disputes arise regarding the contract.

Asides the effects of the pandemic, arbitration is desirable when compared with litigation because of its speed. The average number of years for the conclusion of litigation from a High Court through to Supreme Court in Nigeria is about 12 years or more, depending on the number of parties involved in the action. On the average, however, it takes an average 3 months generally, for arbitrators to produce an arbitral award on a dispute. Parties may sometimes decide on the approach which an arbitral tribunal will take, but usually, the panel focuses on the project until an award is given which is very unlikely in litigation.

Arbitration is also very desirable because of the parties are involved in choosing an arbitrator and in making their choices, parties may consider the expertise and experience of an arbitrator on the subject matter in dispute. This choice is impossible in litigation because when an action is filed, the Administrative Judge decides on who the action is assigned to.

An Arbitrator is usually fully dedicated to resolving a particular referred dispute without interference from other cases. A plus for arbitration is the level of privacy and confidentiality that can be ensured when it is explored. Unlike litigation, the principle of law which requires publicity and openness for court proceedings is not binding or relevant in arbitral proceedings.

An arbitral award is as good as final under Nigerian laws as there is no provision for appealing an award on merits although an award may be set aside subject to the grounds provided for in Sections 29 and 30 of the Arbitration and Conciliation Act, Cap A18, Laws of the Federation 2004 (“ACA”). An award may be set aside only where it was obtained improperly or tainted by fraud or where the arbitrator misconducted herself, and finally, where the award relates to matters beyond the scope of issues that can be decided through arbitration.

When an award is set aside, parties have to commence the rigorous procedure of commencing the action at a trial court with the appropriate jurisdiction and the concluded arbitration becomes a nullity. Considering the courtroom-culture that is prevalent in Nigeria, it will take a steady and consistent move by both legal practitioners as well as the society to see arbitration as an end, rather than a means to an end, otherwise, its finality may not be welcomed by parties who adore the options of appealing decisions.

The inability to appeal an award on merit is not the only factor to consider when opting for arbitration over court proceedings. In deciding for arbitration, it is also important to take cognizance of the cost implications which is the highest when compared with other forms of ADR. Arbitrators’ fees are mostly very high depending on the expertise and experience and the cost implications may be just a little lower or even higher than the cost implications of court proceedings.

Some formalities are still also relevant in arbitral proceedings when compared with other ADR forms where a simpler and less complex operating systems are used in resolving disputes. This might also be regarded as one of the great benefits of arbitration considering that it makes the dispute resolution process more coordinated and usually less cumbersome as the procedure applicable in courtrooms. For arbitration, an exchange of points of claim and defence as well the documentation of all correspondence is required.

As currently apparent, court-room procedures are unable to meet the high demands of numerous complex commercial disputes which are unfolding daily in the country. The several regulatory bodies of Courts in Nigeria over the months issued guidelines and practice directions for litigations in the country and most cases pending before the courts to be considered within the period of the pandemic were restricted to criminal cases or time-bound cases.

Contrariwise, arbitrations are not limited or affected by the pandemic as such because of the existing procedure of Virtual Arbitrations already explored at international commercial disputes. The flexibility of parties to determine so many things regarding the procedure of ADR proceedings is a plus, even for the Nigerian legal system. Section 16.2 of the ACA provides that: “unless otherwise agreed by parties, the arbitral tribunal may meet at any place it considers appropriate for consultation among its members, for hearing witnesses, experts or the parties, or for the inspection of documents, goods or other property.” As long as parties agree to a virtual arbitral proceeding, therefore, the proceeding is valid and a dispute can be validly resolved through virtual arbitration in Nigeria.

With the possibility of resolving a dispute within 3-6 months, the choice of parties to decide on experienced Arbitrator(s) who are also experts in the industry of the subject in dispute, the opportunity to opt for either a virtual or physical arbitration and the several other benefits attached to ADR- arbitration appears to be an answer to the prayers of a lot of parties involved in commercial transactions.

It is believed that the benefits of arbitration outweigh its downside, especially where a neutral and experienced arbitrator is chosen to handle the dispute. In this future that the world has stepped in, it will be a great move and in the right direction if businesses and business owners employ arbitration in resolving commercial disputes. The overflooding courthouses and even the Nigerian judicial system will heave a sigh of relief.

Esther Olatunbosun is a legal practitioner specializing in corporate/commercial litigation and Intellectual property law. She is also a writer with a number of legal articles and creative writings credited to her name. She is based in Lagos, Nigeria and is currently an Associate at the law firm of Paul Usoro & Co.