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Overview: Arbitration Proceedings in Nigeria

Published on : June 2019
Author(s):Several

Arbitration Proceedings in Nigeria

Trade is connected with the potential for strife, and the development of globalization in business implies that the potential for conflict has also developed exponentially. Then what can be considered to resolve such disputes occurring out of these commercial proceedings? Disputes eventually need resolution, and in commercial tradings, this means litigation, arbitration or any other alternative dispute resolution procedure. Courts are described by solidness, the judges are randomly allocated, and the procedures are strict and rigid. On the other hand, formation, and construction, the arbitration system is unique and adjusts to every particular case. Judges might be designated by the parties to the case, the tenets of the system and the relevant law can be indicated, and, it very well can be chosen where the mediation will occur.

Nigeria is one such jurisdiction which has adopted Arbitration as one of its alternatives to Court’s Dispute Resolution procedure for the smooth and immediate solution of the conflicts. The principle law that governs arbitration in Nigeria is The Arbitration and Conciliation Act 1988(ACA), which is functional over the federation except for Lagos State as it has its law, The Lagos State Arbitration law, 2009 (LSAL).

The Nigerian Arbitration law is derived mainly from statutes both international as well as local. The international statutes include:

  1. The UNCITRAL Model Law; 
  2. The UNCITRAL Arbitration Rules; and
  3. The New York Convention.

While the local statutes are:

  1. The Arbitration ACT 1914; and
  2. The Arbitration and Conciliation Decree 1988.

Nigeria is a contracting state party to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the Convention). Nigeria endorsed the Convention on 17 March 1970, and it went into power on 15 June 1970.

As for the Article I of the Convention, the pertinent Nigerian law gives that any international or foreign decree dependent on the Convention might be perceived and upheld in Nigeria if the contracting state party where the decree was issued has equal enactment perceiving the authorization of arbitral decrees made in Nigeria as per the arrangements of the Convention. That law also confines the applicability of the Convention to only conflicts emerging out of a lawful relationship that is legally binding.

The essential legal requirement, as contained in section 1(1) of the ACA is that every arbitration agreement shall be in writing or must be contained in a written document signed by both the parties. Section 1(2) provides that: ‘Any reference in a contract to a document containing an arbitration clause constitutes an arbitration agreement if such contract is in writing and the reference is such as to make that clause part of the contract.’

The above requirements will be satisfied provided the agreement is contained in:

  1. a document by both parties;
  2. an exchange of letters, correspondences, telegrams or other means of communication that provides a record of the arbitration agreement; or
  3. exchange of certain points of claim and defence.

Section 2 of the ACA is unequivocal on the non-enforceability of an arbitration agreement. It gives that, except if a contrary intention is mentioned in the agreement, an arbitration agreement shall be unavoidable except by agreement of the parties or by leave of the judge or a court. It must also be noted that there is no provision on joinder of any third parties in the ACA. Although, the LSAL, which is applicable only within the state of Lagos, provides that a party can, by application in writing and with the consent of the parties, be joined to arbitral proceedings.

The Arbitration and Conciliation Act (“ACA”) does not explicitly list conflicts that are not arbitrable. The test is whether the conflict can be settled legitimately by method for accord and fulfilment (United World Ltd Inc v MTS (1998) 10 NWLR 106). The accumulative opinion of the legal scholars is that any such matters that affect the legal status of any individual are not arbitrable. A recent court decision mentions that such commercial conflicts resulted out of the fiscal clauses of contracts are not arbitrable, as the debate impacts on the government's duty of tax collection.

Some examples as to arbitrable and non-arbitrable matters are as follows:

 Disputes that can be settled by arbitration include:

  1. Breach of contract
  2. Matrimonial causes
  3. Tort
  4. Compensation for acquisition of land.

Arbitration cannot be used in settlement of the following matters:

  1. Disputes involving crime
  2. Disputes involving the interpretation of the constitution or other statutes.

The proceeding of arbitration is much the same as to that of usual trial where parties to the dispute go through the procedure of examination of witnesses. This is but subject to any contradicting agreement by the parties as to whether the arbitral tribunal shall decide whether the arbitral proceedings shall be conducted (Section 20 Arbitration and Conciliation Act).

An arbitration proceeding is provided for under section 15 of the Arbitration and Conciliation Act.

Section 15 provides thus:

  1. The arbitral proceedings shall be by the procedure contained in the Arbitration Rules set out in the First Schedule to this Act.
  2. Where the rules referred to in subsection (1) of this section contain no provision in respect of any matter related to or connected with a particular arbitral proceedings, the arbitral tribunal may, subject to this Act, conduct the arbitral proceedings in such a manner as it considers appropriate to ensure a fair hearing.
  3.  The power conferred on the arbitral tribunal under subsection (2) of this section shall include the power to determine the admissibility, relevance, materiality and weight of any evidence placed before it.

JamesMiller & Partners Ltd. v. Whitworth Street Estates (Manchester) Ltd (1970) A. C 583 at 606.

In arbitral proceedings, where the tribunal for arbitration determines on its own procedural rules, it is totally on its discretion to derive them from national law or formulate its own rules. It is imperative for the arbitral tribunal to observe the requisite rules of national law applicable to international arbitration in the national jurisdiction where the arbitration takes place to make sure that the decree to be made by it will be enforceable at law Arbitration being a matter of procedure as opposed to a matter of substantive law is governed by the lex fori (the law of the country in which an action is brought)

As per section 14 of the Act, parties will be qualified for equal treatment, and they ought to be offered a chance to introduce their cases. The venue of arbitration will be decided by the tribunal with due respects to the issue and the convenience of the parties. The tribunal likewise can appoint and expected to provide details regarding the issue before it while it could also order the presence of a witness.

The detailed procedure under ACA and its practice, certain procedural stages are required to be followed, especially for the institution to be valid or commencement of arbitral proceedings.

These include:

  1. Issuance of communication of the notice of arbitration by the claimant to the respondent in the format prescribed. As per Article 3 of the Arbitration rules, 30 days’ notice is mandatory.
  2. Constitution of the tribunal.
  3. Meetings (preliminary meetings, pre-hearing meetings, pre-hearing review, an inspection of documents or subject-matter, etc.).
  4. Hearing and determining preliminary issues if any.
  5. Parties’ presentation of cases, documents and evidences.
  6. Hearing (if oral evidence is to be considered).
  7. Re-hearing in the event of replacement of an arbitrator. Note that the re-hearing is mandatory in the event of replacement of the sole or preceding arbitrator, but in the event of replacement of any other arbitrator, re-hearing is at the discretion of the tribunal.
  8. Final submissions (oral or written).
  9. Publication of the final decree of the tribunal to the parties.
  10. Apart from the above, there are other procedural steps under ACA, such as the procedure for the default of parties in appearance and presentation of a case and pleadings, the procedure for the challenge of arbitrators, the procedure for enforcement of an award or challenge of enforcements, etc.

Under ACA, parties have the autonomy in appointing arbitrators of their choice. This autonomy is although limited to the extent that the arbitrators appointed shall be independent and not partial and shall also give a declaration or disclose any such instances that may affect the independence or their impartial nature. The so chosen arbitrators shall possess the required experience and professional qualifications contained in the arbitration agreement to have a legitimately constructed tribunal and, consequently, a valid decree pronounced by it.

Where the parties do not agree upon the method of appointment of the arbitrators, or where the method so chosen by them fails, the arbitrators will be appointed by the court.

An arbitral award is perceived as binding and upon application recorded in writing to the court, be enforced by the court. The party relying on the decree or applying for its implementation will supply-(a) the appropriately authenticated original award or properly certified duplicate thereof; (b) the original arbitration agreement or a duly certified copy thereof. As per section 31 of the Arbitration and Conciliation Act, It ought to be noted that any of the parties to the agreement may ask for the court to reject acknowledgement or enforcement of the decree/award.

Although the arbitration process is considered for several of its benefits ranging from speed and informality of the process, cost-effective, parties have the control over selection of the arbitrators, the processes are private and do not form the part of public records, it cannot be overlooked for its drawbacks as compared to a court proceedings. Like the absence of formal evidence process, lack of formal appeals process, mandatory arbitration clauses, arbitrators may not be unbiased, and the very fact that arbitration proceedings are not public may put one side at a disadvantage.

Such an alternate dispute resolution process when putting to use minus the disadvantages can be beneficial in unloading the court’s pressure of handling disputes.