What everyone should know about arbitration in Nigeria

Alternative dispute resolution (ADR) is becoming increasingly popular globally and Nigeria is not left out. ADR is an umbrella term for any means of settling disputes outside the courtroom. Such means include mediation, arbitration and negotiation. This blog post will focus on helping non-technical readers understand the general concept of arbitration.

Unlike litigation which is a court based process to settle a difference or dispute, arbitration involves bringing a dispute or difference between two parties or more for resolution before a disinterested neutral person known as an arbitrator. After hearing all the sides involved in the matter, the arbitrator arrives at a decision that may be binding on the parties.

Long before gaining mainstream recognition in Nigeria, arbitration together with other forms of alternative dispute resolution has often been used by families and communities to settle various differences in customary or informal settings, thus making it an age-long phenomenon. However, the first indigenous statute on Arbitration and Conciliation was enacted in 1988 by the military administration and it came into effect on March 13, 1988. It was known then as the Arbitration and Conciliation decree 1988 (ACA 1988). In 2004, the decree was re-enacted as the Arbitration and Conciliation Act Cap A18 Laws of the Federation of Nigeria (ACA 2004). Arbitration can take two forms -- it can be voluntary or mandatory. In most cases mandatory arbitration comes from contracts voluntarily entered into by both parties without necessarily knowing. The voluntary model often occurs where parties have placed in the contracts that when dispute occurs, they’ll arbitrate rather than litigate.

In situations where arbitration is voluntary, the parties in disputes have the freedom to appoint a sole arbitrator or a tribunal of three arbitrators which further attests to the flexibility of arbitration as compared to litigation. In case of sole arbitrators, the decision of the arbitrator wanted is jointly made by the parties in dispute. However, when a tribunal of arbitrators is involved, the parties appoint one arbitrator each. The appointed arbitrators then appoint another who serves as the chairman or the presiding arbitrator. Where parties in dispute fail to appoint arbitrators, a court, a third party or an appointing authority is empowered to do it on their behalf. One important point to note is that the decision (referred to as an award) of the arbitrator(s) is binding on the parties as he/she is a quasi-judge.

Arbitration though with few disadvantages has many advantages over litigation. One of the advantages is that it takes less time compared to litigation. This is because litigation involves some laid down regulations and procedures which must be strictly followed by the parties involved. These procedures take some time to carry out. However on the part of arbitration, the rules and procedures are flexible. Another important disparity is that arbitration allows some disputes to be settled based on documents available and this in turn also allows for less time since only documents will be checked to decide the award.

Litigation takes place in the open court, attracting a lot of publicity and formality which many people usually don’t want to go through. Some even get scared at the mere mention of court trials. Arbitration however can be less formal and confidential with the parties involved in a more relaxed atmosphere. Less financial commitment can be involved in arbitration as parties in dispute may not necessarily need the appointment of legal counsels thus cutting out the huge costs associated with securing their expertise. This works well when parties agree to settle disputes with documents without hearing or when the difference is technical in nature.

The process of arbitration is quicker, therefore reducing the expenses that might be needed when compared to litigation. And that’s good for business. Also, arbitration puts the convenience of the parties in dispute into consideration. This affects the setting of dates, time and venue of hearing whereas in litigation, the court is the ultimate and its convenience is the major concern. Arbitration is flexible in the selection of arbitrator as it allows the parties in dispute to select the arbitrator that is an expert in the issue of concern. Litigation does not give that opportunity as cases can only be heard by the judge in the court of hearing.

Despite the aforementioned advantages, arbitration has its own disadvantages. For example, parties may resort to litigation when the guilty fails to implement award or in the event of a few other issues. However the merits outweigh the demerits and arbitration has come to stay in Nigeria.

Arbitration as a form of alternative dispute resolution has a bright future in Nigeria as it will go a long way to ease the queue and load of the nation’s judiciary which in turn can bring about economic growth and development as many commercial disputes will have quick resolutions. This will further strengthen the confidence of both local and international investors.

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