International Commercial Arbitration: An Effective Tool for Resolving Commercial Disputes in Nigeria

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International trade and the global economy have made international commercial contracts and transactions to be on the rise. Commercial contracts these days cut across more than one State. They may be between two States or a State and a private person or between two private persons.

In the course of executing these contracts, disputes may arise and because of the international nature of the contracts, resorting to national courts may not be suitable because of the risk of exposing the subject matter of the suit to the public and wasting business time in litigation. This makes International Commercial Arbitration (“ICA”) to be desirable.

Indeed, ICA is suitable for cross border commercial transactions and contracts. It is a more efficient option to litigation before national courts. ICA may be institutional or ad-hoc. Institutional arbitration involves referring the dispute to an arbitral body. Usually, the body has its laid down rules and procedure and parties agree to be bound by them. While in ad-hoc arbitration, parties appoint their Arbitrators, choose the governing law and procedure most suitable to them. The parties agree on the entire arbitral process.

Before ICA proceedings can be commenced there must be a prior agreement by parties to resort to ICA. This usually takes two forms. In the first instance, the parties at the beginning of their relationship sign an arbitration agreement stipulating that in the event of any dispute arising out of the contract; it will be settled by arbitration. The arbitral agreement would specify important elements like the scope of the dispute, adoption of an institutional arbitration or ad-hoc arbitration, number and means of selecting Arbitrators, venue of the arbitration proceedings, language of the conduct of arbitration proceedings, governing law, procedural rules, cost of the proceedings and Arbitrator’s fee. It is important to set these out in details to avoid unnecessary conflicts.

In the second instance, in the absence of an arbitration agreement, where a dispute arises, one of the parties may issue to the other party a request to submit to arbitration. The submission agreement would contain the aforementioned elements and once the other party accepts the request, the dispute would be referred to arbitration.

It is important to note that there must be an agreement by parties to refer a dispute to arbitration because ICA is voluntary. ICA proceedings may apply international treaties and conventions, case laws, procedural and substantive national laws and rules of arbitral institutions.

One major advantage of ICA is that it allows parties to avoid technicalities of national Courts procedures. Disputes are resolved by neutral and impartial Arbitrators who are independent of any State and party. ICA also ensures timeous conduct of the proceedings. It is a flexible process which is not subject to stringent laws and procedures.

Parties can choose their Arbitrators. The choice of Arbitrators is not left to the discretion of the legal system of the State. Parties can also choose experts in the field of the subject matter of the dispute. This removes the issue of bias which a foreign party may encounter if the dispute is resolved by a national Court. It affords parties the opportunity to choose the governing law for their dispute. This allows them not to be victims of outdated or inefficient legislations.

Interestingly, arbitral awards can be enforced across borders. The United Nations Convention on the Recognition & Enforcement of Foreign Arbitral Awards of 1958 (“the New York Convention”) was enacted to simplify the process of registration and enforcement of awards in other States other than the State from which the award was made. The New York Convention makes it possible for arbitral awards to be enforced in many States of the world.

Persons from States like Nigeria, who are signatories to the New York Convention, can take advantage of it to enforce their awards. However, where a State is not a signatory to the Convention or has not ratified it, then the national laws would be relied upon to enforce the arbitral award.