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What is Preventing Arbitration from Being the Main Means of Resolving Commercial Disputes in Nigeria?

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What is Preventing Arbitration from Being the Main Means of Resolving Commercial Disputes in Nigeria?

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(a) Option to litigate matters subject to arbitration

The Arbitration and Conciliation Act (“the Arbitration Act”) itself needs a total overhaul and urgent amendment. Though, Sections 4 and 5 of the Arbitration Act empowers the Court to stay proceedings and refer a dispute to arbitration, the provisions provide a leeway for a party to an arbitration agreement to renege from settling a dispute by arbitration and encourage parties to an arbitration agreement to opt for litigation of a dispute which is subject to arbitration. The Court is even given discretion to determine whether or not there is sufficient reason to refer a matter before it to arbitration. If parties agree to resolve their commercial disputes by arbitration, there is no need to subject the arbitration agreement to Court scrutiny.

(b) Lacuna in the Arbitration Act

The provision of the Arbitration Act which provides that the number of arbitrators shall be deemed to be 3 where the parties did not agree on the number of arbitrators unduly increases the cost of arbitration. There is no provision in the Arbitration Act which provides for appeal against appointment of arbitrator by the Court. The elaborate provision on setting aside of award has been a bane to enforcement of awards. There are no provisions on immunity of arbitrators, joinder and consolidation, umpire, award of interest and the meaning of “application in writing to court” to enforce an award. Professor Paul Obo Idornigiecalls on the State Assemblies and National Assembly to amend the Arbitration law in their States and the Arbitration Act respectively.

(c) Ingrained culture of litigation

The ingrained culture of litigation of commercial disputes is a major problem to the growth of arbitration in Nigeria. There are businesses that are used to resolving complicated commercial disputes by Court proceedings while some Legal Practitioners insist on litigating a matter subject to arbitration. In spite of the continual training of Judges on the role of arbitration in dispute resolution, some Judges are still hesitant in referring matters subject to arbitration as a result of their fear that arbitration may gradually usurp the roles of Judges and the powers of the Courts.

Though an arbitral award is final and binding, the losing party may do all it can to set aside the award on the flimsy excuse that the Arbitrator misconducted himself. For commercial disputes with huge financial implications, the losing party may bring an application to set aside the award at the High Court and even appeal the decision of the High Court to the Court of Appeal and then the Supreme Court if the application to set aside the award is dismissed. In such a circumstance, the winning party may be exposed to the same troubles faced by a litigant in conventional Courts.In order to prevent this trend, Professor Idornigie advice that where a Counsel brings any frivolous application to Court, the Court should refuse it and award cost personally against the Counsel to deter him from using the Court system to frustrate arbitral proceedings.

(d) Ambiguous arbitration agreement

Again, a poorly drafted or an ambiguous arbitration agreement may lead to ambiguity and confusion. An arbitration agreement which does not clearly state the number and method of selecting the arbitrators, the scope, seat, language, rules of arbitration, and governing law of the arbitration may delay the arbitration proceedings or even defeat the parties’ intention of resolving their commercial dispute through arbitration. Professor Idornigie suggests that the business community should know when to litigate or arbitrate. This is why they should engage competent Legal Practitioners to advise them on their contracts, arbitration agreement, arbitral institutions and appointment of arbitrators.

(e) Foreign business partners’ insistence on seat of arbitration abroad

Furthermore, in business transactions between Nigerian and foreign businesses, the Nigerian partner is made to execute a ready-made template prepared by the foreign partner with the seat of arbitration at the foreign partner’s country or other foreign jurisdiction. This trend has greatly hampered the growth of Nigeria as a foremost arbitration center in Africa; infringes the rights of Nigerian partners to freely contract and discourages them from invoking the arbitration clause when a dispute arises. This is because the laws of the seat of arbitration may not be favorable to Nigerian businesses. This is why Nigerian businesses and Legal Practitioners should insist on the seat of arbitration to be in Nigeria and patronize domestic arbitral institutions.

(f) Teleconference

In international commercial arbitration, it is common for the parties to agree to hold preliminary meetings or even the main hearings through teleconferencing. This makes it easy for the parties to proceed with the arbitration even though they are far apart. This saves travel, hotel costs of the parties and the cost of arbitration. However, the importance of face to face meeting cannot be overemphasized as it enables the arbitrator to study the body language of the witnesses and experts in order to form an opinion on the weight to be attached to their testimony. It is also more effective for the parties to be heard in one swoop rather than back and forth email correspondence. Poor network service may prevent effective meeting through teleconference. It is advised that teleconference should be limited to preliminary meetings only.

(g) Cultural differences

It is common for international commercial arbitration to be between persons from different cultural backgrounds. This may lead to hardship which may defeat the end of justice. For instance, in some societies, putting your hands at your back when addressing a gathering is a sign of respect while in some societies, it is a sign of disrespect or dishonesty. Again, in some societies, it is good advocacy to bombard witnesses with myriad of questions in a confrontational way while in other societies, it shows poor breeding. Arbitrators should know the cultural values of the witnesses so as not to run into hasty and erroneous conclusions.

(h) Corruption

Arbitration is designed for arbitrators to be appointed based on merit, track record and ability to give a sound award which will meet the justice of the parties’ case. But, there have been reported cases of appointment of arbitrators based on the foreknowledge that they will get along with each other and not disagree in their decisions. Some arbitrators compromise and misconduct themselves by asking for bribes and even making awards in favor of the highest bidder. It is difficult to track down these corrupt arbitrators and this defeat the whole purpose of the parties choosing arbitration as the means of resolving their disputes.

(i) Legal Practitioners as arbitrators

Also, Legal Practitioners may act as Counsel in arbitration and also act as arbitrator. But arbitration is not litigation. The difference is clear. Since Legal Practitioners are trained in the University and Law School to be Counsel, they need to be adequately trained to qualify as arbitrators. This will greatly increase the confidence of businesses in arbitration, improve the quality of awards and prevent Legal Practitioners who act as arbitrators from bringing the excess baggage and bottlenecks of litigation into arbitration.

(j) Statutes of limitation

Moreover, the Arbitration Act and the New York Convention does not specify a time for the enforcement of an award. This mean limitation for enforcement of arbitral awards is governed by the Statute of Limitation Act, 1966 and the Limitation Laws of the various States of the Federation. The Limitation Act has provided for the time limitation period for bringing an action in arbitration to be 6 years.


Effective recognition of arbitral awards is very important in the economic growth of Nigeria. This is because enforcement of awards has significant relevance in this era of increased international trade and foreign investments. Businesses will be more comfortable doing business with Nigerian partners knowing that if they obtain awards, it can be readily enforced against the judgment debtor in Nigeria. Hence, there is a clarion call for the Arbitration Act to be amended to meet modern realities. The Courts on its part should reduce reliance on undue technicalities in registration proceedings and be proactive in ensuring that the intention of the legislature and parties in opting for arbitration is realized.

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