Arbitration Process in Nigeria: A Step by Step Guide

There has been an increase in the use of Arbitration process in Nigeria to resolve complex commercial disputes. The resurgence in the use of arbitration process in Nigeria is as a result of users’ dissatisfaction with the slow pace and inefficiency of the normal court system in Nigeria. The normal court system in Nigeria is known to be unsuitable for the resolution of complex commercial disputes because of the overwhelming case load in the courts and the lack of specialized knowledge to deal with commercial disputes that sometimes require judges who are vast in the technical aspects of those disputes.

What is Arbitration process?

Arbitration process is an alternative dispute resolution mechanism whereby parties to a dispute instead of going to court for the resolution of their dispute, appoint or agree to appoint a neutral third party know as an arbitrator to hear their dispute and render an award that will be final and binding on the parties.

Arbitration is particularly suitable for the resolution of commercial disputes because unlike the traditional courts system, arbitration it is fast, effective, flexible, and confidential. Additionally, parties to the arbitration are free to choose arbitrators who are experts in the subject matter of their dispute.

How Does Arbitration Work in Nigeria?

Arbitration in Nigeria is primarily regulated by the Arbitration and Conciliation Act (ACA) which incorporates the UNCITRAL Model Law o International Commercial Arbitration 1985. Because Nigeria is a Federal Republic that comprises 36 States, States are allowed to enact their own Arbitration laws. In this regard, Lagos and Rivers States have enacted Arbitration laws to regulate arbitration in their territories.

Nigeria has also signed and ratified the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). By the provisions of the New York Convention, Nigerian Courts are mandated to recognize and enforce arbitration awards as binding and enforceable. The Courts are also mandated by the New York Convention to uphold arbitration agreements by parties.

How Do You Enter Arbitration Process in Nigeria?

Section 1 of the Arbitration and Conciliation Act makes it mandatory for arbitration agreement to be in writing. So for parties to have their dispute resolved through arbitration, they must ensure that their agreement to use arbitration is made in writing. Such agreement can either be contained in a clause in their commercial contract or an email, text message or telex.

However, even if there was no arbitration agreement in writing before the dispute arose, the parties are free to subsequently agree to proceed to arbitration after their dispute has arisen.

When Should Arbitration Be Used?

Arbitration should be used essentially for commercial related disputes

What are the Steps in the Legal Requirements and Steps involved in the Nigerian Arbitration Process?

As mentioned earlier, for arbitration process to be activated in Nigeria, there must be an arbitration agreement in writing where the parties agree to submit their dispute to arbitration. However, for such arbitration agreement to be binding and enforceable, the dispute that the parties are seeking to submit to arbitration must be arbitrable. This is because certain disputes are arbitrable in Nigeria. These include for example: (i)disputes relating to rights and liabilities which give rise to or arise out of criminal offences; (ii) matrimonial disputes relating to divorce, judicial separation, restitution of conjugal rights, child custody; and  (iii) guardianship matters etc.

Can a Party go to Court in Violation of the Agreement to Arbitrate?

Parties are not allowed to file their cases in court over a dispute that is covered by an arbitration agreement. The Nigerian Courts have established in a long line of cases that parties are not permitted to file their cases in court after agreeing to arbitrate. One of the most notable case is Owners of MV Lupex v. Nigerian Overseas Chartering & Shipping Ltd (MV Lupex) where the Nigerian Supreme Court stated the principle on the in the following words: “[w]here parties have chosen to determine for themselves that they would refer any of their dispute to arbitration instead of resorting to regular courts a prima facie duty is cast upon the courts to act upon their agreement”

To ensure that parties are discouraged from instituting actions in court in violation of the agreement to arbitrate, the Chief Justice of Nigeria issued a practice direction to this effect, mandating all courts to refuse to hear cases that covered by arbitration agreement and to sanction parties that file cases in violation of the agreement to arbitrate.

What should a Party do to Stop the Party who has Filed a Case in Court in Violation of the Agreement to Arbitrate?

Section 4 and 5 of the Arbitration and Conciliation Act requires a party who has been taken to court in violation of the agreement to arbitrate to ask the court to stay or stop the hearing of the case and refer the parties to arbitration.

However, it is important for the party seeking to stop the court hearing to file an application asking the court to stop the hearing and refer the parties to arbitration early enough after being served with the court process. The Courts in Nigeria may refuse to stop the court hearing and refer the parties to arbitration if the party who is seeking to stop the proceedings have already participated or taken steps in the proceedings. In such a case, the court may find that the party seeking to stop the court from hearing the case his waived his right to do so.

It is also important to state that the Nigerian Courts have held that a party seeking to stop the court action must demonstrate unequivocally by documentary and/or other visible means that he is willing to arbitrate. In other words, a party seeking to stop the court from hearing a case that was filed in violation of the agreement to arbitrate must show that his application to stop the court from hearing the case and refer the parties to arbitration is filed in good faith.  The party can do this by notifying the other party in writing that he intends to refer the matter to arbitration and propose arbitrator or arbitrators for the arbitration.

Can a Party Seek the Assistance of the Court to Appoint an Arbitrator?

Parties to arbitration are allowed to seek the assistance of courts in Nigeria to conduct their arbitration. Such assistance may include the appointment of an arbitrator where the parties are unable to agree on the appointment of an arbitrator. The Courts are also empowered to assist the parties in taking of evidence, presentation of documents issuing witness summons in support of their arbitration process.

What are the Types of Arbitration in Nigeria?

Arbitration in Nigeria is institutional, ad hoc or customary. Arbitration is said to be institutional if the arbitration is administered under the rules of one of the arbitral institutions in Nigeria. There are several arbitral institutions in Nigeria including the Regional Centre for International Commercial Arbitration Lagos, Lagos Court of Arbitration, Lagos Chamber of Commerce International Arbitration Centre etc. Arbitration can also be administered in Nigeria under the rules of international institutions like ICC.

Ad hoc arbitration on the other hand is an arbitration that is not administered by any arbitral institution while customary arbitration is administered under local customs and traditions.

Who Pays for Arbitration Costs in Nigeria?

Arbitration costs are essentially borne by the parties. Additionally, some arbitral institutional rules have a structured formula for costs allocation among parties.

How can Parties Enforce Arbitration Awards?

Parties may require steps to enforce the arbitration award rendered by the arbitrator at the conclusion of the arbitration process. This is in often the case when the losing party in the arbitration process refuses to comply with the orders of the arbitrator as contained in the arbitral award.

The party in whose favour the arbitral award was given may approach the court to have the award recognized and enforced as the judgment of the court. A party who is seeking to enforce the arbitral award is required to furnish the court with the following:

(a) the duly authenticated original award or a duly certified copy thereof;

(b) the original arbitration agreement or a duly certified copy thereof; and

       (c) where the award or arbitration agreement is not made in the English language, a duly certified translation thereof into the English language.

It is important for the party seeking to enforce an award to do so in the court with requisite jurisdiction to enforce the award.  In choosing which court to institute the enforcement action, it is important to ascertain the identity (whether corporate or individual) and the location of the party in whom the award is been sought to be enforced, as well as the subject of the dispute. This will determine which court whether federal or state has the requisite territorial and subject matter jurisdiction to entertain the action.

It is also important to engage a lawyer that is vast in the practice and procedure of the courts regarding the enforcement of arbitration awards.

Conclusion

Arbitration has become the preferred mode of resolving commercial disputes because of its unique features of efficiency, effectiveness and user friendliness. The Nigerian arbitration landscape has come of age with international standards because of the attitude of the courts to always provide assistance to parties seeking to resolve their disputes through arbitration. Parties are therefore encouraged to explore to possibility of using arbitration as their dispute resolution mechanism in all their commercial transactions.

Written By:

Joseph Bowei Siyaidon

Contributor

OAL