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The Problems Militating Against The Growth Of Arbitration In Nigeria

Published: 01 Jul 2017

Unlike commercial litigation where litigants spend many years in court for their dispute to be resolve by a Judge, an arbitration proceeding is fast and flexible. The parties agree on the process of resolving their dispute. Arbitration proceedings are confidential and an arbitral award is not subject to appeal. Notwithstanding the advantages of arbitration over litigation, there are many challenges facing Arbitration as a means of resolving commercial disputes in Nigeria.

Either by design or coincidence, litigation gradually became the main means of resolving commercial disputes in Nigeria. Some businesses insist on resolving complicated commercial disputes by initiating legal proceedings in Court while some legal practitioners prefer to litigate 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 to arbitration as a result of their fear that arbitration may gradually usurp their roles and the powers of the Courts. This ingrained culture of litigation is a major problem to the growth of arbitration in Nigeria.

Again, a poorly drafted or ambiguous arbitration or submission agreement may lead to ambiguity and confusion. An arbitration or submission agreement which does not clearly state the number and method of selecting the arbitrators, the scope, venue, 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.

Furthermore, the growth of international trade and investment is supposed to develop Nigeria’s arbitral institutions and its culture of arbitration. But in most business transaction between Nigerian and foreign partners, the Nigerian partner is tacitly 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 and discouraged local partners from invoking the arbitration clause when a dispute arises.

Moreover, though an arbitral award is final and binding, the losing party may seek leave of Court to set aside the award on the grounds of misconduct of the Arbitrator. For commercial disputes with huge financial implications, the losing party may even appeal 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.

Despite the numerous challenges, arbitration offers businesses in Nigeria, the opportunity to settle their commercial disputes timeously while maintaining their business relationship. It strengthens the powers of the Courts because apart from assisting in decongesting the Courts, the Court aids the arbitral process by issuing subpoenas and injunctions. An arbitral award lacks force until it is pronounced upon by the Courts. The increased awareness on the need of a properly drafted arbitration agreement with the seat of arbitration in Nigeria is a move in the right direction.

Firm: Addleshaw Goddard

Practice Area: Trade & Customs

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