Article by M.O Ibrahim[1]

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Abstract

Arbitration is fast rising into prominence and it seem like the projectile of growth and development of this effective and reliable means of dispute resolution has undeniable won the hearts of many people. Hence, this area is undoubtedly becoming ‘the peoples’ favourite’ in place of long and tedious means of dispute resolution, most notably courtroom litigation processes. Arbitration although now prominent, has deep roots in local traditions; culture, lifestyle and religion. Against this backdrop, it is no doubt that these deep roots have over the years shaped and developed the structure of arbitral proceedings both in practice of customary arbitration and modern arbitration. It follows that arbitration if consistently practiced under the existing strides as of today, will become the focal point of dispute resolution for every class of citizens in this decade and beyond.

This research adopts a doctrinal approach on the existing knowledge on arbitration, although tweaks were made in form of recommendations to buttress areas worth looking into to move arbitration firmly into the promised land. The pilot part of the paper talks focuses on roots of arbitration right from customary arbitration right to the modern arbitral practice. Focus is then shifted to types of arbitration and reasons to choose arbitration over other forms of dispute resolution with notable awards in discussion. The third part of this paper, examines the benefits of arbitration and being an arbitrator. The penultimate discusses the constraints of practicing arbitration and challenges faced by arbitral panels before the conclusion and recommendations.

Grassroot Arbitration

Arbitration has its root deep into the traditions of the people, being that dispute is part of the day to day activity of man which he must come in terms with one way or the other. Disputes could be as domestic as an altercation between married couples, families and even siblings of the same household. Disputes could also be a communal issue stemming from disputes between elder chiefs and the different peer groups of the community based on policies, it could also be dispute between two or more communities on trade, tax[2] or border related issues. From the foregoing, it is important to note that dispute is everywhere as it is inevitable because it is a product of human interaction which cut across all sphere of human social relationship engagements. However as for resolution of disputes,  the magic is not in resolving the dispute just to make the parties enemies of each other because as the Yoruba saying goes, “a o kiin tiile ejo de kaa je ore”[3], but rather in making sure that the resolution reached by the parties is a win-win resolution which eliminates future or further enmities between the parties.

The advent of court system of justice came as a result of colonization through our colonial masters but before the courts, we had indigenous means of resolving disputes along with punishments for offenders. One of the long-standing traditions of resolving disputes which has consequentially eaten into the deep roots of various ethnical tradition in Nigeria is arbitration. This means has not only proven effective in resolving household issues through the head of the family who calls the concerned parties with the purpose of listening to their grievances and reaching a resolution favourable to all parties, it has proved far beyond effective in resolving communal issues which in turn kept the community’s peace.

It is worth stressing that arbitration as a form of dispute resolution is a tradition long standing among the indigenous people of Nigeria despite the evolution of our legal system. This view was rightly observed by Oguntade J.C.A in his dissenting judgement in Okpuruwu v. Okpokan where he observed thus:

“In pre-colonial time and before the advent of regular courts, our people certainly had a simple and inexpensive way of adjudicating over disputes between them. They referred them to elders or a body set up for that purpose. This practice has over the years become so strongly embedded in the system that they survive today as custom.”[4]

In the instant case, the majority of the Court of Appeal (Enugu Division) refuted the existence and constitutional validity of customary arbitration on Nigeria. The majority of the Court of Appeal with Uwaifo, J.C.A delivering the lead judgment held inter alia:

“To talk of customary arbitration having a binding force as a judgment in this country is therefore somewhat a misnomer and certainly a misconception. Of course, to say that a decision by such a body creates resjudicata is erroneous… I do not know of any community in Nigeria which regards the settlement by arbitration between disputing parties as part of its native law and custom. It may be that in practical life when there is dispute in any community, the parties involved my sometimes decide to refer it to a disinterest third party for settlement. This means more of a common device for peace and good neighbourliness rather than a feature of native law and custom, unless there is any unknown to me which carries with it, judicial function or authority as in Akan laws and customs. I do not know of such customs. If any, or more correctly, such a practice, to get a third party to intervene and decide a dispute can elevate such a decision to the status of a judgment with a binding force and yet fit it into our judicial systems… I say by way of emphasis that we have no equivalent of Akan laws and customs in this country under which elders of the same description in Ghana’s circumstances perform recognized judicial functions consistent with our judicial system.”

However, in the determination of this case, the court failed to examine the position of the law on the validity of customary arbitration as elucidated in Idika & Ors v. Erisi & Ors.[5] In that case, the Court of Appeal accepted the existence and validity of customary arbitration.

“It is well settled that one of the many African customary modes of settling disputes is to refer the dispute to the family head or an elder or elders of the community for a compromised solution, based on subsequent acceptance by the parties of the suggested award.”[6] Flowing from the traditional practice of arbitration, the Supreme Court of Nigeria in Agu v. Ikewibe[7], defines “customary arbitration as an arbitration of dispute founded on the voluntary submission of the parties to the decision of the arbitrators who are either the chiefs or elders of their community.” It follows that the courts recognize arbitration as a customary practice of dispute resolution in so far, the parties voluntarily submit to the adjudication of the elders and the decision reached. The decision in Agu v. Ikewibe further laid down conditions/requirements for which customary arbitration would attain existence and constitutional validity as follows:

1. voluntary submission of the dispute to an arbitration of one or more persons;
2. willingness of the parties to be bound by the decision;
3. freedom to withdraw from the proceedings before the award is made; and
4. the award must be in conformity with the custom of parties or their trade or business.

Modern-day Arbitration

Arbitration in this era of globalization and urbanization has a lot of prospects as we have to resolve disputes for the purposes of peaceful cohabitation. Disputes now arises from all aspects of human interaction because of its inevitable nature. However, with the plethora means of resolving disputes, arbitration seems to be standing out because of various advantages it has, most especially its efficiency and effectiveness, involvement of parties through willful choosing and submission to the guiding laws and procedures, less formality and an award which is binding and enforceable like a court judgment. Indeed, it is correct to posit that a modern-day contract agreement without an arbitration clause inserted and agreed to by the parties is incomplete. This is not to say that an arbitration clause is a compulsory term of contract, but it would serve in the best interest of the parties to have such a clause inserted in the contract. Most arbitration is driven by a pre-dispute contract entered into by the parties, in which they agree that if a dispute should arise, it will never get into the court.

What is Arbitration?

The World Intellectual Property Organization (WIPO), one of the 15 specialised agencies of the United Nations defined arbitration “as a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute.”[8]

The American Bar Association (ABA) defined arbitration “as a private process where disputing parties agree that one or several individuals can make a decision about the dispute after receiving evidence and hearing arguments.”[9]

Arbitration is defined as “the reference of a dispute or difference between not less than two parties for determination after hearing both sides in a judicial manner by a person or persons other than a court of competent jurisdiction.”[10]

Section 57(1) of the Arbitration and Conciliation Act 1990, defines arbitration as a commercial arbitration whether or not administered by a permanent arbitral institution. On what constitute commercial arbitration, the Act further provides for it to mean “all relationships of a commercial nature including any trade transaction for the supply or exchange of goods or services, distribution agreement, commercial representation or agency, factoring, leasing, construction of works, constructing, engineering licensing, investment, financing, banking, insurance, exploitation, agreement or concession, joint venture and other forms of industrial or business co-operation, carriage of goods or passengers by air, sea, rail, or road.”[11]

From the foregoing definitions, a working definition can be correctly reached, arbitration is described as an ancient dispute resolution mechanism process other than litigation which allows voluntary and total submission of disputing parties to neutral persons for the purposes of listening to testimonies and reviewing of documents before a binding decision in form of an award is reached. Arbitration on the surface is a simple, less complicated and less formal but that is not to say that it doesn’t have its own guiding rules and procedures.

Forms of Arbitration

There are various arbitrations depending upon the terms, subject matter of the dispute and the law governing the arbitration agreement. Arbitration may be domestic or international, ad hoc or institutional.

Domestic Arbitration – This is dispute resolution between 2 or more persons to an agreement within the same jurisdiction. A good example of this is local arbitral proceedings in Nigeria. Also, activities of multidoor courtrooms in some judicial divisions in Nigeria fall into this category.

International Arbitration – This occur between 2 or more person who are not within the same jurisdiction or country but bounded by the terms of an agreement, accord or treaty which has been breached. Also, parties can mutually agree to the jurisdiction of international arbitration. That is, their dispute should be treated international in so far, they expressly agree that any dispute arising from the commercial transaction shall be treated as an international arbitration. Arbitration can be international where the parties expressly agreed that the subject matter of the arbitration agreement relates to more than one country. International arbitration is elucidatorily provided for in Section 57(2) Arbitration and Conciliation Act 1990. It follows that, any instance not mentioned in the instant section does not fall within the premise of international arbitration. A good example of international arbitration is Process & Industrial Developments Limited (P&ID) v. The Federal Republic of Nigeria, where award was given against Nigeria.

Institutional Arbitration – Here, parties submit to the guiding laws and procedures of specialized arbitral institution through the inclusion of an arbitration clause which empowers the institute to conduct the arbitral proceedings through their appointed arbitrators. They agree to be guided by the rules and also the award to be reached by the panel. A party may apply to the court to set aside an award if it meets the requirements provided in the Act.[12] Also, awards can be enforced against the party who refuses to acknowledge the award.[13]

Some of the prominent local institutions include the following; Nigerian Institute of Chartered Arbitrators, Lagos Regional Centre for International Commercial Arbitration, etc.

Some of the leading international institutions are, International Chamber of Commerce (ICC) in Paris, London Court of International Arbitration (LCIA), London Maritime Arbitration Association (LMAA), International Centre for Settlement of Investments Disputes (ICSID) in London, Grain and Feed Trade Association (GAFTA) in London, American Arbitration Association (AAA) in New York, Court of Arbitration for Sport (CAS) in Switzerland and World Intellectual Property Organization (WIPO), an agency of the United Nations, offering services for intellectual property disputes, etc.

What does an arbitration clause look like?

The importance of arbitration clauses in agreements cannot be overemphasized because in the event that a party to such agreement decides to start dragging his feet, the other party who has performed his obligations wholly or partly can trigger the clause to get the erring party tied to perform his obligations in the terms of the agreement. This process is faster and prevents long litigation processes which could end up discharging the agreement through frustration.

A simple arbitration clause: “all disputes arising out of or in connection with or in relation to the contract shall be referred and settled under the rules and procedures of the Nigerian Institute of Chartered Arbitrators by one or more arbitrators appointed by the parties in accordance with the rules of the Institute.”

Institutional arbitration is advantageous because it will nevertheless be possible to arbitrate effectively, because a set of rules exists to regulate the way in which the arbitral tribunal is to be appointed and the arbitration is to be administered and conducted.[14]

Ad hoc Arbitration – Here, the parties agree to go through arbitration but without submitting or accepting to be governed by any institutional rules. Section 63(1) of the Lagos State Arbitration Law, 2009 defines ad hoc arbitration as “a proceeding that is not administered by an institution or other body and which requires the parties themselves to make their own arrangements for selection of arbitrators and for selection of arbitrators and for designation of rules, applicable law, procedure and administrative support.” Since, parties are not obliged to submit their arbitration to the rules of an arbitral institution; they may largely stipulate their own rules of procedure. The geographical location of ad hoc arbitration will be of great importance, because most of the difficulties concerning the arbitration will be resolved in accordance with the national law of the seat of arbitration.[15] If the seat of arbitration is Nigeria, the rules in the Arbitration and Conciliation Act 2004, can be adopted by the parties.

Customary Arbitration – Customary arbitration is an arbitration of dispute founded on the voluntary submission of the parties to the decision of the arbitrators who are either the chiefs or elders of their community.[16] This is based on custom and traditional practices.

 

Benefits of Arbitration

According to Aristotle, “it is equitable to be patient and not retaliate; to be willing that a difference shall be settled by discussion rather than by force; to agree to arbitration rather than to go to court- for the umpire in an arbitration looks to equity, whereas the juryman sees only the law. Indeed, arbitration was devised to the end that equity might have full sway.”[17] It follows that, arbitration is a patient process through discussion of issues for the purpose of getting the common ground to mostly arrive at a win-win situation. This is likened to equity whose aim is to mitigate the harshness of common law through equitable reliefs. Here are some of the advantages of arbitration;

1. Parties may be represented by persons other than legal practitioners unlike where a legal practitioner must enter appearance on behalf of his client.
2. Arbitration is very flexible and less formal compared to the rigidity and formal procedures in litigation.
3. Arbitration is easier and faster as arbitral proceedings must be concluded before a stipulated time. Although, it may run longer in some cases.
4. Arbitration enjoys privacy and confidentiality which is in contrast with the requirement that court hearings must be public. Confidentiality also applies to the award.
5. Arbitration is not subject to the rules of the Evidence Act. However, proceedings ensure fairness and justice between the parties.
6. The decision of the arbitral panel which is known as award has a binding effect on the parties and recognized by the court. Awards can be set aside and it can be enforced by the court.
7. The date, time and venue for the proceeding is collectively decided by the parties at their convenience. Arbitration is not done in court.
8. Arbitration helps to decongest the case docket of the court. This is done through making sure prospective litigants exhaust all possible ways to resolve their dispute before submitting to the jurisdiction of the court.
9. Parties have reserved right to appoint their arbitrators. Although where this right is not exercised, the court can appoint one.
10. Arbitration gives room for a win-win situation unlike litigation where for a party to emerge victorious, the other party on the other hand must lose.
11. Unlike the court system, there are limited avenues for appeal of an arbitral award, which limits the duration of the dispute and any associated liability.
12. Due to the provisions of the New York Convention 1958, arbitral awards are generally easier to enforce in other nations than court judgments.

Who is an Arbitrator?

There is no statutory definition of who an arbitrator is. Nevertheless, from the working definition of arbitration given above, an arbitrator can be described as a neutral person appointed either by an arbitration clause in an agreement or impliedly appointed by the voluntary submission of the parties or by appointment by court with the purposes of listening to the dispute and testimonies of the parties and witnesses respectively and reviewing of documents to reach a binding decision known as award.

It is however important to note that, anyone can be an arbitrator in so far, the person has a qualifying certificate from a qualified and recognize institute to carry out the job description of an arbitrator. The Institute is required to keep a record of all its arbitrators as this helps in the identification and appointment of arbitrators for an institutionalized arbitration. Hence, being an arbitrator is not gender based, age based or profession based.

However, in customary arbitration where a qualifying certificate has no purpose. It suffices to call someone an arbitrator if the person falls within the category of elder, chief, community leader, head of the family and traditional leader. This is so because in a typical traditional or customary setting, the above listed classes of person are well respected in the society and as a result of this, they partake in various peacekeeping activities which include resolution of disputes between members of the community or households who voluntarily submit to them. Hence, this act qualifies them as arbitrators.

 

Challenges faced by Arbitration in Nigeria

Arbitration has rose to prominence over the years as prospective litigants are forced to resolve issues through alternative dispute resolution mechanism and would only be entertained in court where and when the court reasonable believes and agree that the parties have tried to resolve in futility. Although the practice of arbitration is rising but still faces some notable challenges in reaching its full potential as the first option available for disputers. These challenges include;

1. The use of multidoor courtrooms where alternative dispute resolution mechanisms are being devised has not been adopted by most judicial divisions in Nigeria. The implication of this is that, these divisions will have a lot of case files in court which will mostly contain issues that are well within the matters suitable of arbitration where the doctrine of fairness and justice will be upheld. The limitation of this is that, we are not unleashing the full potentials of arbitration which would unarguably clear the court dockets of matters that are not really contentions.
2. Another challenge faced by arbitration is lack of awareness to the numerous opportunities in the practice of arbitration in Nigeria. As an arbitrator, you are not limited to a particular aspect when it comes to subject matter, although we have some specialized institutions but we also have some institutions that are not. It follows that some arbitrators are not aware of new emerging areas where they can build and become an authority but would rather join an already congested area of specialization in arbitration.
3. Also, it is really not encouraging that most higher education institution in Nigeria has failed to include arbitration into their curriculum. Any social science discipline that is devoid of arbitration is incomplete because social science deals with the interaction between man and his environment and since it is in the nature of man to have disputes, ways of resolving these disputes should be taught both in theory and practical sense with emphasis on the practical aspect. Courses like international relations and law should get dedicated time to practicing negotiation skills.
4. In further reference to the third challenge above, we do not have enough arbitration facilitators or teachers in Nigeria as most arbitrators are only interested in practicing and making money at the expense of impacting their field knowledge on students. This however creates a deficit which can only be rectified by having facilitators who are passionate about academics.
5. Furthermore, it is important to note the positive projectile growth in science and technology in the global world of today. This growth is digitally inclined as a lot of things could be done right from the comfort of one’s home or office. It follows that it is time we moved arbitration to a digital platform where pieces of evidence can be submitted electronically. Arbitration can also be conducted through e-conferencing which eliminates the tedious process of securing a venue or stressful journey of getting to venues in a metropolitan city like Lagos whose traffic issues has gained a worldwide notoriety. Hence, being underdeveloped in science and technology as negatively impacted the advancement of arbitration through digital science and technology.
6. Also, the attitude of Nigerians towards anything Nigeria-made is not encouraging. It need not be stressed that we have a few Institutes that pride themselves on apt training on alternative dispute resolution in Nigeria through training and a qualifying examination in which a certificate is awarded at the end of successful completion of the training. However, the attitude of some Nigerians toward these training is not encouraging as most feel they are inferior to international Institutes. This attitude is pointless because as an Associate of the Nigerian Institute of Chartered Arbitrators, I can boldly say that the training is one of the most carefully and aptly delivered process I have participated in when it comes to professional courses.

 

Conclusion

This paper examined various definitions of arbitration before devising a working definition for the purpose of making sure that the discussions therein are aptly delivered. It established that the long practices of arbitration is embedded in local tradition and customary practices. It is also important to note that arbitration is evident in religion too, most noticeably in Islam through ‘sulh’ which simply means ‘reconciliation’. This is done through permitting a third party to listen to dispute with the sole aim of reconciling the parties. These shows that resolution of dispute has been existing alongside each agent if socialization right from the first agent which is the family. Legal development in Nigeria saw the birth of the Constitution which serves as the grundnorm today but it is interesting to know that the Constitution recognizes customary law which gives legality to customary arbitration. In the case of Agu v. Ikewibe,[18] Karibi-Whyte J.S.C stated that the combined reading of sections 6(1) and 6(5) of the 1979 constitution vested the court with judicial powers. However, this does not stop disputant from resolving their dispute in the manner acceptable to them. He further alluded that section 274(3) and (4) (b) of the 1979 constitution[19] gives legality to customary law through its recognition as a body of rules of law in force immediately before the coming into force of the 1979 constitution. Hence, customary arbitration was saved by this section and therefore recognize as a means of dispute resolution as earlier opposed in Okpuruwu v Okpokan[20] where the judgement was entered in error that customary arbitration was not means of resolving dispute. It is pertinent to also note that section 35 of the Arbitration and Conciliation Act, 2004 recognizes customary arbitration.

The paper also examined what modern day arbitration looks like stating out the types and benefits of arbitration over other means of dispute resolution, most especially litigation. Further aspect of the paper examined the challenges of arbitration in Nigeria. These challenges are seen as some of the numerous factors mitigating the advancement of arbitration in Nigeria.

In conclusion, it is the believe of this writer that arbitration is the ultimate means of resolving dispute in the coming decades but without proper preparation to face the existing challenges and future challenges that may likely spring up, arbitration might not get to the promised land.

 

Recommendations

It is no doubt that alternative dispute resolution mechanisms are becoming prominent as people do not see the needless need to stay long in courtrooms where simple dialogue with a lot of understanding can identify and proffer long lasting solutions to the issues. Arbitration with its swift processes and careful attention to detail in deriving at fairness must buckle up for the present challenges and future challenges. Here are some recommendations to the challenges and it is the believe of this writer that if properly managed, arbitration is to be the new dispute resolution mechanism of this decade and the coming decades.

1. All courts in Nigeria no matter the judicial division should have multidoor courtrooms were matters should be referred to as the court of first instance. Stringent rules and procedures should be made in order to direct and regulate the procedures in order to prevent abuse of power and bringing of frivolous matters. This is going to decongest the docket of the court and also allow more people into the field of arbitration. It is also going to be make adjudication faster and exercising the power to go to court would only come after futile attempts to settle amicably.
2. Arbitration as a course should be added to all social science discipline in Nigerian universities since social science deals with human interactions with his immediate environment. The knowledge of arbitration is going to help students identify, analyze and resolve disputes. This is going to improve human interaction and reduce the drastic effects of disputes.
3. It is very clear that new areas in disciplines are emerging and arbitration is no exception. Hence, we have little or no experts to teach arbitration to the present and future generations. This should be addressed in ways beneficial to students and the facilitator. Universities should sponsor lectures in their bid to learn new areas teachable to students and also encourage the use of field knowledge in teachings.
4. Nigeria need to be on the same page with digital science and technology. If arbitration should go digital, it would save disputants from stress of getting to venues and also waiting for the other party or a member of the panel who is running late as a result of traffic. Digital arbitration brings comfort as arbitration can be conducted from anywhere in the world without interruption so far there is good network coverage. For instance, the corona pandemic has halted a lot of proceedings. Imagine a world with digital arbitration proceeding, even corona would not be able to stop fairness.
5. One important thing is attitude. Keith Harrel in his book titled “Attitude is Everything” could not have overstressed the importance of attitude to our day to day activities. As Nigerians, we need to change our attitude towards ‘Made in Nigeria’ products and services. Arbitration training in Nigeria is as good as any arbitration training abroad. Hence, awareness should be created to change such impression and attitude. If this can be effectively done, it would be beneficial in educating people about the benefits of arbitration which would in turn have a positive effect on people opting for arbitration rather tha litigation.

Positioning Arbitration as the Future of Dispute Resolution in Nigeria: Issues and Prospects.

 

Contributed by

Olaitan Ibrahim

ACArb, MNSIL, LL. B (Hons), B.L (in view)

 

FOOTNOTES:

[1] ACArb, MNSIL, LL. B(Hons)

[2] In cases of conquered states paying tax to the master state.

[3] This translates to “We do not come back from court and remain friends”.

[4] (1998) 4 NWLR pt. 90 at p.554

[5] 1985 2 NWLR pt 70.

[6] Lateef A. Adeleke Ph.D, NICArb Journal of Arbitration; ‘Psychotherapeutic Elements in Customary Arbitration Among the Yoruba of South-Western Nigeria: Constitutional Validity of Customary Arbitration’, 2019, Vol 14, p.457.

[7] (1991) 3 NWLR pt. 180 at 385.

[8] Available online at https://www.wipo.int/amc/en/arbitration/what-is-arb.html. Last accessed on 10th of April, 2020.

[9] Available online at https://www.jamsadr.com/arbitration-defined/. Last accessed on the 10th of April, 2020.

[10] Halsbury’s Laws of England, 4th Ed. Vol.2, P.256, Para. 501

[11] Section 57(1) of Arbitration and Conciliation Act, 2004.

[12] Sections 29, 30 and 48 of the Arbitration and Conciliation Act, 2004.

[13] Sections 31, 32, 51 and 52 of the Arbitration and Conciliation Act, 2004.

[14] Redfern and Hunter, Law and Practice of International Commercial Arbitration, fourth edn. 2004, P.p 47, 1–99

[15]  M. Govindarajan, Institutional, Statutory and Ad-Hoc Arbitration

[16] Agu v. Ikewibe (1991) 3 NWLR pt. 180 at 385

[17] The Rhetoric of Aristotle, Book I, ch.13

[18] ibid

[19] This constitution has been repealed by the 1999 constitution. The sections stated were replaced by section 315(3) and (4) (b) in the 1999 constitution.

[20] ibid