Resolution of Commercial Disputes in Nigeria

THE OPTIONS 

It is inevitable that occasional disputes would occur in the course of doing business. In Nigeria, the most common recourse adopted by aggrieved parties who cannot resolve disputes amicably amongst themselves is to seek redress in the law courts.

The jurisdiction and hierarchy of these courts (i.e. magistrate Courts, State High Courts, the Federal High Court, the Court of Appeal and the Supreme Court) are spelt out in the constitution of the Federal Republic of Nigeria. With the increasing legal awareness of the populace, the courts have become inundated with litigation. In a country which had in the past resolved disputes conclusively through the traditional mediation of “community elders”, it is perhaps not surprising that inadequate arrangements were made to establish enough courts and appoint sufficient judges to deal with an ever increasing volume of litigation. The resultant effect is that the process of seeking redress through the normal court system has become too protracted and unsatisfactory to continue to serve as the primary recourse option of businessmen.  

The prospective investor in Nigeria would be well advised to consider other options for settlement of commercial disputes of a general nature particularly under the provisions of the Arbitration and Conciliation Act, which was enacted in 1998.  

THE ARBITRATION AND CONCILIATION ACT

The Arbitration and Conciliation Act (the arbitration Act) of 1998 was enacted with the declared intention of providing a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation. The Act also makes the Convention of the Recognition and Enforcement of Arbitral Awards (New York Convention) applicable to any award in Nigeria or indeed in any contracting State arising out of international commercial arbitration.

SOME PRACTICAL IMPLICATIONS OF THE ARBITRATION ACT          ON COMMERCIAL TRANSACTIONS

An extensive discussion on the merits and demerits of arbitration per-se are beyond the scope of this book. However, it will endeavour to address some of the more common type of enquiries that could guide investors in their commercial transactions.  

Are there any Opportunities Available for the Conciliation and Amicable Settlement of Disputes?

Many jurisdictions do not recognise “conciliation” as a formal institution, in the context of private arbitration. However, it is becoming more apparent that contractual parties often consider it expedient to explore opportunities for amicable settlement of some contractual aspects of a dispute, even pending any formal arbitration proceedings. In this regard, the conciliation rules of the Nigerian Arbitration Act are quite unique in providing that:  

“Not withstanding the other provisions of the Act, the parties to any agreement may seek amicable settlement of any dispute in relation to the agreement by conciliation under the provision of this part of the Act”.
 
Whilst the Arbitration Act may be a local statutory enactment in its application, it seems to have certain favourable features in respect of international contracts, where either one of the parties is based in Nigeria or the contract between the parties is to be executed in Nigeria. For example:

There is a clearly stipulated opportunity for an interim conciliation procedure towards amicable settlement of disputes:

  • the location of conciliation and/or arbitration proceedings could be such jurisdictions as have been mutually agreed by the parties, i.e. in Nigeria or elsewhere
  • adoption of the provisions of the Arbitration Act as the applicable arbitration rules of any international contract puts to rest any doubts as to applicable law to the contract and issue of enforcement
  • the sequence and modes of the dispute resolution opportunities offered by the Act may be less protected and more cost effective than some of the conventionally assimilated rules and other arbitration bodies.

Under the Nigerian Law, IS A “Choice of Laws” Provision In Contract Enforceable?

There are certain categories of contracts which must expressly designate Nigerian laws as the applicable law, e.g. contracts/agreements relating to the transfer of technology to any Nigerian entity which attract royalties and fees in connection with the use of trade marks, patented inventions, supply of technical expertise etc, or the case of contracts/agreements for the supply of goods and/or services to federal and state governments of Nigeria. As regards to other international commercial contracts, and depending on the manner in which the agreement is couched, the parties are free under Nigerian law to choose the applicable law to the transaction.  

Sector 47(1) of the Arbitration Act clearly states that:
“The arbitral tribunal shall decide the dispute in accordance with the rules in force in the country parties have chosen as applicable substance of the dispute”.  
Can there be a Mandatory Arbitration Agreement  Whereby the  Parties, Rather than Resorting to the Court System, Utilize formal  Arbitration Proceedings?

Yes, there can be a mandatory Arbitration Agreement between the parties. However such an Agreement must be clearly incorporated in the contract between the parties with specific clauses prescribing the following:  

  • the applicable law;
  • the language of construction agreed by the parties;
  • the arbitration procedures applicable, and the parties shall regard the arbitral awards as final;
  • the place where the parties have agreed to hold arbitral proceedings.  

What arbitration organization would be most suitable or  recognized in Nigeria?
 

  • According to the Act, the parties to an international commercial agreement may agree in writing that the disputes in relation to the agreement shall be referred to arbitration in accordance with the Arbitration Rules set out in the Arbitration and Conciliation act of Nigeria, or the UNCITRAL Arbitration Rules or any international arbitration rules acceptable to the parties. Whilst the parties are at liberty to choose such international arbitration as they deem fit, it would be reasonable to propose the adoption of the UNCITRAL Arbitration Rules (as set out by the United Nations Commission on International Trade Law on 21st June, 1985.
  • Reciprocal enforcement of arbitral awards is also assured since Nigeria has ratified and is party to the ‘Convention on the Recognition and Enforcement of Foreign Arbitral Awards' concluded at New York on 10th June, 1958.

 
THE REGIONAL CENTER FOR INTERNATIONAL COMMERCIAL  ARBITRATION.  
Dovetailed to the UNCITRAL arbitration Rules is the Regional Centre for International Commercial Arbitration Lagos (the Centre). This is an institution carrying-out Arbitration and other alternative dispute resolution work in sub-Saharan Africa.

The Centre's Arbitration Rules are the same as the UNCITRAL arbitration Rules with modifications meant to facilitate institutional Arbitration as the UNCITRAL Arbitration Rules are for ad hoc arbitration and therefore possess no institutional features.  

The arbitration Rules of the Centre allow a great deal of flexibility in the conduct of proceedings of the Arbitration and leave a wide discretion to the parties with regard to the choice of arbitrators, the place of arbitration and indeed in administering the rules to the essential processes of the arbitration proceedings.  

The facilities for arbitration under the auspices of the Centre can be availed of by parties who may request for it, whether government, individuals or corporate bodies. Similarly, the Centre offers other Alternative Dispute Resolution (ADR) services such as conciliation and mediation.

The Asian-African Legal Consultative Organization (AALCO) an organization consisting of forty-five Asian and African Countries, with the assistance of the Federal Republic of Nigeria, established the Centre. The Centre is independent, neutral and has an autonomous international character and its seat is in Lagos-Nigeria. It enjoys diplomatic immunities and privileges accorded to international organizations in accordance with International law.  

The Centre has arrangements with certain institutions such as World Bank's International Centre for Settlement of Disputes under which arbitration proceedings under the auspices of such institutions can be held at the seat of the Centre.  

Government recognising that the Centre maintains an International Panel of Arbitrators and acts as appointing authority and administrators has approved in view of its economic policy of attracting foreign investors to buoy up Nigeria’s economy and the conservation and prudent expenditure of its foreign exchange earnings, the incorporation of the Centre’s Model Arbitration Clause in international contracts executed by its ministries, parastatals and extra-ministerial agencies, so that any dispute arising from such contracts may be resolved in accordance with the Arbitration Rules of the Regional Centre for International Commercial Arbitration, Lagos; which are the same as the United Nations Commission on International Trade Law (UNCITRAL Arbitration rules with slight modifications. 

To wit:
MODEL ARBITRATION CLAUSE

Any dispute, controversy or claim arising out of or relating to this contract or the breach, termination or invalidity thereof, shall be settled by arbitration in accordance with the Rules for Arbitration of the Regional Centre for International Commercial Arbitration, Lagos.

Parties may wish to add the following:

  • The appointing authority shall be the Regional Centre for International Commercial Arbitration, Lagos
  • The number of arbitrators shall be----------
  • The place of arbitration shall be---------
  • The language(s) to be used in the arbitral proceeding shall be---------
  • The law applicable to this contract shall be that of----------

 

DOMESTIC CONTRACT AND ARBITRATION

In relation to domestic contracts, government has approved that all disputes arising from such contracts shall be referred to arbitration which shall be administered by the Centre under the applicable Arbitration Rules in the schedule to the Arbitration and Conciliation Act chapter 19- Laws of the Federation of Nigeria (LFN) 1990.

All ministries, parastatals and extra-ministerial agencies shall accordingly incorporate into all government contracts the above stated model clause in international contracts which shall be administered by the Centre and refer all domestic arbitration arising from domestic contracts to the Regional Centre for International Commercial Arbitration, Lagos.

OTHER INSTITUTIONS INVOLVED IN ALTERNATIVE DISPUTE         RESOLUTION.  

Some institutions in Nigeria carry out aspects of disputes resolution. They include the Institute of Construction Industry Arbitrators, which carry out arbitration in the specialized area of construction; the chartered Institute of Arbitrators (London) Nigeria Branch, the Negotiation and Conflict Management Group (NCMG) and the Centre for peace in Africa, which are involved in mediation of commercial disputes.  


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