Arbitration as an ADR

Mechanism I
Hannah Olusoga-Tinubi
The Nature and Scope of Arbitration
What is Arbitration?
• Arbitration is a form of alternative dispute
resolution in which two or more parties agree
to submit a dispute to the binding decision of
a person called an arbitrator, who serves a s a
private judicial authority, rather than to a
court of law.
• The private judicial authority examines the
issue(s) by considering evidence, listening to
submissions and reaching a decison (award).
• Arbitration refelcts in a private proceeding
the role of a civil court of law.
Features of arbtration
• It is consensual
• Parties have procedural freedom
• Arbitrators must be independent and
impartial. Thus arbirators must disclose any
conflict of interest. What are some examples
of a conflict of interest? Shares in a company
which is a party to the dispute etc.
• The arbitrator must act in accordance with
the rules of natural justice. E.g. Fair hearing -
audi alteram partem
• Arbitral award is binding on the parties
The Nature and Scope of Arbitration
Prerequisites for a valid arbitration
• The existence of a dispute
• Agreement to refer the dispute
to arbitration - this agreement
can be pre-dispute or post-
dispute
• Agreement to be bound by the
award
• Initiation of the arbitration
Arbitration and other ADR Mechanisms
- similarities
• Flexibility - this is reflected in the
choice of arbitrators, the
number of arbitrators, location
of hearing, the applicable law,
the discovery process, the
schedule of sitting, the choice of
expert witnesses, the
evidentiary standard, the choice
of counsel etc.
The Nature and Scope of Arbitration
Arbitration and other ADR
Mechanisms - similarities
• Voluntary
• Privacy
• Confidentiality
• Party Autonomy and
Independence
• Its proceedings cannot be relie
upon as evidence in a
subsequent trial
Arbitration and Litigation - similarities
• It is an adjudicative process -
• Like a judgement, the award is based
on the merits of the case after the
presentation of facts by the parties.
Parties do not create their own
settlement. The arbitrator may
however limited by any limitation
contained in the arbitration
agreement
• The award is binding and enforceable
at law.
The Nature and Scope of Arbitration

Questions
• How is arbitration similar to litigation?
• It is the determination of the legal rights and
obligations of the parties with a binding effect
and enforceable at law.
• How is arbitration different from litigation?
• A private judicial authority and private
proceeding.
• choose arbitrators
• choose arbitration
• What factor distinguishes arbitration from
other forms of Alternative Dispute Resolution?
• The binding decision of a third party
The Nature and Scope of Arbitration
Historical Development of Arbitration
in Nigeria
Arbitral Instituions
• There are general arbitral
institutions resolving a wide variety
of commercial conflicts (The
Chartered institute of Arbitrators,
Nigeria; the International Court of
Arbitration of the International
Chamber of Cmmerce, Paris) and
specialist arbitral insitutions
specialising in resolving specific
disputes (the London Maritime
Arbitrators Association;). There are
also international and local arbitral
institutions
Sources of Arbitration Law in Nigeria
• Primary Sources
• Statutes
• Arbitration and Concilitaion Act 1988 (Cap A18) LFN 2004; - An Act to provide a unified legal frame work for the fair and
efficient settlement of commercial disputes by arbitration and conciliation; and to make applicable the Convention on the
Recognition and Enforcement of Arbitral Awards (New York Convention) to any award made in Nigeria or in any contracting
State arising out of international commercial arbitration.
• Arbitration and Conciliation Laws of various states of the federation
• Common Law
• Case law
• International Convention and Treaties - 1985 United Nations Commission on International Trade Law (UNCITRAL)
legislative texts; New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards; other
bilateral treaties with other countries generally affording some form of protection to foreign investors.
• Express agreement of parties
• Practice and Customs of parties in the field in which parties operate - e.g. what is practice or custom as to what
constitutes an architectural drawing in the field of engineering?
• Other Sources
• Textbooks
• Comparative law
Mechanism of Arbitration
What type of dispute can be the
subject of arbitration?
• Generally, disputes of with a
sufficient element of legitimate
public interest are not subject to
arbitration. E.g. criminal matters
• It is worthy of note that in other
jurisdictions there is an increase in
exceptions to this rule.
• However in Nigeria, by virtue of
section 57 of the ACA, only disputes
arising from a commercial
transaction can be the subject
matter of an arbitration.
What type of dispute can be the
subject of arbitration?
• Equally worthy of note is the
decision of the Supreme Court of
Nigeria in Kano State Urban
Development Board v. Fanz
Construction Co [1990] 4 NWLR
[Pt 142] 1 wherein the Supreme
Court listed the categories of
matters that cannot be referred
to arbitration as follows:
Mechanism of Arbitration
What type of dispute can be the
subject of arbitration?
• An indictment for an offence of a public nature
• disputes arising out of an illegal contract
• Disputes arising under agreements void as being by
way of gaming or wagering
• Disputes leading to a change of status, such as divorce
petition, (paternity)
• Any agreement purpoting to give an arbitrator the
right to give judgemnet in rem (judgement on the
stutus of a perticular subject or property or thing as
opposed to pronouncements on persons)
Capacity to refer to Arbitration
• Arbitration is consensual. Its very existence
rests upon the legally binding contractual
agreement. The implication of this is that
parties to an arbitration agreement must have
the legal capacity to enter into agreements.
• Thus infants or persons of unsound mind may
lack the capacity to enter into an arbitration
agreement
• Note that, this does not preclude their legal
guardian, acting in good faith, to enter into
such agreement on their behalf
Mechanism of Arbitration
Capacity to refer to Arbitration
• The arbitration agreement may
validly entitle only one of the
parties to refer the dispute to
arbitration.
• The arbitration agreement may
define the types of disputes that
can be referred to arbitration.
Who can act as an arbitrator
• Natural person
• A judge can be an arbitrator
• Arbitrator shpuld be selected on
the basis of qualification and
skills
• appropriate training
• being proactive
• knowledge of law
• expertise in the area of dispute
• time availability and management
Mechanism of Arbitration
What is the limitation statute on
arbitration?
• A limitation statute refers to a
statute prescribing the time limit
for the initiation of legal
proceedings on a dispute.
• When the time limit is exceeded,
it is said that the legal action is
staute barred.
• The ACA Act does not make
provisions for the time limit to
institute arbitration proceedigs.
Note that in In Lagos state ,
limitation laws apply to arbitral
proceedings as they do to
judicial proceedings. (see
section 35 AC Law Lagos state
2009)
• In City Eng. (Nig.) Ltd v. FHA
[1997] NWLR Pt 520 at 224, the
Supreme Court sets the time
limit at 6 years
Mechanism of Arbitration
• Where the applicable law has
Applicable Law
• This refers to the law that
determines the substantive
rights of parties.
• The applicable law plays an
important role in the arbitration
process. The provisions of the
applicable law are applied to
settle differences through out
the proceedings. The arbitral
award is also based on the
applicable law.
not been pre-determined, it will
be infered that parties have
chosen the law to which the
transaction has its closest and
most real connection. To this
end, features such as nationality
of parties, the subject matter of
the contract, the place of
performance etc will be
considered
Mechanism of Arbitration
Phases of Arbitration
1. Initiation - a demand by one of
the parties invoking the
arbitration clause or an
agreement by parties to settle
dispute by way of arbitration.
This may also involve the
selection of an arbitral
institution.
2. Pre-hearing meetings - at this
stage parties engage in clarifying
the rules governing the process,
iron out procedural issues
(production of documents, service
of documents, use of exert
witnesses etc.)
3. Preparation for hearing -
gatherong docuemts, witnesses
etc
4. Hearing - presentaton of evidence
and arguments
5. Decision making
Advantages and Disadvantages of Arbitration

Advantages Disadvantage
• Cost • Cost
• Saves time
• Saves lawyer fees
• abirators must be paid
• cost of venue
• Lack of publicity
• Speed • Multi-party disputes
• Technical expertise • Confidentiality
• Finality and enforcement of an award
• Stength of the case and the preference for a
• Representation summary court procedure
• Extent of jurisdiction
• Leave to Appeal
• Neutrality and equality
• Convenience • Not suitable for dispute as to law
• Flexibility of procedure • Legal aid
Debate - is arbitration suitable for the settlement
of disputes (for and against)