What is Preventing Arbitration From Being the Main Means of Resolving Commercial Disputes in Nigeria?

(a)  
Option
to litigate matters subject to arbitration 

The Arbitration and Conciliation Act (“the Arbitration Act”) itself needs a
total overhaul and urgent amendment. Though, Sections 4 and 5 of the Arbitration Act empowers the Court to stay proceedings
and refer a dispute to arbitration, the provisions provide a leeway for a party
to an arbitration agreement to renege from settling a dispute by arbitration and
encourage parties to an arbitration agreement to opt for litigation of a
dispute which is subject to arbitration.  The Court is even given discretion to determine
whether or not there is sufficient reason to refer a matter before it to
arbitration. If parties agree to resolve their commercial disputes by
arbitration, there is no need to subject the arbitration agreement to Court
scrutiny.

(b)  
Lacuna
in the Arbitration Act

The provision of the Arbitration Act which
provides that the number of arbitrators shall be deemed to be 3 where the
parties did not agree on the number of arbitrators unduly increases the cost of
arbitration. There is no provision in the Arbitration Act which provides for
appeal against appointment of arbitrator by the Court. The elaborate provision
on setting aside of award has been a bane to enforcement of awards. There are
no provisions on immunity of arbitrators, joinder and consolidation, umpire,
award of interest and the meaning of “application
in writing to court” to enforce an award. Professor Paul Obo Idornigie calls on the State
Assemblies and National Assembly to amend the Arbitration law in their States
and the Arbitration Act respectively.

(c)  
Ingrained
culture of litigation

The
ingrained culture of litigation of commercial disputes is a major problem to
the growth of arbitration in Nigeria. There are businesses that are used to
resolving complicated commercial disputes by Court proceedings while some Legal
Practitioners insist on litigating 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 subject to
arbitration as a result of their fear that arbitration may gradually usurp the
roles of Judges and the powers of the Courts.

Though
an arbitral award is final and binding, the losing party may do all it can to
set aside the award on the flimsy excuse that the Arbitrator misconducted
himself. For commercial disputes with huge financial implications, the losing
party may bring an application to set aside the award at the High Court and
even appeal the decision of the High Court 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. In
order to prevent this trend, Professor
Idornigie advice that where a Counsel brings any frivolous application to
Court, the Court should refuse it and award cost personally against the Counsel
to deter him from using the Court system to frustrate arbitral proceedings.

(d)  
Ambiguous
arbitration agreement

Again,
a poorly drafted or an ambiguous arbitration agreement may lead to ambiguity
and confusion. An arbitration agreement which does not clearly state the number
and method of selecting the arbitrators, the scope, 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. Professor
Idornigie suggests that the business community should know when to litigate
or arbitrate. This is why they should engage competent Legal Practitioners to
advise them on their contracts, arbitration agreement, arbitral institutions
and appointment of arbitrators.

(e)  
Foreign
business partners’ insistence on seat of arbitration abroad

Furthermore,
in business transactions between Nigerian and foreign businesses, the Nigerian
partner is 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; infringes the rights of Nigerian
partners to freely contract and discourages them from invoking the arbitration
clause when a dispute arises. This is because the laws of the seat of
arbitration may not be favorable to Nigerian businesses. This is why Nigerian
businesses and Legal Practitioners should insist on the seat of arbitration to
be in Nigeria and patronize domestic arbitral institutions.

(f)    Teleconference

In international commercial arbitration,
it is common for the parties to agree to hold preliminary meetings or even the
main hearings through teleconferencing. This makes it easy for the parties to
proceed with the arbitration even though they are far apart. This saves travel,
hotel costs of the parties and the cost of arbitration. However, the importance
of face to face meeting cannot be overemphasized as it enables the arbitrator
to study the body language of the witnesses and experts in order to form an opinion
on the weight to be attached to their testimony. It is also more effective for
the parties to be heard in one swoop rather than back and forth email
correspondence. Poor network service may prevent effective meeting through
teleconference. It is advised that teleconference should be limited to
preliminary meetings only.

(g)   Cultural differences

It is common for international commercial
arbitration to be between persons from different cultural backgrounds. This may
lead to hardship which may defeat the end of justice. For instance, in some
societies, putting your hands at your back when addressing a gathering is a
sign of respect while in some societies, it is a sign of disrespect or
dishonesty. Again, in some societies, it is good advocacy to bombard witnesses
with myriad of questions in a confrontational way while in other societies, it
shows poor breeding. Arbitrators should know the cultural values of the
witnesses so as not to run into hasty and erroneous conclusions.  

(h)   Corruption

Arbitration is designed for arbitrators to
be appointed based on merit, track record and ability to give a sound award
which will meet the justice of the parties’ case. But, there have been reported
cases of appointment of arbitrators based on the foreknowledge that they will
get along with each other and not disagree in their decisions. Some arbitrators
compromise and misconduct themselves by asking for bribes and even making
awards in favor of the highest bidder. It is difficult to track down these
corrupt arbitrators and this defeat the whole purpose of the parties choosing
arbitration as the means of resolving their disputes. 

(i)     Legal Practitioners as
arbitrators

 Also, Legal
Practitioners may act as Counsel in arbitration and also act as arbitrator. But
arbitration is not litigation. The difference is clear. Since Legal
Practitioners are trained in the University and Law School to be Counsel, they
need to be adequately trained to qualify as arbitrators. This will greatly
increase the confidence of businesses in arbitration, improve the quality of
awards and prevent Legal Practitioners who act as arbitrators from bringing the
excess baggage and bottlenecks of
litigation into arbitration.

(j)    
Statutes
of limitation

Moreover, the Arbitration Act and the New York Convention does not specify a time
for the enforcement of an award. This mean limitation for enforcement of
arbitral awards is governed by the Statute of Limitation Act, 1966 and the
Limitation Laws of the various States of the Federation. The Limitation Act has
provided for the time limitation period for bringing an action in arbitration
to be 6 years.

Conclusion

Effective recognition
of arbitral awards is very important in the economic growth of Nigeria. This is
because enforcement of awards has significant relevance in this era of
increased international trade and foreign investments. Businesses will be more
comfortable doing business with Nigerian partners knowing that if they obtain
awards, it can be readily enforced against the judgment debtor in Nigeria.
Hence, there is a clarion call for the Arbitration Act to be amended to meet
modern realities.  The Courts on its part
should reduce reliance on undue technicalities in registration proceedings and
be proactive in ensuring that the intention of the legislature and parties in
opting for arbitration is realized.