APPRAISAL OF NIGERIAN ARBITRATION AND CONCILIATION ACT TOWARDS A BETTER REFORM

ABSTRACT

Arbitration  is  a  private  consensual  means  of  resolving  disputes  and  is  the  most institutionalized  of  all  the  Alternative  Dispute  Resolution  (ADR)  mechanisms.  The principal Act for regulating Arbitration and Conciliation in Nigeria is the Arbitration and Conciliation  Act (Nigerian Act) enacted in 1988. The  enactment of the Nigerian Act followed  the  United  Nations  Commission  on  International  Trade Law (UNCITRAL) Model  Law  on  International   Commercial   Arbitration,   1985  and  the  New  York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958(New York Convention). The objectives of the Nigerian Act include providing a unified legal framework for the fair and efficient settlement of commercial disputes by arbitration and conciliation and to make applicable the New York Convention to any award  made in Nigeria or in any contracting State arising out of international commercial  arbitration. One thing which seems clear is that the Nigerian Act has, however, not achieved some of the major objectives that inspired its enactment. This is especially as it affects unified legal framework, fair and efficient dispute resolution process. The major objective of this thesis is to establish that the legal framework for arbitration and conciliation in Nigeria is neither unified nor adequate and efficient  but could be made more efficacious for the benefit  of  Nigerians  and  foreign  investors  alike  by enhancing  party  autonomy  and minimizing, if not obviating undue judicial intervention in arbitration. To achieve this task, this thesis adopts both doctrinal and non-doctrinal methodologies, relying on both primary and secondary materials. In the main, the thesis critically analyzes the provisions of the Nigerian Act as well as the Reform Bill on Arbitration and Conciliation in Nigeria pending  before  the  National  Assembly  since  2006.  The  study finds  that  inelegantly drafted provisions of the Nigerian Act have created confusion and generated conflicting and retrogressive  judicial decisions.  The study also  finds  that outdated  concepts  and definitions under the Nigerian Act have prevented the arbitral process from keeping pace with contemporary trends in international trade and commerce. The 1985 UNCITRAL Model Law and the 1976 UNCITRAL Rules which greatly influenced the provisions of the Nigerian Act were altered in 2006 and 2010 respectively, in order to meet up with existing realities. Yet, twenty-eight years after the enactment of the law, the Nigerian Act has remained fixated despite glaring need for amendment. This thesis concludes that the enactment of a new  Nigerian Act modeled after the new Model Law and Rules is an imperative for the Nigerian business and regulatory environment.

CHAPTER ONE GENERAL INTRODUCTION

1.1       Background to the Study

Disputes arise from human interaction due to conflicting interests. In order to promote harmonious  relationships,   human  beings  have  evolved  different  dispute  resolution mechanisms such as negotiation, reconciliation, mediation, conciliation, arbitration and litigation.

In pre-colonial  times  and  before  the advent  of  regular  courts  in Nigeria,  the various  indigenous  ethnic  groups  had  a  simple,  inexpensive  system  of  adjudication, notably, by referring disputes to elders or a body set up for that purpose; and this has over the years been embedded in the system.1

Although judicial powers are vested in the courts,2  customary law which varies

from one community to the other and being a body of rules of law in force immediately before the coming into force of the 1999  Constitution,  is saved by  virtue of section

315(3) and (4) thereof, as an existing law.

Apart  from  customary  law,  Christianity  and  Islam  (which  are the two  major received religions in Nigeria) have exerted a tremendous influence on the adjudicatory system. This is based on the injunctions of the Holy Scriptures that: “If someone brings a lawsuit against you, do your best to settle the dispute with him before you get to court”3 and “If two parties among believers fall into a quarrel, make ye peace between them. The

1    The dissenting opinion of Oguntade JCA (as he then was) in Okpuruwu v. Okpokam [1988] 4 NWLR (Pt. 90) 554 at 586-587.

2 Constitution of the Federal Republic of Nigeria, Cap. C23, Laws of the Federation of Nigeria (LFN) 2004

as amended, hereinafter, “1999 Constitution”, section 6.

3     Luke   12:58,   Matthew   5:25,   GoodNews   Bible,   Today’s   English   Version   Catholic   Edition

(Kolicata/Swalnaa Printing Works PVT Ltd., 2004).

believers are but a single brotherhood, so make peace and reconciliation between  your two (contending) brothers; and fear Allah that ye may receive mercy”.4

The  Muslim  community  of  Northern  Nigeria  usually  consists  of  chiefdoms known  as  Emirates  headed  by  Emirs  who  adjudicate  disputes  under   the  Islamic customary  law  called  Shariah.  Instructively,  arbitration5is  regarded  under  the Maliki

School of Shariahas a form of contract upon which parties agree to bring any dispute or

disagreement arising from the terms of a contractual agreement before an arbitrator6  for settlement.7

Generally  in Southern  Nigeria,  although  disputes  occurring  within the  family were often settled by the family or (kindred) head with the assistance of elders, arbitral tribunals were also constituted based on the agreement of the parties.8

The native adjudicatory system takes the form of negotiation for settlement  or

customary arbitration. The main distinction between the two is that under negotiation for settlement,  disputes  are  referred  to  the  family  head  or  an  elder  or  elders  of  the community for a compromise solution based upon subsequent acceptance by both parties before such a decision can become binding, whereas an award made under customary arbitration  is supposed  to  be final  and  binding.  This  is because,  when  parties  have voluntarily  submitted  their  dispute  to  an  arbitrator  on  their  own  accord,  pledging themselves as beforehand to be bound by his findings,  unless some fundamental error

was committed by him in the proceedings or his decision is otherwise unsupportable on

4 Chapter 49:9 – 10, Holy Quran.

5Tahkom.

6 Or Hakam.

7Falsal M. Kutty, “The Sharia International Commercial Arbitration”, Expresso Preprint Series, Working

Paper 875, 2005, 30, available at

http://law.bepress.com/egt/viewcontent.egi?article4382&context=expresso, last accessed on 13 May

2013.

8 Ben Nwabueze, Machinery of Justice in Nigeria, (London: Butterworth Publishers, 1963), p.43.

some grounds, the parties would be bound by the decision and a party would not  be allowed to resile from it simply for the reason that it did not favor it.9

On the  whole,  the object of settlement  of dispute  under  customary  law is  to ensure a continued peaceful coexistence among the people.10

The point to underscore here is that almost every dispute resolution process is preceded  by  more  or  less  intense  negotiations  between  business  managers.  Some commercial contracts contain highly sophisticated  multi-tier dispute  resolution clauses which require  going through consecutive  steps of different  private dispute resolution

processes11  in order for the parties to reach a settlement of their dispute.

Negotiation which encourages parties to first discuss among themselves is often the preferred first option because a mutual agreement reached without a third party will not only resolve the differences, but also facilitate useful future relationship. However the parties may be compelled to seek the intervention of a third party where negotiation

fails.12

The  yardstick  for  measuring  success  in commercial  dispute  resolution  is  the interest of the parties. A fair and lasting reconciliation of the parties’ interest  should therefore be the ultimate goal and dispute resolution process should aspire  to develop cost-effective procedures that ensure a final resolution while also realizing the potential to create value for the parties since the parties themselves  know best what is in their interest. In other words, it ought to be the parties  themselves who should fashion the

9Anjoku v. Nnamani14 WACA 357 at 359; Assampong v. AmuakuSotunbo(1992) 5 (Pt. 243) 514; Ojibah v. Ojibah [1992] 5 NWLR (Pt191) 296 CF Agu v. Ikewibe[1991] 3 NWLR (Pt180) 385; Ohiaeri v. Akabeze[1992] 2 NWLR (Pt 221] 1; Eke v. Okwaranyia[2001] 12 NWLR (Pt 726) 181. The conflicting decisions of the courts in these cases are discussed in chapter 3 of this thesis.

10 J.H. Driberg, “The African Conception of Law”, Journal of African Society 14 (1935), 231.

11   Klaus Peter Berger, Private Dispute Resolution in International Business: Negotiation, Mediation, Arbitration, Vol.1: Case Study and Interactive DVD-ROM (Netherlands: Kluwer Law International,

2006), preface.

12 “Dispute Settlement”, United Nations Conference on Trade and Development in New York and Geneva, (2005), https://www.unctad.org/en/Docs/edmmisc232add41_en.pdf (last accessed 23 May 2013).

solution on a consensual basis and it is only where consensus cannot be reached that a final resolution has to be guaranteed through a binding decision issued by a third party. Hence,  the guiding  principle  for dispute resolution  process  mechanism should  be to maximize  the consensual  element  in any solution and to  have a third-party decision-

making available, but limited to an indispensable minimum.13

In business transactions with international flavor, disputing parties often need  a neutral legal process which earns their confidence to settle their  differences. National courts are perceived to have an inherent national prejudice and aside from the fact that most (if not all) of the judges are drawn from the same nationality, some of them may not be competent to handle international disputes with conflicting legal, cultural, political and  ethical  systems.  Therefore,  contracting  parties  from  one  country  are  generally reluctant to submit to the national courts of the other party either because they are not suitable or due to lack of trust.14  This is a major reason most contracting parties usually

resort to Alternative Dispute Resolution (ADR) methods.

ADR  strengthens  judicial modernization  efforts,  reduces  delay by  unclogging courts dockets, increases access to justice especially for the poorest disputants, reduces cost  of  justice  for  all  users,  preserves,  improves  or  restores  relationships  among disputants, supports economic development  by reducing  transaction costs of disputes, promotes certainty of investments and increases satisfaction of the users.15  As a result, international  trade  and  commercial  transactions  thrive  in  Nigeria  due  to  abundant resources resulting in negotiations, drafting and interpretation of contracts, commercial

13   Christian  Buhring  –  Uhle,  Lars  Kirchhoff  &  Gabriele  Scherer,  Arbitration  and  Mediation  in

International Business, (2nd edn.) (The Netherlands: Kluwer Law International, 2006), p.266.

14   Julian D.M.  Lew,  Loukas A.  Mistelis& Stefan M.  Kröll,  Comparative International Commercial

Arbitration, (The Netherlands: Kluwer Law International, 2003), pp.5-6.

15  “Training Manual for ADR and Restorative Justice”, Nigerian Judicial Institute in Collaboration with the United Nations Office on Drugs and Crime Sponsored by the European Commission, October, 2007, (hereinafter, “Training Manual”) available at http://www.equalbeforethelaw.org/library/training-manual- alternative-dispute-resolutionadr-and-restorativ-justice (last accessed on 23 May 2013).

agreements and dispute resolution.16  Most often, decisions are made which may result in breach of the terms of commercial agreements between parties. It is therefore common to insert arbitration clauses in such domestic or international commercial contracts.17

Apart  from  negotiation,  there  are  other  well-known  forms  of ADR,  such  as mediation, mini-trials and Med-Arb. Some forms of mediation are now provided for in some High Court Civil Procedure Rules under the institutional administration of a Multi- Door Court House, to facilitate the resolution of civil disputes.

The process by which disputing parties, by consensus request a third party to assist them in their effort to reach an amicable settlement is interchangeably referred to as  Mediation  or  Conciliation.  The  Arbitration  and  Conciliation  Act18   refers  to  this process  as  Conciliation   and  the  Draft   Federal  Arbitration  and   Conciliation   Bill

200619adopts the definition of Conciliation in article 1(3) of the 2002 United  Nations

Commission  on  International  Trade  Law  (UNCITRAL)  Model  Law  on  Conciliation which provides as follows:

A process, whether referred to by the expression conciliation,  mediation or any expression  of similar import,  whereby  parties  request  a third party person  or persons  (the conciliator)  to assist them in their attempt  to reach  an amicable settlement  of their dispute arising  out of or relating  to a  contractual  or legal relationship.  The conciliator  does  not have the  authority to impose  upon the parties a solution to the dispute

ADR can be an integral part of the construction and reform of a healthy judicial system, according  the  goals  for  which  it  is  implemented,  the  background  conditions  and facilitating factors, but it requires adequate political and economic support on the part of

government with supportive traditional and cultural norms to succeed.20

16 Akin Akinbote, “Arbitration in Africa – The State of Arbitration in Nigeria”, A Paper Presented at the

2008 Colloquium of the Association for the Promotion of Arbitration in Africa, held at Djeuga Palace

Hotel,          Yaounde          from         January         14-15,          2008,          p.1         available         at

http://www.ohada.com/imprimer/actualite/261/ohada-arbitration-ecowas-the-state-of-arbitration-in- nigeria.html, last accessed on 23 May 2013.

17Ibid.

18 Cap. A18, LFN2004, (hereinafter, Nigerian Act).

19Hereinafter, “Reform Bill”, section 51(2).

20 “Training Manual”, above, note 15 chapter 1, at p.19.

In Nigeria, a lawyer shall not in his representation of his client, fail or neglect to inform his client of the option of ADR mechanisms before resorting to or  continuing litigation on behalf of his client.21

Where  a statute  prescribes  a legal  line of action for the determination  of  an

action, be it an administrative  matter, chieftaincy matter, or a matter  of taxation,  an aggrieved  party must exhaust all the remedies in that law before going to  court.22  In appreciation of the role of arbitration in the settlement of commercial disputes, a judge handling commercial matters should not only encourage parties to  reach agreement for settlement but to depart from usual procedure to ensure speedy and economical disposal of such cases.

The role of arbitration in the private sector-driven economy is very crucial as it helps to promote economic development in a free market enterprise regime. If there is a breach of contract or if there is interference with private rights, in order to avoid undue publicity of the dispute and to forestall the risk of estrangement of business relationship, the  private  nature  of  the  arbitral  process  is usually  embraced  by businessmen.  The importance  of arbitration  as a dispute  resolution  mechanism  in the domestic  market cannot therefore, be undervalued because it is cost effective and ensures quick and cheap

resolution of disputes.23   It is therefore not surprising that Nigeria  is one of the  most

accommodating countries in the world for ADR. Nigeria also adopted the UNCITRAL Model Law on International Commercial Arbitration 198524  and fashioned the Nigerian Act after it with slight modification.

21 Rules of Professional Conduct for Legal Practitioners, 2007, Rule 15.

22Owoseni v. Faloye[2005] 14 NWLR (Pt 946) 719, 740; Aribisala v. Ogunyemi[2005] 6 NWLR (Pt 912)

212.

23AkinlaniYairo,  “Alternative  Dispute  Resolution  for   Small   Businesses  (2)”,  Daily  Independent Newspaper,  July  25,  2005  C5  cited  in  Mohammed  Mustapha  Akanbi,  “Domestic  Commercial Arbitration in Nigeria: Problems and Challenges” Ph.D Thesis, (University of London, 2006) p.105.

24 Hereinafter, “Model Law”.

The  first  legislative  framework  on arbitration  in  Nigeria  was  the  Companies Ordinance of 191225, which was superior to the Received English Laws  which at that time operated concurrently with the local customary laws. The Arbitration Ordinance of

191426  which leaned heavily on the English laws was subsequently enacted to regulate domestic commercial arbitration  in Nigeria.27  The 1958 Act which was  based on the

1889 English Arbitration Act was applicable to the Regions and later to the States when States  were  created  by  the  defunct  military  administration  under  the  leadership  of General Yakubu Gowon in 1967.

The  current  Nigerian  Act  was  promulgated  as  a  decree  by  another  military administration led by General Ibrahim B. Babangida in 1988. The Nigerian Act which repealed the 1958 Act was silent however on the status of the  arbitration laws of the States as adopted or modified.28The Nigerian Act, which provides for both domestic and international arbitrations is applicable throughout the Federation of Nigeria, itis divided into  four parts namely:  Part I (Domestic  Arbitration);  Part II (Conciliation);  Part III (International Arbitration) and Part IV  (Miscellaneous Provisions).  The First Schedule

contains Arbitration Rules, the Second Schedule is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (otherwise referred to as  the New York Convention); while the Third Schedule contains Conciliation Rules.

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