Alternative Dispute Resolution Processes ;Its Importance in Modern Times and the Position of the Law.
By Barr. Nneoma Grace Ogbah
No matter the size or seriousness of a conflict, resolution is always possible as long as the right skills are in place and the disputants are willing and desirous to make peace with each other. ADR processes usually gives a win/win result unlike litigation which results to a win/loose situation.
The disadvantages of litigation such as the strain in relationships at the end of the litigation process, delay in litigation process, expensive nature of litigation, unpredictable nature, adversarial, over professionalized and rigid nature of the process has placed so much focus on ADR in most contemporary jurisdictions as a means of resolving disputes.
Importance of dispute resolution:
In every contract agreement, it is very pertinent to include a dispute resolution clause so as to provide a peaceful way to settle disputes and misunderstandings that may arise in the course of carrying out the contract. Disputes are damaging and time consuming and can unleash devastating effects on the individual, organization and community.
Meaning of ADR:
Alternative Dispute Resolution can simply be said to be methods or processes of resolving disputes ( be it civil or commercial), with or without the help of a third party, without resorting to litigation. ADR can be applied before instituting a court action or before judgement is given if the matter is already in court. In the latter case, the terms of settlement reached by the parties will be brought to the court and adopted as consent judgement.
There are several methods of Alternative Dispute Resolution, but for the purpose of our study, we shall only focus on the following:
This is the most popular process, whereby parties to a dispute refer their differences to a third party known as an arbitrator or arbitration tribunal, who hears both sides and afterwards, renders his decision. The Supreme Court gave its own definition of arbitration in the old case of Kano State Urban Development Board .v. Fanz Construction Co. Ltd (1990) 4NWLR (pt. 142) 1@
The decision of this arbitrator or arbitral tribunal is what we refer to as arbitral award. Arbitration is generally governed by the Arbitration and Conciliation Act, 2004.
There are 2types of arbitration viz;
- Domestic arbitration
- International arbitration
Domestic arbitration usually involves claims by private individuals that may be small in amount. Domestic Arbitration is a form of alternative dispute resolution (ADR) where one or more person(s) are appointed to hear a case that takes place within one jurisdiction. The award is binding and enforceable in court.
Domestic arbitration is further divided into 3types namely;
- Customary law arbitration
- Common law arbitration
- Arbitration under the Act.
Customary law arbitration:
The court in the case of Ufomba & Anor .v. Ahuchaogu & Ors (2003) 14NSCQR 159@164, defined customary law arbitration as a native arrangement by selected elders of the community who are vast in the customary law of the people, and who take decisions which are mainly aimed at bringing some amicable settlement, stability and social equilibrium to the people and their immediate society or environment. See also the celebrated case of Agu .v. Ikewibe (1991) 3 NWLR ( pt.180) 385@407.
For customary arbitration to be valid, there must be an indication of willingness of the parties to be bound by the decisions or be free to reject such decision where not satisfied. Customary law arbitration is oral and is not required to be written and even when the decision is reduced in writing, it doesn’t change the fact that it is a customary law arbitration. It is also important to point out that once a party consents to an arbitration under the customary law, such party cannot resile from the proceedings midstream or after an award is given, unless he can show that under his custom, there is a right to resile in respect of arbitration.
A party relying on customary law arbitration must specifically plead it. The court in a plethora of cases have laid down what the applicant must prove if he hopes to succeed. See the cases of Nwankpa .v. Nwogu (2006) 2 NWLR (pt.964) 251@276; Ohiaeri .v. Akabueze (1992) 2 NWLR (Pt.221) 1; Agu v. Ikewibe (1991) 3 NWLR (Pt.180) 385. An applicant relying on customary arbitration must specifically plead the following:
- That the disput between them was deliberated upon by a third party.
- That the third party gave a decision in his favour.
- That a valid customary arbitration exists where the parties voluntarily submitted to the arbitration.
- That the parties agreed beforehand to be bound by the arbitral decision.
- That none of the parties withdrew from the arbitration midstream.
- That none of the parties rejected the award immediately it was made.
- And that the arbitrators reached a decision and published their award.
Common law arbitration:
Just like the customary law arbitration, the common law arbitration is also oral and is concerned with present dispute which has arisen between the parties. Here, an arbitrator who is appointed by oral agreement can be removed at any time before he makes his award and a party to a common law arbitration agreement can abandon the arbitration proceedings and proceed with an action in court.
Arbitration under the ACA:
This type of domestic arbitration is governed by the Arbitration and Conciliation Act, cap A18 Laws of the Federation of Nigeria, 2004. By section 1of the ACA, for an agreement to be governed by the ACA, it must be in writing contained: a. In a document signed by the parties
- In an exchange of letters, telex, telegrams or other means of communication which provide a record of the arbitration agreement.
- In an exchange of points of claim and of defense in which the existence of an arbitration agreement is alleged by one party and denied by the other.
Where parties to an agreement voluntarily submit to arbitration by their agreement ( usually a
clause in the agreement), the decision of the arbitrator or arbitral panel will be binding on them unless such decisions are set aside by the court based on some fundamental error(s) which was committed by them in their proceedings or their decision is unsupportable on some ground. The mere reason that a decision did not favour a party is not enough not to be bound by an arbitral award. See the case of Environmental Development Construction & Anor .v. Umara Associates Nigeria (2000) 4NWLR (pt.652) 293@304.
It is worthy to note that in a contract, where reference is made to a document containing an arbitration clause, such constitutes an arbitration agreement if such contract is in writing and the reference is such as to make that clause part of the contract.
Another point worthy of note is that an arbitration agreement under the Act will not only bind the actual parties to it, but also agents of the parties, as well as personal representatives. However, where the rights, duties and obligations of a party(s) to an arbitration agreement are extinguished by death, any arbitration agreement referring their present or future dispute to arbitration is extinguished too and by that, their agents or persons representatives will not be bound too. This is in line with the actiopersonalismoritur cum persona rule, which is to the effect that a personal right of action dies with the person.
Nevertheless, the provision of Section 1 of the Law Reform (miscellaneous provisions) Act, 1934 tries to replace this common law principle, to allow that on the death of a party to an arbitration agreement, all causes of action subsisting against him shall survive, especially when it is for the benefit of his estate.
On the other hand, international arbitration being the 2nd type of arbitration is the type of arbitration that involves the settlement of disputes arising from international trade between physical or legal persons who at the time of concluding the agreement had their habitual place of residence or their seat in different contracting states. (See Article 1of the European Convention of 1961)
According to Section 57(2) of the Arbitration and Conciliation Act of 2004, an arbitration is said to be international if:
- The parties to an arbitration agreement have at the time of the conclusion of their agreement, their places of business in different countries.
- One of the following places is situated outside the country in which the parties have their places of business:
- The place of arbitration if such place is determined in or pursuant to the arbitration agreement.
- Any place where a substantial part of the obligation of the commercial relationship is to be performed or the place with which the subject matter of the dispute is most closely connected.
- The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country; or
- The parties despite the nature of the contract, expressly agree that any dispute arising from the commercial transaction shall be treated as an international arbitration.
It is however worthy to note that by the provision of section 57(3) of ACA, for the purposes of section 57(2) of the Act, where a party has more than one place of business, the place of business shall be that which has the closest relationship to the arbitration agreement and if a party has no known place of business, reference will be made to his habitual residence.
There are 2forms of international commercial arbitration namely; 1. Institutional arbitration
- Adhoc arbitration
Institutional arbitration can be said to be the type of arbitration conducted under the rules of permanent arbitral institutions, centers and organizations. The principal role of these organizations and centers is to provide the rules and administrative facilities to keep arbitrators and conciliators appointed by the parties to operate. Nevertheless, although the use of this institutions provide highly trained, skillful and experienced staff to carry out the arbitration proceedings, this type of international arbitration is expensive and may usually not meet the need for speed.
On the other hand, adhoc arbitration takes place wherever the arbitration clause in the original agreement of the parties provides for arbitration without designating any arbitration institution and without referring to any particular set of institutional rules. Here, the parties establish their own rules of procedure.
It is worthy to note that matters bordering on international commercial arbitration are usually governed by the United Nations Conference in International Trade Law ( model law) on
International Arbitration of 1985.
Arbitral agreements enjoy the recognition of the law and are usually enforced by the court. Arbitration agreements operate on the principle of “ pacta sunt servanda ” which means “agreements must be kept”.
Sometimes, an arbitration clause may provide that the award of an arbitrator shall be a condition precedent to the enforcement of any rights under the contract. This means that a party cannot have a cause of action in respect of a claim falling within the clause unless an award has been made. This clause is what we know as the “Scott .v. Avery rule”. An arbitration agreement does not become invalid by reason of death of any party, in the event of death of any of the party, the personal representatives take over. See section 7(3) of the ACA.
Although parties to an arbitration are allowed to choose their arbitrators, the law still allows a party to challenge the appointment of an arbitrator for a genuine reason, usually when there is nondisclosure of a thing that has made the arbitrator not to be impartial or independent. In other to avoid situations like this, an arbitrator who has or knows any circumstances which may give rise to any justifiable doubts as to his impartiality or independence is advised to disclose such circumstances to the parties. An arbitrator will also be disqualified if he has interest in the subject matter of the dispute, is an employee of either party to the arbitration or is a director or shareholder in a company which is a party to the dispute. A party who wishes to challenge the appointment of an arbitrator shall do that within 15 days of becoming aware of the circumstance(s) for the challenge. This 15 days can however be extended by the arbitral tribunal if it considers it necessary to do so.
P.S: criminal matters cannot be arbitrated upon unless the policy of the law permits it to be compromised, which is usually in very rare cases.
This is the process whereby a third party is appointed a neutral and unbiased person to help parties involved in a dispute to achieve a settlement by steering negotiations towards an amicable conclusion. It essentially involves identifying a right that has been violated and searching for the best solution to arrive at a satisfactory agreement.The conciliator listens to both parties together and separately, he hears evidence from both parties and draws up terms of settlement based on the arguments of both parties. The purpose of conciliation proceedings is to reach an amicable, cost-efficient and swift settlement of a dispute. Where parties agree to submit their dispute to conciliation, ICMA assigns a member of its panel of conciliators as conciliator to the case.
Conciliation is less formal than arbitration and is a non- binding procedure. The parties select their conciliator and the conciliator serve at their expense. It is however worthy to note that both the conciliation and arbitration are backed up by statutes such as the Arbitration and Conciliation Act, 2004in Nigeria and internationally by the International Centre For The Settlement Of Investment Dispute (ICSID).
By the provision of section 55of the ACA, parties to an international commercial agreement may agree in writing that disputes arising from their agreement shall be settled by conciliation rules set out in the third schedule of the Act.
After an invitation to conciliate is sent to the other party, the latter has 30days to accept or reject the invitation and until he accepts same, there can not be any conciliation proceedings. Silence of the former however, will be translated as rejection of the invitation. Unless otherwise agreed by the parties to a conciliation proceeding, the number of conciliator shall be one and when they are more than one, they must act together. Parties in a conciliation proceeding can be represented by persons of their choice. The conciliator and parties in a conciliation proceeding must keep al matters relating to the conciliation proceeding confidential, including the settlement agreement arrived at by the parties. C. Mediation:
According to the Blacks Law Dictionary, mediation is a method of non- binding/ nonjudicial dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution. The main aim of mediation is to help disputants achieve a new perception of their relationship and not to impose rules on them. If the mediation is successful at the end of the day, the parties will resolve the dispute by entering into a binding agreement, which if necessary, any of the parties can enforce by legal action. If there’s no resolution, the parties proceed to arbitration or litigation. D. Negotiation:
Negotiation according to the Blacks Law Dictionary is a consensual bargaining process in which the parties attempt to reach an agreement on a disputed or potentially disputed matter. Here, the negotiator uses various communication methods to bring the parties involved in the dispute to a settlement. It is an informal process and as such, relatively flexible.
From the above discussion, it can be said that the various dispute resolution processes have many similarities. Arbitration seems to be the only outstanding ADR process and has more differences than the others. Even our court rules and practices encourage amicable settlement of disputes by parties. Order 28 of the High Court of Lagos State (Civil Procedure) Rules, 2019 provides for Alternative Dispute Resolution proceedings and by rule 2 of Order 28, all ADR applications are to be taken by the ADR judge.
In the same vein, Order 19 of the High Court of the Federal Capital Territory, Abuja (Civil Procedure) Rules, 2018, particularly Rule 1, provides that it is the duty of a court or judge to encourage settlement of matters either by Arbitration, conciliation, mediation or any other method of dispute resolution. See also the Federal High Court ( Alternative Dispute Resolution) Rules, 2018.
The promotion of amicable settlement of cases or adoption of alternative dispute resolution is one of the obligations of the court and the parties at pre-trial conference and as such, must be adhered to.
Barr. Nneoma Grace Ogbah
Legal officer, DITOIL Energy ltd.
Phone no: 08119690931, 08106472510
This work is published under the free legal awareness project of Sabi Law Foundation (www.SabiLaw.org) funded by the law firm of Bezaleel Chambers International (www.BezaleelChambers.com). The writer was not paid or charged any publishing fee. You too can support the legal awareness projects and programs of Sabi Law Foundation by donating to us. Donate here and get our unique appreciation certificate or memento.
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