Beyond the Backlog: Why Arbitration should replace Litigation as Nigeria’s default for Commercial disputes.

Beyond the Backlog: Why Arbitration Should Replace Litigation as Nigeria’s Default for Commercial Disputes.

By Joseph Kuatsea

Introduction and Overview

Nigeria’s litigation system is adversarial in nature, meaning parties to a dispute are often, if not always, in adverse positions with each other. In addition, it has become the overarching norm and standard practice under Nigerian judicial system for litigation to be protracted, tedious, and unduly delayed.

In the world of business and commerce, where time is money, subjecting commercial disputes to a protracted, tedious, and unduly delayed system is antithetical to its progress and effectiveness.

Commercial transactions are unique to the extent that their operations and disputes require speedy dispensation and resolution.  The word ‘backlog’ is more or less a euphemism to describe the harmfully slow and mounting cases our courts are burdened with. The practical effect  thus for businesses is operational paralysis, lingering crisis, lack of faith in doing business in Nigeria, or illegal or an attempt at an illegal bypass of the courts and laws.

In a special session to flag off the commencement of the 2024/2025 legal year, the Honourable Chief Judge of the Federal High Court, Justice John Tsoho disclosed that a total of 155,969 cases are awaiting the attention of the judges of the court. It is thus conspicuously apparent that the court is overburdened by too many cases; as such, their ability to timely settle disputes in commercial matters, and all matters at that, is minimal. This in turn has maximal detrimental repercussions on the operation and running of business, which in turn will inevitably have detrimental effects on the economy. While cases are pending before the courts, awaiting hearing dates some as long as 5 years, 10 years and so on, foreign investors watch Nigeria’s dispute system and decide to go elsewhere, contracts collapse, investments cannot be returned, and reputations are damaged in public records. Litigation designed and intended to deliver public justice has become a liability to commerce.

Arbitration is the correction. It replaces delay with decision,  undue publicity with confidentiality, and legal generalism  with commercial expertise.

If Nigeria, the Giant of Africa is to become a top-tier business-friendly country, it must promote and ensure alternative dispute resolution mechanisms such as arbitration are the default dispute remedial channel for commercial transactions.

Definition of Key Terms

1. Litigation
2. Commercial Disputes
3. Arbitration

Litigation

Litigation can be defined as the settlement of legal disputes before a court of competent jurisdiction.

More comprehensively, litigation is a legal process through which parties involved in disputes are given the opportunity to present their cases before a judge, who then  delivers judgement based on facts, evidence, and arguments presented.[i] Ariwoola CJN (as he then was) in EFCC v House Attahiru Bafarawa Bauchi[ii] expressed: Litigation is not a game of chess where players outsmart themselves by dexterity of purpose and traps. On the contrary Litigation is a contest by judicial process where parties place on the table of justice, their different positions clearly and without tricks.

Litigation in Nigeria is conducted across all the courts contained in the Constitution[iii]

Commercial Disputes

Commercial disputes is not a technical term, so to say. It simply refers to all and any form of disagreement arising out of commercial transactions, business relations, trade and other commercial services.

Arbitration

Arbitration is the fair resolution of a dispute between two or more parties by a person o persons other than by a court of law. It is the reference of a dispute by parties thereto for settlement by a person or tribunal of their own choice rather than a court. The basis of arbitration is the consent of the parties to submit or refer their dispute to arbitration[iv]. Holdsworth describes it as:

The practice of Arbitration therefore, comes so to speak, naturally to the primitive bodies of law; and after courts have been established by the state and a recourse to them has become the natural method of settling disputes, the practice continues because the parties to a dispute want to settle it with less formality and expense than is involved in a recourse to the courts[v]

1. Ezejiofor defines Arbitration as;

The reference of a dispute or difference between not less than 2 parties for determination after hearing both sides in a judicial manner, by a person or other persons other than a court of competent jurisdiction[vi]. G. Ezejiofor argues that Arbitration would effectively shield parties from:

• The frustrating delays which have bedevilled the judicial process, completely overwhelmed the Judiciary and reduced it to a position of helplessness.
• The comparatively heavier financial outlay of such process
• The disclosure of business secrets to competitors, which sometimes occur in litigation(which are always public)
• The adverse publicity which some litigation attract to the litigating firms and
• The rigid formality which characterise court trials[vii]

The Courts of law have also lent their contributions to the literature on Arbitration as laid out in the case of Nigerian National Petroleum Corporation v Lutin Investment Ltd & Anor[viii]:

An Arbitration is the reference of a dispute or difference between not less than 2 parties for determination after hearing both sides in a judicial manner; by a person or persons other than a court of competent jurisdiction. The arbitrator, who is not an Umpire , has the jurisdiction to decide only what has been submitted to him by the parties for determination. If he decides something else he will be acting outside his authority and consequently the whole proceedings will be null and void and of no effect . This will include any  award he may subsequently make.

Arbitration is a method of dispute resolution involving one or more neutral third parties who are usually agreed to by the disputing parties and whose decision is binding.[ix]

Arbitration is an internationally recognised concept with strong enforcement structures here in Nigeria.

The Arbitration and Mediation Act 2023 which repealed the 1988 Arbitration and Conciliation Act is the primary and foremost legislation governing arbitration in Nigeria

Nature of Commercial Transactions

Commercial disputes in Nigeria commonly arise from breach of contract, debt recovery, shareholder disagreement, banking and finance conflicts.

With the advent of technology and AI the world has become a global village, people from various parts of the world can transact with each other from their palms. Disputes in commercial transactions thus sometimes transcend multiple countries and as such transcend varying legal systems and laws. Commercial transactions are also very time sensitive; as such, resolution of dispute in a timely and swift manner is of the utmost essence.

Commercial transactions are also very profit oriented, people in business prioritise making maximal profits and greatly limiting their cost. Thus, the very nature of commercial transactions necessitates a system of dispute resolution that will be suitable in addressing all its peculiarities and special needs and address it in a timely manner. Litigation, known for undue delays, high cost and sometimes adverse judgements present a huge burden and strain on the effective settlement of commercial disputes which invariably affects commerce and business growth in Nigeria.

Problem of Litigation

1. Litigation is time consuming.
2. High cost involved.
3. Copious formalities, processes and procedures involved.
4. Adversarial in nature.
5. Most times it takes on this winner-take-all dynamic, that is injurious to business relations.

Why Arbitration?

1. Comparatively, Arbitration costs less.
2. It is swift and efficient, thus promoting speedy resolution of disputes.
3. It is non-adversarial in nature
4. Arbitration, while awards may be given against a party, does not have the same winner take all dynamic that is common in litigation.
5. Arbitration lacks the rigorous processes and formalities that are prevalent in litigation thus ensuring it is a more seamless process.
6. Ensures confidentiality of business records and secrets as its proceedings are not open to the public.
7. Arbitration in Nigeria, although regulated primarily by Nigerian statutory law, is an internationally recognised concept as such there are several international laws on the matter that regulate arbitration in Nigeria as such transnational commercial disputes can easily be resolved. The Nigerian Arbitration and Mediation Act (AMA) is modelled after the UNCITRAL Model Law on Arbitration.  Nigeria (the first African country to do so) adopted the UNCITRAL Model Law on Arbitration into the ACA in 1988 and subsequently into the AMA in 2023.

Challenges of Arbitration

While arbitration is the preferred dispute remedial mechanism for commercial disputes, it is not without some challenges that need addressing:

1. Loose or non enforceability of arbitral awards. While on paper all arbitral awards are enforceable, in practical reality, parties who did not obtain the outcome they desired try to circumvent enforcing the awards by challenging the award at a court of law sometimes under frivolous claims to unduly delay enforcement. The AMA is clear on the grounds on which an arbitral award can be challenged[x]
2. Unrestricted appeals against orders enforcing arbitral awards: To further compound the problem of delaying the enforcement of arbitral awards is the unrestricted appeals against court sanctioned orders enforcing arbitral awards to appellate courts thus further delaying the conclusion of disputes that went to arbitration to escape the tediousness and unnecessary delay of traditional courts. Parties as a matter of law can appeal court orders enforcing arbitral awards to appellate courts and while the principle is rooted in the principle of judicial review some mischievous elements use it as a tool to delay the conclusion of matters.[xi]
3. Insufficient expertise in the field.
4. Corruption and arbitration bias.

Solutions

1. Ensuring stronger compliance and enforcement of arbitral awards
2. Arbitral awards should not be challenged at the High courts but rather should go directly to the Court of Appeal for judicial review, this will cut the time arbitral awards spend in the High court almost being relitigated after a panel of arbitrators has already sat and decided on the matter.
3. While compared to traditional litigation, arbitration does not have as many processes and procedures, the procedures of arbitration still need to be streamlined more to have a more seamless process.
4. Capacity building and more training programs on arbitration should be encouraged. Law students at the university level should also be taught arbitration as a course.

Recommended Reading

1. UNCITRAL Model Law and the AMA
2. Idornigie P.O (2019) Commercial Arbitration Law & Practice in Nigeria.
3. Challenges confronting Arbitration vis-à-vis Commercial disputes: The Nigeria experience by Juliet Orie Rex- Chikezie
4. Ezejiofor, The law of Arbitration in Nigeria
5. Commercial Arbitration in Nigeria: Law & Practice 2^nd Edition by Fabian Ajogwu SAN
6. Adedoyin Rhodes-Vivour, SAN – Arbitration and Alternative Dispute Resolution as instruments for economic reform published in Development of Business Law: A compilation presented at the Nigerian Bar Association Section on Business Law Conferences journal.

Endnotes

[i] Afam Chukuka – The role of Litigation in Nigeria today: sustainable, stagnant or shifting.

[ii] (2024) 3 NWLR (PT. 1925) 251 at 274

[iii] Section 6(5) 1999 Constitution Federal Republic of Nigeria 1999 as amended

[iv] Commercial Arbitration in Nigeria: Law and Practice 2^nd Edition by Fabian Ajogwu, SAN

[v] Holdsworth, History of English law, Vol. XIV, 1964, 187

[vi]  G. Ezejiofor, The law of Arbitration in Nigeria

[vii] ibid

[viii] (2006) 2 NWLR (PT. 965) 506

[ix] Black Laws Dictionary

[x] See Section 8 AMA

[xi]  See the cases of Sunderson Ltd & Milon Nigeria Ltd v Cruiser Shipping PTE Ltd & Universal Navigation PTE Ltd (2014) LLJR – CA

About the Author

Kuatsea Shagbaor Joseph, Best Graduating Student (Male), Faculty of Law, University of Abuja. His interests include Legal Compliance and Regulations, Taxation, Arbitration, Energy Law, Intellectual Property, International Humanitarian Law, and Corporate Law.

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