APPRAISAL OF JUDICIAL INTERVENTION IN DOMESTIC COMMERCIAL ARBITRATION IN NIGERIA

 

CHAPTER ONE

I N T R O D U C T I O N

 

1.1.      Background of the Study

Arbitration is a reference of a dispute between not less than two parties for determination after hearing both parties in a judicial manner by a person or persons other than a court of competent jurisdiction.[1] Parties have the right to define the tenure of their agreement. The courts are enjoined to enforce such terms, and give effect to whatsoever rights the parties conferred on one another and the obligations they choose to impose on one another.Though the courts are available to them, parties may opt for arbitration out of their own volition to suit their peculiar business interests. In doing so, parties circumscribe their right to seek redress in a court of law if a dispute arises which comes under the terms of their arbitration agreement. Therefore, compliance with the arbitration contract becomes a sine qua non, a condition precedent for a party to seek redress in the court.[2]

In choosing arbitration instead of litigation, the intendment of the parties is to resolve their disputes privately and on their own terms. They choose arbitration to circumvent the usual delays, publicity, rancour and technicalities that pervade the formal court system. Rather, the parties seek to maintain and protect their privacy, business secrets and goodwill, and be in a position to mend fences in the interest of their mutual interests. Again arbitration affords the parties the opportunity to shun strife and ill-will which usually accompany formal litigation processes.

However, many a party toarbitration agreement, when a dispute arises which falls within the contemplation of the arbitration agreement, renege and go foul of the agreement. Where parties have chosen some persons they trust their skills, impartiality and fairness to determine issues arising between them, one wonders why either party is to be allowed to take steps in flagrant disregard of their extant agreement toarbitrate, except of course in deserving circumstances.

 

1.2.      Statement of the Problem

Parties opt for arbitration to avoid litigation in the resolution of disputes between them. They prefer arbitration to avoid the time wastage and technicalities associated with litigation. However, some parties who are unwilling to honour arbitration agreements resort to the courts when disputes arise which fall within the contemplation of their agreement. Some parties submit to arbitration but resort to the courts later on the conviction that the arbitrators are biased against them or because of their indisposition to accept unfavourable awards.

Incessant judicial intervention impacts negatively on arbitration. Parties conduct the arbitral processes half-heartedly, knowing that they can later fall back on the courts. Arbitration which ought to be expeditious eventually drags on for many years. Control measures in the Arbitration and Conciliation Act are not adequate to curb judicial intervention in the arbitral process. Although section 34 of the Act provides that the courts shall not intervene except as provided by the Act, the Act provides for numerous circumstances where the courts can intervene. Parties find several excuses under these provisions to go to court. This inadequacy leads to continual resort to courts by parties, virtually at every stage of the arbitration process. While court intervention per se may not be the problem, it is notorious that the courts are neither pragmatic nor efficient.

 

1.3.      Research Questions

The central focus of this study revolves around the following research questions:

• Why do parties opt for arbitration as an alternative dispute resolution mechanism?
• Whichfactors promote parties’ resort to the courts?
• What are the effects of incessant judicial intervention in arbitration?
• Is the Arbitration and Conciliation Act adequate in controlling judicial intervention in the arbitral process?

 

1.4.      Objectives of the Study        

The objectives of the study are as follows:

• To critically examine parties’ preference of arbitration as an alternative dispute resolution mechanism.
• Toidentify factors which promote parties’ resort to the courts.
• Toexamine the effects of incessant judicial intervention in arbitration.
• To determine the adequacy or otherwise of the Arbitration and Conciliation Act in controlling judicial intervention in arbitration.

 

1.5.      Methodology

The research design adopted in this dissertation was interview. The population was all the arbitration law lecturers of universities in old Anambra State of Nigeria, made up of Anambra State, Enugu State and Ebonyi State. Arbitration law lecturers were chosen for this study because the subject-matter of this dissertation comes within their area of specialization and they teach arbitration practitioners who directly impact on the success or otherwise of arbitration. The samples were arbitration law lecturers from three universities, one from each of the States, of which fifty percent (50%) of the lecturers were interviewed. For the purposes of this study, the arbitration law lecturers were categorized into two groups: (i) lecturers from the rank of senior lecturer and above and (ii) lecturers below the rank of senior lecturer.

Equal numbers of lecturers were interviewed from each of these two groups. The lecturers interviewed from each group were picked at random. They were interviewed mainly on the following issues: (i) arbitration as an alternative dispute resolution mechanism, (ii) factors promoting resort to the courts by parties to arbitration agreements, (iii) effects of incessant judicial intervention in arbitration, (iv) adequacy of the Arbitration and Conciliation Act in controlling judicial intervention in the arbitral process and (v) ways of making arbitration more efficient in Nigeria.

This study relied on primary source materials, namely, interviews, observations and comments of legal practitioners teaching arbitration law, statutes and subsidiary legislations. The following secondary source materials were utilized: case law, textbooks, dictionaries, journals, articles and conference papers. The dissertation described arbitration as an alternative to litigation and discussed the state of the law of arbitration in Nigeria as it bears on the subject matter of this study. The dissertation also evaluated judicial intervention in the arbitral process, examined ways of eliminating the bottlenecks and suggested avenues to enhance the effectiveness of arbitration.

 

1.6.      Scope of the Study

In its diversity, arbitration traverses a wide spectrum of our jurisprudence. Equally, there are various shades and forms of arbitration. In the circumstance, it is necessary to delimit the scope of this study. In this vein, this work focuses on domestic commercial arbitration in Nigeria, with particular emphasis on judicial intervention in the arbitral process.

 

 

1.7.      Literature Review

Alternative dispute resolution, according to Idornigie, is a range of procedures that serve as alternative to litigation for the resolution of disputes, in the main involving the intercession and assistance of a neutral third party.[3] For Orojo and Ajomo, alternative dispute resolution is the methods and procedures used to resolve disputes either as alternative to the traditional dispute resolutionmechanisms of the court or in some cases as supplementary to such mechanism.[4] As Efevwerhan puts it, alternative dispute resolution is any means of achieving a mutually acceptable solution to disputes agreed to by the parties without recourse to conventional court litigation.[5] Nevertheless, Bernstein underscores the fact that “Where alternative dispute resolution takes place as an adjunct to litigation, the court must have a role to play of both support and supervision, but there are those who believe that that role should be limited”.[6] Nwakoby highlights that one of the ways of settling disputes is arbitration, whereby those concerned agree to submit the dispute to a third party in whom both have confidence and undertake to abide by the decision of the arbitrators.[7]

Arbitration is defined as 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.[8] Arbitration has also been defined as “A reference of a dispute between not less than two parties for determination after hearing both parties in a judicial manner by a person or persons other than a court of competent jurisdiction”.[9] On their own part, Afolayan and Okorie perceived arbitration this way:“Arbitration is a mechanism for the resolution of disputes which takes place usually in private, pursuant to an agreement between two or more parties, under which the parties agree to be bound by the decision to be given by the arbitrator according to law, or if so agreed, other considerations after a fair-hearing, such decisions been enforceable at law.”[10]Thus arbitration is a settlement technique in which a third party reviews the case and imposes a decision that is legally binding on both sides. In respect of arbitration under the Act, Olorumfemi states that it is “an alternative adjudicatory process to litigation whereby two or more parties agree to submit the determination of a dispute arising between them to a tribunal.[11]

In view of the definition of arbitration, especially the one by Halsbury’s Laws of England, Ezejiofor observes that “An exercise is not arbitration, strictly so called, if it does not answer to this definition, not withstanding that it is described as arbitration.  Thus an arbitration board appointed not to settle a dispute, but to determine the value of certain assets taken over by the government from certain companies, is not an arbitration within this definition.”[12]However, the authors of Russell on Arbitrationobserve that an arbitral tribunal may be specifically instructed by the arbitration agreement to decide the dispute on some basis other than the law.[13] Such provisions are generally known as equity clause. However, Lew observes that litigation and arbitration are frequently seen as a step in the negotiation process rather than purely as a means by which to seek redress for some wrong.[14] However, to Fulton, “Anybody but the most hopeless prejudiced lawyer would accept that some disputes are more amenable to swift settlement by arbitration than by the judicial process.”[15]

For arbitration proceedings to arise, there must have been an agreement providing for such proceedings when necessary.[16]  Thus parties must have entered into an agreement for that purpose. The capacity of a party to enter into an arbitration agreement is the same as the capacity to enter into contract.[17] Sagay defines a contract as an agreement which the law will enforce or recognize as affecting the legal rights and duties of the parties.[18] He also added that where the parties have the intention to enter into a legal relationship the agreement will be actionable, but where there is no such intention the agreement will not be actionable as the existence of a contract is negated.[19]  Sagay goes on to observe that “…apart from the express terms contained in a contract, the parties’ responsibilities may be further amplified by other terms known as implied terms.”[20]

Philips expresses the view that arbitration agreement is “an agreement by the parties to submit to arbitration all or certain disputes which has arisen or which may arise between them in respect of a defined legal relationship whether contractual or not”.[21] Nevertheless, Naon contends that arbitration is a contractual arrangement, which the court recognizes and enforces because the statute permits it.[22]Be that as it may, Ezejiofor interjects that it is not every differences or dispute that may be referred to arbitration.[23] And besides, that the arbitral disputes are those disputes that can be compromised by way of accord and satisfaction.[24]

Arbitration has been viewed as an alternative to litigation alongside other alternative dispute resolution mechanisms. Orojo and Ajomo opine that the embrace of alternative dispute resolution is to avoid going to court on the one hand and/or to settle out of court on the other hand. This is despite the fact that it is sometimes employed as auxiliary to the court system by way of supplementing the court mechanism.[25] Also under alternative dispute resolution, there is no need for the parties to appear before formal institutions or authorities set up for the determination of disputes.

Other popular alternative dispute resolution mechanisms include Mediation and Conciliation. The modus operandi of the mediator is to meet each party privately, understand each party’s side of the story, then bring both parties  together so that they may themselves work out a compromise solution to their dispute.[26]  However, in the case of conciliation, the conciliator moves some steps further than that of the mediator, as he fashions out proposals and modalities for the resolution of the dispute. Nevertheless, in contrast to an arbitrator, the conciliator does not go to the extent of handing down a binding decision on the dispute.[27]

Arbitration and litigation share a common but cardinal feature. This is the fact that their decisions are fundamentally judgmental.  Be that as it may, arbitration and litigation are poles apart. Nwakoby asserts that the essence of arbitration is that the dispute between the parties is taken out of formal court processes and determined by arbitrators chosen by the parties themselves or appointed for them by the court or arbitral institution. The intention of the parties who go before an arbitral tribunal is fundamentally to exclude the interference of the court in their case.[28] That notwithstanding, Nwakoby emphatically states that arbitration practices generally and arbitration agreement in particular are not made with the intention to challenge or oust the jurisdiction of the court.[29] Likewise Ezike affirms that the jurisdiction of the court is not ousted by arbitration agreement.[30] As regards the ouster clauses, Akaniro did not hesitate to state that generally where there is a statute purporting to oust their jurisdiction, the Nigerian courts have taken the stance that the language of any such statute will be jealously watched.[31]

At the end of an arbitral process, the arbitral tribunal hands down an award. To be enforceable, the award has to be final. An award is final if it determines all the issues referred to arbitration.[32] Nevertheless, the parties must have been given fair-hearing. Akaniro elucidates that when it is stated that a hearing was in breach of the right of fair-hearing, the court does not have to go into the question whether or not the decision itself was correct.  What is being impugned is the circumstances of the decision, not the decision itself.[33]In this regard, Ikeyi rejoins that, “What enforcement of arbitral agreement under the Act achieves is to take the hearing and determination of the dispute out of the hand of the court …though in theory the court retains jurisdiction over the matter.”[34] In furtherance thereto, Afolayan and Okorie[35]aver that the court has power to intervene in such areas as stay of proceedings, revocation of arbitral agreement, appointment of arbitrators, attendance of witnesses, production of documents, setting aside of an award, remission of award, enforcement of an award and refusal of enforcement.

Ezike remarks that section 6(6)(a) and (b) of the 1999 Constitution implies that the judicial powers cannot be circumscribed or curtailed except as stipulated by the Constitution. But he went on to reiterate that “all matters” as stated in section 6(6)(a) and (b) of the 1999 Constitution are bracketed out from courts intervention by section 34 of the Act, except where so provided by the Act. It therefore follows that the judicial powers extends to “some matters” and not to “all matters”.[36]

Idigbe remarks that one would expect that a party having chosen arbitration as a faster means of dispute resolution will be free entirely from the interference of court, but that is usually not the case.[37] However, the Act limits the intervention of courts in arbitration. Section 34 of the Act curtails the inherent jurisdiction granted the courts vis-à-vis arbitration matters. Section 34 of the Act provides that “A court shall not intervene in any matter governed by this Act except where so provided in this Act.” Finally, Ikeyi reiterates that the essence of this provision is to strike a balance between the supervisory powers of the State and freedom of the arbitral process.[38]

[1]Halsbury’s Laws of England, 3rd edn., Vol. II, p. 2.

[2] Where a party heads to the court without first referring the matter to arbitration, the other party reserves the  right to apply to the court to stay the proceedings under the Arbitration and Conciliation Act, Cap A18, LFN 2004 (hereinafter referred to as the Act). He can do so under section 4 or section 5 of the Act. The court may stay proceedings and order that the matter be referred to arbitration.

[3] P. O. Idornigie, “Alternative Dispute Resolution Mechanism” cited in A. F. Afolayan and P. C. Okorie,

Modern Civil Procedure Law, (Lagos: Dee-Sage Nigeria Ltd., 2007), p. 564.

[4] J. O. Orojo and M. A. Ajomo , Law and Practice of Arbitration in Nigeria,

(Lagos:Mbeyi and Associates Nig. Ltd., 1999), p. 14.

[5] D. I. Efevwerhan, Principles of Civil Procedure in Nigeria, (Enugu: Changlo Ltd., 2007), p. 239.

[6] R. Bernstein, Handbook of Arbitration Practice, (London: Sweet & Maxwell, 1998), p. 600.

[7] G. C. Nwakoby, The Law and Practice of Commercial Arbitration in Nigeria, (Enugu: Iyke Ventures

Production, 2004), p. 1.

[8] B.A.Garner (ed.), Black’s Law Dictionary, (9thedn., USA: West Thomson Reuter Inc., 2009), p.119.

[9]Halsbury’s Laws of England, 3rd edn., Vol. II, p. 2 cited in G. Ezejiofor,  The Law of Arbitration,

(Ikeja, Lagos; Longman Nigeria Plc., 1997), p. 1.

[10] A. F. Afolayan and P. C. Okorie, Modern Civil Procedure Law, (Lagos: Dee-Sage Nigeria Ltd., 2007), p. 567.

[11] J. F. Olorunfemi, “The Effect of Arbitration Agreement on the jurisdiction of Court in Nigeria” ,

   Nigeria  Journal of Public Law, Vol. II, No 1, 2009, p. 311.

[12] Ezejiofor, op. cit., note 9,p.14.

[13] D. J. Sutton, J. Kendall and J. Gill, Russell on Arbitration, (21st edn.; London: Sweet & Maxwell, 1997),

162. 162.

[14] J.D. Lew (ed.), The Immunity of Arbitrators, (London: Lloyd of London Press Ltd., 1990), p. 1.

[15] M. J. Fulton, Commercial Alternative Dispute Resolution, (London: Sweet & Maxwell, 1989), p. 55.

[16] F. Nwadialo, Civil Procedure in Nigeria, (2nd edn., Lagos: University of Lagos Press, 2000), p. 1096.

[17] O. D. Amucheazu, “Enforcing Arbitration Agreement in Nigeria”, Unizik Law Journal, Vol. IV, p. 91.

[18] I. E. Sagay, Nigerian Law of Contract, (Ibadan: Spectrum Books Ltd., 2000), p. 1.

[19]Ibid., p. 113.

[20]Ibid., p. 124.

[21] J. F. Philips, Arbitration: Law, Practice and Precedents, (Cambridge: ICSA Publishers, 1988), p. 40.

[22] H. A. Naon, Choice of Law: Problems in International Commercial Arbitration, (Tubingen: Mohr, 1992),

15. 15.

[23]Ezejiofor, op. cit., note9, p. 3.

[24]Ibid.

[25] Orojo and Ajomo, op. cit., note4, p. 4.

[26] Ezejiofor, op. cit., note9, p. 7.

[27] E.O. Ezike, Unpublished Lecture Notes on Law of Arbitration I, Faculty of Law,University of Nigeria,

Enugu Campus, p. 9.

[28] G. C. Nwakoby, “Courts and Arbitral Process in Nigeria”, Unizik Law Journal, Vol. IV, No 1, p.20.

[29] G. C. Nwakoby, “Arbitrate, Avoid the Courts and Do Not Litigate”, (2002), 6 NLPJ, p. 127.

[30]Ezike, loc. cit., note 27, p. 29.

[31] A. G. Akaniro, Introduction To Nigerian Legal System,(Ikeja-Lagos: Elcoon Press Ltd., 1998), p. 27.

[32] Orojo and Ajomo, op. cit., note4, p. 238.

[33] Akaniro, op. cit., note 31, p. 36.

[34] N. Ikeyi, “Enforcing Arbitration Agreement in Nigeria: The Constitutional Question”, Unizik Law Journal,

Vol. IV, p. 296.

[35] Afolayan and Okorie, op. cit., note 10,p. 573.

[36] E. O. Ezike, “The Validity of Section 34 of the Nigerian Arbitration and Conciliation Act”, The Nigerian   

    Juridical Review, Vol. VIII, 2000 – 2001, 140.

[37] A. I. Idigbe, “Court Control of Arbitral Process”, (n. d.) available at

http://www.nigerianlawguru.com/articles/arbitration/COURT%20CONTROL%20OF%20ARBITRAL%20PROCESS.pdf  (last accessed 13 June 2014).

[38] N. Ikeyi, “The Court and The Arbitral Process in Nigeria”, The Arbitration and Dispute Resolution Law

    Journal, 1997, p. 357.

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