TIWALADE ADEROJU
OLYMPUS SOLICITORS AND ADVOCATES
JUNE 2023
Disputes are inevitable in human affairs. It is therefore the responsibility of every civilised state to make available to its citizens, mechanisms for just and peaceful settlement of disputes between them. 1 States carry on this responsibility through the
instrument of law and the judicial arm of the government. And over the years, the law has strived to evolve efficient means of resolving disputes in our changing world. 2 Litigation has been the most common, formal, and well-established mechanism for
dispute resolution in any society. Alternative dispute resolution (“ADR”), on the other hand, is another mechanism for dispute settlement. ADR is not new to Nigeria, as ADR processes were in practice in the country even prior to the colonial era. 3 ADR is ‘’a
procedure for settling a dispute by means other than litigation, such as arbitration or mediation.” 4 Arbitration, as a type of ADR, is a dispute resolution process in which disputing parties submit their dispute to neutral third party for resolution. Mediation is “a flexible process conducted confidentially in which a neutral person actively assists parties in working towards a negotiated
agreement of a dispute or difference with the parties in ultimate control of the decision to settle and the terms of resolution”. 5
Litigation has been criticised, among others, for the delay in dispute settlement, high cost of justice delivery, and straining the business relationship between disputing parties. ADR has, however, been applauded for fostering the relationship between
conflicting parties, speedy dispute resolution, confidentiality, among others. This article, accordingly, will examine the advantages and disadvantages of arbitration and mediation over litigation in Nigeria.
1 See Bremer v. South India Shipping Corp. Ltd. AC 909, 917 (1981).
2 Alero Akeredolu (2014). “Institutionalising Alternative Dispute Resolution in The Public Dispute
Resolution Spectra in Nigeria Through Law: The Lagos Multi Door Court House Approach”. Vol. 12. US- China Law Review.
3 Joseph Nwazi (2017). “Assessing the efficacy of alternative dispute resolution (ADR) in the settlement of environmental disputes in the Niger Delta Region of Nigeria.” Vol 9 (3). Journal of Law and Conflict Resolution.
4 See The Black’s Law Dictionary, 19th Edition. Page 91
5 Omobamidele Olufemi and Adekunbi Imosemi (2013). “Alternative Dispute Resolution and the Criminal Judicial System: A Possible Synergy as Salve to Court Congestion in the Nigerian Legal System.” Vol. 1,Z No. 10. Arabian Journal of Business and Management Review (Nigerian Chapter)
ESTABLISHED DISPUTE SETTLEMENT MECHANISM
Litigation is known to be a well-established dispute settlement mechanism around the world, including Nigeria. The 1999 Constitution of the Federal Republic of Nigeria, as
amended, (“Constitution”) established the courts, including providing for processes of adjudication. Different bodies involved in the settlement of disputes through the court, are well established and regulated by Acts of the National Assembly.
It is not the same case with arbitration, mediation, and other ADR processes in Nigeria.
The Constitution only references ADR in Section 19, which is regarding foreign policy. Also, while Arbitration and Conciliation Act 6 remains the most significant legislation on ADR in Nigeria, with its primary focus on arbitration and conciliation, there is no unified
legislation on mediation in Nigeria, with application spreading across the country. There is also no unified, established legislation regulating the training, qualification, certification, and supervision of ADR practitioners. What is currently obtained is different arbitration and other ADR bodies, after registering with the Corporate Affairs Commission, competing for members in a business venture manner. 7
VOLUNTARINESS
An important attractive attribute of arbitration, mediation, and other ADR mechanisms, compared to litigation, is the voluntariness of the parties to resolve their disputes through the ADR processes. The voluntary agreement to resolve disputes through ADR
is usually included in the contract between the parties before the dispute arises. Also, where disputing parties are “mandated” by the court to explore ADR settlement, the mandatory nature of the court order applies only to order parties to try ADR; it does not
compel the parties to participate. 8
Courts in Nigeria, over the years, have shown favourable disposition to ADR processes, with emphasis on the voluntary agreement of parties to resolve their disputes out of court. The position of the Court on ADR processes is enumerated in the case of EZERIOHA & ORS v. IHEZUO 9 where the Court stated the essence of arbitration and the attitude of the court to it as follows:
“The very essence of arbitration is not only alternative dispute resolution, but the promotion of the public policy to the effect that it is in the interest of the community that there should be an end to disputes. Where parties and concerned members of the
6 Cap. A18, Laws of the Federation of Nigeria, 2004
7 Festus Okpoto Agbo. “Assessing the Dangers of Unregulated Practice of Arbitration and Other Alternative Dispute Resolution Mechanisms in Nigeria.” Available at: https://ssrn.com/abstract=3907723
8 Alero Akeredolu (2014). “Institutionalising Alternative Dispute Resolution in The Public Dispute Resolution Spectra in Nigeria Through Law: The Lagos Multi Door Court House Approach”. Vol. 12. US- China Law Review.
9 (2009) LPELR-4122(CA)
community that there should be an end to disputes. Where parties and concerned members of the community elect that a dispute be settled out of Court and in furtherance of the same there was mediation and the terms of settlement
announced which are acceptable to the parties, the Court of justice should not treat such mediation lightly. Since agreements are meant to be honoured and Equity acts in personam, the law and equity will act in unison to estop a party to
such mediation or out of Court settlement who had accepted the terms of settlement from reneging and acting to the contrary of what he had accepted.”
It has also been held in a plethora of cases that the court has a duty to give effect to the arbitration clause which is voluntarily agreed to, by parties to a contract. The position was reiterated by the Supreme Court in this year’s decision, 2022, in the case of
KWARA STATE GOVT & ORS v. GUTHRIE (NIG) LTD 10 that, “Arbitration clauses are included in contracts to enable parties cut short litigation time and engage in the shorter and simpler method of dispute resolution. Parties should not be
encouraged on any pretext to renege from arbitration clauses in order to clog the
Courts with litigations they had consented to subject to arbitration.” Litigation is the natural recourse, where disputing parties do not agree on the means for resolving their disputes. Where a party commences proceedings in court against another party, and that other party fails to appear in court, judgement in default of appearance, in fact, can be entered against that other party, and such judgment enforced accordingly.
CONFIDENTIALITY
Arbitration, mediation, and other ADR processes are private and confidential in nature, unlike litigation which is open to the public. This confidentiality attribute of ADR is suitable especially for matters involving business or trade secrets. 11 This is an important
reason ADR is attractive for resolving commercial disputes.
COSTS
Due to the alarming costs and inefficiencies associated with litigation, the justice system is becoming inaccessible to ordinary citizens, as well as small and medium-scale enterprises. 12 ADR mechanisms are advantageous over litigation in this sense of
10 (2022) LPELR-57678(SC)
11 Alero Akeredolu (2014). “Institutionalising Alternative Dispute Resolution in The Public Dispute Resolution Spectra in Nigeria Tugh Law: The Lagos Multi Door Court House Approach”. Vol. 12. US-
China Law Review.
12 Alero Akeredolu (2014). “Institutionalising Alternative Dispute Resolution in The Public Dispute Resolution Spechrotra in Nigeria Through Law: The Lagos Multi Door Court House Approach”. Vol. 12. US- China Law Review.
flexibility in processes. Parties may also agree to settle their matters in a court- connected ADR centre which is cheaper means of settlement compared to litigation. Walk-in, for instance, is one of the ways matters could be commenced at the Lagos Multi-Door Courthouse (“LMDC”). In another sense, litigation is advantageous over ADR concerning costs, especially in sophisticated commercial disputes. The parties to arbitral proceeding pay for the administrative cost of the processes, including paying for the services of the arbitrators and the venue. 13 These administrative charges are provided for by the state in the case of litigation. 14
LIMITATION
Unlike litigation which can be employed for resolving virtually any kind of dispute, certain matters have been held non-arbitrable. Matters relating to crime or allegations of fraud cannot be settled by arbitration in Nigeria. The Court stated this position in the
case of MEKWUNYE V. LOTUS CAPITAL LTD. & ORS. 15 : “It is undisputed that before a matter can be referred to arbitration, same must first be seen to be arbitrable. The dispute must not relate or cover matters which by law, are not permitted to be settled by other dispute resolution mechanisms other than in Court, the Arbitration and Conciliation Act, Cap A18, does not demarcate between disputes that are arbitrable or otherwise, it has however been judicially recognized as a matter of
public policy that matters relating to crime, matrimonial causes, winding up of a company or bankruptcy are of such nature that cannot be settled by arbitration.”
There are, however, clamours for the integration of ADR into the Nigerian criminal justice system. The Nigerian criminal justice system has been characterised by a lack of prompt and efficient justice delivery machinery, which has led to delay in judicial/legal
proceedings. 16 The introduction of ADR into the criminal justice system is therefore believed to lead to prompt and quick resolution of criminal disputes; and in some cases, lead to restorative justice between the victims and the offenders. 17
13 Hyacinth Ifeanyichukwu Ugorji and Leonard Chinasaokwu Opara (2020). “Arbitration in Place of Litigation for the Settlement of Commercial Disputes in Lagos Nigeria: A Discourse.” Vol. 7 (2). Nnamdi Azikiwe University Journal of Commercial and Property Law
14 Ibid.
15 (2018) LPELR-45546s(CA); See also Kano State Govt. & Anor. V. A.S.J. Global Links (Nig) Ltd.
16 Omobamidele Olufemi and Adekunbi Imosemi (2013). “Alternative Dispute Resolution and the Criminal Judicial System: A Possible Synergy as Salve to Court Congestion in the Nigerian Legal System.” Vol. 1, No. 10. Arabian Journal of Business and Management Review (Nigerian Chapter)
17 Ibid.
In a 2021 decision, the Court of Appeal, in the case of ZAMFARA STATE GOVT & ORS v. N. C. G. INTEGRATED ENG. WORKS LTD & ANOR, 18 also stated certain conditions for a resort to arbitration as follows: “"In the case of NIGERIA LNG LTD VS. AFRICAN DEVEL OPMENT INSURANCE
CO. L TD (1995) 8 NWLR (PT. 416) P AGE 677 , Uwaifo, JCA ( as he then was) listed five conditions for a resort to arbitration. They are: (a) that there is an agreement between the parties thereto or a statutory provision which compels arbitration in such matters; (b) that the parties before the Court are parties to the agreement or the transaction which compels arbitration; (c) that the arbitration
sought is within the contemplation of the arbitration agreement or circumstances calling it; (d) that there is no sufficient reason why reference to arbitration should not be made; and (e) that the application for stay of proceedings pendingarbitration was made in time as envisaged under Section 5 of the Arbitration Act.” Further, disputing parties ultimately have recourse to litigation, irrespective of their arbitration agreement. The inclusion of an arbitration clause in a contract has been held to merely postpone the right of either of the contracting parties to resort to litigation, as opposed to the arbitration clause being an ouster of court jurisdiction over the matter. 19
This point is elaborated in the case of BILL & BROTHERS LTD & ORS v. DANTATA & SAWOE CONSTRUCTION CO. (NIG) LTD & ORS. 20 as follows:
“The first point to be made is that an arbitration clause in an agreement does not raise the issue of jurisdiction of a Court. This is because the jurisdiction of a Court is donated to it by the Constitution of Nigeria and /or the statute establishing the Court. Parties cannot by their agreement seek to oust the jurisdiction so donated. It would be a constitutional apostasy to hold otherwise.
An arbitration clause only postpones the right of either of the parties to the agreement to resort to litigation in Court whenever the other contracting party elects to submit the dispute under the agreement to arbitration. Whenever a party
to the agreement promptly and properly raises the issue of reference to arbitration, the Court seized of the matter will lean towards enforcing the clause, not by striking out the case for want of jurisdiction but by staying proceedings pending arbitration. Section 5 (1) of the Arbitration and Conciliation Act Cap A. 18 LFN, 2004, provides that: ‘lf any party to an arbitration agreement commences
any action in any Court with respect to any matter which is the subject of anarbitration agreement, any party to the arbitration agreement , may , at any timeb after appearance and before delivering any pleadings or taking any other steps in the proceedings, apply to the Court to stay proceedings.”
18 (2021) LPELR-55712(CA)
19 See CONFIDENCE INSURANCE LTD V. THE TRUSTEES OF THE ONDO STATE COLLEGE OF
EDUCATION STAFF PENSION (1999) 2 NWLR (591) 373
20 (2015) LPELR-24770(CA)
DELAY
The majority of court cases in Nigeria take too long before judgment is reached. This is illustrated in the case of AMADU V. NNPC 21 which took 13 years before the Supreme Court finally ruled on an interlocutory appeal, then sent the matter back to the High
Court for the continuation of the substantive suit. 22 ADR proceedings, on the other hand, are characterised by the principle of party autonomy and flexibility of proceedings. Parties are free to choose the tribunal and its composition, the venue, and the law,
among others. 23 This helps in speeding up the ADR processes.
WIN-WIN SITUATION
Litigation, over the years, has been labelled as a hostile dispute resolution mechanism. This is because parties to a dispute go to court with the belief that one party will be victorious while the other party will be vanquished. This mentality often has an adverse
effect on the subsequent (business) relations between the disputing parties. ADR, on the other hand, is believed to create a win-win situation between the parties, by allowing them to amicably settle their dispute. This fosters the relationship between the disputing
parties afterwards. The Court of Appeal reiterates this essence of settlement of disputes out of court, in the case of SALIHU & ORS v. MINISTRY OF EDUCA TION GOMBE STATE & ORS. 24 as
follows:
“Now, while in every civilized, more especially in all democratic society litigation is the ultimate in the resolution of disputes where parties are unable to amicably sort out their differences, yet it is a truism that litigation
in most cases are either prolonged and end in favour of one party against the other and other and tending to even widen the differences between the parties in the spirit of the "victor" and the "vanquished". This is where the
concept of alternative but amicable resolution of disputes between parties by themselves steps in to afford the parties the uniqueopportunity of being "both winners" in the "win win" result of peaceful out of Court settlement of
dispute by the parties. . . Both parties are made to and have become winners, none a loser ; this augurs well for a complete or total
21 (2000) 10 NWLR (Pt. 676) 76
22 Chukwuma Victor (2018). “Alternative Dispute Resolution (ADR): Client-Interest Friendly Than Litigation in Dispute Resolution.” Interview Presentation: Abuja.
23 Hyacinth Ifeanyichukwu Ugorji and Leonard Chinasaokwu Opara (2020). “Arbitration in Place of Litigation for the Settlement of Commercial Disputes in Lagos Nigeria: A Discourse.” Vol. 7 (2). Nnamdi Azikiwe University Journal of Commercial and Property Law.
24 (2015) LPELR-40626(CA)
reconciliation and thus engender future cordial relationship between the parties to such amicable settlement.”
DECISIONS
While arbitration has certainty and finality of an award in the same manner as a judgment of a court, in other ADR processes, including mediation, parties have to work out a mutually acceptable settlement agreement. This is a disadvantage of mediation
compared to litigation, as mediation settlement agreement is a contract simpliciter. Parties may, however, elect to have their settlement agreement endorsed as a court judgment by an ADR Judge. 25 The agreement becomes a consent judgment upon
endorsement. It is a trite law that once consent judgment is given, parties do not have right of appeal, except with the leave of court. 26
CONCLUSION
Litigation is the most common mechanism for dispute resolution in Nigeria, as noted above. Alternative dispute resolution, including arbitration and mediation, is another means of resolving disputes between conflicting parties. This article analysed the advantages and disadvantages of arbitration and mediation over litigation, that disputing parties may want to consider when choosing the mechanism for their dispute settlement.
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25 See Lagos State Multi-Door Courthouse Law, s. 19.
26 See S.P.M. LTD. V. ADETUNJI (2009) 13 NWLR (Pt. 1159) 647
