Arbitration Agreements in Nigeria

Arbitration Agreements in Nigeria

An arbitration agreement is simply an agreement between the parties to refer any or all current or future disputes arising from their legal relationship (whether or not arising from a contract) to a neutral person or persons for the purpose of determining their respective rights and liabilities in relation to the dispute under reference.

Part 1 of the ACA provides for arbitration agreement and it spans from Sections 1 to 5. An arbitration agreement can be in the form of a separate contract or a reference in a contract to any document containing an arbitration provision, as long as the contract is written and the reference is such that the clause becomes part of the contract.

The parties’ intent to submit disputes arising out of their contractual agreements to Arbitration has long been upheld by Nigerian courts. In Kano State Urban Development Board v. Fanz Construction Ltd, The Nigerian Supreme Court held that “the defendant having allowed the arbitrator to embark on the whole reference, having regard to the agreement of reference between the parties to this case and without any objection, it is now no longer open to him to challenge the authority of the arbitrator to take the reference.”

Nature of a Valid Arbitration Agreement

The ACA allows for the agreement to be in a form that is not essentially signed by the parties by stating in Section 1(1) that the “arbitration agreement shall be in writing in a document signed by the parties, or in an exchange of letters, telex, telegram, or other means of communication which provides a record of the arbitration agreement.”

Although there may or may not have been an arbitration agreement, the ACA envisions a situation in which one party alleges the existence of an arbitration agreement, and the other party does not deny that allegation in the exchange of pleadings between the parties.

The rationale for this is simple: in the exchange and settlement of pleadings, as well as in adducing evidence, what is asserted by one party in a document served on the other, and which allegation is not rejected by the opposing party, is believed to have been conceded, or at the very least not in dispute.

Except the parties agree otherwise or by leave of the court, an arbitration agreement is irrevocable unless a contrary intention is expressed by virtue of Section 2. The ACA goes further to provide that an arbitration agreement cannot be revoked or invalidated even if one of the parties dies. In the case that one of the parties dies, the agreement will be enforceable against the deceased’s personal representatives.

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Elements of an Arbitration Agreement

The elements of a valid arbitration agreement include the following:

1. Agreement to Arbitrate:

It is the cornerstone of all arbitration proceedings. The agreement must state that the decision of the arbitrator or arbitral tribunal will be final and binding. It is essential to highlight that the arbitral tribunal’s jurisdiction is entirely based on the existence and validity of the parties’ agreement.

There must be a valid agreement to arbitrate before there can be a valid arbitration. The arbitration agreement shows that the parties agreed to resolve their dispute through Arbitration rather than going through the state court system.

The capacity to contract is therefore co-extensive with the power to enter into an agreement to arbitrate. As a result, anyone who is legally capable of contracting can be a party to an arbitration agreement. A clause in the original contract or a separate agreement between the parties may contain an agreement to arbitrate.

2. Persons bound by the Agreement:

Only persons, natural and corporate, can be parties to the arbitration agreement. The assignee of the party is obligated when the subject matter of reference is assignable, such as when it is not of a personal nature. An arbitration proceeding cannot be joined by a third party to the 103 arbitration agreement.

3. Place of Arbitration

The proximity of the venue to the parties, which must have been provided for in the Arbitration, is a consideration in the preference for the venue where an Arbitration action will be conducted. If the meeting location is not specified in the agreement, the meeting will be held at the location specified in the Arbitration and Conciliation Act 2004, s16.

4. Language of the Arbitration

Since parties may be of various nationalities, especially in an international arbitration, the language in which the Arbitration will be conducted should be specified in the agreement. If the agreement does not contain a clause to this effect. For clarification, the provision of the ACA 2004, s18(1) will be used.

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5. Applicable Law in Arbitration

A “choice of law” clause defining the “proper law” of the contract, i.e. the system of law by which the parties desire the contract to be governed, is acceptable for parties to a contract including a foreign element to include in their contract.

This is the substantive law that governs the contract’s subject matter and, by extension, the dispute. Ordinarily, the Arbitration procedure is governed and controlled by the laws in effect in the jurisdiction where the Arbitration takes place.

Arbitration agreements are typically assumed to be “separable” from the underlying contract in which they arise. As a result, the arbitration agreement between the parties may be regulated by a different national law than that which governs the underlying contract.