Overview of Arbitration in Nigeria

What is Arbitration?

The various attempts to define Arbitration have sought to reflect the evolving general understanding of Arbitration. Arbitration is a type of alternative dispute resolution (ADR) in which the parties to a dispute refer it to one or more “arbitrators” whose judgment they agree to be bound by as an “award.”

It is a method of dispute resolution in which a neutral third party examines the case of disputants and makes a decision based on their assertions. Arbitration might be done on a voluntary or obligatory basis. It is a voluntary process in which parties agree to arbitrate their disputes on their terms. It may, however, be obligatory in cases where existing legislation requires the parties to submit to arbitration in the event of a disagreement.

Below are some definitions of Arbitration by some authorities: Saunders (ed) Words and Phrases Legally Defined: the reference of a dispute or difference between not less than two parties for determination after judicially hearing both sides by a person other than a court of competent jurisdiction.

Halsbury’s Laws of England:

The process by which a dispute or difference between two or more parties as to their mutual legal rights and liabilities is referred to and determined judicially and with binding effect by applying the law by one or more persons (the arbitral tribunal) instead of by a court of law.

Arbitration is the fair resolution of a dispute between two or more parties by a person or persons other than by a court of law. It refers to a dispute by parties thereto for settlement by a person or tribunal of their own choice rather than a court.

In the words of Holdsworth:

The practice of Arbitration, therefore, comes naturally to the primitive bodies of law, and after the state and recourse have established courts to them has become the natural method of settling disputes, the practise continues because the parties to a dispute want to settle it with less formality and expense that is involved in recourse to the courts.

The Arbitration and Conciliation Act does not contain a definition of Arbitration. The Supreme Court of Nigeria in the case of NNPC v. Lutin Investment Ltd, in defining Arbitration relied on the definition by Halbury’s Laws of England.

Also, in the case of CN Onuselogu Ent. Ltd v. Afribank (Nig) Ltd, the Court of Appeal defined Arbitration in the following terms: An Arbitration agreement is where two or more persons agree that a dispute or potential dispute between them shall be resolved and decided in a legally binding way by one or more impartial persons in a judicial manner upon evidence put before him or them.

As defined by the previous definitions, Arbitration is a method in which a dispute is referred to one or more arbitrators by consent of the parties, who make a binding ruling on the matter. Instead of going to court, the parties choose Arbitration as a private dispute settlement mechanism.


Characteristics of Arbitration 

Some of the characteristic features of Arbitration are listed and discussed below:

  1. Confidentiality

The CFRN provides that a court’s and other tribunal’s proceedings, including the pronouncement of the court’s or other tribunal’s judgment, be held publicly. Arbitration has a built-in element of confidentiality. Unlike court procedures required by law to be open to the public, Arbitration hearings are restricted.

The parties and their lawyers are typically the ones in attendance. It is because Arbitration, as a private law issue, is solely between the parties. To avoid any doubt about whether the arbitral proceedings will be kept confidential, the parties usually include confidentiality clauses in their Arbitration agreements.

  1. Party Autonomy:

When compared to a traditional legal trial, in which neither party has control over Judge selection, the parties to the dispute in an Arbitration usually agree on the arbitrator or arbitrators who will be someone both sides have faith will be impartial and fair. Parties can agree to appoint an arbitrator with expertise in the subject matter of their dispute, ensuring a higher-quality result than domestic courts.


  1. Finality

Arbitration awards are final decisions and can find a plea of res judicata. Unlike a trial judgment, which may be susceptible to appeals, new trials, and additional appeals, the Arbitration procedure measures finality. Although the arbitrator commits a factual or legal error, there is no right of appeal for any party in Arbitration.

There are also extremely few ways to appeal the verdict, implying that the Arbitration will be the case’s final resolution. Other forms of alternative dispute resolution procedures, on the other hand, only attempt to resolve disagreements without resulting in final, binding, and enforceable resolutions.

  1. Consensuality

Arbitration can only take place if both parties have agreed to it. In the case of future disputes arising under a contract, the parties insert an Arbitration clause in the relevant contract. An existing dispute can be referred to Arbitration using a submission agreement between the parties.

In contrast to mediation, a party cannot unilaterally withdraw from Arbitration. There must be a consensus between the parties to an Arbitration Agreement. It is trite that without agreement on the side of both parties, there cannot be a valid Arbitration agreement.

  1. Simplified Rules of Evidence:

In Arbitration hearings, the regular rules of evidence may not be strictly observed, making it much simpler to admit the evidence. Discovery, the time-consuming and costly procedure that entails taking and responding to interrogatories, depositions, and requests for the production of documents, may be significantly reduced in Arbitration. Most issues in Arbitration, such as who will be called as a witness and what documents must be produced, can be resolved through simple phone calls with the arbitrator.

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