Arbitral Review

Arbitral Review

Can An Arbitral Award be Converted into a Court Judgement

A distinctive advantage of arbitration is its binding and enforceable award. Unlike other alternative dispute resolution methods such as negotiation, conciliation and mediation, an arbitration proceedings usually results in a binding outcome; the award. Hence, commercial contracting parties often insist on inserting an arbitration clause into their agreements. Moreover, an arbitral award is a final determination of the merits of all the matters between the parties, as decided by the arbitrator. This is in contrast to “Terms of Settlement” (TOS) resulting from out-of-court negotiations which cannot, and do not operate as final and conclusive judgement, until the court adopts makes the executed TOS a judgement of the court


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Ex-Parte Arbitration Proceedings?

Arbitration, like Litigation, is an adversarial contest. The parties to the arbitration proceedings establish their legal rights through a process of forensic advocacy whereby the parties actively challenge the case put forward by each other.

But, what happens where one side elects to stay away from the arbitration proceedings? Can the Arbitrator(s) validly continue with a one-sided hearing? Would the ensuring arbitral award be valid and enforceable in law against the other party who choose to stay away from the proceedings? This was the Gordian knot that the Supreme Court of Nigeria had to cut in the leading case of Lagos State Development and Property Corporation v. Adold/Stamm International Nigeria Limited (1994) 7 NWLR (Pt. 358) 545.

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NO DISPUTE, NO ARBITRATION!

A typical arbitration clause will read: “All disputes arising from this Agreement are to be referred to arbitration…” It must, however, be noted that the mere insertion of an arbitration clause in a contract does not imply that any issue is capable of being resolved by arbitration. Parties should not overlook the fact that “disputes” means exactly what it is: a legal disagreement, controversy or contest arising from the contract. Accordingly, a non-dispute albeit arising from a contract with an arbitration clause cannot be resolved by arbitration.

The above principle was laid down by the Court of Appeal in the case of United World Limited Inc v. Mobile Telecommunication Services [1998] 10 NWLR (Pt. 586) 106.

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One-Sided Right to Arbitration?

Ordinarily, arbitration clauses provide a level playing field. The parties will usually agree that any dispute arising from their contract can be referred to arbitration by either party (or any party in a multi-party contract). This approach reflects the general equal bargaining positions of the parties.

Unilateral option clauses adopt a different approach. They are bespoke clauses which confers an option on one party to choose a convenient forum; either arbitration or litigation, for the resolution of the parties dispute, after the dispute have arisen, while the other party is restricted to litigation (or vice-versa).

Unilateral option clauses are commonly used in financing agreements, as it affords an exposed lender the procedural advantages of choosing the forum that best suit a specific dispute that has arisen. If, for instance, the matter is a simple recovery of an undisputed debt, the lender may be best served by filing an application for summary judgement at the court. However, if the dispute raises knotty issues which required expert adjudication, or the debtor’s assets have been moved abroad and the enforcement of a local court judgement may become difficult in that foreign country, the lender can choose to go for international arbitration.

A unilateral option clause which confers a “one-sided right of arbitration (or litigation)” raises serious public policy questions. Indeed, the validity of such clauses had been questioned in Nigeria in the case of United World Limited v. MTS Limited [1998] 10 NWLR (Pt. 568) 106.

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OBJECTION TO JURISDICTION? SPEAK NOW, OR REMAIN SILENT FOREVER!

Despite the increased use of arbitration as a mode of commercial dispute resolution, the delineation of the jurisdiction of an arbitral tribunal remains a knotty issue. This is because tribunal’s jurisdiction (i.e. authority to adjudicate over a dispute) sustains the legality of the arbitral proceedings.

A challenge to the jurisdiction of an arbitral tribunal is usually a preliminary matter for the arbitral tribunal to determine. Section 12(3) of the Nigerian Arbitration and Conciliation Act provides that it must be raised before the arbitral panel in timely manner and cannot be raised afterwards unless the grounds for delay are justified.

In Nigerian National Petroleum Corporation v. Klifco Nigerian Limited [2011] 10 NWLR (Pt. 1255) 209; the Supreme Court of Nigeria considered the issue of a timely challenge to the jurisdiction of an arbitral tribunal.

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