07 Dec Commercial Contracts – Alternative Dispute Resolution

1. Introduction

A commercial contract is a legal agreement between businesses.  The contract sets out what the business organizations have agreed to do or not to do.  At the time these contracts are executed, the parties to the contract may not envisage that disputes may arise and when such disputes occur how they should be resolved.

The traditional way of resolving commercial disputes is through the court by the aggrieved party instituting legal proceedings.  However, due to the technical nature of most commercial disputes, and more importantly, the cost and length of time it takes to obtain final determination and delivery of judgment in court, the Nigerian judiciary system has continued to develop mechanisms for the quick resolution of commercial disputes.

The court now encourages parties through the court’s Rules to resolve their disputes through the; Alternative Dispute Resolution (“ADR”) mechanisms. In addition, it is advisable for all commercial contracts to include specific provisions for ADR and not rely on the court to do so.

2. The Alternatives To Litigation

There are three (3) mechanisms of ADR that the judiciary supports to foster speedy and efficient resolution of (mainly commercial) disputes in Nigeria, and these are as follows:

• Arbitration
• Mediation and
• Reconciliation

a. Arbitration

The Arbitration and Conciliation Act governs arbitration in Nigeria. It is a mode of resolving disputes where parties agree and submit to an arbitral tribunal to resolve their dispute. The neutral third party (Arbitrator) decides after hearing both parties and the decision of the Arbitrator is binding on both parties. (Can you appeal the decision of the arbitrator?) In arbitration, the parties have the privilege to choose their arbitrators, tribunal venue, and arbitration law.

This mode of resolving a dispute is mostly accepted by both the legal and business communities in Nigeria. Moreover, it has become common for parties to include an arbitration clause into commercial agreements before execution. It avoids resorting to litigation in the event of a dispute.

b. Mediation

Mediation is a process whereby a third party known as the mediator facilitates negotiation between the parties to a dispute to help the parties find a consensual outcome without litigation. The mediator is involved but has no power to adjudicate and the decision of the mediator is not binding.

In some cases, mediation can be used with arbitration where the parties agree to mediation and proceed to arbitration where mediation fails. This is a modern system for resolving  commercial disputes, known as “advance negotiation.” It can resolve conflicts within the shortest time and at a less expensive rate compared to litigation.

c. Reconciliation

This method, the conciliator enhances settlement by meeting with the parties individually and facilitating a flexible mode of resolving the issues between the parties. The primary aim of this dispute resolution is to enable the parties to amicably reach an agreement.

3. Other Regulatory Bodies That Make Provisions For ADR

a. The Lagos Multi-Door Courthouse (Is there something similar in other States?)

The Lagos Multi-Door Courthouse Law, 2007 created the (LMDC?) to be an independent, non-profit, Alternative Dispute Resolution Centre with offices located at the Lagos State High Court’s premises, and at such other suitable locations within Lagos State. The resolution of disputes at the LMDC, using ADR methods, can originate from a Judge of the Lagos State High Court, other Judges of other Courts of Record, Private Individuals, Corporations, Public Institutions and other Organisations that promote Alternative Dispute Resolution processes.

The decision of the LMDC, which must be co-signed by the disputing parties, only becomes an enforceable Court judgment when endorsed by an ADR Judge of the Lagos State High Court; or by any other person duly authorized to do so by the Chief Judge of Lagos State.

b. Lagos State Mortgage Board Dispute Resolution (again is this just Lagos or other States have similar provisions?)

This Scheme has an effective dispute resolution mechanism through a single Arbitrator appointed by the President of the Lagos Court of Arbitration (LCA). The proceeding is under a specially designed Lagos [HOMS?] Housing Arbitration Rules that are expressly incorporated in all Lagos HOMS documentation.

c. CBN Regulation on the Direct Debit Scheme in Nigeria

The [regulation?] which regulation?  You need to be specific!  of the Central Bank of Nigeria (CBN) to see the effectiveness of the electronic payments system in Nigeria included some ADR provisions in the act. It provides that if any dispute, controversy, or claim arises out of the regulation or in the breach, it will be settled following the CBN’s dispute resolution mechanism and, if unresolved, the same will be transferred to an Arbitral panel. (Arbitration and Conciliation Act Cap. A18 LFN, 2004).

4. ADVANTAGES OF ADR

• Speedy resolution: Some ADR rules provide time limitations within which the proceeding is to be concluded. An example is the Fast Track Procedure (FTP) under the High Court of Lagos State (Civil Procedure Rules, 2012, which offers investors and entrepreneurs the opportunity to resolve commercial disputes within what period?. You need to give an indication of how generally disputes through ADR are concluded within a relatively short period ie 1mth or 3mths?
• Choice of Tribunal ie you mean location or the arbitrator/mediator/conciliator? : Parties to arbitration can choose their tribunal, but where they fail to agree or one party defaults, there is the provision by the rules or agreement for such appointments to be made by an agent of the court.

• Privacy: In situations where the subject matter of the dispute is confidential which any of the party wish not to expose, or where the disclosure of the facts would be detrimental to any of the party, arbitration will offer the desired privacy.
• Cost-efficient: Aside from the expeditious process, it saves costs rather than going through the full litigation processes in an open court.
• Maintains the relationship (both business and personal) of the parties: It is one of our judicial system’s cardinal principles to allow parties to resolve the disputes between them amicably. By doing so, it would determine the hostile relationship between the parties.
• Process:– The ADR mechanisms are less formal particularly Mediation and Reconciliation compared to litigation and are designed in most cases to reach a  consensual agreement between the parties.

5. CONCLUSION

Resolving disputes through any of the ADR mechanisms set out above are options that should be considered and expressly provided for in commercial contracts.

At Berkeley Legal, Litigation and Commercial Dispute Resolution are one of the core activities of our lawyers. We assist in resolving any commercial dispute and can represent clients at any organization or board.

The content of this document is solely for information purpose and should not in any way be construed as a legal opinion if you require specific legal advice on any of the matters covered in this article, please contact info@berkeleylegal.com.ng