• by Zingtim Gambo. ACArb.

Appointment of Arbitrators and Implementation of Arbitration Clause in a Contract

Introduction

Arbitration is an alternative dispute resolution method that is widely used in resolving disputes in a more efficient and cost-effective manner compared to traditional litigation. In arbitration, neutral third parties called arbitrators are selected to hear evidence from both parties and make a binding decision on the outcome of the dispute. The selection of the Arbitrators is crucial to ensuring a fair and impartial resolution of the dispute. The process of selecting arbitrators varies depending on the arbitration agreement or rules that govern the dispute resolution process.

In Nigeria, the field of arbitration and mediation has experienced substantial advancements over time, with changes in legislation often mirroring the evolving practices on a global scale. In an effort to modernize and align with international standards in arbitration and mediation, Nigeria enacted the Arbitration and Mediation Act 2023 (AMA) on 26 May 2023. The replacement of the 35-year-old Arbitration and Conciliation Act of 1988 with the AMA marks a significant legal shift.

Sections 7(3) and 59 of the Act outline the procedures for selecting arbitrators in cases where the parties are unable to agree on a method or fail to complete the selection process. According to Section 7(4) of the Act, the court has the authority to intervene in the selection of arbitrators at the request of either party. This intervention may be necessary if a party does not comply with the agreed selection procedure, if the parties or appointed arbitrators are unable to choose a presiding arbitrator, or if the appointing authority or a third party fails to fulfill their duties.

The Selection of Arbitrators and Qualifications

Nigeria's Court of Appeal ruled in the case of Shell v Federal Inland Revenue Service that only Nigerian qualified legal practitioners are allowed to sign documents for arbitration proceedings in Nigeria. This ruling effectively excludes foreign qualified legal practitioners who are not enrolled in Nigeria from these proceedings. This limitation also extends to the selection of arbitrators, as only legal practitioners can be appointed in cases where the arbitration agreement specifies this requirement.

This decision is in contrast with the ruling in the case of Stabilini Visinoni v Mallinson, where the Court of Appeal emphasized the flexibility of the arbitral process. In that case, the court acknowledged that arbitration practice is open to both lawyers and non-lawyers, reflecting the general policy in arbitration-friendly jurisdictions. However, the decision in Shell v FIRS seems to restrict this flexibility and limit the parties' choice in representation.

Key Components of an Effective Arbitration Clause

First and foremost, an effective arbitration clause must include a clear and unequivocal agreement to arbitrate. This means that the parties to the contract must expressly state their intention to resolve disputes through arbitration rather than litigation. Secondly, an effective arbitration clause should set out a well-defined arbitration process. This includes specifying the rules and procedures that will govern the arbitration, such as the selection of arbitrators, the location of the arbitration hearings, and the timeline for resolving the dispute.

The Enforceability of Arbitration Clauses

The enforceability of arbitration clauses can vary depending on the jurisdiction. The United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention) provides a framework for enforcement in over 150 countries.

In the case of Nigeria, the previous ACA, section 5 allowed the court to use its discretion in deciding whether to grant a stay of proceedings based on the applicant's ability to demonstrate a valid reason. This was evident in the Enyelike v Ogoloma case. However, the introduction of Section 5 in the AMA now mandates the court to refer parties to arbitration and halt proceedings unless the arbitration agreement is deemed to be invalid, inoperative, or impossible to execute.