Arbitration as an Alternative Dispute Resolution Mechanism

It is common to find that disputes will arise in everyday community living. The members of a society are generally bound to disagree on issues and sometimes, this may be resolved with a quick conversation and nipped in the bud. However, some other times, the disagreement may escalate to a full-scale dispute requiring third-party involvement for a peaceful resolution of the dispute. This is why formal methods of dispute resolution were established to create a system for the amicable settling of issues between disputing parties.

The earliest form of formal dispute resolution in Nigeria was litigation. Litigation is a dispute resolution method that involves recourse to a formal judicial system presided over by trained judicial officers at various levels of the court system. It entails a legal action in which one party, the plaintiff, files a lawsuit against another party, the defendant, in order to obtain a legal remedy or judgement. Typically, litigation entails a number of formal processes, including pleadings, discovery, motions, and trials, which are governed by court rules and procedures. However, because of the strict rules of court, the time-consuming nature of litigation, and its tendency to end in acrimony between the parties, among other arguments against litigation, alternative methods for dispute resolution were introduced with the aim of cushioning the seeming difficulties associated with litigation.

There are various methods of Alternative Dispute Resolution (ADR), the most popular of which is dispute resolution by arbitration. According to the Court of Appeal in Omeaku v Rainbownet, arbitration is the reference of a disagreement between two or more parties for resolution by a person or individuals other than a court of law, where both parties to the dispute must be heard in a judicial manner. When parties agree to submit their dispute to one or more impartial third-party for a binding ruling, it is a private, voluntary, and consensual process known as arbitration. The arbitrator exercises judicial functions, hears testimony from both parties, and renders a final, legally binding decision known as an award.

To initiate the process of arbitration, parties to a dispute must have entered into an arbitration agreement which provides that disputes that may arise in the course of the relations between the parties in relation to a contract or a subject matter between the parties will be resolved by reference to arbitration. The arbitral tribunal draws its jurisdiction from this agreement between the parties. Arbitration can also derive validity from a submission agreement, which is an agreement to resolve a dispute by arbitration entered into after the occurrence of the dispute as opposed to before its occurrence.

In Nigeria, the Arbitration and Conciliation Act is the primary law governing the process of dispute resolution by arbitration.

Features of Arbitration

1. Voluntariness and Mutual Consent

Arbitration is rooted in the voluntary submission of the dispute by the disputing parties to an arbitral tribunal consisting of a neutral third party who acts as an umpire to resolve the dispute. The voluntary nature of arbitration is inextricably tied to the doctrine of mutual consent in arbitration. The implication of this doctrine is that both parties to a dispute must consent to the reference of the dispute to arbitration, otherwise, the award flowing from the proceedings will not be binding on the parties. 

2. Party Autonomy

This is a fundamental distinguishing feature of arbitration from litigation. Essentially, this principle entails that the parties to an arbitration agreement have the ultimate power to determine the course of the arbitral proceedings. This extends to the powers to determine, by agreement, the number and choice of arbitrators, the place of arbitration, the seat of arbitration, etc.

3. Private and Confidential

Arbitral proceedings are private to the extent that the sessions are not open to public attendance and the awards are not required by law to be made available to the public. This element of arbitration makes it attractive to businesses and governments and it is one of the reasons why it is popular in international relations as a method of dispute resolution.

4. Final and Binding Award

The decision of an arbitral tribunal is binding on the parties to the arbitration agreement. However for such a decision, referred to as an award to be binding, it must be final. An award is said to be final if it adequately addresses all the issues contained in the reference of the dispute. Where an award does not cover all the issues referred to arbitration, the general principle is that such an award can be challenged in court for want of finality.

5. Subject Matter of Arbitration

Contrary to the practice in litigation, not all subject matters or disputes can be referred to arbitration for resolution. The Arbitration and Conciliation Act provides a list of arbitrable subject matter. Generally, the law is clear on the arbitrability of criminal matters to the extent that crimes are wrongs against the state and as such are naturally within the exclusive jurisdiction of the courts to determine publicly.

6. Flexibility and Convenience of the Parties

Arbitral proceedings are ideally flexible to accommodate the schedules of the parties. Due to its less formal nature, arbitration proceedings can take the form of round table conversations fixed at an agreed date convenient for the parties and the tribunal. In addition, the strict rules of evidence do not apply to exclude certain evidence or to determine the mode of tendering or admissibility and relevance of evidence.


Arbitrate, do not litigate. This is a common mantra within the arbitration community. Generally, the recourse to arbitration over litigation is focally rooted in the belief that arbitration gives the disputing parties reasonable control over the process of dispute resolution. This also extends to the flexible nature of arbitral proceedings and the cost-effective, timely, and private nature of the proceedings.

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