The place of arbitration in settling commercial disputes

Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of disputes outside the courts.

The parties to a dispute refer it to arbitration by one or more persons (the “arbitrators”, “arbiters” or “arbitral tribunal”, and agree to be bound by the arbitration decision otherwise known as the award. A third party reviews the evidence in the case and imposes a decision that is legally binding on both sides and enforceable in the courts.

Other forms of ADR include mediation which is a form of settlement negotiation facilitated by a neutral third party and non-binding resolution by experts. Arbitration is often used for the resolution of commercial disputes, particularly in the context of international commercial transactions.

In certain countries such as the United States, arbitration is also frequently employed in consumer and employment matters, where arbitration may be mandated by the terms of employment or commercial contracts.

Arbitration can be either voluntary or mandatory, although mandatory arbitration can only come from a statute or from a contract that is voluntarily entered into, where the parties agree to hold all existing or future disputes to arbitration, without necessarily knowing, specifically, what disputes will ever occur.

Parties often seek to resolve disputes through arbitration because of a number of potential advantages over judicial proceedings.

In contrast to litigation, where one cannot “choose the judge”, arbitration allows the parties to choose their own tribunal. This is especially useful when the subject matter of the dispute is highly technical: arbitrators with an appropriate degree of expertise can be chosen.

Arbitration is often faster than litigation in court and can be cheaper and more flexible for businesses. Also, unlike litigation, arbitral proceedings and an arbitral award are generally non-public, and remain confidential.

In arbitral proceedings, the language of arbitration may be chosen, whereas in judicial proceedings the official language of the country of the competent court will be automatically applied.

Because of the provisions of the New York Convention 1958, arbitration awards are generally easier to enforce in other nations than court judgments and in most legal systems including Nigeria’s, there are very limited avenues for appeal of an arbitral award, which is sometimes an advantage because it limits the duration of the dispute and any associated liability.

Arbitration is not entirely flawless as it may be subject to pressures from powerful law firms representing the stronger and wealthier party.

Arbitration agreements are sometimes contained in ancillary agreements, or in small print in other agreements, and consumers and employees often do not know in advance that they have agreed to mandatory binding pre-dispute arbitration by purchasing a product or taking a job.

Despite these and other demerits however, arbitration remains a good option that must be used especially by businesses to settle commercial disputes especially trade related disputes.