Catch A Sneak Peek Of Commercial Arbitration

Adedoyin Adesina, LL.B, B.L
Associate, Harlem Solicitors

Arbitration in its simplest sense is a process that can be used to resolve disputes between parties without going through a formal court system[1], it is one of the forms of alternative dispute resolution (ADR) which is a way to resolve disputes outside the courts. The dispute will be decided by one or more persons (the “arbitrators”, “arbiters” or “arbitral tribunal”), which renders the “arbitration award”. An arbitration award is legally binding on both sides and enforceable in the courts.[2]

Some historians hold that arbitration was used as a means of resolving disputes before the appearance of the court system. These historians point to records of the ancient Egyptians, Greeks and Romans to support this claim. These records indicate that in ancient times, contrary to the practice of today, the arbitrator was generally a person know and trusted by both parties – the better known the arbitrator the more confidence the parties would have in his or her judgment.

Arbitration has always existed in Nigeria although not formalized, in the eras before colonialism and before the emergence of regular courts, Nigerians had ways of settling disputes which involved elders who were considered impartial who the dispute would be brought before for their erudite opinion on the matter.

Commercial Arbitration.

Lord Donaldson once said:

“The shipping and commodity trades of the world are unusual in that they do not regard … arbitration with abhorrence. On the contrary, they regard it as a normal incident of commercial life – a civilized way of resolving the many differences of opinion which are bound to arise …[3]

Arbitration customarily has been used for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade. Form contracts often contain a standard arbitration clause referring to specific arbitration rules. Numerous arrangements between parties in industry and commerce also provide for the arbitration of controversies arising out of contracts for the sale of manufactured goods, for terms of service of employment, for construction and engineering projects, for financial operations, for agency and distribution arrangements, and for many other undertakings.

UNCITRAL Model Law on Commercial Arbitration[4] defines commercial arbitration as:

“… to cover matters arising from all relationships of a commercial nature, whether contractual or not.

“Relationships of a commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering; licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or business cooperation; carriage of goods or passengers by air, sea, rail or road.”

Commercial arbitration is a means of settling disputes by referring them to a neutral person, an arbitrator, selected by the parties for a decision based on the evidence and arguments presented to the arbitration tribunal. The parties agree in advance that the decision will be accepted as final and binding.

Arbitration customarily has been used for the settlement of disputes between members of trade associations and between different exchanges in the securities and commodities trade. Form contracts often contain a standard arbitration clause referring to specific arbitration rules. Numerous arrangements between parties in industry and commerce also provide for the arbitration of controversies arising out of contracts for the sale of manufactured goods, for terms of service of employment, for construction and engineering projects, for financial operations, for agency and distribution arrangements, and for many other undertakings.

The usefulness and significance of arbitration are demonstrated by its increasing use by the business community and the legal profession in many countries of the world. An advantage of arbitration can be the speed with which controversies can be resolved by arbitration, compared with the long delays of ordinary court procedure. The expert knowledge of arbitrators of the customs and usages of a specific trade makes testimony by others and much documentation unnecessary and thereby eliminates some expenses generally associated with court procedures. The privacy of the arbitration procedure also is much valued by parties to the controversy; situations unfavorable to the party’s credit or deficiencies in manufactured goods revealed in arbitration proceedings do not become known to outsiders.

Advantages of Commercial Arbitration

·       Parties to commercial arbitration have more autonomy with regards to procedural matters such as time, place, language, governing laws, etc. Moreover, normally, parties choosing arbitration do not have to go through different levels of adjudication, as in the litigation, which helps to save time and money for both side.

·       The right to choose arbitrators to resolve the dispute gives parties the opportunity to select experts with suitable expertise and practical experience to the nature of dispute (insurance, construction, finance, intellectual property, etc.) This helps to considerably improve the quality of dispute resolution in comparison with the option of administrative assignment of judges at the court.

·       The entire arbitration process will be kept confidential. Unlike in litigation, arbitration hearing will not be held publicly, therefore, parties can protect and preserve their branding/ reputation. Nowadays, confidentiality is growing attention in the context where financial problems are sensitive and can create great impact, either good or bad, toward entrepreneurs, especially joint stock Company which are often times the parties in a commercial litigation.[5]

Arbitration oftentimes derives its jurisdiction from parties’ agreement in which is empowered by but not dependent on state power. As a result, arbitration could be flexible in its own way (allows using foreign languages, foreign laws, etc.) and most suitable to disputes with foreign factors.

[1] https://dynalex.wordpress.com/2012/12/28/a-brief-history-of-commercial-arbitration/ extracted 6th March, 2018 at 12:44pm

[2] O’Sullivan, Arthur; Sheffrin, Steven M. (2003). Economics: Principles in Action. Upper Saddle River, New Jersey: Pearson Prentice Hall. p. 324

[3] Pando Compania Naviera S.A. v. Filmo, S.A.S., [1975] 1 Lloyd’s Rep. 560 (Q.B.).

[4] UNCITRAL Model Law on International Commercial Arbitration (1985)

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