Arbitration Agreement

Abstract

This paper seeks to look into the issues concerning arbitration agreement under the Arbitration and Conciliation Act (ACA). It identifies the categories, forms, parties and highlights of the arbitration agreement. It also examines the enforcement of an arbitration agreement. This paper reveals that arbitration is a major attraction as being the most flexible way of settling dispute. Thus, it was suggested that arbitration agreement is a vital component of an arbitration proceedings.

Introduction

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Arbitration has continued to maintain the lead as the preferred mechanism for resolution of domestic and international business disputes in the Nigerian legal system. An arbitration agreement means a voluntary agreement to submit to arbitration present or future disputes, “whether contractual or not”. It is clear; therefore, that a claim in tort or fraud may be the subject matter of an arbitration agreement (Udechukwu, 2008). An arbitration agreement can be included in the original or be in the form of a separate agreement, either at the time of the contract or subsequently.

Therefore, even in the absence of an original integrated arbitration clause the parties can still decide to settle a presently existing dispute by arbitration. The arbitration agreement is the document, which is normally in writing containing details about the reference of the disputes for resolution by the arbitrators. It is an agreement on paper containing information signed by the parties; containing and providing records of the arbitration agreement (Oyegbile, 2000). It is a very important document guiding the entire process of arbitration.

It also includes any reference in a contract to a document containing an arbitration clause which constitutes an arbitration agreement if such contract is in writing and the reference is such as to make that clause part of the contract. Unless a contrary intention is expressed in the arbitration agreement, it shall be irrevocable except:

• By agreement of the parties
• By leave of the court or a Judge
• Even, the occurrence of death of either of the parties does not automatically revoke the arbitration agreement.

Rather, it shall be enforceable by or against the personal representatives of the deceased. In the past, arbitration agreement could be in oral but the present arbitration act only recognized written agreement to arbitrate. The implication of this is that only written agreements are enforceable by the courts or Judge.

The aim of this work is to provide information on arbitration agreement under the Arbitration and Conciliation Act (ACA) CAP A18 2004. To achieve the above aim, the specific objectives are to:

• Identify the categories of arbitration agreement
• Examine the enforcement of the arbitration agreement
• Identify parties to the arbitration agreements
• Identify the major highlight of Arbitration and Conciliation Act (ACA).

Literature Review

Categories of arbitration agreements

There are two basic types of agreement:

• the arbitration clause
• the submission agreement.

An arbitration clause looks to the future, whereas a submission agreement looks to the past. The first, which is most common, is usually contained in the principal agreement between the parties and is an agreement to submit future disputes to arbitration. The second is an agreement to submit existing disputes to arbitration. Arbitration clauses are usually short, whilst submission agreements are usually long. This is not because of any particular legal requirement. It is simply a reflection of the practicalities of the situation.

An arbitration clause that deals with disputes which may arise in the future does not usually go into much detail, since it is not known what kind of disputes will arise and how they should best be handled. Indeed, although the parties to a contract may agree to an arbitration clause, they hope that there will be no need to invoke it. Usually they insert a short model clause, recommended by an arbitral institution, as a formality. By contrast, a submission agreement deals with a dispute that has in fact already arisen; and so it can be tailored to fit precisely the circumstances of the case.

In addition to indicating the place of arbitration and the substantive law, it generally names the arbitrators, sets out the matters in dispute and even, if thought appropriate, provides for exchange of written submissions and other procedure matters.

Enforcement of the arbitration agreements

Nigerian Courts have adopted a positive approach to the enforcement of arbitration agreements. A review of the decided cases shows a general recognition by Nigerian Courts of arbitration as a good and valid alternative dispute resolution mechanism. In C. N. ONUSELOGU ENT. LTD. V. AFRIBANK (NIG. ) LTD, the Court held that arbitral proceedings are a recognised means of resolving disputes and should not be taken lightly by both counsel and parties. However, there must be an agreement to arbitrate, which is a voluntary submission to arbitration. Where there is an arbitration clause in a contract that is the subject matter of Court proceedings and a party to the Court proceedings promptly raises the issue of an arbitration clause, the Courts will order a stay of proceedings and refer the parties to arbitration.

SECTIONS 6(3) and 21 of the Lagos State Arbitration Law 2009, which “empowers the Court to grant interim orders or reliefs to preserve the res or rights of parties pending arbitration. ” Although the ACA in section 13 gives the arbitral tribunal power to make interim orders of preservation before or during arbitral proceedings, it does not expressly confer the power of preservative orders on the Court and Section 34 of the ACA limits the Courts’ power of intervention in arbitration to the express provisions of the ACA.

The usefulness of section 6(3) of the Lagos State Arbitration Law 2009 is seen when there is an urgent need for interim preservative orders and the arbitral tribunal is yet to be constituted. In this regard, such applications find no direct backing under the ACA and have always been brought under the Rules of Court and under the Court’s inherent jurisdiction to grant interim orders. However, in AFRIBANK NIGERIA PLC V HACO, the Court granted interim relief and directed the parties to arbitrate under the provisions of ACA.

Upon the publication of the award the parties returned to the Court for its enforcement as judgment of the Court. The Courts in Nigeria are often inclined to uphold the provisions of Sections 4 and 5 of the ACA provided the necessary conditions are met. A live case in point is the case of MINAJ SYSTEMS LTD. V. GLOBAL PLUS COMMUNICATION SYSTEMS LTD. & 5 ORS, in this case, the Claimant instituted a Court action in breach of the arbitration agreement in the main contract and on the Defendant’s application, the Court granted an order staying proceedings in the interim for 30 days pending arbitration.

In NIGER PROGRESS LTD. V. N. E. I. CORP. , the Supreme Court followed section 5 of the ACA which gives the Court the jurisdiction to stay proceedings where there is an arbitration agreement. In the owners of the MV LUPEX V. NIGERIAN OVERSEAS CHARTERING & SHIPPING LTD, the Supreme Court held that it was an abuse of the Court process for the respondent to institute a fresh suit in Nigeria against the appellant for the same dispute during the pendency of the arbitration proceedings in London. In AKPAJI V.

UDEMBA, the Court held that where a defendant fails to raise the issue of an arbitration clause and rely on same at the early stage of the proceeding but takes positive steps in the action, he would be deemed to have waived his right under the arbitration clause.

The parties to an arbitration agreement

The parties to a contract must have legal capacity to enter into that contract, otherwise it is invalid. The position is no different if the contract in question happens to be an arbitration agreement.

The general rule is that any natural or legal person who has the capacity to enter into a valid contract has the capacity to enter into an arbitration agreement. Accordingly, the parties to such agreements include individuals, as well as partnerships, corporations, states and state agencies. If an arbitration agreement is entered into by a party who does not have the capacity to do so, (the law where applicable) may be invoked either at the beginning or at the end of the arbitral process.

If it is invoked at the eginning of the process, the party requesting for it would ask the competent court to stop the arbitration, on the basis that the arbitration agreement is null and void. Where the validity of the arbitration agreement is raised at the end of the arbitration process, the requesting party would ask that the competent court to refuse the recognition and enforcement of such an award, on the grounds that one of the parties to the arbitration agreement is “under some incapacity” under the applicable law.

Major highlights of the arbitration act

1. The Arbitration Clause: The Arbitration and Conciliation Act (“ACA”) CAP. A18 2004 mandates that all arbitration agreements must be in writing and signed by the parties, in an exchange of letters, telex, telegram or other means of communication; or point of claim or defence. In Nigeria, arbitration clauses are irrevocable except by the leave of court or mutual agreement of parties. Even where parties had no prior agreement, with a submission agreement, parties may still submit to arbitration;
2. Subject-matter Arbitrability: The “ACA” does not stipulate any particular subject matter that may not be referred to arbitration. The question of whether or not a dispute is arbitrable has therefore been left at the discretion of the Courts. In ARAB REPUBLIC V. OGUNWALE(2002) 9 NWLR (PART 771) 127,the Court of Appeal held that the test for determining whether a dispute is arbitrable or not is that the dispute or difference must necessarily arise from the clause contained in the agreement. However not all disputes are necessarily arbitrable.
3. Binding Nature: The “ACA5” provides that every arbitration award in Nigeria shall be binding on the parties. This is to preclude a recalcitrant party from preventing a successful party from enjoying the fruits of his judgment.
4. Number of Arbitrators: In Nigeria, the number of arbitrators is either one or three. The parties to an arbitration agreement may determine their preferred numbers of arbitrators to be appointed under the agreement, but where no such determination is made, the number of arbitrators shall be deemed to be three.
5. Challenge of an arbitrator: Parties may determine the procedure to be followed in challenging an arbitrator. Where no such procedure is determined a party who intends to challenge an arbitrator shall, within ifteen days of becoming aware of the constitution of the arbitral Tribunal or becoming aware of any of the grounds, send to the arbitral Tribunal a written statement of the reasons for the challenge.
6. Preservative Orders: The provisions of the ACA cloths the members of a Tribunal with the requisite powers to grant preservative orders during an arbitration reference. These orders however do not include granting injunctions etc. The Act provides that in such circumstance, the Tribunal can remit that portion of the reference to a proper court for the grant of such injunctive relief.
7. Language to be used in Arbitral proceedings: In Nigeria, the parties may, by agreement determine the language or languages to be used in the arbitral proceedings. But where they do not do so, the arbitral Tribunal shall determine the language to be used bearing in mind the relevant circumstances of the case.
8. The enforcement of an Award: An arbitral award shall, irrespective of the country in which it is made, be recognised as binding on the parties. This is made possible by the Foreign Judgments (Reciprocal Enforcements) Act, Cap 152, Laws of the Federation of Nigeria 2004, which makes foreign arbitral awards registerable in Nigerian Courts if at the date of registration it could be enforced by execution in Nigeria.

It is also known as the doctrine or principle of autonomy or independence of the arbitration clause. Separability means the arbitrability clause in a contract is considered to be separate from the main contract of which it forms part and as such, survives the termination of that contract. It noteworthy to mention that arbitration agreement can be in form of an arbitration clause in a contract or in a separate agreement addressing disputes that have already arisen.

The doctrine of separability is most relevant to arbitration clause in a contract an underlying contract. At the outset it must be recognised that this doctrine is inextricably linked with the doctrine of kompetence-kompetence which empowers the arbitrator to decide his own jurisdiction in the first instance. While kompetence-kompetence empowers the arbitration tribunal to decide on its own jurisdiction, the doctrine of separability affects the outcome of this decision.

The doctrine of separability is provided for under Section 12(2) of ACA: For purposes of subsection of this section, an arbitration clause which forms part of a contract shall be treated as an agreement independent of the other terms of the contract and a decision by the arbitral tribunal that the contract is null and void shall not entail ipso jure the validity of the arbitration clause. For arbitral tribunals whose seat is in Nigeria (including under domestic arbitration) the source of this doctrine is article 12(2) of ACA quoted above which is a mandatory provision.

Parties cannot therefore as a matter of contract, derogate from this provision and agree otherwise. Finally, separability thus ensures that if, for example one party claims that there has been a total breach of contract by the other, the contract is not destroyed for all purposes. Instead: “It survives for the purpose of measuring the claims arising out of the breach, and the arbitration clause survives for determining the mode of their settlement. The purposes of the contract have failed, but the arbitration clause is not one of the purposes of the contract. ”

In bid to gather information for this study, the secondary source of data collection was utilized, which includes - journals, textbooks and other relevant document from the internet (web sites and e-library).

Conclusions

The importance of the arbitration agreement is imperative and vital to the success of an arbitration proceeding. The arbitration agreement represents the wishes of the parties to submit future dispute to arbitration while submission clause attends to disputes that have already arisen.

References

1. ACA. (2004). Arbitration and Concilation Act CAP A8, Laws of the Federation of Nigeria (LFN) . Nigeria. National Open University. (n. d. ). Alternative Disput Resolution II. Retrieved 02 23, 2013, from www. noun. edu. ng
2. Oyegbile, S. O. (2000). An Introduction to Arbitration and Conciliation. Minna: Jameson Graphic Publishers. T
3. olulope, A. (2012). Arbitration in the Emerging Markets. The International Charmber of Commerce Clyde & Co. Conference (pp. 2-4). London: Aron.
4. Udechukwu, C. E. (2008). Professional Practice for Real Estate Professionals. Lagos: Treem Nigeria Limited.
5. Wikipedia. (2013). Web Encylopedia. Retrieved 02 14, 2013, from www. wikipedia. com: http://www. wikipedia. com

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