Call anytime+234 810 159 9159
Arbitration in Nigeria is generally governed by the Arbitration and Mediation Act, 2023[1], and has gained global acceptance as an alternative dispute resolution mechanism, especially in commercial transactions. Parties frequently insert arbitration clauses into their contracts to ensure that disputes are resolved outside the conventional courts. However, occasions often abound whereby a party in a fragrant departure from the arbitration agreement or clause approach the courts to resolve the dispute without recourse to arbitration. This has birthed the recurring legal question of whether an arbitral clause can completely oust the jurisdiction of the courts.
It is against this backdrop that this article aims to examine the doctrinal, statutory, and judicial position in Nigeria and globally.
THE NIGERIAN EXPERIENCE: A LOOK AT STATUTORY PROVISIONS AND JUDICIAL PRONOUNCEMENTS
The question of whether an arbitration clause can oust the jurisdiction of the courts in Nigeria has been resolved by virtue of statutory provisions and judicial pronouncements. First, it is important to state that the courts are a creation of the constitution[2], which is the grundnorm from which other laws derive their validity[3]. By virtue of the above, any law which is inconsistent with constitutional provisions is, to the extent of such inconsistency, null and void[4]. This brings the arguments within the realm of whether private agreements can override constitutional provisions.
However, the Arbitration and Mediation Act, 2023 (AMA 2023) has, in clear terms, provided for the powers of the courts to adjudicate over a matter subject to an arbitration agreement, provided the adverse party fails to raise an objection timeously before taking further steps in the proceedings[5]. For emphasis, Section 5 of the AMA provides as follows:
“5.—(1) Notwithstanding the provisions of any other law, a court before which an action is brought in a matter, which is the subject of an arbitration agreement shall, if any of the parties request, not later than when submitting their first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is void, inoperative or incapable of being performed.
(2) Where an action referred to in subsection (1) has been brought before a court, arbitral proceedings may be commenced or continued, and an award may be made by the arbitral tribunal while the matter is pending before the court.
(3) Where a court makes an order for stay of proceedings under subsection (1), the court may, for the purpose of preserving the rights of parties, make an interim or supplementary order as may be necessary.”
The purport of the above is that where a matter subject to an arbitration agreement is initiated in court, the court is empowered to stay proceedings against any party or any other person claiming through or under him, on the application of the said party after appearance but before filing his pleadings or defence.[6]Furthermore, the court may, if satisfied that there is no sufficient reason why the matter should not be referred and the applicant or parties are willing and ready to go into arbitration will make an order to stay proceedings unless it finds the arbitration agreement void, inoperative, or incapable of being performed.[7]
Furthermore, a party that, despite being aware of an arbitration agreement, fails to object before joining issues in the court proceedings may be deemed to have waived its right to the arbitration. This has been upheld in a plethora of cases, as the issue of when a party submits their first statement on the issue has always been controversial.
In the case of SEMBCORP ENGINEERING PTE LTD v. IPCO (WA) HOLDINGS LTD & ANOR[8], the Supreme Court held that a defendant has to raise the issue of referral to arbitration timeously. That is to say, where a defendant fails to raise the issue of the arbitration clause at an early stage of the proceeding, but rather takes positive steps in the action, he will be deemed to have waived his right under the arbitration clause or agreement.
Similarly, in the case of Compagnie D’Importation et D’Exportation SA v. Nigerian Produce Marketing Co. Ltd[9], the court held that the defendant, who filed an application for extension of time within which to file a statement of defence, has taken steps in the proceedings. Again, in the case of Obi Obembe v. Wemabod Estates Ltd[10], the court held that a party who makes an application whatsoever to the court, even though it may be a mere application for extension of time, has taken a step in the proceedings.[11]
It follows from the above that to preserve the right to arbitrate, the aggrieved party must desist from taking any action that would amount to taking steps before asking the court to stay proceedings. Therefore, the court has held in the case of Nigerian Ports Authority v. Construzioni Generali Farsura (COGEFAR) SPA and McEwen[12], that the conditions for the grant of stay of proceedings under Section 5 of the Act, which is in part material Section 5 of the AMA, 2023, are as follows:
a. That the applicant has taken no steps in the proceedings
b. That the applicant was, at the time the proceedings were commenced, and still remains ready and willing to do all things necessary to the proper conduct of the arbitration; and
c. That the court considers it proper to make the order
It follows, therefore, that an arbitration agreement does not oust the jurisdiction of the court. However, the other party must take steps to challenge the court’s jurisdiction before taking further steps in the proceedings. This aligns with the decision of the Court of Appeal in the 2025 case of APUDI INSTITUTE FOR PEACE STUDIES & SOCIAL REHABILITATION v. FAROUK SULE GARO INTL LTD[13], where the court held that:
“The law is clear that a contract with an arbitration clause will not oust the jurisdiction of a Court; rather, the suit will be stayed if a party raises the arbitration clause, before taking any steps in the proceedings. In the case subject matter of this appeal, the Appellant failed to raise the arbitration clause, but went ahead to file a lengthy statement of defense. The Appellant is thus deemed to have, by consent, submitted to the jurisdiction of the lower Court.”
THE GLOBAL AND INTERNATIONAL BEST PRACTICES: A LOOK AT STATUTORY & JUDICIAL PRONOUNCEMENTS
Certain international instruments equally contain provisions to the effect that an arbitral clause does not oust the jurisdiction of the courts. For instance, Article II (3) of the New York Convention[14] provides as follows:
“3. The court of a Contracting State, when seized of an action in a matter in respect of which the parties have made an agreement within the meaning of this article, shall, at the request of one of the parties, refer the parties to arbitration, unless it finds that the said agreement is null and void, inoperative or incapable of being performed.”
Similar provisions are contained in Article 8 (1) & (2) of the 1989 UNCITRAL Model law[15] as follows:
“(1) A court before which an action is brought in a matter which is the subject of an arbitration agreement shall, if a party so requests not later than when submitting his first statement on the substance of the dispute, refer the parties to arbitration unless it finds that the agreement is null and void, inoperative, or incapable of being performed.
(2) Where an action referred to in paragraph (1) of this article has been brought, arbitral proceedings may nevertheless be commenced or continued, and an award may be made, while the issue is pending before the court.”
From the foregoing, it is apparent that the international instruments respect parties’ agreements. This, however, does not oust the jurisdiction of the courts to intervene and preserve judicial supervision and remedies. This also aligns with case law positions across multiple jurisdictions.
CONCLUSION
Arbitral clauses cannot completely oust the jurisdiction of the courts. While such clauses reflect the parties’ freedom to choose their dispute resolution mechanism, the courts retain residual and supervisory jurisdiction to ensure legality, fairness, and compliance with public policy. This explains why the court’s interference is still needed to ensure the granting of interim measures, setting aside an arbitral award, enforcement and recognition of arbitral awards, etc.
Thus, in Nigerian law and indeed, under most modern arbitration regimes, arbitral clauses suspend rather than eliminate judicial jurisdiction. In other words, while arbitration clauses may limit judicial intervention, it does not completely exclude the courts. The relationship between courts and arbitration could be termed complementary as opposed to exclusionary.
[1] The Arbitration and Mediation Act, 2023, was enacted in 2023 and repealed the Arbitration and Conciliation Act, Cap A18, Laws of the Federation of Nigeria, 2004.
[2] See generally section 6 of the 1999 Constitution of the Federal Republic of Nigeria (As Amended)
[3] See section 1(1) of the 1999 Constitution of the Federal Republic of Nigeria (As Amended)
[4] See Section 1(3) of the 1999 Constitution of the Federal Republic of Nigeria (As Amended)
[5] See Section 5 of the Arbitration and Mediation Act, 2023
[6] Hagler Okorie “Arbitration Law: Practice and Procedure” (Princeton & Associate Publishing Co. Ltd 2024) P. 34
[7] See Section 5(1) of the AMA, 2023
[8] (2024) LPELR-62984(SC)
[9] (1968) ALL NLR 570
[10] (1977) 11 NSCC 264, 271
[11] Hagler Okorie “Arbitration Law: Practice and Procedure” (Princeton & Associate Publishing Co. Ltd 2024) P. 36
[12] (1971) 2 NCLR 44
[13] (2025) LPELR-81183(CA)
[14] Article II (3) Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York, 1958)
[15] UNCITRAL Model Law on International Commercial Arbitration, 1985
Written by Muhiz Adisa for The Trusted Advisors
Email us: info@cms.trustedadvisorslaw.com