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The construction and infrastructure industry is a cornerstone of economic development in Nigeria, driving growth, creating jobs, and enhancing the quality of life for citizens. This sector encompasses a wide range of activities, from road construction to large-scale infrastructure projects, and is crucial for the nation’s progress. However, the complexity and scale of construction projects often lead to disputes among stakeholders, including contractors, clients, and subcontractors. As a result, arbitration has emerged as an essential mechanism for resolving conflicts in the industry. Unlike traditional litigation, arbitration offers a more efficient, confidential, and specialized approach to dispute resolution, making it particularly suited for the intricacies of construction projects.
This essay explores the significance of arbitration within the context of FIDIC (Fédération Internationale Des Ingénieurs-Conseils) contracts, which are widely used in the construction industry. It will begin by discussing the relevance of arbitration to various FIDIC contracts. Following this, the essay will address the challenges that arise in arbitration related to construction disputes and FIDIC contracts, proposing potential solutions to these challenges. Finally, the essay will conclude by summarizing the key points discussed and offering recommendations for improving the arbitration process in the Nigerian construction sector.
DISPUTE RESOLUTION IN FIDIC CONTRACTS
FIDIC contracts are widely used in the construction industry to provide a framework for the management of construction projects.[1] They are typically designed to be fair and balanced, which in turn ensures equality between parties.
FIDIC contracts are categorized variously according to the nature of the project, circumstance and the parties may demand, thus, the Red book, yellow book, the Silver book, green book, and white book.[2] Although dissimilar for their use and purpose, the dispute resolution process for all the forms of FIDIC contracts are practically the same with certain exceptions as to the number of persons to constitute the Dispute Adjudication Board (some may allow for just one while others may allow for three) also some agreements may provide for a standing DAB (appointed at the point of entering the agreement), while others may allow for an ad hoc DAB (formed when a dispute arises).[3]
Using the Red Book FIDIC Contracts as a model to discuss FIDIC Contracts generally. It is formally regarded as the “Conditions of Contract for Construction”, which is the most commonly used form of FIDIC contracts.[4] In this form of contract, the employer provides the design, creating a clear division of labour, contractors’ roles, risk allocation, and payment.
In spite of the clarity of the above provisions, disputes still often arise, and as such, a dispute resolution process needs to be put in place.
Disputes arising from construction projects related to FIDIC Contracts are first referred to the engineer; based on the wealth of knowledge and expertise, the engineer will most likely make a sound decision acceptable to the parties, but in the event that the engineer is unable to settle the parties or any of the party is dissatisfied with the decision of the engineer, they can settle amicably by negotiation; here the parties meet and try to resolve the dispute peaceably, mostly aiming for compromise, if efforts at negotiations fail, the dispute will be referred to the Dispute Adjudication Board (DAB).[5]
The board is vested with the duty of first reviewing the nature of the dispute, the number of persons that constitute the board can either be one or three persons (must be odd in order to have a tie breaker), by hearing the parties involved, and from its findings, makes a decision. This decision is binding on the parties.[6] However, the exceptional circumstance to its binding effect is if any one of the parties is dissatisfied with the decision of the DAB. In such a situation, the dissatisfied party is to issue a notice stating their dissatisfaction and the reason for the same.
CHALLENGES OF ARBITRATION IN CONSTRUCTION AND FIDIC CONTRACTS
Most commonly, fees payable for arbitration will be based on the value of the contract, and the overall nature of the dispute can be significantly more expensive than other dispute resolution methods.[7] Costs include arbitrator fees (which can be substantial, especially for complex cases), administrative fees charged by the arbitration institution, legal fees for lawyers and experts, and the costs of preparing and presenting evidence. These costs can quickly escalate, especially in lengthy and complex construction disputes, making arbitration a costly undertaking for all parties involved.
Construction disputes are inherently complex, often involving technical issues, engineering principles, and intricate contractual relationships. Arbitrators need to have a strong understanding of these aspects to make informed decisions.[8] Finding arbitrators with the necessary expertise in construction, engineering, and contract law can be challenging. Furthermore, the presentation of evidence, expert testimony, and legal arguments can be complex, requiring significant preparation and resources from all parties.
While arbitration awards are generally enforceable, there can be challenges in certain jurisdictions. The enforcement of an award may be contested on various grounds, such as procedural irregularities, lack of jurisdiction, or violation of public policy. This can lead to further delays and costs as parties seek to enforce or challenge the award in court. The effectiveness of arbitration depends on the willingness of courts to uphold and enforce arbitration agreements and awards, which can vary across different legal systems.
POSSIBLE SOLUTIONS TO THE CHALLENGES OF ARBITRATION IN CONSTRUCTION AND FIDIC CONTRACTS
There is no problem without a solution; the aforementioned challenges can be overcome by the following;
1. Enhanced training should be organized for relevant stakeholders in the construction and infrastructure industry, which will enlighten them on the provisions of FIDIC contracts. This will create a better understanding of the nature of these contracts and the proper execution of projects.
The training programs should be all encompassing as to cover all the types of FIDIC Contracts, i.e., the Red book (For Construction), Yellow book (for plant and design build), Silver book (For EPC / Design Build) e.t.c. The training should be focused on role allocation, payments and the mode thereof, variations, and dispute resolution.
The training can take the form of seminars, workshops, online courses, practical or infield trainings.
This would, in effect, enable stakeholders ranging from project managers, engineers, and even the legal teams to have a better understanding of the nature of FIDIC Contracts, enabling a more effective project management, enhanced and properly calculated risk management, and aim to resolve disputes quickly and amicably.
2. Improved and robust frameworks should be established for the enforcement of arbitral awards from disputes arising from FIDIC Contracts settled by arbitration.
This is essential to ensure that the end game of an arbitration proceeding is not nugatory by ensuring that the parties involved respect the process and the award of the same. This can be achieved in the following ways;
i. It will require a strong legal and regulatory framework in the jurisdiction where the project is being executed, which provides for and upholds the arbitration process from the beginning to the award stage. An instance could be an FIDIC project executed in Nigeria, which would ordinarily be guided by the Arbitration and Mediation Act 2023 as a law that provides for the enforcement of arbitration awards.
In the event of collaborations or partnerships between parties internationally, there should be the import of foreign statute, such as the New York Convention, which facilitates the recognition and enforcement of arbitral awards anywhere in the world across different countries.
ii. Court systems should be reimagined to ensure a swift and impartial adjudication of applications for the recognition and enforcement of arbitral awards. While that may not be the case in practice, the party seeking to enforce the award should pursue the same with diligence. Undue delays may hinder the overall effectiveness of the arbitration process.
3. There should be strict measures put in place for better enforcement of arbitral awards and compliance with the same. The measures suggested include the ability to seize assets, exercising lien over goods, withholding of services, as the case may be; all in a bid to ensure compliance by the party against whom the award was made. These measures should be as transparent as possible, and the parties should be informed ahead of time, agree to it, and be bound by it.
CONCLUSION
In conclusion, arbitration plays a vital role in the construction and infrastructure industry in Nigeria, particularly when guided by FIDIC contracts. The essay has discussed the importance of arbitration in resolving disputes efficiently, highlighted successful case studies, and examined the challenges faced in the arbitration process. To enhance the effectiveness of arbitration in this sector, it is crucial to implement the proposed solutions, which can lead to a more streamlined and fair dispute resolution process. By fostering a culture of understanding and cooperation among stakeholders, Nigeria can improve its construction landscape, ultimately contributing to sustainable economic growth.
[1] https://www.mayerbrown.com/-/media/files/news/2012/12/introduction-to-fidic-contracts/files/lexisnexis_2012_intro-to-fidic-contracts/fileattachment/lexisnexis_2012_intro-to-fidic-contracts.pdf%3Frev=3013a65d215441dca719cec838565ddc <Accessed September 15, 2025
[2] https://fidic.org/sites/default/files/FIDIC_Suite_of_Contracts_0.pdf <Accessed September 15, 2025
[3] https://www.fenwickelliott.com/sites/default/files/rm_-_the_2017_fidic_dispute_resolution_procedure_part_1.pdf <Accessed September 15, 2025
[4] https://zabeelinstitute.ae/blog/what-is-fidic-red-book/ < Accessed September 21st, 2025>
[5] https://www.fenwickelliott.com/sites/default/files/jg_fidic_dispute_adjudication_boards.pdf <Accessed September 21st, 2025>
[6] Ibid 5.
[7] https://www.charlesrussellspeechlys.com/en/insights/expert-insights/dispute-resolution/2023/arbitration-is-cheaper–myth-or-reality/ <Accessed September 22nd 2025
Written by Obinna Okoli for The Trusted Advisors
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