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Commercial disputes are an inevitable feature of business activity in Nigeria, arising from contractual breaches, partnership disagreements, and supply‑chain disruptions. While litigation remains a fundamental dispute‑resolution mechanism, it is often time‑consuming, costly, adversarial, and frequently straining commercial relationships. Mediation, as an Alternative Dispute Resolution (ADR) mechanism, offers a practical and collaborative approach to resolving such disputes. This article examines mediation in commercial disputes, focusing on when it is most effective, why it succeeds, and its inherent limitations.
UNDERSTANDING MEDIATION
Mediation is a voluntary and non-binding process in which a neutral third party (the mediator) facilitates negotiations between disputing parties to assist them in reaching an amicable settlement[1]. The mediator does not impose a decision but guides the discussions, identifies common interests, and promotes mutually acceptable solutions.[2]
In Nigeria, mediation has gained increasing institutional recognition through bodies such as the Lagos Multi-Door Courthouse (LMDC) and the Nigerian Institute of Chartered Arbitrators (NICArb)[3]. The enactment of the Arbitration and Mediation Act, 2023 (AMA 2023) further strengthened mediation by providing a unified legal framework that promotes efficient, fair, and enforceable settlement of commercial disputes in line with international best practices.
WHEN TO MEDIATE
Mediation is generally most effective when pursued early, though not prematurely. Parties may require sufficient time to understand the facts and legal positions involved. However, prolonged delay can entrench adversarial positions, reducing the prospects of settlement.
Mediation is particularly appropriate once direct negotiations have failed but before litigation costs and hostilities escalate. At this stage, parties remain relatively flexible and are often motivated by the potential cost and time savings. Conversely, mediation may be ineffective where parties are unwilling to compromise or where communication has completely broken down, although once litigation expenses begin to accrue.[4]
SUITABLE SCENARIOS FOR MEDIATION
Mediation is not a one-size-fits-all solution, but it thrives in specific commercial contexts where the parties’ interests align toward preservation and efficiency. It is especially effective in the following commercial contexts:
1. Ongoing Business Relationships: Where parties intend to maintain future dealings such as joint ventures, supply agreements, or franchise arrangements, mediation helps preserve goodwill and commercial continuity.[5]
2. Early-Stage Conflicts: Disputes identified before positions harden are more amenable to resolution. Many commercial contracts now mandate mediation as a preliminary step before arbitration or litigation.[6]
3. Confidential Matters: Disputes involving sensitive information, trade secrets, or intellectual property benefit from mediation’s private and confidential nature.[7].
4. Complex or Multi-Party Disputes: In sectors such as construction, oil and gas, or infrastructure, mediation allows for flexible and tailored solutions that may not be achievable through formal adjudication.[8]
WHY MEDIATION WORKS IN COMMERCIAL DISPUTES
Mediation is effective in commercial disputes for several reasons, including:
• Efficiency: It allows parties address core issues within days rather than the months or years typical of litigation, significantly reducing legal and ancillary costs.
• Interest-Based Solutions: By focusing on underlying commercial interests rather than strict legal rights, mediation enables parties to develop creative, business-oriented outcomes.
• Improved Communication: The process facilitates open dialogue, enabling parties to clarify misunderstandings, reassess assumptions, and identify common ground.
open to changing their perceptions about a dispute when they listen to the other side.
• Party Autonomy: Parties retain control over both the process and the outcome, allowing flexibility in procedure and scope.
• Confidentiality: The private nature of mediation encourages candid discussions and protects commercial reputations.
• Foundation for Future Resolution: Even when mediation does not result in immediate settlement, it often narrows issues and paves the way for later resolution.[9]
LIMITATIONS OF MEDIATION
Despite its advantages, mediation does not guarantee a settlement and involves time and cost. Some disputes that settle at mediation may have resolved eventually without it, albeit at a later stage. However, mediation often accelerates resolution and reduces overall costs.
Mediation also depends on the good-faith participation of all parties. Power imbalances or unwillingness to compromise may undermine the process without skilled mediation. While the AMA 2023 provides mechanisms for enforcing mediated settlements, mediation may be unsuitable for disputes requiring public accountability, authoritative legal precedent or coercive remedies.
CONCLUSION
Mediation is a highly effective mechanism for resolving commercial disputes in Nigeria, particularly where efficiency, confidentiality and relationship preservation are priorities. Supported by the Arbitration and Mediation Act 2023, and growing institutional acceptance, mediation is increasingly positioned as a preferred first step in commercial dispute resolution. Legal practitioners should encourage the inclusion of mediation clauses in commercial contracts and advise clients to consider mediation at an early stage, thereby transforming disputes into opportunities for constructive and sustainable business solutions.
[1] https://chamanlawfirm.com/mastering-commercial-dispute-resolution
[2] Section 91 the Arbitration and Mediation Act, 2023.
[3] https://www.linkedin.com/pulse/resolving-commercial-disputes-nigeria-exploring-dispute-oyebo
[5] https://legalpediaonline.com/mediation-as-a-tool-for-resolving-commercial-disputes
[7] https://www.mediatoracademy.com/blog/benefits-of-mediation
[8] ibid
Written by Eunice Jatau for The Trusted Advisors
Email us: info@trustedadvisorslaw.com
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