The National Policy on Arbitration and Alternative Dispute Resolution (ADR) was published in July 2024 with the aim of transforming Nigeria into a center of excellence for arbitration and ADR in Africa and beyond. The policy’s goal is to establish fundamental principles to guide the Federal and State government’s participation in arbitration references, to position Nigeria as an attractive hub for domestic, regional, and international commercial arbitration, whilst protecting national interests and reducing the burden on the Court systems. Ultimately, this will promote the ease of doing business and enhance investors’ confidence in Nigeria.

Analysis of Key Provisions of the Policy

 Although the policy is not legally binding and serves primarily as a guide, it outlines several key considerations, including the following:

1.  Application of the policy:

This policy applies to where one of the parties to a contract is a Federal or State Ministry, Department, or Agency (MDA). The Federal and State Ministries, Departments, and Agencies are at liberty to agree on any arbitration rules that will apply to their disputes, and in the absence of such agreement, the Arbitration Rules or other ADR mechanisms under the statutes will apply. The policy is to be implemented over a five-year period, after which it will be reviewed to reflect the prevailing trends in arbitration and ADR Practices^[i]

2. Selection of Arbitrators^[ii]:

The policy provides that the arbitral tribunal shall comprise three arbitrators, the arbitrator to be appointed by the Federal and State MDA must be an ADR expert with the qualifications required to be an arbitrator. For international arbitration, the Attorney General of the Federation or State can request the director of the Regional Centre for International Commercial Arbitration (RCICL) to appoint a suitably qualified and competent arbitrator.

Where the parties fail to agree on the procedure of appointment, the Attorney General of the Federation or the Attorney General of the state shall request the RCICAL or any other centre to appoint suitably qualified and competent Nigerian arbitrator(s) for the Federal/State MDAs. However, where the dispute deals with a claim above the threshold of the sum of Fifty Million Naira, the appointment shall be approved by the Honourable Attorney General of the Federation.

3. Criteria for engagement of Counsel^[iii]:

The policy also provides that the Federal and State MDA shall adopt a clear and transparent process for engaging Nigerian counsel in such proceedings and gives them the ability to hire a foreign counsel.

The foreign counsel must be engaged on grounds of experience and shall partner with a Nigerian Counsel for the Nigerian Counsel to gain hands-on experience in the course of the case. It can be seen to allow Nigerians to gain experience

The choice of counsel shall entirely be based on merit and will have significant consideration for the technical ability, international arbitration and ADR expertise, and depth of experience of the Counsel.

4. Contract, Negotiation, Drafting, and Arbitration Monitoring^[iv]:

Both Federal and State MDAs are to ensure capacity in managing arbitration and other ADR processes. The capacity should be developed for the purpose of contract negotiation, drafting, and implementation monitoring. They are to monitor the implementation of contracts involving the Federal and State MDAs, especially where foreign parties are involved. They are also to monitor all ongoing commercial arbitrations or ADR related matters before a court of law, and a bi-annual report shall be provided by the Civil Department to the Honourable Attorney General of the Federation/State.

5. National Arbitration and ADR Registrar:

The policy states that the Federal and State MDA provide in detail the particulars of all ongoing and pending investment or commercial arbitration before any arbitration tribunal or court of law to the Federal or State Ministry of Justice, respectively.

6. Repository for Bilateral Investment Treaties:

It is now the duty of the Federal Ministry of Justice to receive all treaties entered into by the Federation and other countries for recording purposes. The Federal Ministry of Justice is to maintain an up-to-date register of treaties, which shall be open to members of the public for inspection^[v].

7. Seat and Venue of Arbitration^[vi]:

Nigeria is to be the preference as the seat and venue of arbitration will encourage investment, drive economic development, as well as improve arbitration and ADR practices amongst arbitrators.

To achieve the this, the policy states that there should be the preference of the seat and venue of arbitration to be in Nigeria; stipulating Nigeria as the seat of all arbitration involving Nigerian’s governmental bodies with the RCICAL as the default appointer, where necessary; where cases are within a particular money threshold involving state government agencies such cases should undergo ADR at the MDCs.

The FMOJ shall issue guidelines from time to time with regard to the threshold; the private sectors are also encouraged to utilize ADR at first instance at the MDC and other Governor ADR Centres.

8. The Role of Courts: National Judicial Policy on Arbitration:

The policy enjoins the judiciary to establish special courts, including small claims commercial courts and specialized divisions of the judiciary, as well as the expansion and strengthening of ADR Centres to promote the fair and expeditious resolution of disputes.

The policy enjoins the Courts to refrain from entertaining actions in respect of a contract in which parties have included an arbitration clause without first giving effect to the arbitration clause and encouraged to stay proceedings in actions where it is satisfied that there is no reason why the matter should not be referred to the arbitration in accordance with the arbitration clause.

It is also advised that all heads of court should develop more courts for the hearing and determination of arbitration-related matters. The judiciary would be encouraged to develop a practice direction on arbitration and ADR and to award punitive costs in deserving cases where lawyers are using the instrumentality of the court to frustrate arbitration.

Judicial proceedings arising from arbitrations and ADR shall be determined within a period not exceeding 60 days from the date of filing the proceedings before the Court, and this should be considered in the rules of the Court^[vii]. In a case of an appeal arising from the decision of the Court of first instance, the appeal should be determined within a period of 270 days from the date of filing their appeal. 

9. Small Claims Arbitration^[viii]:

This is to provide and facilitate access to justice to the economically and socially disadvantaged people. It will help to provide cheap and speedy access to justice, devoid of all the complexities. The policy recommends that the Chief Judge of the Federal and State High Courts issue practice directions to establish small claim that features arbitration and explore enabling law to support the establishment of the court.

The jurisdiction of the SCA would be debt recovery not exceeding five million^[ix], breach of contract, landlord and tenant, consumer rights issues, where the claim does not exceed Five Million.

The process of instituting a small claim can be done by the claimant filing the small claims form in any small claims court without the need for a legal practitioner. The form is to be sent to the small claims registry, and the filing fee is to be paid. A hearing note is issued and served. The parties are to present their respective cases personally, and the judge shall deliver. The day from filing to judgment should not exceed 60 days. The judgment is to be enforced like any other court judgment.

 Small claim judgments can be subject to appeal by the submission of an appeal form through the small claims registry for onward submission to the fast-track court at the federal or state levels. From the assignment of appeal to judgment should not exceed 30 days.

10.  Training:

The policy provides that Judicial officers should be trained by capacity capacity-building institution, for the FG and SG to partner with the private sector to leverage existing platforms to create awareness, and that the Government should commit into introducing arbitration and arbitration courses into the curriculum of law facilities, law school, and continuing legal education.

Thoughts on the policy

The Policy represents a significant step in the reform of the country’s legal and institutional framework for arbitration and alternative dispute resolution. The policy seeks to promote arbitration as the preferred mechanism for resolving commercial and international disputes. By doing so, it aims to enhance Nigeria’s position as a regional hub for business and investment, addressing the growing demand for efficient dispute resolution mechanisms in the face of a rapidly developing economy.

The policy has several strengths, one of them being its alignment with international standards. This international alignment aims to make Nigeria a more attractive destination for foreign investments, as businesses prefer jurisdictions with a reliable and predictable system for resolving disputes. The policy also promotes cooperation with other African nations, enhancing Nigeria’s role in regional dispute resolution efforts within Africa.

The policy focuses on reducing the pressure on Nigeria’s overburdened judicial system by encouraging ADR as an alternative to litigation. By providing a faster, more cost-effective solution to disputes, the policy aims to alleviate the growing backlog in Nigerian courts. ADR mechanisms like mediation, conciliation, and arbitration allow for quicker resolutions, enabling businesses to resolve conflicts without waiting for lengthy court proceedings.

In addition to promoting ADR, the policy emphasizes the development of a robust ADR infrastructure. This includes establishing specialized arbitration centers and ensuring the appointment of qualified arbitrators and mediators. Such institutions will help foster a fair and impartial environment for dispute resolution, contributing to increased confidence in Nigeria’s ADR processes.

While we acknowledge the several notable strengths of the policy, there are however, several challenges, notably in the areas of enforcement and implementation. The slow pace of enforcing arbitration awards in Nigeria has been a long-standing issue, and the policy will need to address these gaps. Strengthening enforcement mechanisms is crucial to ensuring that arbitration awards are upheld and parties comply with decisions in a timely manner.

The policy also needs to prioritize capacity building by training arbitrators, mediators, and legal professionals in best practices for ADR. Public awareness of the benefits and effectiveness of ADR must be increased to ensure widespread acceptance and use. Furthermore, while arbitration is highlighted as the preferred method, the policy should also balance its approach by promoting mediation and conciliation for disputes that may benefit from less adversarial resolution methods. A comprehensive and balanced implementation will require strong political will and collaboration across all sectors to make the policy successful.

CONCLUSION

Summarily, the national Policy on Arbitration and Alternative Dispute Resolution (ADR) is a significant step toward modernizing the country’s legal framework and improving dispute resolution processes. By promoting arbitration as the preferred method for resolving disputes and aligning with international standards, the policy aims to alleviate pressure on the judicial system, attract foreign investment, and foster economic growth. However, its success hinges on addressing key challenges, including enforcement, capacity building, and raising public awareness. A comprehensive and balanced approach, supported by strong governmental commitment, will be essential for realizing the policy’s full potential and positioning Nigeria as a regional leader in ADR.

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^[i] Paragraph 17 of the policy.

^[ii] Paragraph 6.0 of the policy

^[iii] Paragraph 7.0 of the policy

^[iv] Paragraphs 10.1 and 10.2 of the policy

^[v] Paragraph 12 of the policy

^[vi] Paragraph 13 of the policy.

^[vii] Paragraph 16.3 of the policy

^[viii] Paragraph 16 of the policy

^[ix] Paragraph 16.2 of the policy

Written by Toluwani Kalaro & Grace Eniyandunmo for The Trusted Advisors

Email us: info@cms.trustedadvisorslaw.com

Telephone Number: +234 810 159 9159