1. Introduction:
Arbitration Clauses in Commercial Contracts have become a generally acceptable practice. Unfortunately, Parties have been known to disregard Arbitration Clauses and swiftly resort to the traditional court system to enforce the terms and provisions of such contracts or the resolution of any dispute
arising from the contract. This Article seeks to probe the rationale behind the inclusion of Arbitration Clause in a Contract and the position of Nigerian Courts to the inclusion and the validity of Arbitration Clauses in Commercial Contracts.
2. What is an Arbitration Clause?:
An arbitration Clause is a written consensus embodying the Agreement of parties to resort to Arbitration should any dispute arise with regards to the obligations which both parties have undertaken to observe.
; it provides for compulsory arbitration in case of dispute as to rights and liabilities under such contract. This presupposes that Arbitration is the first procedure which the Parties to that Contract intend to adopt in settling their grievances.
3. Does an Arbitration Clause Oust the Jurisdiction of the Court?:
No, the
jurisdiction of courts is statutory and not a matter of consent of parties, an Arbitration
Clause therefore only seeks to temporarily suspend the intervention of the Court
while parties seek other means of dispute resolution as agreed by them.
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4. Nigerian Courts and Arbitration Clauses:
Being a clause embedded in a contract between parties, the Court would ordinarily uphold an Arbitration Clause as contained in the agreement of parties; it is settled law that parties are bound by
the terms of their contracts and the Court would as much as possible uphold and
enforce the terms of the contract and not allow parties renege on their undertakings.
5. Arbitration:
Whether a Must for Every Contractual Agreement: The Courts have declared that arbitration is merely procedural for ascertaining the rights of parties with nothing in it to exclude a right of action on the contract itself, it merely allows the party against whom an action may be brought to apply to the court to stay proceedings in the action in order that the parties may resort to the procedure
which they agreed on. In essence, parties are not obligated to insert an Arbitration
Clause in their Contracts. A contract is therefore neither void nor voidable merely on
the ground that it does not contain an Arbitration Clause. No Court can lawfully
nullify a contract because it does not contain Arbitration Clause.
6. Is an Arbitral Award Absolute?
The disposition of the Nigerian Court is to
intervene with caution and within strict guidelines in the review of an Arbitral Award;
if at all. It is settled Law that an Applicant cannot ordinarily be heard complaining
against the findings of the Arbitral Tribunal which on the face of it is good8 but in
cases where there are allegations that the award is a result of corruption or that the
Arbitrator is guilty of misconduct, the Courts in these instances have handed out the
indices upon which it may be said that an Arbitrator misconducted himself, thereby
necessitating the setting aside of any award to wit:
a) An error of law on the face of an arbitral award: This means that one can find
in the Award or a document actually incorporated therein, some legal
proposition which is the basis of the award and which can be said to be
erroneous. Thus, where it is impossible to say, from what is shown on the face
of the award, what mistake, if any, the Arbitrator has made, or that the
Arbitrator has tied himself down, on the face of his award, to some special
legal proposition which is unusual, the award will not be disturbed.10
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b) Even when there is an error of law on the face of the Arbitral Award, the party
seeking to set aside the award on such ground must show that the question(s)
of law were not the ones specifically submitted to the Tribunal for
determination but were unilaterally raised and determined by the Arbitral
Tribunal. “… and where the question referred for arbitration is a question of
construction, which is, generally speaking, a question of law, the arbitrator’s
decision cannot be set aside only because the court would itself have come
to a different conclusion; but if it appears on the face of the award that the
arbitrator has proceeded illegally, for instance, by deciding on evidence
which was not admissible, or on principles or construction which the law does not countenance, there is error in law which may be ground for setting aside
the award. But the court is not entitled to draw any inference as to the finding
by the arbitrator of facts supporting the award; it must take the award at its
face value.
7. Conclusion:
This Article seeks to show that Nigerian Courts have great regard
for the Arbitral agreement of Parties and would rarely intervene in reviewing a good
Arbitral Award. While Parties often chose Arbitration because it’s faster and devoid
of technicalities, Parties should be willing to be bound by the decision of the
Arbitration as same was what they agreed to when they signed the Contract with
the Arbitration Clause. Otherwise, since Arbitration Clauses are not compulsory in a
Commercial Contract, Parties may choose to omit it from their contracts.