By Oluwatoyin Bamidele Oni.
Introduction
The need for a mechanism which intensifies speedy resolution of Commercial disputes in business transactions arose following major industrial and political revolutions across the world in the twentieth century. This industrial and political revolution initiated a plethora of domestic and international commercial activities alongside corresponding disputes. The process of International Commercial Arbitration emanates primarily from the agreement of the parties. It is a procedure for the settlement of disputes where the parties are to be bound by the decision of one (or more) impartial person(s) of their choice known as Arbitrator(s) and whose decision(s) would have a final and binding effect on both parties.
Article 7 (1) of the United Nations Commission on International Trade Law[1] defines an “Arbitration Agreement” as an agreement by the parties to submit to arbitration all or certain disputes which have arisen, or which may arise between them in respect of a defined legal relationship, whether contractual or not.
The Collins English Dictionary[2] clearly defines an Arbitration as the “hearing and determination of a dispute by an impartial referee selected or agreed upon by the parties concerned”;
The award or decision made by an Arbitrator upon a disputed matter is known as an “arbitrament”.
An Arbitration Agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement executed by the parties. Irrespective of whatever form the Arbitration Agreement takes, there must be an Agreement to submit the dispute to arbitration.
It is noteworthy that in Commercial transactions, both written contracts and Oral contracts can be binding on the parties as they are both valid when the essential elements of a contract are present. However, Oral Arbitration Agreements cannot be said to be binding on the parties at least not in all Jurisdictions.
Oral Contracts
Oral Contracts are generally business contracts which are agreed upon mainly through spoken words or verbal communications. It is an express or implied agreement which plainly generates legal rights and obligations on the terms agreed by the parties, these terms are usually outlined and agreed to in spoken words.[3]
Oral Arbitration Agreement under The Arbitration and Conciliation Act of Nigeria.
At Common Law, an oral agreement is valid, binding and enforceable. However, when it comes within the purview of the Arbitration and Conciliation Act of Nigeria (Cap 19 1990), an Oral Arbitration Agreement is invalid. The Arbitration and Conciliation Act is applicable throughout the Federation of Nigeria except Lagos State which has enacted its own Arbitration Law known as The Lagos State Arbitration Law, 2009 (LSAL).[4] The Arbitration and Conciliation Act of Nigeria (Cap 19 1990) does not embody what constitutes an Arbitration Agreement but it identifies clearly the form of an Arbitration Agreement. The Act requires the agreement to be in writing, contained in a document signed by the parties or in an exchange of letters, telex, telegram or other means of communication which provide a record of the Arbitration Agreement or an exchange of points of claim and points of defense in which the existence of an Arbitration Agreement is alleged by one party and not denied by another.
Section 1 of the Arbitration and Conciliation Act provides that
1. (1) Every Arbitration Agreement shall be in writing, contained-
(a) in a document signed by the parties; or
(b) in an exchange of letters, telex, telegrams or other means of communication which provide a record
of the arbitration agreement; or
(c) in an exchange of points of claim and of defense in which the existence of an Arbitration Agreement is alleged by one party and denied by another.
(2) Any reference in a contract to a document containing an Arbitration clause constitutes an Arbitration
Agreement if such contract is in writing and the reference is such as to make that clause part of the contract.
Section 1 of the ACA provided above is to the effect that an Arbitration Agreement or an agreement to submit to Arbitration must be in writing,contained in a document signed by the parties, in letters, telex or telegrams exchanged by the parties, an exchange of points of clams and defence, or other means of communication which provides a record of the Arbitration Agreement in writing. Furthermore, except a contrary intention is expressed, an Arbitration Agreement under the ACA remains irrevocable except by agreement of parties or by leave of a court or a judge[5].
This provision of the Arbitration and Conciliation Act has received judicial notice in a Plethora of Cases. The Court of Appeal of Nigeria in C N ONUSELOGU ENT. LTD v. AFRIBANK (NIG) PLC[6], where the appellant who was an engineering contractor and customer of the respondent had a fixed deposit of N18 Million which was given to the respondent as a collateral to secure an over-draft of N5 Million but was later increased. When disagreement arose about the state of the appellant’s account, both parties willingly submitted the dispute to arbitration by a legal practitioner. The arbitrator awarded the sum of N7,893,408.34 in favour alongside 21% interest thereon from 1st September 1994 till the date of judgment and 5% interest from then until the judgment sum is liquidated. Being dissatisfied with this judgment, the appellant appealed to the Court of Appeal.The Court of Appealwhile commenting on the nature of Arbitral proceedings stated that;
“Arbitral proceedings should not be taken lightly by both counsel and the parties. They are recognized means of resolving disputes. It must be stressed, therefore, that there must be an agreement to arbitrate, which is a voluntary submission to Arbitration. In my humble view, there is no Arbitration Agreement contained in any clause to any document between the parties or in the exchange of letters tendered as exhibits “A – G2” in the Court below between the parties. These are the bundle of documents leading to the transaction which gave rise to this case now on appeal. I am yet to see any documented Arbitration Agreement between the parties to submit possible dispute to Arbitration. If so, the absence of this agreement to my mind, robs exhibit ‘E’ of the status of an arbitral award. Although under the common law, an oral agreement to submit present or future differences to arbitration may be valid and enforceable but Section 1(1) and (2) of the ACA[7] have clearly displaced this common law principle…”
From the foregoing, it is evident that even though an Oral Contract is binding on all Parties, when it comes to the realm of Arbitration under the Arbitration and Conciliation Act in Nigeria, an Oral Arbitration Agreement or an agreement to submit to Arbitration if or when made orally is illegal, null and invalid.
The existence of an Arbitration Agreement which must be in writing is essential under the Arbitration and Conciliation Act of Nigeria, as it indicates the parties’ consent to settle any dispute that arises from the transaction by Arbitration. The Arbitral proceedings mirror the expression and will of the parties and party autonomy is consciously guarded. Where the arbitration forms part of the original contract between the parties that has come to an end, the obligation to arbitrate survives and it is regarded as an independent obligation separable from the rest of the original contract. It is noteworthy that once the parties to Arbitration have given their consent to the process, it cannot be unilaterally withdrawn. This consent however must be in writing for it to be binding under the Arbitration and Conciliation Act of Nigeria.[8]
On the Flip side, the Nigerian Court has taken a step further in addressing the issue of Oral Arbitration agreement, while maintaining the position that an Oral Arbitration Agreement is void considering section 1 (1) b of the ACA. The Court of Appeal of Nigeria in DANGOTE FARMS LTD v. PLEXUX COTTON LTD[9] held succinctly that even though the Act provides that Arbitration Agreement should be in writing, an Arbitration Agreement which is concluded by oral acceptance of a written offer is sufficient, valid and enforceable under the Act. This decision of the Court of Appeal has put to rest the issue of validity with regards to an Arbitration Agreement concluded by oral acceptance of a written offer. This decision remains the position of the Law in Nigeria until it is overruled by the Supreme Court or the Court of Appeal overrules itself. While it is believed respectfully by some scholars that the Nigerian courts may have gone too far in interpreting section 1(1) b of the ACA and that Oral acceptance cannot provide a record of the Arbitration Agreement as required by the section,[10] I am of the independent opinion that both the offer and acceptance of an Arbitration Agreement need not be in writing in as much as there is an oral acceptance of an offer contained in a document, exchange of letters, telex, telegrams, exchange of points of claim and of defense or other means of communication which provide a record of the Arbitration, an oral acceptance of the written offer is sufficient for the validity of same.
ORAL ARBITRATION AGREEMENT UNDER THE UNCITRAL MODEL LAW ON INTERNATIONAL COMMERCIAL ARBITRATION 1985 (AS AMENDED IN 2006) AND THE NEW YORK CONVENTION (1958).[11]
Even though the UNCITRAL Model law and the New York Convention are both International enactments on Arbitration, they are distinct with regards to purpose of enactment. The UNCITRAL Model Law makes provision for all steps of International Commercial Arbitration proceedings as a soft law while the New York Convention regulates the recognition and enforceability of foreign arbitral awards. It is therefore safe to state that the intention of both enactments is to ensure compliance and encourage member states with respect to participation in International Arbitration proceedings.
The UNCITRAL Model Law
The UNCITRAL Model Law envelops the various stages of the Arbitration Agreement, the Arbitral process, the composition, jurisdiction of the Arbitral Tribunal and the degree of court intervention through to the recognition and enforcement of the Arbitral Award. The UNCITRAL Model Law was enacted to support countries in developing their laws on International Commercial Arbitration and to make it compatible with the various Domestic Laws[12]. While it is a soft law that only applies to countries that implement model law in their national legal regime, it is designed to assist States in reforming and modernizing their laws on Arbitral Procedure so as to take into account the particular features and needs of International Commercial Arbitration.[13]
The UNCITRAL[14] Model Law holds the same firm view that an Arbitration Agreement shall be in writing, Option 1, Article 7 (2)[15] states succinctly that for an Arbitration Agreement to be binding, “The Arbitration Agreement shall be in writing”. Article 7(3) further states that “An arbitration agreement is in writing if its content is recorded in any form, whether or not the arbitration agreement or contract has been concluded orally, by conduct, or by other means.
Suffice to say that the UNCITRAL Model Law remains unwavering on the condition that an Arbitration Agreement must be in writing. However, the meaning of “in writing” has been expanded in light of Article 7(3) to include any form of electronic communication in which the information contained therein is accessible so as to be useable for subsequent reference. I am of the independent view that an oral communication which is recorded electronically and accessible for subsequent reference is deemed to be a valid Arbitration Agreement and “in writing” under Article 7(2-5) of the UNCITRAL Model Law.
While the ACA 1990 prohibits Oral Arbitration Agreements, the UNCITRAL Model Law encourages Oral Arbitration Agreement in as much as it is recorded in any electronic communication and the content is accessible and useable. Furthermore, an Arbitration Agreement under the Model Law is deemed to be in writing if it is contained in an exchange of statements of claim and defense in which the existence of an agreement is alleged by one party and not denied by the other.
The New York Convention
The Convention on the Recognition and Enforcement of Foreign Arbitral Awards is commonly referred to as the “New York Arbitration Convention” or the “New York Convention”.[16] Article II the New York Convention[17] provides thus:
1. Each Contracting State shall recognize an agreement in writing under which the parties undertake to submit to arbitration all or any differences which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not, concerning a subject matter capable of settlement by arbitration.
2. The term “agreement in writing” shall include an arbitral clause in a contract or an arbitration agreement, signed by the parties or contained in an exchange of letters or telegrams.
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.
The New York Convention is applicable only to foreign or non-domestic arbitrations. It is an International Convention based on International Public Law which is directly applicable and binding between member states. The New York convention is a hard law regime which does not recognize Oral Commercial Arbitration.
Conclusively, it is trite law that an oral agreement is valid. However, an Oral Arbitration Agreement under the ACA of Nigeria is null and void with exception to circumstances where the offer is made in writing either as a document signed by the parties, in letters, telex or telegrams exchanged by the parties, an exchange of points of clams and defense, or other means of communication which provides a record of the Arbitration agreement and acceptance by the other party is communicated Orally, where the acceptance of an offer in an Arbitration Agreement is done orally, such Arbitration Agreement is valid and enforceable. This is not to say that an oral agreement can supersede a written agreement as the debate on the superiority of a written agreement over an oral agreement has been put to rest through several judgments including the case of Prime Industries Ltd. v. SEIL Ltd.[18] The contents of a Written Arbitration Agreement hold more weight than an Oral Arbitration Agreement. However, in the absence of a Written Arbitration Agreement, an Oral Arbitration Agreement in compliance with Article 7 of the UNCITRAL Model Law will suffice while a Written Arbitration Agreement which is accepted orally is also valid and subsisting in Nigeria. An Oral Arbitration Agreement, though valid and subsisting in some jurisdictions, does not hold more weight than a written arbitration agreement executed by the parties.[19]
Moreover, many countries have also ensured the enforceability of an Oral Arbitration Agreement. For instance, in the Swedish case of Profura v. Blomgren[20], the court in Sweden held that an Oral Arbitration Agreement is enforceable in Sweden.
The enforceability of Oral Arbitration Agreement is however not a license for parties to shun Written Arbitration Agreement as the terms of a Written Arbitration Agreement will most likely not be challenged since it is written and formally executed by both parties or it is written and accepted orally by the other party.[21]
[1] UNCITRAL Model Law on International Commercial Arbitration 1985 With amendments (as adopted in 2006)
[2] The Collins English Dictionary 7th Edition Page 72
[3] Okoi Nkanu, ‘Proving Oral Contracts Under Nigerian Law’ (Fred-Young & Evans, 3 March 2020) <https://www.mondaq.com/nigeria/contracts-and-commercial-law/899476/proving-oral-contracts-under-nigerian-law> acessed 1 June 2022
[4] STA Law Firm, ‘Overview: Arbitration Proceedings In Nigeria’ (13 June 2019) <https://www.mondaq.com/arbitration-dispute-resolution/814570/overview-arbitration-proceedings-in-nigeria> accessed 1 June 2022
[5] Arbitration and Conciliation Act off Nigeria (ACA) [1990]CAP 19, Section 2
[6] (2005) LPELR-11302(CA) Per SULEIMAN GALADIMA, JCA (Pp 4 – 6 Paras E – F)
[7] Arbitration and Conciliation Act [2004] LFN Cap 19
[8] Tinuade Oyekunle, Bayo Ojo: Handbook on arbitration and ADR Practice in Nigeria (LexisNexis 2018)
[9] (2018) LPELR-46581(CA). The Court in this matter relied on the decision in Zambia Steel and Building Supplies V. Clark and Earl (1986) 2 Lloyds Rep 225.” Per BIOBELE ABRAHAM GEORGEWILL, JCA (Pp 38 – 39 Paras F – D)
[10] Elvis E V B A R U O V B O K H A N R E Asia, ‘Enforceability of arbitration clauses in online agreements under the Nigerian law’ <https://www.academia.edu/40091408/Enforceability_of_arbitration_clauses_in_online_agreements_under_the_Nigerian_law>
[11] The New York Convention (The Convention on The Recognition And Enforcement Of Foreign Arbitration Awards (New York, 1958) (Appendix D)
[12] Av. Gürkan Deniz, ‘Arbitration Agreement Under Uncitral Model Law and New York Convention’ (22 March 2019)
http://deniz.legal/en/arbitration-agreement-under-uncitral-model-law-and-new-york-convention/#_ftn5 accessed 1 June 2022
[13] <https://uncitral.un.org accessed > accessed 1 June 2022
[14] The United Nations Commission on International Trade Law
[15] UNCITRAL Model Law on International Commercial Arbitration 1985 With amendments (as adopted in 2006)
[16] <https://www.newyorkconvention.org> accessed 1 June 2022
[17] The New York Convention (The Convention on The Recognition and Enforcement Of Foreign Arbitration Awards (New York, 1958)
[18] 2010
[19] Mother Boon Foods Pvt. Ltd. v. Mindscape One Marketing Pvt. Ltd. The respondent claimed that the parties had entered into an oral agreement regarding opting for arbitration for dispute resolution by demanding a three-member tribunal which was contrary to the Clause in the written agreement, the Indian Court ruled that an oral arbitration agreement cannot supersede a written arbitration agreement.
[20] (T 2863-07, Court of Appeals for Western Sweden), from 19 March 2008
[21] as is applicable in Nigeria.
