Introduction:
The UNCITRAL Model Law, Article 7(1), provides a comprehensive definition of an arbitration agreement. The model law defines an arbitration agreement as “an agreement by the parties to submit to arbitration all or certain dispute which have arisen or which may arise between them in respect of a defined legal relationship, whether contractual or not.” It is pertinent to mention that this agreement can manifest as an arbitration clause within a contract or as a separate, standalone agreement.
Arbitration agreements serve as the backbone of dispute resolution mechanisms in contractual relationships. Embedded within contracts, these agreements define the process by which parties resolve disputes outside of traditional litigation.
Key Characteristics of Arbitration Agreements:
1. Binding and Enforceable: Section 1(3) of the Arbitration and Mediation Act (AMA) 2023 establishes the binding nature of arbitration agreements. Such agreements are enforceable against each party exclusively, barring any alternative dispute resolution methods unless specified otherwise or deemed void.
2. Form and Structure: Arbitration agreements may exist as integral components of existing contracts or as distinct, independent agreements, as articulated in Section 2 of the AMA 2023. Their formality demands adherence to written documentation, irrespective of the agreement’s initial formation method.
3. Written Requirement: The AMA 2023 mandates that arbitration agreements must be in writing, encompassing any recorded content, regardless of whether the agreement was orally concluded, based on conduct, or established through alternative means. (Section 2(3) of the Arbitration and Mediation Act 2023)
Legal Precedence and Enforcement:
The principle of “pacta sunt servanda[1],” or agreements must be kept, underpins the sanctity of arbitration agreements within contractual relationships. The Nigerian Court of Appeal’s ruling in Celtel Nigeria BV v. Econnect wireless ltd & ors (2014) underscores the significance of arbitration clauses as distinct entities within contracts. It emphasizes the enforcement of arbitration clauses and the need for judicial intervention when breaches occur.
“An arbitration clause in a written contract is quite distinct from the other clauses. whereas the other clauses in a written contract set out obligations which the parties undertake towards each other, the arbitration clause merely embodies the agreement of both parties that if any dispute should occur with regard to the obligations which the other party has undertaken to the other, such dispute should be settled by a tribunal of their own constitution and choice[2]. The appropriate remedy therefore for a breach of a submission is not damages but its enforcement. So where a party refuses within a given time after due notice to have an arbitrator appointed, the court has full power and jurisdiction to appoint an arbitrator on an application properly made by the party who has served such notice”.
Practical Implementation:
Arbitration clauses are prevalent in contracts, dictating the resolution of disputes through arbitration. Parties may establish pre-dispute arbitration clauses before conflicts arise or post-dispute clauses to resolve ongoing disputes. The choice of self-administration or institutional administration, such as through the Nigerian Institute of Chartered Arbitrators (NICArb), ensures professionalism and clarity in the arbitration process.
Nigerian Institute of Chartered Arbitrators (NICArb) Model Arbitration Clause:
NICArb offers a comprehensive arbitration clause that encompasses all essential elements necessary for a valid arbitration agreement. The Institute provides two distinct resources tailored to varying circumstances:
1. A model clause specifically crafted for inclusion in contracts reads as follows:
“Any dispute, controversy, or claim arising out of or relating to this contract, including any question regarding its breach, validity, or termination, shall be referred to and finally resolved by arbitration under NICArb’s Arbitration and Alternative Dispute Resolution Centre Arbitration Rules of the Nigerian Institute of Chartered Arbitrators. These Rules are deemed to be incorporated by reference to this clause. The number of arbitrators shall be determined as (one or three), to be appointed by the institute. The place of arbitration shall be (city and country). The language to be used in the arbitral proceeding shall be (insert language). The governing law of the contract shall be the substantive law of (insert jurisdiction).”
2. Additionally, a template is available for situations where a dispute has already arisen, and parties elect to pursue arbitration despite the absence of arbitration provisions in their original contract terms:
“A dispute having arisen between the parties concerning (insert the nature of the dispute), the parties hereby agree that the matter shall be referred to and finally resolved by arbitration under NICArb’s Arbitration and Alternative Dispute Resolution Centre Arbitration Rules or Arbitration Rules of the Nigerian Institute of Chartered Arbitrators. The number of arbitrators shall be determined as (one or three), to be appointed by the institute. The place of arbitration shall be (city and country). The language to be used in the arbitral proceeding shall be (insert language). The governing law of the contract shall be the substantive law of (insert jurisdiction).”
Conclusion:
Arbitration agreements are pivotal in contractual relationships, delineating the path to dispute resolution outside traditional litigation channels. Parties must meticulously craft arbitration agreements to outline the scope of disputes and ensure adherence to arbitration as the preferred dispute resolution mechanism.
[1] a Latin phrase which means “agreement must be kept”
[2] Bryan Walker, ‘The anatomy of an arbitration agreement’ (published in November 2022) https://www.nortonrosefullbrighr.com > accessed 13th February 2024
