If you’ve never heard of Alternative Dispute Resolution (ADR) before, please read our previous article. In this article, we will be focusing on the Arbitration agreement, and how to make sure yours is effective.
The arbitration agreement, signed by both parties in a contract, sets forth the limits of authority they are granting the arbitrator while presiding over their disputes. The arbitrator cannot act beyond this authority, however, if the parties agree, the authority may be expanded as they deem necessary.
Because the arbitration agreement essentially defines the limits of disputes that can be adjudicated upon, it is important to ensure an arbitration agreement is fit for intended purpose. If not, the agreement may be ineffective or inoperable. Please ensure therefore, that your arbitration agreements do the following:
1. Avoid End Date Limitations.
If a period is set, such as six months for an arbitration to conclude, the authority of the arbitral tribunal ceases at the end of that period – whether or not the arbitral award is ready. As such, it will no longer be able to serve its intended purpose because no tribunal can act outside authority, unless the parties consent to an extension.
2. Use a Permanent Appointing Authority.
If you choose to use an appointing authority to administer your arbitration, and it ceases to exist by the time your disputes arise, then your arbitration agreement becomes inoperable. To avoid this, choose a permanent authority/institution.
3. Give Authority to Settle Contract Validity
If the existence or validity of the underlying contract of your dispute is challenged by your opposition, the arbitral tribunal must be able to adjudicate on it to proceed. So ensure that the wording of your arbitration agreement gives them this authority.
4. Include Both Disputes and Claims
A party may argue that the arbitration agreement restricted the arbitral tribunal to dealing with DISPUTES. Therefore, the tribunal cannot handle CLAIMS. For good measure, please ensure both disputes and claims are stated in the arbitration agreement as matters for the tribunal to address.
It is nonetheless possible that there is a disagreement for which no financial claims are made.
5. Include the Governing Substantive & Procedural Laws
Time will be saved and decision making will be easier during arbitral proceedings if you choose and state the laws that will govern the substance of dispute and procedure of arbitration in your arbitration agreement.
The Lagos State Arbitration Law (2009), and the Lagos Court of Arbitration Law (2009) are good modern laws that meet international standards.
6. Selects a Convenient Location
Factor in cost of attendance and administration of proceedings when making your choice of location for your arbitration. You want to minimize these and reduce the overhead incurred. However, keep in mind that in choosing the place of arbitration, you also chose the mandatory laws that will govern your proceedings. Mandatory laws of the place of arbitration must always be respected.
7. Selects a Trained Arbitrator When Possible
All that is required of an arbitrator is independence and impartiality with respect to the parties and subjects concerned. However, to be sure of an enforceable award, please choose a trained arbitrator to preside over your disputes.
You may seek help from the Chartered Institute of Arbitrators or the Lagos Court of Arbitration, both at the International Center for Arbitration and ADR, No.1A, Remi Olowude Street,
2nd Roundabout, Lekki Phase 1 (atlantic side), Lekki-Epe Expressway, Lagos.
More information may be found online or requested of the author.
Draft Arbitration Clauses
For Ad-Hoc Arbitration:
Any dispute or difference arising out of or in connection with this
contract shall be determined by the appointment of a single Arbitrator
to be agreed between the Parties, or failing agreement within fourteen
days, after either Party has given to the other a written request to
concur in the appointment of an Arbitrator, by an Arbitrator to be
appointed by the Chairman or Vice Chairman of the Chartered Institute of
Arbitrators Nigeria Branch.
For Institutional Arbitration:
Any dispute arising out of or in connection with the interpretation of
the provisions of this Agreement or the performance of same, shall be
submitted to the Lagos Court of Arbitration and shall be resolved
under the Rules of the Lagos Court of Arbitration. The dispute
shall be resolved by a sole arbitrator, except as otherwise agreed by
the parties to be by a tribunal of three arbitrators. The appointment of
the Arbitrator(s) shall be in accordance with the said Rules, and the
Award/Decision of the arbitrator(s) shall be final and binding on the
parties. The seat of the arbitration shall be Lagos, Nigeria and
the language to be used in the arbitral proceedings shall
be English.”