Arbitrations and the Judicial process

The conventional notion of commercial arbitration is that it is a private forum established by parties, of their own accord, for the purpose of resolving a dispute which has arisen between them. The great advantage of arbitration is that it provides a more expeditious and flexible means of resolving disputes. Regrettably this advantage is being eroded by the judicialisation of arbitrations. The experience in many countries, particularly in Nigeria, is that arbitration matters which ought to take no more than a few months now last several years in court. Very many arbitration matters now end up at the Supreme Court, having passed through the High Court and Court of Appeal. This problem was recently highlighted in the case of A. SOVOIA LTD vs SONUBI (2000) 7SC Part 1 pg 36 where His Lordship M. E. OGUNDARE JSC remarked as follows: -

“It has always been thought that proceedings by way of arbitration is a quick way to resolution of disputes between contracting parties when compared with the tardy proceedings of a law court. This case appears to cast some doubt on the truism of this belief.”

The dispute in that case arose in 1984 over building contract. The matter was referred to arbitration and an Award was made in March 1985. An application was subsequently made to the High Court to set aside the Award and thereafter the matter reached the Supreme Court which eventually delivered judgment in July 2000. It is noteworthy that the Award by the arbitrator was made within a year while the case later spent another 15years in court.

This experience is not unique to Nigeria. England and some other common law countries have encountered similar problems in the past. This was once illustrated vividly by Lord Goddard in KYPRIAHOU vs CYPRUS TEXTILES LTD (1958) 2 Lloyds Report pg 60 at 63 in the following words.

“This is another very good illustration of what happens nowadays in arbitrations. The matter goes on appeal to the appeal committee of the Association; who reverse the arbitrator: it then goes to the judge who reverses the appeal committee: and it now gets to this court which reverses the judge. That is one of the beauties of and shows the ‘economy’ of going to arbitration”

In Nigeria, as in other countries, the wide latitude granted to the courts for reviewing awards either by way of application for judicial review or the appeal process has resulted in the judicialisation of the arbitrations. Several Law Commissions have been set up in other countries to look into the problem and they have recommended that the right of appeal or the grounds for judicial review be strictly limited to cases which raise points of law of exceptional importance.

In Nigeria the Arbitration and Conciliation Act was enacted in 1988 in order to modernize our law but regrettably the promulgation of the enactment has not resulted in any significant restrictions on the right of appeal in relation to arbitration matters.

The Act does not specifically provide for a right of appeal in arbitration matters, rather it grants to the parties the right to apply to court to set aside the award on grounds of misconduct of the arbitrator, or where the award or proceedings has been improperly procured. The award can also be set aside if it is beyond the scope of the submission. These matters are dealt with in Section 29(2) and 31 of the Act. The Act then goes on in Section 34 to provide that “A court shall not intervene in any matter governed by this Decree except where so provided in this Decree”.

It is doubtful if the provision of section 34 of the Act will have any significant effect in restricting the scope for judicial intervention in arbitrations. Interestingly enough the view has been expressed to the effect that the scope for judicial review of awards by Nigerian courts is quite narrow. The Learned authors of the book LAW AND PRACTICE OF ARBITRATION & CONCILIATION IN NIGERIA by J. Orojo & M. A. Ajomo have expressed the view, in page 275 of their book, that:

“It should be noted that in Nigeria there is no right of appeal to the court on an arbitration award. So it is well established that there is no power of judicial review by the court to control arbitral proceedings however gross the abuse either at common law or under the Decree”

It is submitted that the views of these eminent authors do not accurately reflect the scope for judicial intervention in arbitration matters in Nigeria. Whilst it is true that an appeal cannot arise directly from an award, the liberty which has however been granted to parties to apply for the setting aside of an award under section 29 (2) gives a sufficiently wide latitude for judicial review of arbitration awards, especially when one considers the very wide interpretation given to term “misconduct of an arbitrator”. Worse still the scope for judicial intervention has been broadened by the decision of the Supreme Court in THE AUTOMATIC TELEPHONE CO LTD vs THE FEDERAL MILITARY GOVT (1969) NMLR 241. In that case a dispute which arose between the parties was referred to arbitration. The arbitrator in the course of the proceedings before him referred two points of law to the High Court for its opinion under Section 15 of the Arbitration Act. One of the parties being dissatisfied with the opinion given by the High Court appealed to the Supreme Court. The full court held that the opinion of the High Court on a question of law referred to it was a ‘decision’ within the meaning of Section 117 of the 1963 Constitution and that that decision was final in so far as the High Court was concerned; therefore an appeal lay from it as of right. The result has been to give to parties to an arbitration a virtually unfettered right to challenge awards through appeals arising from the decisions of the High Court on applications to set aside Awards. These appeals then undergo the same process as all other appeals filed in Court.

In considering what changes to recommend, it is quite useful to examine the changes which have taken place in other common law Countries. In 1982, a Law Reform Commission of British Columbia in Canada examined the problem brought about by the judicialisation of the arbitrations and recommended that the scope for judicial intervention in arbitrations should be limited to appeals only in two situations; firstly, where a point of law of general or public importance arises and secondly where the determination of a point of law would prevent a miscarriage of justice. The commission also recommended that parties should be at liberty to exclude judicial review or appeals, provided the agreement is entered into after the commencement of the arbitration. The Dervaird Committee in Scotland has also recommended that the scope for judicial review of arbitration awards should be circumscribed and restricted. In its Report the Committee observed as follows:-

“……………..It seems to the Committee that access to the courts in relation to arbitral decisions is in this respect a novelty in Scots law, and not one which the relatively few cases yet reported on the matter suggest as being of significant benefit in relation to the Scots Law of Arbitration. Scots Law for a very long time has seen nothing contrary to public policy in the concept that people who are parties to a contract should be able to have their disputes determined privately and with finality without the intervention of the Courts”

In England, the solution has similarly been found in the restriction of the right to judicial review and a limited right of appeal. Since the passing of the Arbitration Act of 1979 the scope for appeal has been confined to questions of law alone and except both parties consent to the appeal, it can only be prosecuted with leave of court. Such leave will not be granted unless the question of law involved could substantially affect the right of one or more of the parties. The access to the English Court of Appeal is even more circumscribed. No appeal is allowed except the High Court grants leave and certifies that the question of law raised is either one of general public importance or the case is which the Court of Appeal considers should be entertained for some special reason. The decision of the Court of Appeal on the grant or refusal of leave is final.

Given the experience of these countries in tackling delays in the administration of Justice it now appears quite clear that we can no longer afford a system which grants unrestricted rights of appeal in arbitration matters. There is therefore a need to amend the Arbitration and Conciliation Act to provide for a limited right of appeal which will be available only in situations where a point of law of exceptional importance is involved. Arbitration matters ought not be subjected to the same judicial process as other routine cases. Allowance should also be made for the parties to an arbitration to exclude any form of judicial review by the courts. For arbitrations to become a more attractive means of resolving disputes in Nigeria matters ought to be concluded within a reasonable time frame.