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The When and How of Arbitration in Commercial Transactions – Mayowa Ogunsan

Introduction

Contracts and agreements between parties to a transaction are the basis of enforcement for every business relationship/transaction. Every contract must therefore contain such clauses as are necessary towards ensuring the smooth and effective implementation of the intention of parties.

Practice has however shown that no matter how clear the intentions of parties are dispute sometimes arise when carrying out such intentions. Practitioners therefore observed adopting the traditional method of resolving disputes in respect to commercial arrangements could forestall the essence of entering into such contract, thus the need to devise an alternative method to resolving dispute.

In the light of this, an Arbitration Clause became an essential feature imbedded in every agreement entered into by parties to a transaction. This dispute resolution mechanism has overtime been adjudged the best alternative to dispute resolution. The rationale behind this presumption is that it is fast, cost effective and party driven.

This article therefore seeks to look into the when and how of arbitration while using the Lagos Chamber of Commerce International Arbitration Centre (LACIAC) Rules as a guide.

WHEN CAN I ARBITRATE

Arbitration is an option open to parties in the event dispute arises from a contractual obligation. Where an agreement provides for arbitration, any of the parties to the agreement can initiate an arbitral proceeding in accordance with the Arbitration Clause.

It is therefore essential that an Arbitration Clause in an agreement contains terms essential for effective and effectual proceedings. Some of the essential terms parties must include in the clause are:

1. Time within which dispute may be subject to arbitration
2. Arbitration rule to apply
3. Place of arbitration
4. Numbers of arbitrators
5. The language to be used in the arbitral proceedings

In the event a dispute arise and an agreement does not contain an Arbitration Clause, parties to the agreement may agree to first subject the dispute to arbitrationbefore proceeding to court in other to resolve the dispute amicable amongst themselves.

HOW CAN I ARBITRATE

Although arbitration is used broadly to describe a method of alternative dispute resolution, arbitrations themselves can take many forms. Depending on the Arbitration Rule parties adopt while executing the agreement, the Rules governs how the arbitral proceedings is initiated.

For the purpose of this discuss, we shall be looking into the Lagos Chamber of Commerce International Arbitration Centre (LACIAC) Rules of Lagos State.

Where parties agreed that disputes between them in respect of a defined legal relationship, whether contractual or not, shall be referred to arbitration under the LACIAC Rules, as administered by LACIAC (or “the Centre”), then such disputes shall be settled in accordance with the LACIAC Rules, as amended from time to time, subject to such modifications as the parties may agree.

Proceedings

Proceedings are initiated where a party or parties (hereinafter called the “claimant”) communicate to the LACIAC Secretariat and the other party or parties (hereinafter called the “respondent”) a notice of arbitration. Where such communication has been made, the Respondent must within 30 days respond to the information as contained in the notice.

Numbers of Arbitrators

If the parties have not previously agreed on the number of arbitrators, and if within 30 days after the receipt by the respondent of the notice of arbitration the parties have not agreed that there shall be only one arbitrator, three arbitrators shall be appointed. Note that where parties agree to the number of Arbitrator, the LACIAC shall be the appointing authority. However, in appointing an arbitrator, the LACIAC shall gather a list of three (3) Arbitrators within which parties shall be allowed to choose from.

Registration

Upon filing the notice of arbitration, the claimant is mandated by law to pay a registration fee amounting to US$250 (two hundred and fifty US dollars). The same amount is also required to be paid by the Respondent upon filing a counterclaim, or upon the filing of a notice of arbitration against any other party to the arbitration agreement. If the registration fee is not paid upon filing the notice of arbitration or the counterclaim, the LACIAC Secretariat will not register the notice of arbitration request or the counter claim, but without prejudice to the right of the claimant and/or respondent to submit the same claims at a later date in another notice of arbitration or counterclaim.

Administrative Expenses

The administrative expenses of the LACIAC Court are determined based on the sum in dispute. The sum in dispute is determined by be the aggregate value of all claims counterclaims and set-offs. Where the sum in dispute cannot be ascertained, the LACIAC Court determines the administrative expenses taking all relevant circumstances into account.

Fees and Expenses of Arbitrators

The arbitrators’ fees are determined based on the sum in dispute. The sum in dispute is determined by the aggregate value of all claims, counterclaims and set-offs. Where the sum in dispute cannot be ascertained, the arbitral tribunal, in its discretion, determine its fees taking all relevant circumstances into account.

The Rule provides that the fees so determined must be reasonable in amount, taking into account the complexity of the subject matter, the time expected to be spent by the arbitrators and any other relevant circumstances of the case.

Please note that any fee charged may either be negotiated with the arbitrator or challenged at the LACIAC Court within 15 days

Arbitration Proceedings

As soon as practicable after its constitution and after inviting the parties to express their views, the arbitral tribunal establishesa provisional timetable of the arbitration. By the provision of the Rules, parties are to fill all their pleadings within 45 days that is, Statement of Claim, Statement of Defence, Amendments and other processes that might be needed in furtherance to the arbitral proceedings

Decisions/Award

The decision is made by a majority of the arbitrators where there is more than one arbitrator.

MayowaOgunsan is a Consultant and an Associate in the law firm of Wiseview Legal Consultancy. Tel: 08165219729 E-mail: m.ogunsan@wiseviewlegal.com

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