Courts lend teeth to CJN’s recent call for enforcing arbitration clauses in commercial contracts
In line with international best practices, arbitration clauses have become common fixtures of most contracts between parties and the intention, in most cases, is to provide a short circuit to issues resolution, avoiding lengthy litigation when matters arise that parties to an agreement dispute.
Recently, no other person than the Chief Justice Walter S. Nkanu Onnoghen (GCON), issued a strong statement encouraging not to entertain or hear matters where parties included arbitration clauses in their commercial contracts or agreements, but to refer such matters back to arbitration tribunals and use their courts’ time for other pressing cases before them. Citing the sacrosanct nature of arbitration clauses, the CJN pressed a huge reset button in the administration of commercial justice in Nigeria, especially as it affects the growth of commerce and investments in our economy.
The CJN’s exact words: “That no court shall entertain an action instituted to enforce a contract or claim damages arising from a breach thereof, in which the parties have, by consent, included an arbitration clause and without first ensuring that the clause is invoked and enforced. The courts must insist on enforcement of the arbitration clause by declining jurisdiction and award substantial costs against parties engaged in the practice.
“A party who institutes an action in court to enforce breach of contract containing an arbitration clause without first invoking the clause is himself in breach of the said contract, and ought not to be encouraged by the courts.”
Aside from being the CJN, the Honourable Justice Onnoghen is well positioned to appreciate the import of this practice on the Nigerian economy himself being a Fellow of Chartered Institute of Arbitrators. An institute whose work over the years have contributed in raising Nigeria’s profile as a country with a robust commercial arbitration system, the system having enabling laws (the Arbitration & Conciliation Act), having a national body of professionals in the Chartered Institute of Arbitrators in Nigeria, and having certified members as practitioners, many with long years of service, and the last component being the general acceptance and adoption of the arbitration clause in most contracts in Nigeria today.
The CJN’s position has been very positively received by a cross section of the local and international business community, and indeed the legal profession that represents them. Early signs indicate also that judges nationwide have started implementing the CJN’s directives on this matter.
The recent ruling in June 2017 by the Hon. Justice (Prof) Chuka Austine Obiozor of the Federal High Court, Lagos Division, in Spit ti,umber FHCjLjCSj1103j2016 ordering parties to return to arbitration is a fresh indication that indeed a new vista in the dispensation of commercial justice is now in place following the CJN’s directive.
In the matter before Hon. Justice Obiozor, a telecommunications company, a subsidiary of a group in Southern Africa, had instituted the matter urging the court to stop a private businessman, Mr. Oliver Nnona, from proceeding to arbitration in a dispute over professional fees due the latter from the firm. Parties had entered into a contract in 2015 with an arbitration clause which was triggered by the firm in 2015, and from available court filings and records, the firm acknowledged before justice Obiozor that it indeed retained the services of Mr. Nnona and that he did deliver on the contract as stated, but citing internal irregularities with her board and the firm’s management is now disputing the contract, opting not to participate in arbitration. The firm was asking the court to permanently bar Mr. Nnona from seeking redress through arbitration, on the ground that the contract was not valid and therefore the arbitration, argument therein was also not valid.
It is common knowledge today that well placed companies in Nigeria consider it best practice to enter into agreements with intent to default, even with arbitration clauses, choosing rather to delay and fight those clauses in court. And this is why prominent members of the organised private sector are worried at the rate at which corporate Nigeria now flout and disregard Arbitration as an alternative dispute resolution mechanism, especially for commercial disputes.
The firm’s case with Nnona is a stark demonstration of how convenient and pervasive it has become for organisations, foreign multi-nationals inclusive, to elect to deliberately avoid arbitration, or out rightly work to frustrate it. This writer has observed creative legal techniques applied to prolong indefinitely the resolution of otherwise simple commercial disputes, often to the disadvantage of businesses and professionals whose revenue and taxes power our economy.
From gross disregard to legally issued arbitration directives, including refusal to submit to a properly constituted arbitration tribunal, to some parties instituting multiple court processes, all in a bid to cause protracted delays.
The sheer number of cases in court that should ideally be in arbitration is alarming, especially where parties have consented ab initio to being governed by arbitration clauses in their contracts. Onnoghen’s position underscores the point that, if the judges don’t heed the CJN’s recent directive on arbitration, the courts can indeed sabotage our economy, even with all of our government’s best efforts. In the CJN’s own words, “No investor, whether domestic or international, would want his investment tied down in seeming endless litigation, hence the desire to employ the alternative, being arbitration,” he said.
This recent ruling by Hon. Justice Obiozor in the Nnona case should therefore become a template for other judges to follow and dispense with frivolous law suits brought by parties seeking to stop other parties in a contract they entered into from enforcing rights though alternative dispute resolution means. By addressing the judge directly, the CJN aimed the dart where the power of resolution lies, for indeed he could have just advised legal practitioners to desist from filing those frivolous court processes, often reaching to the Appeal Court, but in speaking directly to Judge, the CJN acknowledges that Judges themselves have a strategic role in upholding the sanctity of arbitration clauses in contracts by ruling swiftly to vacate any delay tactics, processes filed towards stopping or slowing arbitration.
• Ayodele is a public affairs analyst
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