Unit 1 Flashcards
What are the differences between litigation and arbitration
- While litigation is a public mechanism established by the State for the resolution of disputes, arbitration is generally a private mechanism agreed to by the parties.
- In litigation, the defendant’s consent is not required before a suit may be instituted against him. But in arbitration (unless where it is mandatory arbitration), the consent of the respondent is required before arbitration matter can be instituted.
- Whereas the State determines how litigation is conducted, the conduct of arbitration (subject to the few mandatory provisions of the law) is based on party autonomy.
- Whereas the rules of evidence are strictly applied in litigation, the arbitrator is not mandated to follow them. The arbitrator’s mandate is to conduct the arbitral proceedings in a fair and impartial manner and not to follow any particular rules of evidence.
- Whereas in litigation there is an appellate system in place, in Nigeria and many other jurisdictions, the award of the arbitrator is final and not appealable.
What is the origin of Arbitration
The origin of arbitration may be discussed from two perspectives. The first perspective deals with its origin as an ancient practice. The second perspective deals with the origin of its modern practice. While the ancient practice of arbitration predates litigation as discussed above, the modern day practice of arbitration was a result of a search for alternatives to litigation, which had become time-consuming, inefficient and costly. The modern practice of arbitration was also necessitated by its amenability to resolving cross-border disputes.
What is the ancient practice of arbitration
Long before the development of litigation men restored to litigation to resolve dispute. Earliest form of dispute resolution. From the time of Solomon listening to the two mothers. For example the Arabic word for arbitration is Tahkeem and the arbitrator (Hakam) and in case of Persian language an arbitrator is called Salis.
The Origin of Modern day Arbitration practice
The Origin of Modern day arbitration may be divided into
1. The origin of modern- day domestic arbitration
2. The growth of international commercial arbitration
3. The development of international investment arbitration
The origin of modern- day domestic arbitration
At this time in the development of arbitration, there was very little of what could be called international commercial arbitration. It did not matter that the dispute happened to include a foreigner as one of the parties; the arbitration remained a domestic arbitration. Domestic law was applied, both as to the procedure and, more importantly, to the substance of the dispute as well. That was most striking in the case of England until the 1979 Arbitration Act. There was considerable arbitration in London involving international trade, shipping and insurance. The parties were often non-English. In fact, it often happened that neither party was English. Nevertheless, the arbitration proceeded as a strictly national arbitration with English procedural and substantive law applied.
Growth of international commercial Arbitration
In the early 1920s, international commercial arbitration faced two main challenges:
Validity of agreements to arbitrate: In many countries, agreements to arbitrate future disputes were not enforceable.
Enforcement of foreign arbitral awards: There was no international system for enforcing awards from other countries.
The League of Nations addressed these issues with two key agreements:
1923 Geneva Protocol on Arbitration Clauses: Established the validity of agreements to arbitrate future international commercial disputes.
1927 Geneva Convention for the Execution of Foreign Arbitral Awards: Required contracting states to enforce awards made in other contracting states.
These agreements were successful, but the requirement for double exequatur (recognition in two countries) in the 1927 Convention limited its usefulness.
The United Nations addressed this with the:
1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards: Simplified enforcement by requiring courts to enforce awards unless specific exceptions apply.
Since then, other agreements like the UNCITRAL Model Law have further strengthened international commercial arbitration by promoting party autonomy and providing a framework for ad hoc arbitration.
Customary Arbitration
The practice of disputes settlement using the process of arbitration is as old as the existence of the African societies. For instance, arbitration had existed in the various indigenous communities in Nigeria long before the advent of the British legal system of court litigation into the country. It was part of the customary norms of Nigerian society; before the colonial era, customary law operated freely in its areas of influence as a complete and independent legal system. There was also in existence a separate, independent and organised dispute resolution system based on the individual customary law of each community; this system of dispute resolution is generally referred to as customary arbitration and customary arbitration tribunals constituted by elders of that community administer it. The tribunals derive their authority from the custom and tradition of the community, which are accepted by members as binding on them. Finally, customary arbitration is also recognised under Nigerian law as a valid dispute resolution mechanism and its outcome can be enforced as a judgment of the customary court.
There are judicial authorities that validate the fact that before the advent of colonialism in Nigeria, there were operational systems of law in the various autonomous territories that now constitute the entity known as Nigeria. Arbitration featured in these legal systems and was governed by the customs prevalent in the various territories (Okpuruwa v Ekpokam
[1988], Odonigi v Oyeleke [2001]
Development of International Investment Arbitration
Traditionally, foreign investors relied on their home government’s diplomatic protection for disputes with the host country. This system had drawbacks:
No guaranteed protection for investors.
Disputes became inter-government issues, straining relations.
Investors had no direct voice in international tribunals.
The World Bank’s 1965 Washington Convention offered an alternative for resolving investment disputes.
