The When And How Of Arbitration In Commercial Transactions By 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 arbitration before 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
establishes a 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.

Mayowa Ogunsan is a Consultant and an Associate in the law
firm of Wiseview Legal Consultancy. Tel: 08165219729 E-mail:
[email protected]^[1]