“The practice of arbitration therefore, comes, so to speak, naturally to primitive bodies of law; and after courts have been established by the state and a recourse to them has become the natural method of settling disputes, the practice continues because the parties to a dispute want to settle them with less formality and expense than is involved in a recourse to the courts” [1]
In the rapidly evolving landscape of global commerce, the ability to resolve economic disputes efficiently and effectively is of paramount importance. Nigeria, as one of Africa’s largest economies, is no stranger to the complexities and challenges that come with commercial transactions. Traditional litigation, while necessary in certain instances has overtime proved to be time-consuming, expensive and adversarial, making it less suitable for the proactive and dynamic needs of modern business transactions. This article aims to outline the numerous benefits of resolving commercial disputes with Alternative Dispute Resolution (ADR) methods (for the purpose of this article, ADR methods include; Negotiation, Mediation, Arbitration and Conciliation) and emphasize the attendant importance of the increased use of ADR methods in maintaining business relationships, ensuring efficiency and ultimately promoting economic growth.
The Benefits of ADR Methods
All business transactions potentially involve disputes and a successful transaction must have a means of dispute resolution other than force. [2] This is where ADR methods come into play, offering an amicable approach to resolving commercial disputes. The attendant benefits if utilizing ADR methods include;
- Speed and Efficiency
One of the most significant advantages of ADR methods is the speed at which commercial disputes can be resolved. Unlike the traditional court system which is often burdened with a backlog of cases, ADR processes are designed to be swift. This is particularly beneficial in the commercial sector, where time is a critical factor. Businesses using ADR methods can resolve disputes quickly, minimizing disruptions to their operations and allowing them to focus on growing their business.
- Cost-Effectiveness
ADR methods are generally more cost-effective than traditional litigation. [3] In litigation, legal fees and court costs can quickly add up as well as the overwhelming potential for prolonged trials. ADR methods, on the other hand, tend to be more cost-effective making it an attractive option for resolving commercial disputes, especially for small and medium-sized enterprises (SMEs). For example, mediation and conciliation, in particular, are less formal and less expensive than litigation. Even arbitration, which is more formal, usually results in lower overall costs compared to a full court trial, as the process is generally faster and more focused. [4]
- Confidentiality
Commercial disputes often times involve sensitive information that parties may not want to be disclosed publicly. Litigation, being a public process, can expose business secrets, financial data, and other proprietary information. ADR methods offer a higher degree of confidentiality which encourages parties to be more open during the discussions and facilitates a more candid exploration of potential solutions [5]. This confidentiality is crucial for businesses that want to protect their reputation, invention and avoid negative publicity.
- Preservation of Business Relationships
Unlike litigation, which is inherently adversarial, ADR methods are more collaborative in nature. Mediation and conciliation, in particular, focus on finding a mutually acceptable solution that satisfies all parties involved. This approach helps to preserve and even strengthen business relationships, as it encourages cooperation and understanding rather than conflict. In a commercial context, maintaining good relationships can be just as important as resolving the dispute itself, especially in long-term partnerships. [6]
- Flexibility in Process and Solutions
ADR methods offer greater flexibility compared to the rigid procedures of litigation. Parties have more control over the process, including the selection of the mediator, arbitrator, or conciliator, and can tailor the proceedings to fit their specific needs. Additionally, ADR allows for creative solutions that may not be available through the court system. For instance, parties can agree on a settlement that includes non-monetary terms, such as changes in business practices or future commitments, which a court might not have the jurisdiction to impose.
- Enforceability of Awards
Arbitration, one of the most commonly used ADR methods in commercial disputes, has the added benefit of producing enforceable awards. Under the Arbitration and Conciliation Act, arbitral awards in Nigeria are recognized and enforceable by the courts, similar to a court judgment [7]. This enforceability extends internationally, as Nigeria is a signatory to the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, making it easier to enforce arbitral awards across borders [8].
- Reduction of Court Backlog
The Nigerian judiciary is often overwhelmed with a high volume of cases, leading to delays in the administration of justice. By resolving disputes through ADR, parties help reduce the burden on the court system, allowing the judiciary to focus on cases that truly require judicial intervention [9]. This contributes to a more efficient legal system overall, benefiting the entire country.
- Promoting a Culture of Dialogue and Cooperation
The increasing use of ADR in Nigeria fosters a culture of dialogue and cooperation within the business community. As more businesses turn to mediation, conciliation, and arbitration, there is a growing recognition of the value of resolving disputes amicably rather than through confrontation. This cultural shift is essential for the development of a more harmonious and productive business environment. [10]
Conclusion
Alternative Dispute Resolution methods offer numerous benefits for resolving commercial disputes in Nigeria. By providing a faster, more cost-effective, and flexible approach, ADR supports the needs of modern businesses and contributes to a more efficient and harmonious commercial environment. As Nigeria continues to grow as an economic powerhouse, the increased adoption and promotion of ADR methods will play a crucial role in ensuring that the country’s commercial landscape remains robust, dynamic and conducive to business growth.
REFERENCE
[1] Redfern & Hunter, “Law and Practice of International Commercial Arbitration, 2nd Ed. (1991), p.22
[2] Mustill, “History and Background” (1989) 6 Journal of International Arbitration, p.22
[3] https://www.linkedin.com/pulse/resolving-commercial-disputes-nigeria-exploring-dispute-oyebo/
[4] ibid 3
[6] https://www.willans.co.uk/knowledge/preserving-commercial-relationships-an-advantage-of-mediation/
[7] Section 57(1) of the Arbitration and Mediation Act (AMA), 2023
[8] Section 60 of AMA 2023
[9] https://pdf.usaid.gov/pdf_docs/PNACB895.pdf
[10] https://www.theverge.com/2018/6/27/17510908/apple-samsung-settle-patent-battle-over-copying-iphone