no appeal over arbitration

Arbitration is mandatory even where arbitration clause states that parties “may” arbitrate their dispute.

Sino-Afric Agricultural & Ind. Co. Ltd. v. Ministry of Finance Inc. [2014] 10 NWLR (Pt. 1416) 515 at 531-532, paras. E-A, per Orji-Abadua, JCA:

“It must be observed that one question that often arises before the court is, whether arbitration is mandatory where the arbitration provision merely provides that the parties ‘may’ arbitrate their dispute. In some international jurisdictions particularly the United States, their Federal Courts uniformly answered the question in the affirmative by finding that the presence of the term ‘may’ does not render an arbitration clause permissive. In Conex Florida Corp. v. Astrium Ltd. 499 F. Supp. 2d 1287 (M.D. Fla. 2007), the court reasoned that a contrary interpretation would render the arbitration provision illusory, as parties can always agree to arbitrate, even in the absence of a contractual provision and even if the word “may” did create an ambiguity in the arbitration provisions, meaning therefore, that any uncertainty would have to be resolved in favour of arbitration. In the U.S. Federal Case Law, the term “may” was interpreted to suggest that if a dispute arises, and one party elects to arbitrate, the arbitration will be mandatory. It has been widely held that arbitration clauses are to be given the broadest possible interpretation in order to promote the resolution of controversies outside of the Courts…”

Blogger’s Note:

In reaching the above unanimous decision, the learned Justice of the Court of Appeal in delivering the Leading Judgment made reference to several case law authorities (both local and foreign) and further concluded at page 533, paras. C-D of the report that “it is perceived that by any agreement containing an arbitration clause, it is an indication that the contract requires the parties to resolve their disputes through an arbitration process. Undoubtedly, arbitration is usually encouraged because arbitration clauses reduce the burden on court systems to resolve disputes. It is said that in keeping with the informality of the arbitration process, the law is generally keen to uphold the validity of arbitration clauses even when they lack the normal formal language associated with legal contracts.”
In addition to the sound reasoning of the Court in the above case, the Court was also of the view that if the parties do not intend recourse to arbitration to be mandatory, they should expressly clarify that point in the contract. The Court magnanimously suggested a draft which reads: “Any and all disputes, upon mutual agreement, may be arbitrated or with the consent of the other party, either party may commence arbitration.” See page 534, para. H of the report.

 We have seen several cases where parties prefer to file actions in court in spite of the existence of an arbitration clause. It was these cases that brought to light the principle of “taking steps”. This principle states that notwithstanding the existence of an arbitration clause, if a party decides to file an action in court and the other party, upon being served with the court processes, takes a step by filing its defence and other processes, then that party is deemed to have waived the right to insist on reference to arbitration. However, if the party simply files a memorandum of conditional appearance under protest, and an application for stay of proceedings as in the instant case of Sino-Afric, this would not amount to taking steps. See Section 5 of the Arbitration and Conciliation Act, 1988. See also K.S.U.D.B. v. Fanz Construction Ltd [1990] 4 NWLR (Pt. 142) 1. You may also read this article – Taking Steps Frustrates Arbitration in Nigeria. More so, it is important to note that the position of the law is that courts have jurisdiction to make restraining order of injunction in order to preserve the subject matter of an agreement whether or not it contains an arbitration clause. See Injunctions and Protective Orders; Commercial Arbitration in Nigeria.
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