ANALYSIS OF THE STRENGTHS AND WEAKNESSES OF ALTERNATIVE DISPUTE RESOLUTION (ADR) IN COMMERCIAL DISPUTES
ABSTRACT
The crux of this essay was to study the practice of Alternative Dispute Resolution in Commercial Disputes and examined different ADR mechanisms and their strength and weaknesses. The study examined the workability and reality of these advantages and the disadvantages too in the world of commerce with a view to making appropriate recommendations.
The research methodology adopted in this study is the library research method. The study relied on primary and secondary sources of information. The primary sources include foreign and Nigerian statutes such as the Arbitration and Conciliation Act, the United Nations Commission on International Trade Law, judicial decisions and international conventions such as, United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958 (the New York Convention). The secondary sources include textbooks, journals, articles and materials gotten from the internet.
This study found that the practice of Alternative Dispute Resolution in Commercial Disputes is increasing on the global platform and the Nigerian platform. This study also found that a perfect blend of ADR into the commercial world is necessary for effective dispute resolution. Although, ADR does come with its challenges, this study found that ADR is still a more viable alternative to commercial dispute resolution when considering the challenges of its counterpart – litigation.
The study concluded that both ADR and litigation must work concurrently as vehicles of dispute resolution in order to achieve both efficiency and effectiveness. This study further concluded that the features of each ADR mechanism are unique and that the choice of mechanism should be dependent on the specific nature of dispute and the aim of the parties concerned.
TABLE OF CONTENTS
CHAPTER ONE – 1.0. GENERAL INTRODUCTION
1.1 Background to the Study
1.2 Statement of Research Problem
1.3 Aim and Objectives of the Study
1.4 Research Methodology
1.5 Scope and Limitation of the Study
1.6 Structure of the Study
CHAPTER TWO – 2.0. COMMERCIAL DISPUTES AND MODES OF DISPUTE RESOLUTION
2.1 The Meaning and Scope of Commercial Disputes
2.2 Mode of Resolution of Commercial Disputes
2.2.1. Litigation
2.2.2. Alternative Dispute Resolution
2.3 Meaning of Alternative Dispute Resolution (ADR)
2.4 Forms of Alternative Dispute Resolution
2.4.1. Negotiation…
2.4.2. Conciliation…
2.4.3. Mediation…
2.4.4. Arbitration
2.4.5. Med-Arb…
2.4.6. Online Dispute Resolution…
2.4.7. Pre-trial Conference…
2.5 Comparison between ADR and Litigation
CHAPTER THREE – 3.0. ARBITRATION IN COMMERCIAL DISPUTES
3.1 Arbitration…
3.1.1 Definition of Arbitration…………
3.1.2 Features of Arbitration
3.1.3 Arbitration: Litigation or ADR1
3.1.4 Forms of Commercial Arbitration…
3.2 Arbitration of Commercial Disputes
3.2.1 Arbitration of Commercial Disputes under Common Law
3.2.2 Arbitration of Commercial Disputes under Modern Law
3.3 International Commercial Arbitration
3.3.1 Meaning of International Commercial Arbitration
3.3.2 Legal Framework for International Commercial Arbitration
3.3.3 The International Chamber of Commerce (ICC
3.4 Arbitration in Intellectual Property Disputes
3.4.1 Definition of Intellectual Propert
3.4.2 Arbitrability of IP Disputes
3.4.3 The WIPO Arbitration Rules
3.5 Advantages of Arbitration in Commercial Dispute Resolution
CHAPTER FOUR – 4.0. MEDIATION, CONCILIATION, NEGOTIATION AND ONLINE DISPUTE RESOLUTION IN COMMERCIAL DISPUTES
4.1 Mediation
4.1.1 Historical Background of Mediation
4.1.2 Meaning of Mediation
4.1.3 Features of Mediation
4.1.4 Types of Mediation
4.2 Mediation in Commercial Disputes
4.2.1 Legal Framework for Mediation in Commercial Disputes
4.2.2 Mediation of Commercial Disputes in Nigeria
4.3 Mediation in Construction Disputes
4.4 Conciliation of Commercial Disputes
4.4.1 Legal Framework for Conciliation of Commercial Disputes
4.4.2 Conciliation of Commercial Disputes in Nigeria
4.5 Negotiation of Commercial Disputes
4.6 Online Dispute Resolution (ODR)
4.6.1 Meaning of Online Dispute Resolution
4.6.2 Framework for Online Dispute Resolution
4.7 Advantages of Mediation, Online Dispute Resolution, Conciliation, Negotiation in Commercial Disputes
4.7.1 Advantages of Mediation in Commercial Disputes
4.7.2 Advantages of Online Dispute Resolution in Commercial Disputes
4.7.3 Advantages of Conciliation and Negotiation in Commercial
TABLE OF STATUTES
American Arbitration Association Construction Industry Mediation Rules, 1987.
Arbitration and Conciliation Act 1988, LFN 2004, CAP A18.
Constitution of the Federal Republic of Nigeria 1999, LFN 2004.
European Convention on international Commercial Arbitration, 1961.
High Court Law, Chapter H3, Laws of Lagos State, 2012.
The Washington Convention on the Settlement of Investment Disputes between States and Nationals of other States (ICSID Convention), 1965.
The World Intellectual Property Organisation (WIPO) Arbitration Rules, 2014.
United Nations Commission on International Trade Law, 2006.
United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Award, 1958.
TABLE OF CASES
Alhaji Abdullahi Atanda Kolawole v. Alhaji Salami Adisa Olori, 3PLR/2008/5 (CA) Baker (Nig) Ltd v Chevron (Nig) Ltd, (2000) 12 NWLR (Pt. 681) 393 at 406 CA Dunnett v Railtrack [2002] All ER 850.
Harkader v. Farrar Oil Co., 2005 WL 1252379 (Ky. App. 2005).
Hurst v Leeming [2002] EWHC 1051 (Ch).
Process and Industrial Developments Ltd -v- Nigeria [2019] EWHC 2241 (Comm). Scherk v. Alberto-Culver Co, 417 U.S. 506, 519 (1974)
Wiley & Sons v. Fuchs, 217 U.S.P.Q. (BNA) 741 (S.D.N.Y. 1981).
LIST OF ABBREVIATIONS
AAA – THE AMERICAN ARBITRATION ASSOCIATION ACA – ARBITRATION AND CONCILIATION ACT ADR – ALTERNATIVE DISPUTE RESOLUTION
ICC – INTERNATIONAL CHAMBER OF COMMERCE
ICSID – INERNATIONAL CENTRE FOR THE SETTLEMENT OF INVESTMENT DISPUTES
LCA – LAGOS COURT OF ARBITRATION
LCIA – LONDON COURT OF INTERNATIONAL ARBITRATION LFN – LAWS OF THE FEDERAL REPUBLIC OF NIGERIA LMDC – LAGOS STATE MULTI-DOOR COURT ODR – ONLINE DISPUTE RESOLUTION
OECD – ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT UNCITRAL – UNITED NATIONS COMMISSION ON INTERNATIONAL TRADE LAW UNCTAD – UNITED NATIIONS CONFERENCE ON TRADE AND DEVELOPMENT WIPO – WORLD INTELLECTUAL PROPERTY ORGANISATION
CHAPTER ONE
1.0. GENERAL INTRODUCTION
1.1. Background to the Study
The reality that disputes are inevitable passes one key message – that resolving disputes is necessary to make any progress in any human endeavour. The entire body of law as it exists today has the resolution of disputes as one of its primary purposes. Many types of disputes are prevalent today. There are disputes in business, in homes, between countries and governments, in academic areas and in religious centres. Disputes are a fact of life in business. Whether between buyers and sellers, manufacturers and suppliers, supervisors and employees, or business and government, conflict is inevitable when the interests of different parties collide. There’s no way to prevent conflict from arising. In fact, businesspeople often benefit from conflict, as it can result in energy, motivation, productivity, and creativity. The challenge lies in managing conflict so that it doesn’t impede progress, or worse, destroy the capacity to achieve business goals.1
So long as man exists with man, there is always going to be disputes which makes the existence of an efficient mechanism for resolving disputes necessary. For a long time, the legal system of most developed or developing countries in the world have paid attention to the Courts as the single mechanism for the settlement of disputes. Settling disputes in courts of justice has its advantages and that’s the reason why it has existed for a long time and still exists as the sure way to settle disputes between warring parties. However, there are a number of problems that exist with the court’s method of settling disputes through litigation. According to an article by
1 Colin Rule, Online Dispute Resolution for Business: B2B, e-Commerce, Consumer, Employment, Insurance, and Other Commercial Conflicts (1st ed, Jossey-Bass 2002).
the Harvard Business Review,2 research on litigation as a mechanism for settling disputes revealed that there are certain problems associated with it. For instance, litigation costs are as expensive as they get. U.S. corporations pay more than $20 billion a year to litigation attorneys—an alarming fact that distracts our attention from other and often more important business costs of litigating our disputes. Lawyers’ fees and other direct costs get the most attention because they are easy to measure. But the indirect business costs of litigation, the cost of diverting key personnel from productive activities, for example, or the cost of destroying a profitable relationship with a former business ally, are perhaps equally important. In other words, while litigation can be an effective means of settling disputes, it is not always the most preferred choice because it is expensive, has little chance of repairing a damaged relationship, it is highly technical and parties involved are not always carried along.
In the world of commerce, the stakes are higher when there’s a dispute. More often than not, the parties have a strong desire to settle disputes as fast and cheap as possible. What this means is that parties are less inclined to move with the traditional wave that is litigation. Therefore, alternatives were sought which led to the progress of Alternative Dispute Resolution (ADR) forms as a mechanism for settling disputes. Although the focus of this paper is largely going to be on commercial disputes, ADR as a mechanism for settling disputes is used in other matters such as family matters, labour issues and in rare cases, criminal matters.
For the purpose of this paper, the term ‘commercial’ is used in its general sense. The word ‘commercial’ is used here to cover all type of transactions involving trade, money, companies, corporations and business organisations. There are many types of commercial activities – tax, maritime, energy, sale of goods, international trade, intellectual property and many more. This
2 John R Allison, ‘Five Ways to Keep Disputes Out of Court’ [1990] Harvard Business Review <https://hbr.org/1990/01/five-ways-to-keep-disputes-out-of-court> accessed 21 January 2020.
paper will focus especially on some type of commercial activities and will also consider commercial activities generally too.
Alternative Dispute Resolution (ADR) offers a workable solution to the difficulties sometimes posed by litigation in the process of settling disputes. Alternative Dispute Resolution simply encompasses the modes of resolving disputes through other means outside litigation. The widespread use of ADR exists in these forms – arbitration, mediation, negotiation, conciliation, online dispute resolution, collaborative practice and early neutral evaluation.3 The good thing about ADR is its ability to give each party a sense of being right. People naturally dislike being told that they are wrong. This view is supported by some learned authors who maintain that while in any dispute, one party may be right and the other wrong, there could also be some element of right on each side; or one party may be morally right and another legally right; or genuine differences of perception or concepts may allow each to be right from different vantage points.4
Arbitration, mediation, online dispute resolution, negotiation and conciliation will be the primary focus of this paper as far as forms of ADR in the settlement of commercial disputes is concerned.
The prevalence of the use of ADR to settle commercial disputes arose because corporations and businessmen could no longer bear the protracted way of the court of law in settling disputes. In fact, modern commercial contracts now include provisions requiring that the parties first attempt to settle any dispute through a form of ADR rather than approach the courts in the first instance.
3 ‘Alternative Dispute Resolution’ (LII / Legal Information Institute) <https://www.law.cornell.edu/wex/alternative_dispute_resolution> accessed 22 January 2020.
4 Journal Committee, ‘Editorial Committee Vol.11’ (2013) 11 Health Prospect <http://nepjol.info/index.php/HPROSPECT/article/view/7471> accessed 22 January 2020.
There is no doubt that ADR as a mechanism for settling disputes works. It is as Arthur Mariott said in The Role of ADR in Settlement of Commercial Disputes; “If ADR is to be of any value, it must work”.5
In Nigeria, provision is made for the settlement of disputes using ADR methods in the Constitution6. There are also other Acts and rules guiding the application of ADR in Nigeria.
Summarily, this paper will explore the meaning and forms of ADR in subsequent chapters, give an overview of disputes generally and commercial disputes specifically. Additionally, specific commercial areas like intellectual property, international trade and construction will be considered in the following chapters.
1.2. Statement of the Research Problem
The idea of involving ADR in the settlement of commercial disputes is as progressive as an idea gets. However, the process is still evolving. There are certain weaknesses and strengths associated with using ADR in commercial disputes. For instance, certain forms of ADR are not binding on the parties involved which can then lead to parties ignoring the process of the dispute settlement in cases where they are not satisfied with the final results.
Furthermore, the term ‘ADR’ and ‘Commercial Disputes’ when considered separately are considerably wide in scope. Not every commercial dispute can be settled through one form of ADR. Therefore, it is important to highlight what type of commercial dispute should use a form of ADR in order to efficiently settle disputes.
5 Arthur Marriott, ‘The Role of ADR in the Settlement of Commercial Disputes’ (1994) 20.
6 s 19, Constitution of the Federal Republic of Nigeria, 1999.
By identifying the strengths and weaknesses of ADR has a disputes resolution mechanism in commercial matters and by evaluating the current application of ADR in various commercial issues, this paper would go some way in increasing the effectiveness of ADR in commercial disputes.
1.3. Aims and Objectives of this Study.
The aims and objectives of this study was to analyse the strengths and weaknesses (advantages and disadvantages) of Alternative Dispute Resolution in commercial disputes.
The specific objectives are to;
i.Examine the scope of commercial disputes and their modes of resolution;
ii. Examine the use of Arbitration in the resolution of commercial disputes;
iii. Examine the use of other ADR mechanisms – conciliation, negotiation, mediation, online dispute resolution, in the resolution of commercial disputes;
iv. Identify challenges inherent in the use of ADR in resolving commercial disputes.
1.4. Research Methodology
This study will rely on both primary and secondary sources of information. The primary source will include the Constitution of the Federal Republic of Nigeria 1999 LFN 2004 CAP 23 (as amended), Legislation such as the Arbitration and Conciliation Act 1988LFN 2004 CAP A18, International Conventions and Treaties such as the United Nations Convention (New York Convention) on the Recognition and Enforcement of Foreign Arbitral Award 1958 and Judicial
Decisions. The secondary source will include textbooks, journal articles, magazines, newspapers, institutional reports, workshop and conference papers, and the Internet.
Data obtained from these sources will be subject to content analysis.
1.5. Scope and Limitation of the Study
There are a number of ADR mechanisms that are practiced around the world. Some of these mechanisms are well established already, others are not. This study will be based on a restricted range of ADR mechanisms. The forms of ADR to be considered in this study are arbitration, negotiation, conciliation, mediation and online dispute resolution.
The types of disputes are as broad as disputes themselves. Nonetheless, this study is streamlined to studying ADR in the settlement of commercial disputes. What constitutes a commercial dispute is discussed in the next chapter.
As regards geographical locations, this study is not restricted to the practice of ADR in Nigeria. In considering ADR in commercial disputes, this study takes a more international perspective. However, since Nigeria is the place of writing, an analysis of ADR through the Nigerian practice is also discussed, albeit, selectively.
Finally, this study has made a selection of commercial disputes with high ADR involvement in them. These disputes include international commercial disputes, intellectual property disputes and construction disputes. Although, ADR is used in many other forms of commercial disputes, these few have been selected because of their international and national relevance.
1.6. Structure of the Study
This paper/study is in six chapters. The first chapter introduces the background to the study, research methodology, the objectives of the study among other things.
The second chapter is divided into five sections. These sections include material on the definition of commercial disputes adopted by this paper. It also defines the term ‘Alternative Dispute Resolution’, highlights the various types/forms/mechanisms of ADR and identifies the forms in focus.
The third chapter focuses on arbitration in commercial disputes and is divided into five sections. The sections in the third chapter cover areas on the general meaning of arbitration and arbitration in commercial disputes. It goes further to examine international commercial arbitration and arbitration in IP disputes – two relevant areas of arbitration. The chapter finally concludes on an analysis of the advantages of arbitration in commercial disputes.
The fourth chapter is dedicated towards mediation, negotiation, conciliation and online dispute resolution in commercial disputes. The sections cover as well as they can, the meaning of mediation and the practice of commercial mediation in Nigeria, negotiation in commercial disputes, conciliation and online dispute resolution in commercial disputes. Mediation in construction disputes is also discussed in this chapter.
The fifth chapter focuses on the identified challenges of ADR mechanisms in the settlement of commercial disputes.
The final chapter gives a summary of the central ideas mentioned throughout the study and a conclusion based on the other chapters. Recommendations are also briefly given at the end of the chapter.
