Making Arbitration Clauses Work: Practical Steps And Key Considerations Under Nigeria's Arbitration Framework

1. Introduction

Arbitration continues to be a preferred dispute-resolution mechanism for commercial parties seeking confidentiality, speed, and procedural autonomy. With the enactment of the Arbitration and Mediation Act 2023 (“AMA”), Nigeria has modernised its arbitral framework, aligning domestic practice with international standards.

Understanding how to give effect to an arbitration clause under the AMA is essential to managing commercial and legal risk. In practice, enforcement can arise in a range of situations from resisting court proceedings to ensuring that an arbitral award is ultimately recognised. This article explores the key stages of enforcement under the AMA, explains the procedural framework that supports it, and outlines practical considerations that contracting parties should bear in mind when negotiating or invoking arbitration clauses.

2. The Legislative Context

Prior to the AMA, arbitration in Nigeria was governed by the Arbitration and Conciliation Act 1988 (“ACA”). While the ACA served as a foundational statute, its provisions no longer reflected global best practice. The AMA, which repeals the ACA, introduces several significant innovations:

Mandatory referral to arbitration: Courts are now required to refer disputes to arbitration where a valid arbitration agreement exists, save where the agreement is void, inoperative, or incapable of being performed.¹

Recognition of emergency arbitrators and interim measures: the AMA enable urgent relief before a full tribunal is constituted.²

The Award Review Tribunal (ART): An optional mechanism allowing limited review of arbitral awards if parties have so agreed.³

Revised enforcement provisions: The AMA consolidates the recognition and enforcement of both domestic and foreign awards, implementing the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958) (“NYC”).⁴

These developments collectively strengthen the credibility and enforceability of arbitration in Nigeria and enhance the attractiveness of Nigeria as an arbitral seat.

3. When Enforcement Arises

In practice, the enforcement of an arbitration clause typically arises in two scenarios:

3.1 Stay or referral of court proceedings
Where one party commences litigation despite an arbitration clause, the other party may apply for a stay to halt the proceeding and apply for a referral to arbitration. Under AMA, the court shall refer the matter to arbitration unless the arbitration agreement is void, inoperative, or incapable of performance.⁵

3.2 Initiation of arbitration proceedings
Where a dispute arises and the counter-party declines to participate in arbitration, the initiating party may rely on the clause to commence proceedings in accordance with the agreed institutional or ad hoc rules, and the tribunal may proceed ex parte where notice has been properly served.

4. Enforcing the Clause: Procedural Overview

Step 1: Confirmation of the existence and validity of the arbitration clause

Before seeking to enforce an arbitration agreement, it is important to confirm that a valid and binding clause actually exists between the parties. The AMA requires that an arbitration agreement be in writing, whether contained in a contract, an exchange of correspondence, or any record that evidences the parties' consent.⁶ This written formality ensures clarity and reduces disputes about whether the parties intended to arbitrate.

Equally significant is the principle of separability, codified in the AMA. Under this rule, an arbitration clause is treated as legally distinct from the main contract in which it appears.⁷ This means that even if the substantive contract is alleged to be invalid, rescinded, or terminated, the arbitration clause may survive and continue to bind the parties. In practice, separability preserves the tribunal's jurisdiction and prevents parties from evading arbitration simply by challenging the underlying contract.

Step 2: Assessing timing and scope

Before invoking an arbitration clause, it is important to ensure that the dispute in question actually falls within the scope of the clause. The tribunal's jurisdiction is derived solely from the parties' agreement, and any claim that lies outside its terms may not be referable to arbitration. Parties should therefore review the wording of the clause carefully, particularly where it distinguishes between contractual and non-contractual claims or limits arbitration to specified issues.

Step 3: Application for stay or referral to arbitration

Where court proceedings have been commenced in breach of an arbitration agreement, the proper course is to apply for a stay of proceedings and a referral to arbitration. The application must be made in writing before the appropriate High Court and supported by evidence of the underlying contract and the arbitration clause.

Under section 5 of the AMA, once the court is satisfied that a valid and operative arbitration agreement exists, it is obliged to stay the proceedings and refer the dispute to arbitration. The court's discretion in this regard is limited, it cannot inquire into the merits of the dispute but may only determine whether the arbitration agreement is void, inoperative, or incapable of being performed.

Step 4: Commence or respond to arbitration

Once the court has referred the matter to arbitration or where no court proceedings have been initiated a party may proceed to commence arbitration in accordance with the procedure agreed in the contract or under the applicable institutional rules. Where the agreement is silent, the AMA provides a default mechanism, presuming the appointment of a sole arbitrator under unless the parties agree otherwise.⁸

Upon constitution, the arbitral tribunal acquires jurisdiction to determine all matters submitted to it, including any challenge to its own competence. This reflects the principle of competence-competence, which empowers the tribunal to rule on its own jurisdiction, including any objection to the existence or validity of the arbitration agreement.⁹

In practical terms, this step underscores the importance of timely participation. A party served with a notice of arbitration should engage promptly either by appointing its arbitrator or responding to the notice to ensure that its procedural and jurisdictional rights are preserved under the AMA framework

Step 5: Enforcement of the arbitral award

At the conclusion of the arbitration, the resulting award is final and binding on the parties. An arbitral award may be recognised and enforced by the court in the same manner as a judgment of that court.¹⁰ This provision ensures that arbitration outcomes carry the same legal weight as judicial decisions, thereby giving practical effect to party autonomy.

For foreign arbitral awards, the AMA adopts and codifies the New York Convention (1958) framework, providing for recognition and enforcement in Nigeria, subject only to the limited grounds for refusal under the Convention such as incapacity, invalidity of the arbitration agreement, lack of proper notice, or contravention of public policy.¹¹

5. Recommended Best Practices under the AMA

In light of the statutory changes introduced by the AMA, the following recommendations represent widely recognised best practices in the drafting and enforcement of arbitration clauses:

5.1 Clarity of drafting
Arbitration clauses should be precise, identifying the seat, applicable procedural rules, number of arbitrators, and language. A well-defined clause reduces the likelihood of preliminary disputes over jurisdiction.

5.2 Timely invocation of arbitration
Where court proceedings are commenced, early reliance on the arbitration clause ensures compliance with section 5 of AMA and maintains procedural efficiency.

5.3 Consideration of the arbitral seat
The seat determines the procedural law governing the arbitration and the extent of court supervision. Section 32 of AMA provides a default seat where none is stated, but express selection remains best practice.

5.4 Record-keeping and procedural compliance
Retention of the arbitration agreement, notices, and communications facilitates enforcement and demonstrates adherence to due process.

5.5 Interim and emergency measures
The AMA empowers emergency arbitrators and courts to grant interim measures. These tools can be instrumental in preserving assets or evidence before the tribunal is fully constituted.

5.6 Preparation for enforcement
Ensuring compliance with the AMA promotes smooth recognition and enforcement of awards. This includes maintaining certified copies of the arbitration agreement and award, and complying with translation or authentication requirements.

6. Key Considerations

Although the AMA modernises Nigeria's arbitration framework and strengthens judicial support for arbitration, parties should remain alert to certain practical and legal considerations that may affect the effectiveness of their arbitration agreements and awards.

6.1 Validity and scope of the arbitration clause

The enforceability of an arbitration agreement depends first on its validity. Ambiguous drafting or failure to comply with the writing requirement under section 2 of AMA may render a clause void or inoperative. Parties should therefore ensure that the clause is clearly expressed, covers the intended range of disputes, and is consistent with the governing law of the contract. A poorly drafted clause may invite jurisdictional challenges or delay enforcement.
6.2 Non-arbitrable subject matter
Not all disputes can be resolved by arbitration. Matters involving public policy,  criminal liability, or certain statutory rights such as those relating to matrimonial causes or taxation are generally excluded from arbitration. Before including an arbitration clause, parties should confirm that the subject matter of their potential disputes is legally arbitrable under Nigerian law to avoid invalidity or wasted proceedings.

6.3 Waiver through litigation

Under the AMA, parties must invoke their arbitration rights promptly. Active or substantive participation in court proceedings without first seeking a stay may be viewed as a waiver of the right to arbitrate. This underscores the need for early procedural strategy: once a dispute arises, parties should decide at the outset whether to pursue arbitration or litigation and act consistently with that choice.
6.4 Timing of jurisdictional challenges

The AMA allows arbitral tribunals to rule on their own jurisdiction, but jurisdictional objections must be raised without undue delay. Failing to challenge the tribunal's authority at the appropriate stage may preclude the party from raising the issue later, including at the enforcement stage. Timely objections therefore preserve procedural rights and prevent unintended submission to jurisdiction.

6.5 Enforcement obstacles
Even under the improved enforcement framework of the AMA, practical hurdles may still arise. These include difficulties in serving foreign parties,  authenticating or certifying awards, and resistance to enforcement on public policy grounds. Successful enforcement depends on procedural diligence such as maintaining proper records, obtaining certified copies of key documents, and ensuring compliance with both domestic and international enforcement requirements.

7. Conclusion

The Arbitration and Mediation Act 2023 represents a significant advancement in Nigeria's dispute-resolution framework. Its provisions enhance judicial support for arbitration and align local practice with global standards. By adopting clear arbitration clauses, observing procedural timelines, and maintaining compliance with the Act's requirements, parties can better secure the efficiency and finality that arbitration is designed to provide.

Footnotes

1. Arbitration and Mediation Act, 2023 section 5(1) .

2. Arbitration and Mediation Act, 2023 sections 16 & 19.

3. Arbitration and Mediation Act, 2023 section 56.

4. Arbitration and Mediation Act, 2023 section 57-60.

5. Arbitration and Mediation Act, 2023 section 5(1).

6. Arbitration and Mediation Act, 2023 section 2(2).

7. Arbitration and Mediation Act, 2023 section 14(2).

8. Arbitration and Mediation Act, 2023 section 6(2).

9. Arbitration and Mediation Act, 2023 section 14.

10. Arbitration and Mediation Act, 2023 section 57.

11. Arbitration and Mediation Act, 2023 section 60.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.