Arbitration is widely recognized as a preferred mode of resolving commercial disputes. It is regarded as an effective means of mitigating issues associated with litigation. Not all disputes are suitable for arbitration. The scope has been extended in some jurisdictions to include class actions. Arbitration is usually between very close group of parties. The basic requirement for arbitration is an arbitration agreement. This invariably means that only parties to an arbitration agreement can be parties to arbitration.
However, some countries have expanded the scope to permit a group or class members to commence arbitration proceedings. This is usually by way of a class arbitration. Class arbitration is a form of arbitration that enables one or a few parties to bring a claim before an arbitral tribunal for and on behalf of others in a similar position. As it has generally followed an analogous model to class action litigation, the party initiating the proceeding asserts to represent a group of claimants.1 It means that only one or more persons are involved in the arbitration proceedings, but the outcome binds a particular class member e.g. disputes in product liability or community disputes against energy companies.
Global Trends in Class Arbitration
Class arbitration is relatively undergoing developments in different jurisdictions. In the United States of America, the Supreme Court in Green Tree Financial Corp. v. Bazzle 539 U.S. 444 (2003), held that class arbitration could be available under an arbitration agreement. The Court further held that where the arbitration agreement was silent about class arbitration, the arbitrator must decide whether class arbitration should be allowed under the agreement. This decision led to the creation of special class arbitration rules by two well-known arbitral institutions: (i) the Supplementary Rules for Class Arbitrations of the American Arbitration Association; and (ii) the Judicial Arbitration and Mediation Services.2 This position was upheld about a decade later in Oxford Health Plans LLC v. Sutter,3 where the US Supreme Court reiterated the power of the arbitrator to determine whether class arbitration was permissible when not expressly stated in the arbitration agreement.
Under the English Law, class arbitration is not expressly provided for in the Arbitration Act, however, parties can include class arbitration in their contracts. Although it is still not clear whether the arbitrator has similar powers as it is in the US, the English law will most likely follow the same trend.
The Nigerian Narrative
In Nigeria, the Arbitration and Conciliation Act ("ACA") does not expressly provide for class arbitration. The Courts have also not made any decisions regarding class arbitrations. However, there are instances where class arbitrations can succeed in Nigeria. First, class arbitration is permissible in trade disputes. Section 9 Trade Dispute Act allows referral of trade disputes to an industrial arbitration panel. By nature, trade disputes usually involve a large class (typically members of a trade union), any action by this class can therefore be classified as class arbitration.
It is also common in Nigeria for energy companies to enter agreements with host communities on issues including engagement of local content from the host communities. These agreements are usually by trustees of the communities for and on behalf of the host communities. This definitely is a case for class arbitration.
Also, arbitration is parties-driven; this means that what parties agree to will be ultimately considered irrespective of the provision of ACA. Therefore, parties can agree in an arbitration agreement to allow class arbitration.
In a country where Alternative Dispute Resolution (ADR) mechanisms are taking the stage due to the slow process and technicality embedded in litigation, it is important to encourage access to justice through ADR mechanisms. Having a definite legal framework to regulate class arbitrations is necessary in Nigeria. This will eliminate any uncertainty that might exist regarding the legality of class arbitrations in Nigeria. This will also ensure that the various concerns (such as confidentiality, enforcement, notice requirements and extent of court intervention) relating to the arbitrability of class actions are adequately regulated. It is further desirable to have a legal framework for class arbitrations in Nigeria to provide a viable alternative to litigation for class actions.
1. Francisco Blavi and Gonzalo Vial: Class Actions in International Commercial Arbitration Fordham International Law Journal Volume 39, Issue 4 Article 2.
2. Francisco Blavi and Gonzalo Vial (Supra).
3. 133 S.Ct. 2064 (2013).
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