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Litigation vs Arbitration – limitations of arbitration.

The world we live in today is full of “sticky” situations and messy disputes. Resolution is usually reached through litigation at the Courts or alternative dispute resolution methods like arbitration.

In Arbitration, the disputing parties refer the matter to a private tribunal of persons for the settlement in a judicial manner. The arbitral tribunal or members of the arbitral panel, called “arbitrators”, are normally made up of people knowledgeable in the field of dispute. The decision of the tribunal or panel is called an “award”, which may be enforced by a conventional Court where necessary; or set aside by the same Court for good cause, such as partiality on the part of the arbitrator or arbitrators; or an unfair award. It’s the most popular form of ADR but ironically that which is most similar to the litigation process. The arbitration process is governed by the Arbitration and Conciliation Act and in Lagos State by the Lagos State Arbitration Law 2009.

The main argument for the use of Arbitration over Litigation is the expedient resolution of matters which is an attractive feature for business owners and foreign investors. However, whilst Arbitration has proven to be a formidable alternative for Litigation in terms of speed and efficiency, it cannot boast of being a worthy substitute in terms of the enforcement of its Awards. Perhaps the greatest limitation to Arbitration is that it still has to go through the hassles of the court system to be enforced. The hallmark of any effective dispute resolution process is to have the end result final and binding on all parties involved; logically the antithesis of this is that a dispute resolution process which decision offers no finality would be largely ineffective and consequently very unattractive.

Restricting the grounds for setting aside arbitral awards would reduce the frequency of court actions challenging such awards and support a reliable and sustainable arbitral system.

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