ON CONSENSUAL NATURE OF ARBITRAL PROCEEDINGS AND NEED FOR PARTIES TO ABIDE BY ARBITRAL AWARDS.

Arbitral awards are not the usual or ordinary decisions/judgments delivered by the ordinary or normal courts established by Law, but outcomes of proceedings and decisions by people or institutions freely and voluntarily chosen specifically by the parties in the course of their agreements/contracts that are fiduciary in nature, to, in the event of any dispute arising from such relationship in which, very often,time is of essence, expeditiously and with relative ease,settle it conclusively to bind them.

The case involves an appeal against the judgement of the Court of Appeal delivered on 22nd July, 2020, refusing the appellants application for dismissing the judgement of the High Court on the contention that the arbitral tribunal lacks the to grant the awardand rightly recognised the arbitral award.The Supreme Court in an unanimous decision allowed the appeal and affirmed the decision of the two lower courts. NICON INSURANCE LIMITED V.BRIGHTHOUSE ESTATE LIMITED (2025)8 NWLR (993)469.SC,

A brief of narration of what transpired in the case was that:

The appellant at the Court of Appeal,by an application,sought for dismissal against the judgment of the Federal Capital Territory High Court in suit No.CV/492/18 delivered on the 9th May,2020 which said application was dismissed.

Before the said application,the respondent was sued by the applicants at the FCT High Court.The applicant and the respondents are parties to an agreement with an arbitration clause. A dispute between the parties was referred to arbitration, and an award was entered in favour of the respondent.

The applicant applied to the High Court to set aside the award.The applicant asserted lack of jurisdiction of the arbitrator on the basis that conditions precedent for invoking the arbitration clause in relation to the indemnity clause of the agreement had not arisen.The applicant also complained about misconduct by the arbitrator.The High Court found and held that the arbitrator had jurisdiction.It also found and held that the applicant failed to provide sufficient materials to show any case of clear misconduct by the arbitrator. Consequently, the High Court refused the application.

Dissatisfied with the decision of the High Court, the applicant appealed to the Court of Appeal where it raised two issues. The first issue was whether the High Court rightly refused to consider and determine the jurisdiction of the arbitral tribunal to grant the award and rightly recognised the arbitral award. The second issue was on whether the Court of Appeal did not err when it held that the sole arbitrator did not misconduct himself by considering issues outside the agreements between the parties.

The Court of Appeal held that there was no misconduct by the arbitrator and that the High Court rightly made the award in question. Therefore,the Court of Appeal resolved the two issues against the appellant and affirmed the ruling of the High Court.

Still dissatisfied, the applicant filed an application for leave to appeal to the Supreme Court, and for stay of execution of judgment at the Court of Appeal.

A legal question was raised on the consensual nature of arbitral proceedings and need for parties to abide by arbitral awards.In its decision the Supreme Court held that;

“Since an arbitral award arises from a determination of dispute(s) by an arbitrator freely and mutually chosen and appointed to determine same by the parties to the dispute, the parties who fully participated in the proceedings without objection, should accept and abide by such an award even if they do not like it because it did not go in their favour. They should be frank and sincere in their attitude towards such awards and should be discouraged from turning arbitral proceedings into apre-litigation or an elongated litigation procedure for the sole purpose of frustrating and eventually defeating the primary purpose of such proceedings freely chosen by them. It defeats the purpose of an agreement to refer a dispute to arbitration if after fully participating therein, a party is allowed to raise technical objections to defeat the award. Put differently, where parties to a dispute have voluntarily submitted themselves to an arbitrator on the complaint raised, it would be unjust for one party to challenge it on its face.”

Arbitration is the reference of a dispute or difference between not less than two (2) parties for determination after hearing both sides in a judicial manner, by a person or persons other than in Court of competent jurisdiction.

Arbitration's consensual nature stems from parties voluntarily agreeing to resolve disputes outside court, making the process flexible and private, but this agreement also binds them to the final, binding arbitral award as if it were a court judgment, with courts providing mechanisms for enforcement, ensuring parties honor their commitment to the process and its outcome. The award, once issued, is final, extinguishes the original claim, and creates a new obligation to comply, with courts stepping in to enforce it if a party defaults, making compliance essential. 

In essence, the choice to arbitrate is a choice to accept a binding, final decision, making compliance with the award a fundamental aspect of the process. 

JUSTICE MUHAMMED LAWAL GARBA J.S.C stated that;

“The applicant has woefully failed to satisfactorily show that there are special circumstances which will justify and warrant the grant of the reliefs sought. I should state that the fact that the motion/application relates to an arbitral award by an Arbitration Tribunal/Arbitrator freely chosen by the parties to settle dispute/s arising from their agreement/contract, makes the requirement for special circumstances provided for in order 2, Rule 31 of the Supreme Court Rule, 2014 (as amended) more imperative for the court to be in a proper position to exercise its discretion judicially and judiciously, as required by Law.Arbitral awards are not the usual or ordinary decisions/judgements”

The supreme court in its judgement granted the appeal, and affirmed both the Judgement of the Court of Appeal and that of the FCT High Court.It further held that the Arbitrator, who is not an umpire, has the jurisdiction to decide only what has been submitted to him by the parties for determination. If he decides something else, he will be acting outside his authority and consequently the whole proceedings will be null and void and of no effect. This will include any award he may subsequently make.Since an arbitral award arises from a determination of dispute(s) by an arbitrator freely and mutually chosen and appointed to determine same by the parties to the dispute, the parties who fully participated in proceedings without objection, should accept and abide by such an award even if they do not like it because it did not go in their favour and where parties to a dispute have voluntarily submitted themselves to arbitration on the complaint raised, it would be unjust for one party to challenge it on its face.                        

In conclusion, it was decided that the Arbitral Tribunal must reach an award and such award enrolled and made available to the parties. An arbitral Tribunal is obliged to resolve the dispute and deliver an award. Once an award is made or delivered, the Arbitral Tribunal becomes functus officio in respect of the matters that were decided within the award and the issues are thereafter res judicata. The Arbitral award is final and binding as to the matters which it decides. The binding nature of the award owes its existence to the law of the seat of arbitration. The decision of an Arbitrator is final and legally binding on all the parties involved in the arbitral proceedings. An award must comply with any requirements within the arbitration Agreement or any applicable rules and the law of the seat of the arbitration.It must also be certain that the parties can ascertain from the award what is required of them.

About the Authors:

Nana Hauwau Abdulazeez and Abdulmuiz Olaleru are members of the Research and Litigation Directorate, Solace Chambers, Bayero University, Kano. Nana Hauwa’u can be reached via +2347039176661. Email-abdulazeeznanahauwau3@gmail.com & Abdulmuiz Olaleru can be reached via +234 915 386 9857