CONTRIBUTOR: LILIAN EKU
INTRODUCTON
Disputes can arise in almost any situation where businesses or people interactespecially where interests conflict and cannot be met to the satisfaction of all parties involved.[1] Such disputes were formally solely resolved through litigation; however, there were lots of criticisms of the litigation process for being expensive, time-consuming, and adversarial, and this can damage business relationships and lead to unsatisfactory outcomes for the involved parties.[2]
This article analyses the increasing relevance of Alternative Dispute Resolution (ADR) mechanisms in resolving commercial disputes outside of traditional litigation. It explores the legal framework governing ADR in Nigeria, including the Arbitration and Conciliation Act, Lagos Court of Arbitration rules, and relevant judicial precedents. The article also examines the benefits of ADR, such as confidentiality, speed, cost-effectiveness, and preservation of business relationships, particularly in complex commercial and cross-border transactions. It highlights recent trends, such as online dispute resolution and sector-specific ADR (e.g., fintech and energy), and offers recommendations for improving institutional capacity, party awareness, and integration of ADR into commercial contracts.
ADR has gained noticeable impact in recent years, particularly with the enactment of the Arbitration and Mediation Act 2023, which strengthens the legal framework for both domestic and international commercial arbitration in Nigeria. This shift reflects a broader global trend favoring arbitration-friendly jurisdictions.
ALTERNATIVE DISPUTE RESOLUTION IN COMMERCIAL TRANSACTIONS
Alternative Dispute Resolution (ADR) refers to mechanisms for resolving disputes without resorting to litigation in courts. In commercial transactions, ADR provides parties with an efficient, flexible, and confidential method to settle disagreements.[3] Arbitration and mediation are the most commonly employed ADR mechanisms in Nigeria, offering the advantage of neutrality and expertise.[4]
Arbitration involves the appointment of an impartial arbitrator or panel who renders a binding decision, while mediation entails a neutral mediator facilitating negotiations between parties to reach a mutually acceptable settlement. the adoption of ADR in Nigeria has steadily grown due to the increasing complexity of commercial relationships and the need to preserve business continuity.
One key reason arbitration is widely adopted in commercial contracts is the legal backing under Section 5 of the Arbitration and Conciliation Act[5]. This provision mandates Nigerian Courts to stay proceedings where a valid arbitration agreement exists, provided that the party requesting the stay has not taken steps in the court process and is willing to arbitrate. This legal framework strengthen the enforceability of arbitration clauses and discourages parties from bypassing agreed ADR processes. The Court of Appeal reiterated the above in the case of Mekwunye v Lotus Capital Ltd &Ors[6].
However, the recent Supreme Court ruling in the case of UBA plc v Triedent Consulting Ltd[7] reemphasized the rule that, despite an arbitration clause in an agreement, there are some cases or matters where a traditional court will have to override the arbitration clause and exercise jurisdiction over the matter.
Unlike the earlier decision, the Court held that an applicant seeking a stay of court proceedings pending arbitration does not necessarily have to provide documentary evidence proving their willingness and readiness to arbitrate.The Court reasoned that requiring such documentary proof contradicts the clear wording of section 5(2) of the Arbitration and Conciliation Act[8], which does not expressly impose this burden. This ruling reflects a more flexible approach to enforcing arbitration agreements and ensures that procedural technicalities do not undermine the parties’ intention to resolve disputes through ADR.[9]
LEGAL FRAMEWORK GOVERNING ADR IN NIGERIA
The legal Framework governing Alternative Dispute Resolution in Nigeria is:
Arbitration and Conciliation Act (Cap A18 LFN 2004): [10] This forms the cornerstone of ADR in Nigeria, codifying both domestic and international arbitration procedures. Part I of the Act governs domestic arbitration proceedings, although it is often applied to international arbitration by judicial interpretation, while Part II establishes the legal framework for conciliation, including both domestic and international mediation mechanisms. Key provisions include the enforcement of arbitration agreements, powers of arbitrators, and recognition of awards.. The Act also aligns with the UNCITRAL Model Law, providing international credibility and enforcement standards, though it is not a complete adoption. Nigeria is also a signatory to the New York Convention, which supports the recognition and enforcement of foreign arbitral awards.[11]
Arbitration and Conciliation Act: This Act has been repealed by the Arbitration and Mediation Act, 2023, which now formally incorporates both arbitration and mediation under Nigerian law.
Lagos Court of Arbitration Rules: Lagos Court of Arbitration serves as an institutional arbitration center with its own set of rules designed to streamline commercial dispute resolution. The LCA Rules provide procedures for arbitration, mediation, and combined processes, emphasizing speed, efficiency, commercially-oriented approach to dispute resolution.
THE BENEFITS OF ADR
Confidentiality: ADR processes, particularly arbitration and mediation, are private and confidential, safeguarding sensitive business information. This confidentiality protects corporate reputations and trade secrets, which are often unattainable in public court proceedings
Speed: ADR is significantly faster than litigation, which can be protracted due to congested court calendars. Arbitration under LCA rules can conclude within 6-12 months, whereas typical commercial litigation may extend over several years.
Cost-Effectiveness: By avoiding extended court proceedings, parties save on legal fees, administrative costs, and time. ADR also reduces indirect costs associated with prolonged business uncertainty.
Preservation of Business Relationships: Unlike adverbial litigation, ADR fosters collaboration and dialogue, helping parties maintain business relationships post-dispute. Mediation, in particular, encourages mutually acceptable solutions, minimizing relational strain.
ONLINE DISPUTE RESOLUTION (ODR)
The integration of technology in ADR has led to the emergence of Online Dispute resolution (ODR). Platforms such as LCA Online facilitate arbitration and mediation virtually, reducing logistical barriers and enabling cross-border dispute resolution. ODR is increasingly relevant in e-commerce and fintech sectors, where disputes often span multiple jurisdictions.[12]Preservation of Business Relationships: Unlike adversarial litigation, ADR fosters collaboration and dialogue, helping parties maintain and even strengthen business relationships after a dispute. Mediation, in particular, encourages mutually acceptable solutions, minimizing relational strain and promoting ongoing commercial operation. This is especially valuable in business settings where long-term partnerships are vital and disputes need nit damage to future dealings.
CONCLUSION
Alternative Dispute Resolution (ADR) has become an indispensable mechanism in the resolution of commercial disputes in Nigeria. The growing adoption of arbitration and mediation reflects a strategic shift from rigid, time-consuming litigation to more flexible, efficient, and relationship-preserving methods. With the enactment of the Arbitration and Mediation Act 2023 and the increasing influence of institutional bodies like the Lagos Court of Arbitration, Nigeria is fast aligning with global best practices in commercial dispute resolution. As commercial activities become more complex and cross-border in nature, ADR mechanisms offer businesses a tailored approach that promotes confidentiality, neutrality, cost-efficiency, and speed. The legal framework now provides clearer guidance, stronger enforceability of arbitration clauses, and a more adaptable judicial attitude toward ADR agreements. These developments present Nigeria as a viable arbitration-friendly jurisdiction within Africa and beyond.
RECOMMENDATIONS
There is a need for increased education and awareness among legal practitioners, corporate entities, and the general public on the benefits and procedures of ADR. ADR clauses should be standard in commercial contracts, and both private and public sector stakeholders should adopt policies that encourage early resort to mediation or arbitration rather than litigation.
REFERENCE
EUNICE R. ODDIRI, ‘ALTERNATIVE DISPUTE RESOLUTION’ (2024), https://nigerianlawguru.com/wp-content/uploads/2024/06/ALTERNATIVE-DISPUTE-RESOLUTION.pdf accessed 26 August, 2025. ↑
- Ibid. ↑
- Lynch J ‘ADR and Beyond: A Systems Approach to Conflict Management’ (2001) Vol.17, No.3, Negotiation Journal, p. 213 ↑
- Colin Egemonye, ‘The Role of Arbitration in Resolving Disputes in Nigeria’(2025) https://globallawexperts.com/the-role-of-arbitration-in-resolving-disputes-in-nigeria accessed 26 August, 2025. ↑
- section 5 of the Arbitration and Conciliation Act Cap A18 LFN 2004 ↑
- Mekwunye v Lotus Capital Ltd &Ors (2018) LPELR-45546 (CA)3 ↑
- (2023) 14 NWLR (Pt. 1903) Pg. 95 (SC) ↑
- Section 5 of the Arbitration and Conciliation Act Cap A18 LFN 2004 ↑
- Adetokunbo Davies, ’Stay of proceedings pending Arbitration: A Legal Critique’(2019) https://loyalnigerianlawyer.com/stay-of-proceedings-pending-arbitration-a-legal-critique accessed 22 August 2025 ↑
- Arbitration and Conciliation Act Cap A18 LFN 2004 ↑
- United Nations, Convention on the Recognition and Enforcement of Foreign Arbitral Awards(New York,1958) ↑
- Okeke C.C., Maduka O.D., Okonkwo I.C. ‘Determinants of Private Sector Growth in Nigeria’ (2022) Vol.5, No.2, African Journal of Economics and Sustainable Development, p.1-20. ↑
