Breaking exorbitant fees barrier for dispute resolution through arbitration
The importance of arbitration in resolving disputes in the country cannot be over-emphasised. In recent times, it has helped in decongesting the courts and speeding up the resolution of disputes. As a popular mechanism for resolving disputes, it helps to reduce the exorbitant cost of judicial administration.
The Court of Appeal Rules 2016 encourages ADR in all its ramifications. As a tool for a speedy dispute resolution, members of a community utilise it as a means of preserving peace and enhancing their affiliation with one another. It enables potential rivals to remain friends in spite of individual differences. It is also effective in contracts and in settlement of commercial disputes thereby acting as a key driver of economic development within the Africa sub-region.
But the use of arbitration is being threatened by its high costs. Some of the costs associated with arbitrating dispute include arbitrators’ fees and expenses, administrative cost, expert fees, legal cost and witnesses, management and other logistical costs.
It is, however worrisome that a significant number of arbitrations of home-generated disputes are exported outside Nigeria. So in providing solutions to all these problems, the Nigerian Institute of Chartered Arbitrators Investiture (NICab) recently gathered in Lagos professionals from various spheres of life. They included legal luminaries and expert on arbitration from various part of the country and abroad.
In his keynote address, the then Chief Justice of Nigeria and Chairman, Board of Governors of the National Judicial Institute, Justice Walter Onnoghen said recourse to arbitration as a method of dispute resolution has been on the increase in Nigeria, and of course the nature of the proceedings and the minimal implications were the drivers. Therefore, if the cost of the arbitration fees should be rising, then, the purpose of the institution would be a mirage.
Nigeria is a signatory to the New York Convention on Arbitration acceding to the convention on March 17 1970 and it came into force on June 15, 1970. Arbitration, therefore, is not new in Nigeria, but its practices are new, because Nigerians are overwhelmed with litigation.
According to him, “the recent paradigm shift from litigation to arbitration is predicated on the impression that arbitration is less costly than litigation and this is one of the economic advantages of the mechanism. In reality, looking at the cost involved in the process of arbitrating a dispute and bearing in mind that the cost must be borne by the disputants, we may have a second thought on whether or not arbitration is the right way to solving a dispute at hand.”
The CJN also noted the internal cost to the parties involved in lending support to any dispute resolution process, such as in-house counsel, company witnesses, and other professional or technical support, depending on the type of arbitration selected (institutional or ad hoc).
He said, “ The fees charged depend on the amount involved. The Nigerian Institute of Chartered Arbitrators, Lagos Court of Arbitration (LCA), and others set hourly, daily or ad valorem feels for arbitration. In the International Chamber of Commerce (ICC) arbitrations, administrative costs consist of a non-refundable US$500 fee paid by the claimant when filing the request for arbitration. Once the proceedings have started, the ICC Court will fix additional administrative fees, based on the amount in dispute.”
While speaking on the theme “Rising Cost of Arbitration Fees: a Potential Threat to Arbitration Practice”Onnoghen said Nigerians need to embrace arbitration embrace the mechanism as an alternative to court proceedings.
His word, “Given the complexity of most commercial arbitration cases, the assistance of experts is almost always recommended, if not required. Parties are responsible for these experts’ fees, which can range from a few hundred thousand naira to tens of millions of naira, depending on the complexity of the case and the type of expert. Parties also need to bear the cost entailed in preparing witnesses for written and oral testimony, including travel and accommodation costs.”
The CJN therefore charged the Nigerian Institute of Chartered Arbitrators to urgently do everything possible to save the situation and recommended that the cost of process be affordable.
“Arbitration mechanism has come to stay in Nigeria because we cannot afford to lose the advantages associated with its practice. Therefore, the time to make a choice between encouraging the clients and patronizing the institution and turning down their offers is now. We can encourage them if we make the cost of the process affordable. Conversely, they can lose the appetite if we allow the cost to be rising without control mechanism in place.”
Also, the vice President and member of council, Nigeria Institute of Chartered Arbitrators, Prof. Fabian Ajogwu (SAN) admonished members to promote arbitration, mediation and other ADR.
While saying that the quest to domesticate arbitration in Nigeria continues to drive the activities of this institute, Ajogwu added that the time has come for a reversal of the trend of home-generated disputes being takenoutside the country.
According to him, “With qualified persons in the institute, there should be no excuse to seek expertise outside, except of course in international commercial arbitration; or where the specific circumstances of a case so demands. What remains is for us to work together to reverse the trend of setting aside arbitral awards at the slightest opportunity, and to appointing qualified arbitrators in Nigeria to conduct arbitration.
“We continue to explore ways of maintaining the high standards of training aimed at achieving the highest standards in our membership. We have tried to ensure that arbitrators are not only competent and experienced in field, but are also people of the highest moral calibre and professional competence. This year’s Fellows, Members and Associate members are a testimony to the high premium that we continue to place on this aspect of our institutional objectives and activities.
“Our members rank at par with ADR practitioners elsewhere across other jurisdictions. It is therefore not surprising that many of them handle matters outside the shores of Nigeria. Arbitration is envisaged to be a final way of determining disputes.
“ It is to be done with the highest sense of professionalism and ethics. This is the charge to you today. This institute continues to encourage specialisation within the field by driving sectoral committees within the institute. They include the Banking and Financial Services Committee, Aviation and Transport Committee, Energy and Power Committee, Maritime, Construction and Real estate, Telecommunications, PPP and Concessions, and other committees.
“It is the plan of the institute to build its office and arbitration centre. This however cannot be done without the contribution of our esteemed members, who directly and indirectly, through your friends, associates, and clients will leave a lasting legacy in the Arbitration Centre and office that will house your institute. It is my commitment to lead this initiative with you support and contributions.”
Responding to how exorbitant fees discourage arbitration in Nigeria, the Principal Partner, Taiwo Osipitan &Co, Professor Taiwo Osipitan (SAN) said, generally, arbitration as an alternative dispute resolution mechanism is expected to be speedy in an informal setting and inexpensive when compared to litigation. However, over the years, it appears that the cost of arbitration is on the high side. This will obviously impact the decision of affected parties to embrace arbitration or not.
He said, “In arbitral awards, costs awarded in favour of successful parties against the losing parties are also very high. As a matter of fact, costs are also awarded on indemnity basis i.e. expenses incurred by the winning party in hiring counsel will be totally borne by the losing party.
“Where expensive counsel is hired by the winning party, the losing party bears the cost of hiring such counsel in addition to paying his own counsel. In addition, where arbitral proceedings are conducted outside the places where parties are based, additional costs are incurred as travelling and accommodation expenses. These are the kind of things that are now discouraging people from using arbitration. “
For Mr. Mike Igbokwe (SAN), exorbitant fees will discourage arbitration in Nigeria. He said,”lot of parties to arbitration matters have been made to understand that arbitration is cheaper than litigation and it has more advantages when it comes to the resolution of commercial dispute than when you use litigation to resolve commercially.
“When the arbitrator’s fees are exorbitant they can discourage them. They may begin to look elsewhere rather than go to arbitration. But again I must say that the fees charged are reasonable and fair based on relevant factors. For instance, the special nature of the matter, it may be one that requires specialised knowledge like maritime or oil and gas and if it is very complex and difficult matter, it is also one that requires a lot of money and also looking at the volume of documents that one has to peruse, the time frame it will probably take you between three and six months or thereabout to finalise the work on the arbitration matter.
“One may decide to charge what is fair and reasonable in the circumstance, again, bearing in mind the provisions of arbitration and conciliation act on such areas. So as long as the fees is fair and reasonable, the arbitrator will be right because you do not also expect arbitrators to do the work of arbitration free of charge.
“ It is not a charity job, so they are entitled to fees as long the fees are fair and reasonable you should know they are not exorbitant considering all these factors. What I have found out, is that sometimes despite the fact that even institutions have scale of fees which are deemed to be fair and just in arriving at what will be payable to the arbitrators, some parties still consider these fees to be too high and are unwilling to pay and which sometimes can actually be seen as a misunderstanding of what arbitration is all about.
“ That you have to pay unlike when you go to the courts, you just pay filling fees, you don’t pay the judge for sitting, the state does that but when it comes to arbitration, the sole arbitrator or the panel of arbitrator will have to be paid.
“ This is apart from the administrative cost and also the charges of other persons, maybe experts etc that may be used during the arbitral process.”
The duo of Osiptan and Igbokwe also dealt with how the fees paid by parties to their arbitrators could be justified.
Osipitan noted that it greatly depends on the status and numbers of the arbitrators who conduct the arbitral proceedings.
According to him, “arbitral proceedings by a single arbitrator will generally be less expensive than that conducted by three arbitrators. Similarly, arbitral proceedings conducted by fellows of various institutes of arbitrators and chartered arbitrators who are more experienced in arbitral proceedings are likely to be more expensive than proceedings handled by non–fellow and non-chartered arbitrators.
“Fees paid to arbitrators also include the cost of hiring of venue of arbitration, payment made to registrar and supporting staff for their services, transportation and accommodation expenses of arbitrators where proceedings are to take place outside the residence of arbitrators.”
Igbokwe expatiated, “I have mentioned some perimeters earlier, the fees of arbitrators are different from administrative fee or the fees of whoever will act as the secretary to the arbitral panel, who will take minutes and also arrange maybe the seat or the venue of the seating of the panel and also to write, or if they are outside the jurisdiction or perhaps an institution, make arrangements for hotel, transportation, maybe from airport to venue and also back, make arrangement for security where it is necessary.
“ All these things are different from the fee of the arbitrator. They are cost that will have to be borne by the parties and they are incidental to the arbitral process.
“The basis of arriving at a reasonable and fair arbitrators fee are what I have indicated that could guide in arriving at what is sometimes stipulated by an institution, it may be hardly negotiable because you just go by what the institution has indicated since they are the ones that chose the institution and the rules of the institution apply to what they are doing. But both parties can deliberate the arbitral fee with the institution in charge in order to come up with a fee that is acceptable.”
He analysed the role of arbitral institutions in reducing the rising cost of arbitration, saying, “if you look at the Rules of Professional Conduct 2007, there is a particular clause there that says ‘use the parameter to determine what is fair and reasonable fee chargeable by a lawyer should be decided upon’ and if you look at the Legal Practitioners Documentation Order of 1990.
“There is also something almost similar to the RPC (Rules of Professional Conduct) for legal practitioners, this gives the parameters for what is fair and reasonable fee chargeable by a lawyer handled in court or charged by legal practitioners when handling matters in court or when they are preparing document for client and as such, it should be different from arbitrators who have to sit like judges. The truth of the matter is that this can still give a fair or some parameters that can be used to arrive at something that is fair and just.
“If it’s looked at clearly, you can also realise that many of those who sit as arbitrators, it is easy for institution to use that as a basis of drawing up what should be applicable. What has always been obtainable is the scale of fees, depending on the amount of money involved, i.e they scale it, and which I think it’s not out of place, ICC (International Chamber of Commerce) does it and other arbitration bodies. They use this scale to determine how far they can go and how low they can go and you have to discuss something that fair.
“This now depends on the party, any party that wants to adopt the rule of any arbitral institution should take time to look at those rules and determine whether the scale of their fees for arbitration will be too high or not too high for them before they proceed in picking what will govern the arbitral process.”
On the arbitration institute looking at the fees currently charged given the country’s economy and the purchasing power of Nigerians, he said it was possible.
“However, do not forget that the exchange rate of what would be charged in naira is lower compared to what the value in naira terms would be if charged in dollar terms. There is no doubt about the fact that if it is exorbitant, it would discourage users. But the question is what would be exorbitant?
“Whatever is fair and reasonable cannot be regarded as exorbitant when you consider the complex nature of the matter, the centralised nature, the questions involved, also, the time spent, the number and volumes of documents that would be involved, and other things that the panel would have to do. So, exorbitant might be a relative term, for some people who are well to do, they can pay, they would understand but for poor people, they may not be able to meet up.
“Also, we can conduct a comparative analysis on what institutions abroad charge and also what other institutions in Nigeria charge in fee. But again, it is not something that will be successful if it is done by only one institution, all the institutions in Nigeria would have to be involved in order to achieve the right result.
“Again, you have to bear in mind that there are some arbitrators that if they feel the amount involved in the matter is too low for them, they would turn it down and we would end up not getting seasoned arbitrator. So, it has to be something that is attractive to them and use it to justify all the time and effort put into it for them to be encouraged to take it up.
“In as much as you want to reduce arbitration fees, you must also ensure that you do not compromise standard or cut down the quality of the experience of those who will be handling those arbitral matters.