More often than not when I’m drafting a contract or a legal agreement between parties, I always infuse the dispute resolution clause or the arbitration clause which always reads; “if there is a dispute emanating from the contract, the first point of recourse for settlement of the dispute is arbitration”. The clause stipulates that any dispute emanating from the contract or amongst the parties to the contract must first be referred to arbitration, it must be only when arbitration fails that the matter will be referred to a traditional court.
The reason for this arbitration clause is that it is always easier and less time-consuming to settle a dispute through arbitration and once there is this clause in the agreement it must be followed based on the legal principle of “pacta sunt servanda” but it is not every dispute that can be settled through arbitration. There are some disputes that must be referred to a traditional court of competent jurisdiction to exercise jurisdiction over the matter despite what the content of the dispute resolution or the contract’s arbitration clause says.
There are some cases that the arbitration panel does not have jurisdiction over and therefore cannot exercise jurisdiction over, such matters will have to be referred to a traditional court.
Tekedia Mini-MBA edition 16 (Feb 10 – May 3, 2025) opens registrations; register today for early bird discounts.
Tekedia AI in Business Masterclass opens registrations here.
Join Tekedia Capital Syndicate and invest in Africa’s finest startups here.
The recent Supreme Court ruling in the case of UBA plc v Triedent Consulting Ltd (2023) 14 NWLR (Pt. 1903) Pg. 95 (SC) 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.
In the above case, one of the core issues before the court for determination is whether a party to a contract can resort to traditional court over a dispute arising from the contract despite the arbitration clause infused in the contract.
The court held that there are some instances where, even though parties have submitted to arbitration, the suitability of litigation takes priority over arbitration. Such instances may include:
(a) where the issue for resolution is essentially a legal one; or
(b) where the issue turns largely on the credibility of the evidence; or
(c) where immediate enforcement of a right is required; or
(d) where one of the parties is intransigent; or
(e) where there are multi-party disputes arising from a transaction.
This is to say that there will be some instances where a court will override an arbitration clause and exercise jurisdiction over a dispute emanating from a contract.