CHAPTER ONE
INTRODUCTION
1.1 Background of the Study
All modern societies have set
up courts for resolution of disputes. Due to historical reasons, proceedings in
courts are lengthy and conducted in a very legalistic manner. Hence those who
are not lawyers often find themselves lost in litigation procedure. Hence with
this motives bearing in mind that some dispute are basically technical and not
legal, it calls for a satisfactory method to resolve disputes and that being
through Alternative Dispute Resolutions, such as arbitration where parties
involved in the disputes are able to participate on the procedures involved
making easy for the judgment to be accepted with minimal appeals. Arbitration
is therefore an adjudicative process in which the parties present evidence and
arguments to an impartial and independent third party who has the authority to
hand down a binding decision based on objective standards, (Trank, 2009).
An arbitral award is final and
binding. It is equivalent to judgment of a court of law and is recognized as
such. It is an important method of deciding disputes other than litigation and
is regulated by fairly well established principles of law Although the law on
arbitration has been part of the statutory framework for many years, it is only
recently that the practice of arbitration has attracted serious attention and
attempts are now being made to ensure that it takes its rightful place in the
dispute resolution hierarchy, International dispute resolution involves the use
of appropriate rules and customs in handling disputes between countries UNCITRAL
is under the united nation office of legal affairs and is core function is to
regulate International trade using the UNCITRAL model law on international
commercial Arbitration. However the model law is not binding, but individual
states may adopt the model law by incorporating it into their domestic law.
Many construction conflicts
worldwide are due to either jurisdiction or difference in cultures hence
important to have the knowledge on the international constructing law to ensure
one has the necessary tools to manage and resolve conflicts arising from
disputes on the construction projects. In Africa there is no doubt that the
continent represents today the world’s most formidable development challenge in
various sectors one of them being the infrastructure. The significant growth of
investments and international trade with African
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countries raises the important
issue of knowledge of its diverse cultures and people in order to establish
solid long term relationships and development when needed besides coming up
with a method to resolve its disputes successfully. Adoption of the UNCITRAL
Model Law on international commercial arbitration in 2010 showed the way,
(Beatty, 2010).
Today Nigeriahas a local
chapter of the Chartered Institute of Arbitrators with a membership of about
4000 registered arbitrators. In addition to being a member, the arbitrators
undergo training for six months to ensure the characteristic they display
during arbitral process is unexceptional and their handling of arbitration
procedures is acceptable to both parties involved in the dispute. Lamentably,
most of the arbitrators are based in Abuja
. Although these developments have raised the profile of arbitration as
a dispute resolution mechanism, the level of utilization of this mechanism
remains dismal. In our view this state of affairs is traceable to the manner in
which arbitration was introduced and the shortcomings of the successive legal
frameworks, (Benjamin, 2009).The transplantation of English law through the
Orders-in-Council 1900 and 1907 saw the beginning of a new historical epoch in
dispute resolution in colonial Kenya.15 It heralded the demise of customary
practices of dispute resolution. But surprisingly, arbitration was
re-introduced by the Arbitration Ordinance 1914 as an extrinsic concept.
The
Ordinance was based on the English Arbitration Act 1889 whose central feature
was the absolute control of the arbitral process by courts of law,(Bok,
2011).The English statute was amended in 1950 but retained the main provisions
of its predecessor. After independence, Kenya’s parliament promulgated a new
Arbitration Act, Chapter 49 (now repealed). This Act was a carbon copy of the
English Arbitration Act of 1950 and remained the operative statute until 1995 when
the current Arbitration Act was proclaimed. Noteworthy, none of the successive
statutes ever made reference to customary arbitration or alternative dispute
resolution mechanisms. It is thus imperative to examine the suitability of the
framework on arbitration and make the necessary recommendations for reforms. As
arbitration and other ADR become increasingly institutionalized, it is
essential that the law encapsulates the necessary policy changes, and reflect
societal and global dynamics. This is inevitable if the country is to take
advantage of international investment and commerce.
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Undeniably, investors and
traders attach a high premium on the availability of operational, neutral and
flexible dispute resolution mechanisms as an alternative to the court system.
Arbitration is the preferred options, owing to the privacy it offers where the
dispute resolved are made non-public only known by the parties involved, and
again the liberty to set the rules of engagement and venue for the proceeding
to take place finally arbitration takes much less time compared to litigation
ensuring businesses or projects like those in construction continue their
operations soon to meet their timeline. This mechanism encourages investment
and engenders growth. Our recommendations in this paper could assist policy
makers, business people and legislators in formulating the future policy and
legal framework on arbitration and ADR ( Brewer, Gates and Goldman, 2010).
1.2 Statement of the Problem
A dispute within the
construction industry covers a diverse range of issues that deserve to be
addressed specifically and in depth. The construction industry is one that
comprises a diversity of interests, professions and procedures which interact
to create a completed project. All of those involved may share a common goal,
but they inevitably have differing and often divergent purposes. In the quest
to achieve their goal the chances or the likelihood of disagreement or
disharmony are substantial (Gould, 1999).
If unresolved in time,
construction disputes can become very expensive, considering the finances,
personnel, time lost, and the opportunity costs. Quantifiable costs include
hiring of attorneys, expert witnesses and the dispute resolution process
itself. The less visible costs like company resources assigned to the dispute,
and lost business opportunities and the intangible costs which include damage
to business relationships and potential value lost due to inefficient dispute
resolution are also considerable, although quite difficult or impossible to
quantify. (Vermunt and Wilke, 2011).
Nigeriahas had laws on
Arbitration from as early as 1914, is a signatory to both the New York and the
Washington Conventions3 and adopted UNCITRALs Model Law in 1995. Nevertheless,
arbitration has yet to win the confidence of business contracts as one of the
basic dispute resolution mechanisms in the country, and the continued usage of
litigation to solve technical disputes like those found in the construction
industry has led to untenable
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backlog of cases that have
diverted the judiciary from its core mandate. The level of utilization of this
important method of resolving construction industry disputes is disconcerting
and there is an overwhelming case for a paradigmatic shift of emphasis from
litigation to arbitration The Nigeria chief justice Dr. Willy Mutunga is put
into record on the March east African newspaper having encouraged Nigerians to
adopt alternative methods to pursue justice other than going to courts, which
are not only expensive but fuel hatred among family members, this when opening
Gatundu law courts in Kiambu County.
The most basic hallmark of
arbitration is the liberty enjoyed by the parties in fashioning the
proceedings. They have capacity to tailor the scope of the submission. They
enjoy wide latitude in selecting the persons who will serve as arbitrators with
the technical knowledge. This is a form of security that has no parallel in
litigation. Essentially, arbitration is a private process with a significant
degree of autonomy and self-sufficiency. (Thornton, 2012)
In the construction industry
arbitration is characterized by countless advantages; notably, neutrality,
finality, binding nature of decisions, speed and confidentiality. Although the
arbitral process has several shortcomings and is unsuitable in circumstances in
which the dispute involves many parties, it is commonly a perfect substitute
for litigation. It does not deny the parties the right to seek judicial opinion
if they so desire and more importantly, if a party is dissatisfied with the
arbitral award, it is entitled to challenge the award in the High court which
has jurisdiction to set the award aside (Lipsky, 2009). Amazingly, even on
technical disputes like the construction industry parties to contracts
undertakings prefer ordinary courts in dispute resolution. As a consequence,
court diaries are perpetually clogged and cases take far too long to conclude.
On average, construction cases take between two and four years to conclude
others like land disputes may take as long as twenty years. Most litigants are
unaware of other cost effective and reliable alternatives.
To my understanding arbitration
has yet to attain the level of acceptance and utilization necessary to make it
an important dispute resolution mechanism in technical areas like the
construction industry in Nigeria and against this background, the importance of
arbitration in dispute resolution cannot be gainsaid.
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1.3 Purpose
of the Study
The
purpose of the study was to investigate the influence of arbitration in the
success of dispute resolution among construction industry in the Abuja County
1.4 Objectives of the study
i.
To establish the influence of
liberty in arbitration processes on dispute resolution within construction
Industry.
ii.
To establish the influence of
flexibility in arbitration processes on dispute resolution within construction
Industry.
iii.
To determine the influence of
neutrality on arbitration processes in resolving disputes within construction Industry
iv.
To determine how privacy in
arbitration influences disputes resolution among construction Industry in Abuja
1.5 Research Questions
i.
What is the influence of liberty on
arbitration processes in the rate at which disputes are resolved in the construction
Industry?
ii.
How does flexibility in arbitration
processes influence dispute resolution within the construction Industry?
iii.
To what extent does neutrality in
arbitration processes contribute to dispute resolution within the construction
Industry?
iv.
How does privacy in arbitration
processes influence how dispute are resolved in the construction Industry?
1.6 Significance of the Study
Arbitration is a realistic
alternative to litigation designed to resolve disputes. Construction industry
is a key pillar for nurturing economic growth for any country because it
contributes greatly to the infrastructure network. In Nigeria construction
industry comes third after agriculture and manufacturing in contributing to the
growth of domestic product (GDP) by 21.5 %.In addition social economic
transformation one of the pillars in Kenya’s vision 2030
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has infrastructure as one of
the six foundation which on the other hand incorporates construction industry.
Construction projects are bound
by time, scope and budgets hence very important to eliminate and manage any
obstacle like disputes that may pull them behind. In case of a disputes arising
it is very important for all the parties involved to fully participate and
contribute in the resolution process, an important role not found with the
litigation process in the courts.
Hence
against this background when construction project are carried out with minimal
interruption like conflicts among the parties involved not only would it ensure
that the economy of a country propagates but also aid a developing country like
Nigeria attain its target goals like vision 2030.In addition on not forgetting
the important role construction industry plays in ensuring modern housing and
decent roads are put up to cater for the social well being of the raising Nigeria population.
The government of Nigeria would
benefit significantly through supporting a well-established arbitration
institution by bringing both local and foreign investors to put in resources in
the construction industry, and create a lot of employment opportunity for the
citizen. The findings would be useful to the Construction industry stakeholders
to adopt arbitration as the preferred method to solve their disputes