ABSTRACT
Mediation is an increasingly relevant dispute resolution mechanism within the Nigerian business landscape. As delays, costs, and inefficiencies in litigation become more pronounced, alternative dispute resolution (ADR) methods particularly mediation offer accessible and business-friendly solutions. This article explores the benefits and practical considerations of mediation for Nigerian businesses within the framework of the Arbitration and Mediation Act, 2023. It also examines relevant case law and policy developments that support mediation as a key dispute resolution mechanism.
- INTRODUCTION
Businesses in Nigeria operate under a legal framework where litigation is often slow, costly, and public. These limitations undermine commercial efficiency and strain business relationships. Against this backdrop, mediation – defined as a voluntary, non-binding process in which a neutral third party assists disputing parties in reaching a mutually acceptable resolution; has emerged as a viable alternative to traditional court-based dispute resolution. In today’s business environment, Nigerian enterprises face various commercial disputes over contracts, partnerships, banking, and more. Mediation offers an alternative to costly, lengthy litigation.
The enactment of the Arbitration and Mediation Act, 2023 (AMA 2023) marks a significant step forward in institutionalizing mediation in Nigeria. With the existing framework of state legislation like the Lagos Multi‑Door Courthouse Law 2007 (as Amended 2015) and the Lagos State Multi-Door Court House Practice Direction on Mediation Procedure 2008, mediation is gaining traction among Nigerian firms. This article examines the legal framework, benefits, and strategic considerations relevant to Nigerian businesses resorting to mediation.
WHAT IS MEDIATION?
Mediation is a voluntary, confidential, non‑binding negotiation process where a neutral facilitator (mediator) helps disputing parties reach a common resolution. Unlike a court or arbitrator, the mediator does not impose a decision. Instead, mediators guide, clarify underlying interests, and foster creative solutions.
- LEGAL FRAMEWORK FOR MEDIATION IN NIGERIA
2.1 PRE-2023 LANDSCAPE
Before 2023, mediation in Nigeria was practiced largely without a comprehensive legislative framework. While the Arbitration and Conciliation Act, Cap A18, Laws of the Federation of Nigeria 2004 provided a basis for conciliation, it did not adequately address mediation. Consequently, practices varied, and the enforceability of settlement agreements reached through mediation was often uncertain.
Notably, several states introduced Multi-Door Courthouses (MDCs) beginning with Lagos state in the year 2002 to institutionalize court-annexed mediation, however there was no unified national law.
2.2 THE ARBITRATION AND MEDIATION ACT, 2023
The Arbitration and Mediation Act, 2023 repealed the Arbitration and Conciliation Act 2004, and for the first time, the novel Act embeds a standalone, empowered Mediation regime which recognizes domestic and international commercial mediation, domestic civil mediation, and the enforcement of settlement agreements such as binding contracts, court judgments, or consent awards.
The AMA 2023 significantly changes the landscape by codifying mediation principles. Part II (Section 67–89) of the Act addresses:
- Voluntary submission of disputes to mediation.
- Suspension of statutory limitation periods during mediation (Section 71).
- Default is a single mediator, unless parties agree otherwise (Section 72).
- Confidentiality of mediation communications (Section 76).
- Binding effect and enforceability of settlement agreements (Section 82).
This Act aligns Nigerian law with international standards, including the UNCITRAL Model Law on International Commercial Mediation 2018 and Singapore Convention on Mediation 2019, although Nigeria is yet to ratify the latter.
2.3 LAGOS MULTI‑DOOR COURTHOUSE (LMDC)
The Lagos Multi‑Door Courthouse (LMDC) was established in June 2002 by the Negotiation and Conflict Management Group (NCMG) in collaboration with the High Court of Lagos state. Settlement agreements reached at the LMDC, in line with Article 17 of the Lagos Multi‑Door Courthouse Practice Direction on Mediation 2004, Section 19 of the Lagos Multi‑Door Courthouse Law 2015 and Order 28 Rule 4(1) of the Lagos State High Court (Civil Procedure) Rules 2019, are deemed to be enforceable as a judgment of the Court.
- BENEFITS OF MEDIATION FOR NIGERIAN BUSINESSES.
3.1 COST-EFFECTIVENESS AND SPEED
Mediation offers a swift and more cost-effective alternative to litigation and arbitration. Legal fees, filing costs, and expert witness fees are minimized. According to Hamu Legal, mediation can resolve disputes within weeks compared to years in the traditional court system.
3.2 CONFIDENTIALITY
Section 76 of AMA 2023 guarantees that statements made in mediation are inadmissible in subsequent proceedings, thereby protecting sensitive business information and reputation.
A major advantage of ADR is that it affords parties the right to privacy and confidentiality, which is valuable in highly sensitive matters. Court cases are often matters of public record and its records and/or judgments may be made available to a 3rd party upon application to the court for a certified true copy. However, ADR proceedings are typically private and helps protect the reputation of the parties involved as well as prevents sensitive information from being made available to the public.
3.3 FLEXIBILITY AND PARTY AUTONOMY
Mediation allows parties to:
- Select their mediator(s);
- Choose rules and venues and;
- Craft creative, non-monetary solutions such as business continuations, product reconfigurations, or future contracts.
This degree of control over the process is highly valued in complex commercial relationships.
3.4 PRESERVATION OF BUSINESS RELATIONSHIPS
Mediation is non-adversarial, thus making it conducive to preserve long-term partnerships, promote dialogue and solutions that safeguard ongoing commercial partnerships. This is particularly valuable in sectors such as construction, oil & gas, agriculture, and logistics where business relationships are vital in commercial spaces.
- LEGAL ENFORCEABILITY
Under Section 82 of Arbitration and Mediation Act 2023, a settlement agreement entered into as a result of mediation is binding as a contract and can be enforced as an arbitral award or application to a court as consent judgment. This gives mediation resolutions similar legal effect to judgments but with fewer procedural hurdles. Additionally, federal law allows cross-border recognition of mediated settlement agreements.
- CONSIDERATIONS AND LIMITATIONS
4.1 NON-BINDING UNTIL SETTLEMENT
Mediation is consensual and non-binding until parties sign a settlement. If mediation fails, parties may have to resort to arbitration or litigation, potentially increasing costs.
4.2 POWER IMBALANCES
In disputes between large and small businesses, unequal negotiation power may influence outcomes. Skilled mediators are essential to ensure fairness.
4.3 LACK OF PRECEDENT
Mediation does not produce binding precedents. While this promotes flexibility, it may result in inconsistent outcomes across similar disputes.
4.4 RISK OF BAD FAITH
One party may exploit mediation to delay proceedings or extract information. Section 76 of the Arbitration and Mediation Act 2023 protects confidentiality, but bad-faith in mediation remains a challenge.
- SUPPORTING CASE LAW AND INSTITUTIONAL DEVELOPMENTS
In the case of UBA Plc v. Trident Consulting Ltd (2013), the Nigerian Court of Appeal upheld the validity of an arbitration clause and reaffirmed the enforceability of ADR agreements. Though not a mediation case per se, it established the judiciary’s pro-ADR stance.
Similarly, the rise of Multi-Door Courthouses (MDCs) has advanced mediation significantly. Several states in Nigeria like Lagos, Abuja, and Kano now have MDCs where court-referred mediation helps decongest the dockets.
The National Industrial Court (NICN) also operates an ADR Centre under its civil procedure rules, handling employment and trade disputes through mediation and conciliation.
The following Nigerian cases have paved the way for mediation and affirmed its enforceability:
In the case of Mekwunye v. Lotus Capital Ltd (2018) the Court of Appeal affirmed that voluntarily entered mediation agreements are binding. In Statoil (Nig) Ltd v. Inducon (Nig) Ltd (2014), the Supreme Court emphasized judiciary respect for arbitration (and by extension ADR) clauses. The Court in the case of O.S.H. Ltd v. African Continental Bank Ltd (1999) upheld the arbitration clauses contained in the contracts thus, echoing respect for ADR mechanisms.
The Court in United Bank for Africa v. Achoru (1990) also enforced stricto sensu compliance with arbitration clause contained in financial contracts.
- PRACTICAL GUIDANCE FOR BUSINESSES
6.1 CONTRACTUAL CLAUSES
To fully leverage the benefits of alternative dispute resolution (ADR), businesses should carefully draft ADR clauses in their contracts. These clauses should:
- Expressly designate mediation as the first step in resolving disputes, before escalating to litigation or arbitration. This ensures parties are contractually bound to attempt amicable settlement through mediation, promoting early resolution and preserving business relationships.
- Clearly outline the procedural framework to initiate mediation proceedings, including the timelines for commencement and rules governing the process as ambiguity in procedures can lead to delay.
- Specify the method of appointing a mediator, whether through mutual agreement, nomination from a designated institution (such as the Lagos Multi-Door Courthouse), or by default appointment mechanisms if parties cannot agree.
- Lastly, parties are enjoined to indicate the venue of mediation, particularly in cross-border contracts, to avoid jurisdictional conflicts and logistical uncertainty.
By addressing these key elements, businesses can ensure that their ADR clauses are enforceable, practical, and effective in promoting efficient dispute resolution.
Sample clause:
“In the event of any dispute, the parties shall first submit the matter to mediation in accordance with the Arbitration and Mediation Act 2023. If not resolved within 30 days, either party may proceed to arbitration under the Rules of the Nigerian Institute of Chartered Arbitrators.”
6.2 MEDIATOR SELECTION
Parties are advised to choose mediators with:
- Subject-matter expertise on the issue for conflict.
- Accreditation (e.g., from the Nigerian Institute of Chartered Mediators and Conciliators or Lagos Multi-Door Courthouse).
6.3 COMBINING MEDIATION WITH ARBITRATION
The med-arb hybrid approach can be effective: mediation first, followed by binding arbitration where no resolution is reached during mediation.
- CONCLUSION
Mediation is a transformative dispute resolution mechanism, particularly well-suited to Nigeria’s evolving commercial landscape. With the introduction of the Arbitration and Mediation Act, 2023, the Nigerian legal system now formally supports the use of mediation as a valid, enforceable, and efficient tool.
Nigerian businesses especially SMEs, multinationals, and joint ventures should incorporate mediation into their contracts and dispute strategies. With trained mediators, clear procedures, and appropriate contractual frameworks, mediation can preserve business relationships, save costs, and enhance access to justice. But it’s not magic: effective mediation depends on structured planning, skilled leadership, equal footing, and meticulous settlement drafting. When deployed well, it can save years, millions, and even reputations.
REFERENCES
- Hamu Legal. (2023). The Benefits of Alternative Dispute Resolution (ADR) Mechanisms in Nigeria. Retrieved from: https://hamulegal.com/the-benefits-of-alternative-dispute-resolution-adr-mechanisms-in-nigeria/?utm_source=.com
- THE ARBITRATION AND MEDIATION ACT, 2023: Arbitration-and-Mediation-Act.pdf
- UBA Plc v. Trident Consulting Ltd (2013): UNITED BANK FOR AFRICA PLC V. TRIEDENT CONSULTING LIMITED – Legalpedia | The Complete Lawyer – Research | Productivity | Health, United Bank For Africa plc. V Trident Consulting Limited Qualified :: News // Banwo & Ighodalo
- https://www.mondaq.com/nigeria/litigation-mediation
- https://www.ibanet.org/the-nigerian-arbitration-and-mediation-act-2023
- https://www.mondaq.com/nigeria/arbitration-dispute-resolution/1638794/a-review-of-the-arbitration-and-mediation-act-2023-charting-a-new-course-in-nigeria?utm_source=.com
- https://guardian.ng/opinion/developments-review-of-arbitration-and-mediation-act-2023-part-3/?utm_source=.com
- https://www.mondaq.com/nigeria/arbitration-dispute-resolution/1374956/evaluating-the-effects-of-the-arbitration-and-mediation-act 2023-on-mediation-practice-in-nigeria-through-the-lens-of-the-lagos-multi-door-courthouse-lmdc?utm_source=.com
Obianuju Megafu
Executive Associate
Lateepha Dauda
Associate