Arbitration Clauses: Common Drafting Errors, Pathological Clauses, And Their Legal Consequences In ADR Proceedings

Arbitration has become a central pillar of dispute resolution in Nigeria’s commercial landscape, driven by party autonomy, confidentiality, procedural flexibility, and the enforceability of awards under the Arbitration and Mediation Act 2023. However, the effectiveness of arbitration is often determined long before any dispute arises at the drafting stage of the arbitration clause.

Poorly drafted clauses, commonly referred to as “pathological arbitration clauses,” continue to undermine dispute resolution processes in Nigeria. Rather than delivering efficiency and finality, such clauses generate jurisdictional confusion, procedural delays, satellite litigation, and, in some cases, complete unenforceability of the arbitration agreement.

This article examines common drafting errors in arbitration clauses, the concept of pathological clauses, and their legal consequences in Nigerian ADR proceedings.

The Central Role of Arbitration Clauses in ADR

An arbitration clause is the jurisdictional foundation of arbitration. It is the agreement by which parties elect to submit disputes to private adjudication rather than the traditional court system.

Under Nigerian law, particularly the Arbitration and Mediation Act 2023, arbitration is strictly consensual. Consequently, the validity, clarity, and completeness of an arbitration clause directly determine whether:

a. ) A dispute can validly be referred to arbitration

b. ) An arbitral tribunal has jurisdiction

c.) The resulting award will be enforceable.

A defective clause therefore does not merely create inconvenience; it can defeat the entire dispute resolution mechanism agreed upon by the parties.

Most importantly, Section 5 of the Arbitration and Mediation Act 2023 provides that where an action is brought before a court in respect of a matter subject to arbitration, the court shall stay proceedings and refer the parties to arbitration unless the agreement is invalid, inoperative, or incapable of being performed.

Similarly, Section 58(2)(a)(ii) permits refusal of recognition or enforcement of an arbitral award where the arbitration agreement is invalid under the applicable law or Nigerian law.

These provisions underscore the fact that the arbitration clause is the legal and jurisdictional backbone of ADR proceedings.

What Are Pathological Arbitration Clauses?

The term “pathological clause” refers to an arbitration agreement that is defective, unclear, or contradictory in such a manner that it frustrates or renders uncertain the arbitral process.

These clauses are defective in drafting and operation: although they exist contractually, they fail to provide a workable framework for dispute resolution.

Common characteristics include: Ambiguity in the intention to arbitrate; Conflicting dispute resolution mechanisms; Omission of essential procedural elements such as the seat, institution, or appointment mechanism; Reference to non-existent arbitral institutions or rules; and Unclear scope of disputes covered.

The result is often jurisdictional disputes at the threshold of arbitration proceedings.

Common Drafting Errors in Arbitration Clauses in Nigeria

A common drafting defect is the combination of arbitration and litigation without procedural clarity. For example:

“Disputes shall be resolved by arbitration or the courts.”

Such clauses create uncertainty as to whether arbitration is mandatory or optional, often resulting in preliminary objections and unnecessary judicial intervention.

(b) Failure to Specify the Seat or Venue of Arbitration

The seat of arbitration determines the procedural law governing the arbitration (lex arbitri) and the court with supervisory jurisdiction over the proceedings.

Failure to specify the seat may lead to: Jurisdictional uncertainty; Difficulties in enforcing interim measures; and Conflicts regarding applicable procedural rules.

A common mistake is confusing the “venue” of arbitration with the “seat.” While the venue refers to the physical location of hearings, the seat is the legal home of the arbitration.

(c) Reference to Non-Existent or Incorrect Institutions

Clauses sometimes refer to arbitral institutions inaccurately named or no longer in existence, including: Incorrect arbitration bodies; Outdated institutional rules; or Poorly defined “international arbitration centres.”

This creates uncertainty regarding the applicable procedural framework.

(d) Ambiguity in the Appointment of Arbitrators

Clauses that fail to clearly define: The number of arbitrators; The appointment mechanism; or The default appointing authority,

often necessitate court applications for appointment, thereby delaying the arbitral process.

(e) Unclear Scope of Disputes Covered

Phrases such as:

“arising out of or in connection with this Agreement”

are sometimes omitted or poorly drafted, leading to disputes regarding arbitrability and the scope of the tribunal’s jurisdiction.

(f) Pathological Multi-Tier Dispute Resolution Clauses

Some agreements combine negotiation, mediation, and arbitration without specifying timelines, procedural sequence, or the consequences of non-compliance.

This frequently results in procedural uncertainty and enforcement challenges.

(g) The “May vs. Shall” Trap

The use of permissive language such as:

“The parties may refer disputes to arbitration”

creates ambiguity as to whether arbitration is mandatory or merely optional.

Nigerian courts have historically grappled with whether the word “may” imposes a binding obligation or merely provides an invitation to negotiate, leading in some instances to prolonged interlocutory appeals.

(h) Incompatible Forums

Clauses that simultaneously designate a court and an arbitral tribunal for the same dispute may create a jurisdictional stalemate.

For example, a clause referring disputes to arbitration while simultaneously conferring exclusive jurisdiction on the Federal High Court creates uncertainty regarding the parties’ true intention.

(i) The “Silent Seat” Problem

Failure to specify the seat of arbitration remains one of the most damaging drafting omissions.

Under the Arbitration and Mediation Act 2023, the seat determines:

1. The procedural law governing the arbitration;
2. The court with supervisory jurisdiction; and
3. The legal framework for enforcement and setting aside proceedings.

An undefined seat can therefore trigger conflicting judicial interventions.

(a) Jurisdictional Challenges

Defective clauses frequently result in preliminary objections challenging the tribunal’s jurisdiction, compelling courts to determine whether a valid arbitration agreement exists.

Instead of streamlining dispute resolution, pathological clauses often generate: Preliminary litigation; Appointment disputes; and Repeated procedural hearings.

This undermines the cost-efficiency objective of ADR.

(c) Risk of Clause Invalidation

In extreme circumstances, courts or tribunals may hold the arbitration clause to be: Inoperative; Incapable of being performed; or Void for uncertainty.

Where this occurs, parties are forced back into conventional litigation.

(d) Enforcement Challenges Under the Arbitration and Mediation Act 2023

Even where an arbitral award has been rendered, defects in the arbitration clause may be relied upon to: Resist recognition or enforcement; or Apply to set aside the award on jurisdictional grounds.

(e) Judicial Intervention and Loss of Party Autonomy

One of the core principles of arbitration is minimal court interference. However, pathological clauses inevitably invite judicial intervention, thereby undermining party autonomy and procedural efficiency.

Nigerian Judicial Attitude Toward Arbitration Clauses

Nigerian courts generally adopt a pro-arbitration approach and seek to uphold arbitration agreements where the parties’ intention to arbitrate is clear. However, courts will not rewrite fundamentally defective clauses or supply missing essential terms.

Where an arbitration clause is defectively drafted, courts may: declare it invalid for vagueness; sever the defective portion and enforce the remainder; or interpret it in line with the parties’ apparent intention.

The court’s role is to give effect to the parties’ intention, not to remake their contract, having regard to the contract terms, parties’ conduct, and surrounding circumstances.

A notable authority is Mekwunye v. Imoukhuede, where the Supreme Court upheld an arbitration clause despite an incorrect reference to the “Chartered Institute of Arbitrators, London, Nigeria Chapter.” The Court treated the error as a mere misnomer and affirmed that minor drafting defects will not invalidate an arbitration clause where the intention to arbitrate is clear.

Relying on Agbule v. Warri Refinery & Petrochemical Co. Ltd, the Court further held that a party who had acted on a defective description could not later challenge it after waiving objection by conduct.

Importantly, arbitration remains rooted in consent and voluntariness. Accordingly, an arbitration clause may be invalid where a party establishes lack of informed consent, fraud, coercion, or misrepresentation.

Best Practices for Drafting Effective Arbitration Clauses

To avoid pathological clauses and ensure enforceability under the Arbitration and Mediation Act 2023, drafters should:

1. Use clear and mandatory language establishing an unequivocal agreement to arbitrate;
2. Specify the seat and venue of arbitration;
3. Clearly identify the arbitral institution and applicable rules;
4. Define the number of arbitrators and the appointment procedure;
5. Clearly define the scope of disputes covered;
6. Ensure alignment with the Arbitration and Mediation Act 2023; and
7. Avoid conflicting dispute resolution mechanisms.

Arbitration clauses are often treated as boilerplate provisions, yet they form the foundation of enforceable ADR mechanisms in Nigeria. Poorly drafted clauses commonly described as pathological undermine party autonomy and expose commercial relationships to unnecessary litigation, delay, and escalating costs.

With the enactment of the Arbitration and Mediation Act 2023, the need for precision in drafting has become even more critical. Arbitration clauses must no longer be inserted mechanically into contracts but carefully structured to define the seat of arbitration, number of arbitrators, appointing authority, governing rules, and language of proceedings.

In practice, one of the most damaging consequences of a pathological clause is the “Empty Chair” syndrome, where one party participates in the arbitration while the other deliberately abstains, only to later challenge the award on jurisdictional grounds arising from defective drafting. Such tactics weaken the integrity of the arbitral process and defeat the efficiency arbitration seeks to achieve.

Ultimately, arbitration succeeds or fails at the drafting stage. Precision in drafting is not merely good legal practice, it is essential risk management.

1. Julian D M Lew, Loukas A Mistelis and Stefan M Kröll, Comparative International Commercial Arbitration (Kluwer Law International 2003).
2. Emmanuel Gaillard and John Savage (eds), Fouchard Gaillard Goldman on International Commercial Arbitration (Kluwer Law International 1999).
3. William W Park, Arbitration of International Business Disputes: Studies in Law and Practice (2nd edn, Oxford University Press 2012).
4. Redfern and Hunter, Law and Practice of International Commercial Arbitration (6th edn, Sweet & Maxwell 2015).
5. Gary B Born, International Commercial Arbitration (3rd edn, Kluwer Law International 2021).
6. Arbitration and Mediation Act 2023.
7. Chartered Institute of Arbitrators (UK), Guidelines on Drafting Arbitration Clauses (CIArb 2015).
8. Mekwunye v Imoukhuede (2019) 13 NWLR (Pt 1690) 439 (SC).
9. Agbule v Warri Refinery & Petrochemical Co Ltd (2013) 6 NWLR (Pt 1350) 318 (SC).
10. UNCITRAL Model Law on International Commercial Arbitration 1985 (as amended in 2006).
11. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.