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Disputes are inevitable in every relationship; they may be civil, commercial, or domestic in nature. In Nigeria, where the court system often faces significant delays due to backlogged cases, Alternative Dispute Resolution (ADR) has become an increasingly popular choice for both individuals and businesses. Due to these challenges, there arose a need to consider alternative methods of settling disputes. Alternative Dispute Resolution refers to several methods of resolving disputes without going to court. These methods include negotiation, mediation, conciliation, arbitration, early neutral evaluation, facilitation, mini-trials, expert appraisal, summary jury trials, and mediation-arbitration, among others. Initiatives such as the establishment of Multi-Door Courthouses by the judiciary in some states across Nigeria have further boosted ADR adoption, making it a valuable tool for resolving disputes in a way that saves time, reduces costs, and fosters collaboration.[1] This article examines the use of negotiation and mediation to resolve commercial disputes in Nigeria.
MEDIATION AND NEGOTIATION PRACTICE IN NIGERIA
Mediation as a form of alternative dispute resolution (ADR) in Nigeria is gradually becoming a viable option in resolving commercial, civil, and family disputes within the shortest possible period when compared with litigation and arbitration. Negotiation is a process in which two or more parties hold discussions in an attempt to reach an agreement on matters of mutual concern. This process, which involves the exchange of ideas and consideration of options to find common ground, forms the basis of all non-adjudicative dispute resolution procedures.[2] Negotiation is an indispensable step in any ADR process, as it is fundamental to all ADR activities. It is widely regarded as the most satisfactory method of dispute settlement. Negotiation involves discussions or dealings intended to reconcile differences and establish areas of agreement, settlement, or compromise that are mutually beneficial to the parties. Usually, negotiation consists of a “quid pro quo,” meaning the giving up of something in order to get something else in return.[3] Negotiation and mediation are non-binding ADR mechanisms. These methods are primarily consensual and reconciliatory. In Nigeria today, mediation tends to take the form of private mediation or court-annexed mediation.
i. Private mediation involves the parties seeking the assistance of an independent third party who offers mediation services on a commercial basis, such as the Lagos Court of Arbitration. Court-annexed mediation pertains to matters already filed in court, where the court directs the parties to attempt settlement through mediation. Any settlement agreement reached during mediation is then entered as the judgment of the court. This aligns with Section 24 of the High Court Laws of Lagos State, which provides that in any action before the High Court, the courts may promote reconciliation among the parties and encourage and facilitate the amicable settlement of disputes.[4] In Union Bank of Nigeria Plc v. Boney Marcus Industries Ltd[5], the court ruled that where a financial contract provides for arbitration, parties must comply before seeking judicial intervention.
ii. Real Estate and Property Disputes: Real estate transactions often lead to disputes over land ownership, tenancy, and contractual breaches. ADR is particularly useful in resolving these disputes efficiently, avoiding the delays associated with litigation.
iii. Maritime and Oil & Gas Disputes: The maritime and oil & gas sectors rely heavily on ADR, particularly arbitration, due to the technical nature of disputes. The Nigerian Maritime Arbitration Association (NMAA) provides a framework for resolving shipping and oil contract disputes without litigation. The case of Shell (Nig) Ltd v. Federal Inland Revenue Service[6] reinforced the importance of arbitration in resolving oil & gas disputes.
BENEFITS OF ADR FOR COMMERCIAL DISPUTES IN NIGERIA
Alternative Dispute Resolution (ADR) offers Nigerian businesses a range of benefits for resolving commercial disputes efficiently and amicably. The following section illustrates these advantages, drawing from real-life examples within Nigeria’s commercial landscape. Additionally, ADR ensures confidentiality, fosters cooperation, and preserves business relationships, making it a valuable tool in the dynamic commercial environment.
i. Cost-Effectiveness: ADR methods are generally more cost-effective than traditional litigation. For example, in Lagos State, many commercial disputes are resolved through mediation at the Lagos Multi-Door Courthouse (LMDC), where the costs and fees are significantly lower than those associated with lengthy court cases. Litigation involves extensive legal fees, court costs, and drawn-out proceedings, which can be financially burdensome for businesses. ADR eliminates many of these expenses, making it an attractive option, especially for small and medium-sized enterprises in Nigeria.
ii. Time Efficiency: ADR processes are typically faster than court litigation. For instance, commercial tenancy disputes in Lagos that are referred to the LMDC or the Citizens Mediation Centre are often settled within weeks, compared to the months or years court proceedings may require. This allows parties to resolve disputes promptly and refocus on their core business activities.
iii. Confidentiality: ADR proceedings are generally confidential, protecting sensitive business information from public disclosure. For example, in the oil and gas sector in Nigeria, companies often prefer mediation or arbitration to avoid sensitive contract details becoming public, as they might in open court. This confidentiality encourages more open discussions and facilitates candid exploration of potential solutions.
iv. Preserving Business Relationships: Commercial disputes often involve ongoing business relationships. Litigation can strain these relationships, leading to animosity and distrust. For instance, mediation has been successfully used to resolve disputes between Nigerian banks and their customers, allowing both parties to maintain a working relationship after settlement. ADR methods, such as mediation and negotiation, prioritize communication and collaboration, enabling parties to preserve their business relationships and find mutually acceptable solutions.
v. Creative Problem-Solving: ADR methods, particularly mediation, encourage creative problem-solving. For example, in disputes involving Nigerian real estate developments, mediators have facilitated agreements that include phased payments, joint ventures, or shared management arrangements—solutions that courts are typically unable to order. This flexibility allows for more innovative and tailored resolutions to meet the unique needs of the parties.
CONCLUSION AND RECOMMENDATIONS
The law is said to be dynamic. As society evolves, the law must adapt to keep pace. Alternative Dispute Resolution is increasingly seen as a way to improve access to justice for the public through its flexible, less expensive, and speedy procedures, in contrast to lengthy and time-consuming court trials. It is only rational that this means of resolving disputes is fully embraced. By explicitly stating in their contracts whether disagreements will be settled by negotiation, mediation, arbitration, or a combination of these, parties can optimise the advantages of ADR. Ultimately, ADR provides companies with a quick, discreet, and cooperative way to settle conflicts, allowing them to remain focused on their core objectives.
Recommendations
[1] https://hamulegal.com/the-benefits-of-alternative-dispute-resolution-adr-mechanisms-in-nigeria/ accessed November 12, 2025.
[2] International Arbitration and Disputes Resolution Directory 1997. “A Summary of Dispute Resolution Options”. By Paul Mitchard. P.3
[3] See J. Orojo and M.A. Ajomo, Law and Practice of Arbitration in Nigeria, published by Mbeyi Associate
[4] https://spaajibade.com/mediation-practice-in-nigeria/ accessed November 12, 2025
[5] (1990) 6 NWLR (Pt. 156) 254
[6] (2016) LPELR-40022 (CA)
Written by Muhiz Adisa and Kareema Mohammed for The Trusted Advisors
Email us: info@trustedadvisorslaw.com
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