Arbitration is a procedure for the settlement of disputes, under which the parties agree to be bound by the decision of an arbitrator whose decision is final and legally binding on both parties. Therefore, where two or more persons agree that a dispute or potential dispute between them shall be decided in a legally binding way by one or more impartial persons of their choice, in a judicial manner, the agreement is called an arbitration agreement.

Arbitration is a form of alternative dispute resolution, others are; negotiation, conciliation, mediation, mini-trial and med-arb. The law that regulates arbitration in Nigeria is the Arbitration and Conciliation Act. Arbitration may arise by virtue of an order of court, by statute or by agreement between the parties. Advantages of arbitration over litigation include;
• Parties select the venue
• Parties have privacy unlike in law courts
• Parties select the law they rather guides them
• It is flexible
• Saves cost
• Make decision making quicker unlike in courts
• The decision of the arbitrator is final
• It preserves the good relationship between parties

It must be noted however that arbitration does not affect criminal proceedings but usually commercial matters. The arbitration panel or arbitral tribunal may be composed of one or more arbitrators. The duty of the tribunal is to hear both parties and to make their decisions based on the interest of justice.

An award is a final determination of a particular issue of claim in the arbitration, i.e. the final decision of the arbitrator in the settlement of controversy which will be binding on both parties in the arbitral proceedings. However, the court may set aside an arbitral award if the party making the application furnishes proof that the award contains decisions on matters which are beyond the scope of the submission to arbitration. It may also be set aside if there is evidence of misconduct on the part of the tribunal.

It has become common practice in Nigeria to include arbitration clauses in commercial agreements as a dispute resolution technique because the courts are too slow and may take years in determining an issue, time which most business men do not have.