It is no secret that the world today is
a global village, interdependent on itself to ensure the continuity of a
thriving commercial community and the survival of each and every nation. Cross
border transactions are the norm in today’s world
and cannot be avoided.  Daily, international business
contracts are signed as well as Bilateral Investment Treaties
(BIT)   to protect international commerce, cross border
transactions and investments.

Human nature dictates that conflicts will
arise in the execution of these transactions. Conflicts are part and parcel of
contracts, particularly cross border contracts. For this reason, dispute
resolution mechanisms are agreed, setting out the parameters for the resolution
of potential disputes before they occur. In a recent survey conducted by White
and Case, in collaboration with Queen Mary University, School of International
Arbitration on the Improvements and Innovations in International Arbitration,
90% of the respondents to that survey confirmed that international arbitration
is their preferred dispute resolution mechanism.

On this premise, the question on the
ease and mechanics of arbitration and its competence in the resolution of
conflicts in the execution of cross border contracts and transactions comes to
fore. How can arbitration be a successful tool for the promotion of investment?

Due diligence must be carried out on the
future stability, predictability, and protection of foreign investment prior to
a potential foreign investor making an investment commitment. Arbitration
, as noted, is the preferred dispute
adjudication method in protecting foreign investment.

Undoubtedly, there is
a nexus between the existence of a stable legal environment which is
pro-arbitration, and the level of investment which an economy can attract. For
instance, Bilateral Investment Treaties (BITs) play a role in promoting Foreign
Direct Investment in countries. BITs are treaties between countries which
protect foreign investors and their investments in a host country. This is
essentially by means of the dispute resolution clause in the BIT. More often
than not, this is an arbitration clause prescribing arbitration at the International
Center for Settlement of Investment Disputes (ICSID).

With the existence of
a BIT, potential investors and their investments enjoy some amount of security.
ICSID, being an institution of the World Bank, enjoys some level of compliance and
unreserved enforcement of its arbitral awards; the ICSID Convention being
widely assented to by countries who would rather be on the good side of the
World Bank.

Countries such as
Singapore, Hong Kong or Rwanda are premium investment hubs for potential
investors. These states each have a thriving pro-arbitration stance to dispute
resolution. In simple terms, arbitration friendly jurisdictions are the preferred
destination for potential investors. One could argue that arbitration not being
subject to any particular jurisdiction essentially wears a “transnational hat”
which strategically makes it independent of the national legal system of the
host nation. This advantage goes a long way in the minds of investors as the
idea of national bias or mistrust of the national legal system of a host state
is removed.

Also, arbitration
enjoys the clout of the Convention on the Recognition and Enforcement of
Foreign Arbitral Awards (the New York Convention 1958). This Convention ensures
the enforcement and recognition of foreign Arbitral awards in all states which
are signatories to the convention. Currently, the convention has 156 members,
thus easing the enforcement of Arbitral awards. These features amongst others encourage
investments and increase Foreign Direct Investment. Nigeria stands to
meaningfully benefit if the investment climate is conducive and receptive to
investors. The Nigerian economy, if it must develop, is in dire need of
investors who offer expertise, capital and industrial revolution.

Nigeria has made
definite progress in ADR over the years and with the recent marked growth in
foreign direct investment, arbitration would most certainly have a role to play
in the protection and sustenance of foreign investment which is fundamental to the
growth and development of our economy.

By – Ridwan Bello

       Associate, Olisa Agbakoba Legal