The Nigerian Law Dictionary defines Arbitration as “the settlement or resolution of a civil dispute between parties in a judicial manner by a person or body other than a judge, who is called an arbitrator, with such a person’s or body’s decision accepted as binding by the disputing parties; a method of dispute resolution involving one or more neutral third parties who are chosen or agreed to by all the disputing parties and whose decision is accepted by the disputants as binding; the determination of a dispute by one or more independent third parties (called the arbitrators) rather than by a court.”

In scholarly literature, “commercial” is described as activities involving the exchange of goods, services, or financial value between parties for the purpose of profit or business advantage. This includes trade, investment, financing, transportation, intellectual property, and consulting services.

Arbitration has emerged as an efficient and flexible method for resolving commercial disputes, often offering a faster and more adaptable alternative to traditional litigation. Its significance in both national and international business transactions continues to grow. One of its key benefits is the ability for parties to select arbitrators with expertise relevant to the subject matter, which improves efficiency and reduces overreliance on extensive legal procedures.

Moreover, arbitration allows parties to customize the procedural rules that govern their dispute, offering a level of autonomy and control rarely found in litigation. Confidentiality, a cornerstone of many arbitral proceedings, is particularly valuable in commercial contexts where business-sensitive information is at stake. Additionally, arbitration can preserve long-term commercial relationships due to its less adversarial nature.

Nonetheless, arbitration is not without challenges. Critics highlight the dangers of mandatory arbitration clauses that may deprive parties, particularly weaker ones, of access to justice. The appointment of arbitrators may also raise concerns about neutrality or perceived bias, especially in repeat appointments. Furthermore, the finality of arbitral awards, while efficient limits opportunities for appeal, which can be problematic in cases of serious legal or procedural error.

Understanding both the benefits and limitations of arbitration enables commercial actors to make informed choices about dispute resolution mechanisms that safeguard their interests while promoting effective dispute settlement.

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References
Born, G. B. (2021). International Commercial Arbitration (3rd ed.). Kluwer Law International.
Lew, J. D. M., Mistelis, L. A., & Kröll, S. M. (2003). Comparative International Commercial Arbitration. Kluwer Law International.
Moses, M. L. (2017). The Principles and Practice of International Commercial Arbitration (3rd ed.). Cambridge University Press.
Redfern, A., & Hunter, M. (2015). Law and Practice of International Commercial Arbitration (6th ed.). Sweet & Maxwell.
Stipanowich, T. J. (2014). Arbitration: The New Litigation. University of Illinois Law Review, 2010(1), 1–59.
Nigerian Law Dictionary (2020). Legal Ideas Limited.