When drafting arbitration agreements, businesses rarely set out detailed rules and procedures to match their particular needs. Indeed, during negotiations, businesses are reluctant to consider the possibility that things will not work out as planned. They, therefore, base their decision to include an arbitration clause with limited background information. This note aims to prevent a rude awakening by providing guidance on the cost structures of leading arbitral institutions in Nigeria. We have selected five institutions, which we believe represent a good mix regarding their reputation and geographic location, namely:
- the Lagos Court of Arbitration (LCA);
- the Lagos Chamber of Commerce International Arbitration Centre (LACIAC);
- the Regional Centre for International Commercial Arbitration, Lagos (RCICAL);
- the Abuja Chamber of Commerce Dispute Resolution Centre (ACC-DRC); and
- the Janada International Centre for Arbitration and Mediation (JICAM).
Components of Arbitration Costs
Arbitration costs are comprised of two broad elements. The first element (beyond the scope of this note) includes the expenses that parties incur in presenting their cases, such as legal representation costs, witnesses and party-appointed experts. The second element, on which this note focuses, concerns the arbitration’s procedural costs, including the arbitrators’ fees and expenses, and institutional administrative fees.
Comparison of the Costs
LCA Arbitration
The LCA bases its calculation of the administrative fees on the amount in dispute (ad valorem system) and the arbitrator’s fee either based on time (a daily rate of NGN 800,000 or an hourly rate of NGN 100,000) or ad valorem.
For the arbitrator’s fee under the ad valorem system, the LCA Rules set a minimum and maximum amount. The LCA determines the exact fee by considering the arbitration’s specific circumstances, such as the complexity of the case, the arbitrator’s experience and the scheme under which a party initiates the arbitration (i.e., the Small Claims, Expedited or Standard). Where the tribunal involves three members, the arbitrator’s fee is multiplied by three.
The LCA’s administrative charges are based on a fixed percentage of the disputed amount.
The chart below demonstrates how the disputed amount affects the costs under LCA’s Standard Scale. As is common with the ad valorem system, the higher the disputed amount, the slower the cost increase. Therefore, arbitration under the LCA Rules appears to be more economically viable when the disputed amount is particularly high.
| Criteria | NGN 30m dispute | NGN 40m dispute | NGN 50m dispute |
| Administrative fees (NGN) | 650,000 | 900,000 | 1,010,000 |
| Min / Max | Min / Max | Min / Max | |
| Arbitrator’s fees (NGN) | 1,243,000 / 4,361,400 | 1,426,770 / 5,317,785 | 1,555,560 / 6,009,435 |
LACIAC Arbitration
As with proceedings under the LCA Rules, LACIAC’s arbitrator fees and administrative charges depend on the disputed amount. Where the tribunal involves three members, the arbitrator’s fee is multiplied by three. The LACIAC Rules differ in that they do not set a minimum and maximum amount for the arbitrator’s fees.
Administrative charges consist of the Secretariat’s ad valorem charges, a non-refundable registration fee (USD 250) and, unless the parties agree otherwise, an additional fee for LACIAC’s registrar services (USD 1,500).
LACIAC designates its fees and costs in USD. The Rules clarify that parties can make payments in NGN at the relevant Central Bank of Nigeria (CBN) exchange rate on the payment date (the chart below uses an exchange rate of NGN 380 to USD 1).
| Criteria | NGN 30m dispute | NGN 40m dispute | NGN 50m dispute |
| Administrative fees (NGN) | 950,000 | 950,000 | 950,000 |
| Arbitrator’s fees (NGN) | 1,499,993 | 1,999,997 | 2,500,001 |
RCICAL Arbitration
The RCICAL calculates the arbitrator’s fees and administrative charges using the ad valorem system. Unlike the LCA and LACIAC, RCICAL appears to use separate scales for sole arbitrators and tribunals involving multiple arbitrators. The Rules set minimum and maximum fees in this regard.
RCICAL’s administrative charges consist of a registration fee (USD 1000) and ad valorem Secretariat fees.
As with LACIAC, RCICAL designates its fees and costs in USD. Parties may presumably make NGN payments at the relevant CBN at the payment date (the chart below uses an exchange rate of NGN 380 to USD 1).
| Criteria | NGN 30m dispute | NGN 40m dispute | NGN 50m dispute |
| Administrative fees (NGN) | 899,995.80 | 1,199,998.20 | 1,500,000.60 |
| Min / Max | Min / Max | Min / Max | |
| Arbitrator’s fees (NGN) | 1,140,000 / 3,990,000 | 1,439,998.60 / 5,189,994.40 | 1,640,000.20 / 5,990,000.80 |
ACC-DRC Arbitration
As with the arbitral institutions discussed above, the ACC-DRC bases its calculation of administrative expenses on the amount in dispute, and the arbitrator’s fees either on time (a daily rate of NGN 500,000 or an hourly rate of NGN 60,000) or ad valorem.
The chart below shows the arbitration costs based on ACC-DRC’s Standard Scale.
| Criteria | NGN 30m dispute | NGN 40m dispute | NGN 50m dispute |
| Administrative fees (NGN) | 325,000 | 450,000 | 530,000 |
| Min / Max | Min / Max | Min / Max | |
| Arbitrator’s fees (NGN) | 950,000 / 3,906,000 | 1,100,000 / 4,625,000 | 1,200,000 / 5,125,000 |
JICAM Arbitration
JICAM oped its doors in the fourth quarter of 2018. Under its arbitration rules, the arbitrator’s fees and administrative charges depend on the amount in dispute. The arbitrator may also base his or her fees on time (a daily rate of USD 2000 for the hearing and an hourly rate of USD 250 for preliminary matters). Where there is a tribunal involving three members, the arbitrator’s fee is multiplied by three.
As with LACIAC and RCICAL, JICAM states its fees and costs in USD. Parties may presumably make NGN payments at the relevant CBN at the payment date (the chart below uses an exchange rate of NGN 380 to USD 1 and is based on JICAM’s Standard Scale).
| Criteria | NGN 30m dispute | NGN 40m dispute | NGN 50m dispute |
| Administrative fees (NGN) | 654,996.50 | 904,998.50 | 987,000.22 |
| Min / Max | Min / Max | Min / Max | |
| Arbitrator’s fees (NGN) | 1,216,550.41 / 4,326,290.90 | 1,380,832.48 / 5,189,879.60 | 1,509,623.51 / 5,881,535.13 |
Factors that businesses should bear in mind
Set out a budget for the arbitration
When a party refers a dispute to an arbitral institution, the institution will, in addition to a filing fee, require the party to make advance payments. These advance payments may make up a large proportion of the total arbitration costs. It is, therefore, desirable to set aside a budget for the arbitration.
It is customary for both parties to share the advance costs equally. However, one party (usually the respondent) may refuse or fail to pay its share. When this occurs, the other party may be called upon to make the advance payments fully, to continue with the proceedings.
The numbers in the charts above do not give the full picture
The total costs of arbitration proceedings will exceed the arbitrator’s fees and administrative charges. Other expenses may include costs for room hire, transcriptions, the arbitrator expenses, etc. There will also be legal fees, which can become a major cost driver.
Consider the best institution for the dispute in hand
Cost is important, but it is not everything. This is reflected by the fact that although the LCA tends to be the most expensive institution in Nigeria, according to the 2020 Arbitration in Africa Survey, it is one of the most popular.
Naturally, when drafting arbitration agreements, businesses should always bear in mind the cost of arbitration if things go wrong. Nevertheless, the important question to ask is—do the benefits of that particular arbitration institution outweigh its costs? We will, in a subsequent post, explore differences in institutional arbitration rules, and how these may affect the choice of an arbitration clause.
