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Über dieses Buch

This book is the first-ever to explore commercial arbitration in the Ethiopian context. Alternative conflict resolution mechanisms are nothing new to the country: arbitration as a dispute settlement mechanism by which a third party issues a binding decision on a dispute between two or more parties by exercising the jurisdictional mandate conferred on it by the parties themselves was established with the adoption of the Civil Code in 1960. This pioneering book evaluates the extent to which Ethiopia’s laws and institutions allow disputing parties to effectively reap the benefits of international commercial arbitration. It interprets the relevant legislation and attempts to bridge the gaps in it, in order to help lawyers, arbitrators, arbitral institutions, academics and judges to understand and apply it. It also helps parties seeking to complete international transactions pertaining to Ethiopia make the right choice regarding conflict resolution.



Chapter 1. Ethiopia and Its Legal System: The Context

This chapter explores the context in which the laws and institutions of relevance to international commercial arbitration operate in Ethiopia. Particularly, attempt is made to introduce the legal system of Ethiopia to those unfamiliar with that.
It finds, overall, that the content of the laws, especially those that are of relevance to commerce and international commercial arbitration is essentially foreign, to say the least. Substantive laws were modelled mainly on Civil Law jurisdictions while procedural laws were adopted from Common Law jurisdictions.
Whatever the source, it may be said that Ethiopia has a fairly advanced body of transplanted commercial laws. That being said, their absorption and application has been modest, at best. Particularly, Ethiopia has yet to grow into a significant part of its commercial laws. This is, of course, not to imply that some of the commercial laws have not fallen obsolete 60 years after their adoption.
Seyoum Yohannes Tesfay

Chapter 2. Arbitration Agreement: Validity, Lapse and Interpretation

This chapter appraises the validity requirements for an arbitration agreement and its interpretation. Ethiopian law imposes some validity requirements that are uncommon in many jurisdictions. Yet most of them do not unreasonably impede the success of arbitration.
The arbitration agreement is required to be in writing only in exceptional cases provided for by law. Where the agreement is required to be in writing, it must be supported by a special document signed by all the parties bound by the contract and attested to by two witnesses. This requirement is impossible to comply with in contracts concluded by correspondence. The Electronic Signature Proclamation No 1072/2018 arguably alleviates this stringent requirement. Besides, the New York Convention to which Ethiopia acceded recently, considers an agreement contained in an exchange of letters or telegrams as having been made in writing, thus, modifying the rule as far as arbitration agreements that come within its scope of application are concerned.
Coming to interpretation, Ethiopian law provides that the provisions of an arbitration agreement pertaining to the jurisdiction of the arbitral tribunal are to be interpreted restrictively. This rule is ill-suited to the needs of commerce, especially in the context of international transactions.
Seyoum Yohannes Tesfay

Chapter 3. Arbitrability

This chapter appraises the state of Ethiopian law on arbitrability. It deals with whether the law proscribes submitting to arbitration specific subject matters. It finds neither the law nor the courts have directly addressed this issue.
Yet, bankruptcy, competition and consumer protection laws are likely to raise the issue of arbitrability. Regarding bankruptcy, it suggests that courts make individualised assessment of whether the continuation of arbitration is compatible with the core objectives of bankruptcy law and allow it to continue where it is compatible. Coming to competition and consumer protection laws, the fact that the law establishes a dispute settlement mechanism does not create irreconcilable incompatibility between the mechanism and arbitration. Arbitrators can decide on the rights inter se while other sanctions such as fines due for breach of the law and imprisonment can be applied by the dispute settlement mechanism that the law establishes.
Regarding the involvement of certain parties in arbitration, entities that are directly or indirectly affiliated with the state routinely object to arbitration on the ground that the contract is administrative and hence they cannot submit to arbitration. Ethiopian courts, by and large, find such contract inarbitrable thought that is not warranted in many cases.
Seyoum Yohannes Tesfay

Chapter 4. The Normative Basis for Decision on the Merits and Procedural Conduct of Arbitration: The Extent of Party Autonomy

This chapter examines the degree of latitude that parties to an arbitration agreement have to determine the norms that apply to the substance of the dispute between them and the flexibility they have to set the rules for the procedural conduct of arbitration. It finds that Ethiopian law is uncharacteristically liberal on these subjects.
The law defines arbitration as the settlement of a dispute by reference to principles of law—a notion that is much wider than law or even rules of law. As a consequence, the arbitration agreement need not expressly authorize the application of principles of law to the merits of a dispute for that to apply under Ethiopian law. Besides, the law does not prohibit parties to an arbitration agreement from choosing foreign law or even rules of law to apply to the substance of a dispute between them. In the same vein, parties are free to authorize a tribunal to apply equity both in the weaker and stronger or extra-systematic sense to the substance of a dispute between them.
Coming to party autonomy regarding procedural matters, parties to an arbitration agreement have maximum flexibility, to the extent of tailor-making the procedure the tribunal must follow. The only limit is that the procedure so devised should not unfairly favour one party over another.
Seyoum Yohannes Tesfay

Chapter 5. Kompetenz-Kompetenz and Separability

This chapter explores the role of arbitral tribunals and courts in the determination of arbitral jurisdiction. It finds that the legitimacy of arbitration trounces its efficacy under Ethiopian law. Any allegation, even a patently false one, that the arbitration agreement is invalid or non-existent has to be settled by a court. The parties to an arbitration agreement cannot even by an express term authorize the arbitral tribunal to decide on such challenge. Moreover, the tribunal does not have jurisdiction to decide on challenges directed even only at the scope of its powers unless the parties have vested in it such powers.
As if a readily available recourse to court were not bad enough, the law does not guarantee even parallel proceedings before a court and an arbitral tribunal. An Ethiopian court may issue injunctive order to halt the arbitral proceeding pending decision by the court on the issue of arbitral jurisdiction. The party resisting arbitration has also the right to appeal against a court decision in favor of arbitral jurisdiction.
That Ethiopian law and the jurisprudence of Ethiopian courts are completely silent regarding the doctrine of separability further exacerbates the foregoing problem. Courts will likely intervene in the manner above even when a challenge on grounds of invalidity or breach is directed at the underlying contract rather than the arbitration clause itself.
Seyoum Yohannes Tesfay

Chapter 6. Judicial Review of Arbitral Awards

This chapter explores whether and how Ethiopian law balances the rival goals of finality and fairness of arbitral awards. It finds that the law allows intervention in awards in a number of ways with far-reaching consequences. Firstly, it allows ‘appeal’ against an award on grounds which are addressed differently, such as by setting aside of an award, in most other jurisdictions. Secondly, an appeal lies against an award on the substantive merit of the award, where the award is ‘on its face wrong in a matter of law or fact.’ As if this were not lopsided enough in favour of the fairness of awards, the law permits contractually expanding the grounds for appeal. Thirdly, arbitral awards are also subject to review on cassation for ‘basic error of law.’ This type of review cannot be waived by agreement. That means potentially every award can end up before the Cassation Bench. This effectively reduces arbitration to a prelude to litigation in courts.
Where a review on appeal or cassation lies, the court can confirm, vary or reverse the award. In consequence, the outcome of a process that started out as arbitration could be essentially a judgment rather than an arbitral award. This defeats the very goal of the agreement to arbitrate. Particularly, it could significantly diminish the ability of the winner to have the ‘award’ enforced outside Ethiopia.
Seyoum Yohannes Tesfay

Chapter 7. Recognition and Enforcement of Foreign Arbitral Awards

Ethiopia ratified Convention on the Recognition and Enforcement of Foreign Arbitral Awards, recently, subject to declarations and reservation. It declared that it will apply the Convention to awards that are considered ‘commercial’ under Ethiopia’s national laws. It also declared that it will apply the Convention only to awards that are made in states party to the Convention, thus, excluding awards that are made in a number of countries including three of Ethiopia’s own neighbors. Besides, it crafted its own reservation that makes a temporal restriction to the applicability of the Convention. In consequence, the Convention does not fully supplant the law that applied to the recognition and enforcement of foreign awards prior to Ethiopia’s accession to the Convention. Hence, two parallel legal regimes are in force.
The New York Convention applies to the recognition and enforcement of awards that have not been excluded by the declarations and reservation made by the country while the Civil Procedure Code rules apply to non-convention awards. The rules in the latter are very restrictive. It is, therefore, hardy possible to secure the recognition and enforcement of foreign awards that have been excluded from the scope of the application of the Convention.
Seyoum Yohannes Tesfay

Chapter 8. The Institutional Setting for International Commercial Arbitration

This chapter appraises the institutional infrastructure for international commercial arbitration in Ethiopia. It evaluates, in particular, the level of support it is gets from the federal judiciary and arbitral institutions that have pivotal role in this type of arbitration.
It finds that federal courts of Ethiopia today do not play their role in arbitration to an internationally acceptable standard. It does seem that their inability, in this regard, is the result of lack of adequate knowledge of the rules and principles that govern international commercial arbitration, deplorable working conditions, the absence of mechanisms of accountability, especially when it comes to quality of judgments, and corruption though to a lesser extent.
Coming to the only arbitration institution that exists in the country, it does play its role fairly well as compared to the judiciary. The financial and organizational constraints under which it operates do, however, pose serious challenges to its success.
Seyoum Yohannes Tesfay
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