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

Clark and Connolly (2017).

Civil Code of Ethiopia Proclamation No. 165/1960, Art 3225(1).

Błaszczak and Kolber (2013), p. 190.

Id., at 191 and 198. Polish doctrine, for example, considers: ‘freedom of contract in international trade, principle of rebus sic stantibus, pacta sunt servanda, the principle of good faith, prohibition of abuse of subjective rights, the principle of cooperation between the creditor and debtor to perform the contract, the principle of liability for breach of contract and damages, prohibition of contradicting the effects of own behavior or prior acts of will (venire contra factum proprium nemini licet), the principle that the impossible excludes obligation (imposibilium nulla obliagatio), the principle of protection of acquired rights, the principle of protection of trust as transnational general principles of law.’

Rodriguez (2002).

Michaels (2007), p. 478. It is possible to divide the evolution of this concept into three stages: ancient lex mercatoria of the middle ages meaning a ‘transnational set of norms and procedural principles that established by and for commerce in (relative) autonomy from states.’ The second stage refers to what one may call ‘new lex mercatoria’ as was understood in the twentieth century to mean ‘an informal and flexible net of rules and arbitrators establishing a private international commercial law.’ The third stage which we may call ‘new lex mercatoria which moves from an amorphous and flexible soft law to an established system of law with codified legal rules’ principally the UNIDROIT Principles of International and Commercial Law and strongly institutionalized court-like international arbitration.

Park (2012), pp. 591 and 596.

Id. at 596–597. Though one may argue, for instance, the Principles of International Commercial Contracts published by UNIDROIT in 1994 represent lex mercatoria this is not tenable. This can at best be a snapshot of lex mercatoria as of 1994, not lex mercatoria itself. In fact, this document can turn out to be a competitor to lex mercatoria gradually.

Błaszczak and Kolber (2013), p. 191.

Reisman et al. (1997), p. 202.

Gaillard (2010), p. 107.

Samuel (2000), p. 195.

UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments, G.A. res. 61/33, U.N. Doc. A/40/17, Article 28(1).

Id. Article 28(1).

For example, in Uzbekistan the national law applies and in Georgia the law is silent on this issue. In Belarus and Moldova, the parties to dispute are free to choose among the laws of other countries or jurisdictions but not ‘rules of law’ such as international customs as codified by some organizations etc.… European Bank for Reconstruction and Development (2007), p. 10.

Civil Code of Ethiopia Proclamation No. 165/1960, Article 3325(1).

Civil Code of Ethiopia Proclamation No. 165/1960, Article 3339(1). According to this provision, ‘[a]ny person may be appointed as an arbitrator.’

David (1973), p. 29.

Civil Code of Ethiopia Proclamation No. 165/1960, Art. 16(1). According to this provision ‘[e]very person is free to exercise any activity which he deems proper . . . .’ Per sub article 2 of the same article ‘[t]he only restrictions which such freedom admits of are those which are imposed by the respect for the rights of others, morality and the law.’

In this connection, things like the UNIDROIT Principles of International Commercial Contracts and INCOTERMS issued by the International Chamber of Commerce come to mind. It is of course difficult to hold that the entire content of such ‘rules’ qualify as principles of law that Ethiopian law states should be the normative basis for decision on merits.

UNCITRAL Model Law as amended in 2006, Article 28(1).

Błaszczak and Kolber (2013), p. 198.

Caramelo (2008), p. 571.

Civil Code of Ethiopia Proclamation No. 165/1960, Article 2243.

Id., Article 2099. See also Articles 2100, 2142 and 2160(1) for more on the Courts use of equity.

Błaszczak and Kolber (2013), p. 199.

Quoted in Rubino-Sammartano (1992), p. 7.

Caramelo (2008), p. 573.

Błaszczak and Kolber (2013), p. 190.

Caramelo (2008), p. 574.

Arbitration laws and case law show a number of countries regarded as important centers of international arbitration allow arbitrators to decide based on equity. For example, Article 1051(3) of the German ZPO and Article 822 of the Italian Code of Civil Procedure allow parties to authorize arbitrators to decide based on the principles of equity. Similarly, in Switzerland and Poland parties are entitled to authorize the arbitral tribunal to decide on the basis of equity. Interestingly, perhaps in keeping with the English tradition that is less disposed to accept decision based on equity, the English Arbitration Act of 1996 only implicitly allows arbitrators to decide based on equity. Article 46(1)b of the Act provides that the tribunal may decide: “if the parties so agree, in accordance with such other considerations as are agreed by them or determined by the tribunal”. See Błaszczak and Kolber (2013), pp. 199 and 201.

‘Honourable Engagement’ (2010).

Caramelo (2008), p. 576. He cites Article 35 of the Portuguese Arbitration Act as conferring such extensive powers in this kind of arbitrator.

Id. According to Mr. Caramelo the wording of Article 35 leads one to conclude that the ‘composição amigável de litígio’ contemplated therein is not a decision in equity minus, but rather a decision in equity plus.

Id. p. 578. According to some authors in Polish doctrine too an amiable compositeur may disregard the rights and obligations ‘formulated imperatively’ in the contract between the parties. See also Błaszczak and Kolber (2013), p. 203.

Bloomberg Law Reports (2010), p. 4, quotes Coderre v. Coderre, Montreal Court of Appeal, Canada 13 May 2008.

Błaszczak and Kolber (2013), pp. 207–208.

UNCITRAL Model Law on International Commercial Arbitration with amendments adopted in 2006, Article 28(4). According to the Travaux Préparatoires empowering arbitrators to act as amiable compositeurs and for that matter to decide based on equity is not used in all legal systems. So, the model law did not want to regulate this. It only wanted to bring this type of arbitration to the attention of the parties and clarify that the terms of the contract cannot be affected even by arbitrators given such powers. See United Nations Commission on International Trade Law (2012), p. 112.

Civil Code of Ethiopia Proclamation No. 165/1960, Article 1763. In the Civil Code of Ethiopia equity plays a role in determining the content of contracts. Article 1713 provides that parties to a contract are ‘bound by the contract and such incidental effects as are attached to the obligations concerned by custom, equity, and good faith having regard to the nature of the contract.’ According to Article 1766 of the Civil Code the court may vary a contract where a special relationship such as family relationship exists between the parties and such relationship compels them to deal with each other in accordance with equity.

Agreement between Miftah Kedir, Mukemil Mohammed and a third partner also signed by seven traditional elders dated 3 November 1997 (23 Tikimt 1990 E.C). The file was obtained from the attorney of one of the parties and a copy is retained.

Id. The agreement contains a penalty clause. It stipulates the person who fails to abide by the decision of the Sergan Jema family council will have to pay by way of penalty 50,000 Birr to the State, 40,000 Birr to the other party and 10,000 Birr to the Sergan Jema elders. The agreement was signed by the three people in dispute and seven Sergan Jema elders.

Application for execution of ‘arbitral award’ lodged by Mr. Mukemil Mohammed dated 12 December 2001(03 Tahsas 1994 EC). The outstanding amount for which execution was lodged was Birr 170,122.75 (One hundred seventy thousand one hundred twenty two and seventy five cents).

Civil Code of Ethiopia Proclamation No. 165/1960, Article 3322(2) provides ‘[t]he parties shall not be bound by the terms of the compromise drawn up by the conciliator unless they have expressly undertaken in writing to confirm them.’

Mukemil Mohammed v. Miftah Kedir, Federal High Court, Case No. 60530, Decision dated 17 April 2008 (Miazia 9, 2000 EC).

Haris et al. (2007), p. 52. In David Wilson Homes Ltd v. Survey Services Limited, a clause in an insurance policy that read as ‘any dispute or difference arising hereunder . . . shall be referred to a Queen’s Counsel of the English Bar to be mutually agreed . . . or in the event of disagreement by the Chairman of the Bar Council’ was deemed to constitute an arbitration agreement despite no mention of arbitration at all in the clause. That the dispute was referred to a third party that would render a binding decision and that the matter related to an insurance policy rendered any construction of this clause to mean something different from arbitration lead to this conclusion.

Telephone interview, with Mr. Miftah Kedir, conducted on 21 February 2015. Unfortunately, I could not get the views of Mr. Mukemil Mohammed, who reportedly, has passed away.

Ethio-Telecom v. PTE International Incorporated, Cassation Case No. 63063, Cassation Bench of the Federal Supreme Court, 03 Hidar 2005 EC. Reported in Cassation Bench Decisions Vol. 14 (2013). The central issues the Cassation Bench addressed are whether review on Cassation is possible despite a finality clause in the arbitration agreement and the substantive issue of whether the facts of the case indicate there was novation of contract. So, the case is not really authority on the issue of amiable composition. It is only an obiter dictum.

Born (2001), p. 2.

Gaillard (2010), p. 94.

UN Convention on Recognition and Enforcement of Foreign Arbitral Award of 1958, Article V(1)d.

Born (2001), p. 2.

Civil Code of Ethiopia Proclamation No. 1965/1960, Article 3345(1).

Civil Procedure Code Decree No. 52/1965, Art 317(1).

Civil Code of Ethiopia Proclamation No. 165/1960, Article 3346.

Sedler (1968), p. 388.

Błaszczak and Kolber (2013), pp. 191–192. In Poland, for example, express authorization by the parties is required for the tribunal to apply principles of law. In contrast, the Swiss and French laws as well as legal doctrine developed in the two countries provide that the basis of decision should be ‘règles du droit’, thus implicitly allowing the use of general principles of law as the basis for decision, so long as at least the general principles are part of the legal system. See also, Hosseraye et al. 2012, p. 352. The 2011 French Law leaves to the parties the choice of law applicable to the substance of the dispute but, where the parties have not made choice, the arbitrators are free to apply the ‘rules of law’ That they consider appropriate. In other words, the arbitrators do not need an express authorization by parties to apply ‘rules of law’ instead of limiting themselves to the law of a specific country. The use of the words ‘rules of law’ instead of ‘law’ is deliberate. They aim at enabling the arbitrators to apply principles of law rather than being bound to the laws of a specific country.

UNCITRAL Model Law on International Commercial Arbitration with Amendments as Adopted in 2006, Articles 28(1) and (2) of the Model Law indicate disputes are to be resolved based on ‘rules of law’ chosen by the parties to the arbitration agreement. In case parties to arbitration agreement fail to choose the applicable law, arbitrators are to apply ‘the law’ determined by the conflict of laws rules they consider are applicable. So, where parties have not chosen ‘rules of law’, what will apply is a specific law reached through the application of conflict of laws rules. So where the ‘law’ of the specific state reached at by application of conflict of laws rules does not mandate the application ‘principles of law’, only the laws of the specific state will apply to the substance of the dispute.

German Code of Civil Procedure (ZPO) of 1998, Section 1051(1) provides that arbitrators are to decide disputes in accordance with such ‘rules of law’ as are chosen by the parties. ‘Rules of law’ are generally construed to be broader than ‘the law’ as seen in relation to French Law. So, the use of this term suggests parties can, according to German law, validly choose the application of principles of law. But providing for cases where parties to dispute have not chosen substantive law applicable to the dispute, sub 2 of Section 1051 says ‘the law’ of the state, with which the subject matter of the proceeding is most closely related applies. Here the change in language indicates use of ‘principles of law’ is not the default option unlike in Ethiopia. See German Arbitration Law of 1998, tenth Book of the Code of Civil Procedure, available in English at: http://​www.​dis-arb.​de/​en/​51/​materials/​german-arbitration-law-98-id3, accessed on 13/09/2011.