17 Jun
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Cassation Number 2239/2003 and Party Autonomy in Ethiopian Arbitration Law

Parties’ freedom to agree on any matter extends to agree to resolve their dispute either judicial litigation or arbitration. Arbitration is a system of dispute settlement where by disputants takes their case before arbitrators of their own choice. The civil code defines it “as a contract whereby the parties to a dispute entrust its solution to a third party, the arbitrator, who undertakes to settle the dispute in accordance with the principles of law.” (Art 3325(1)).

As any kind of consensual undertaking, the arbitral submission must adhere to the requirements under art 1678 of the civil code. The incapacity of the parties, the inarbitrability of matters, and the form in which it is signed might make the dispute settlement clause void. For instance, if an administrative agent enters into arbitration agreement, the dispute settlement clause will be voidable, as per art 315(2) of the civil procedure code. Also, for insurance contracts, the dispute settlement clause is expected to be in writing.

Recognizing parties’ interest to take their case to arbitration presupposes their autonomy. Party autonomy is an important pillar in any kind of contract agreement. The concept of party autonomy refers to the parties’ freedom to choose arbitration over judicial litigation, the venue of arbitration, the time limit in which the award can be given, substantive and procedural laws (in case of international arbitration). During signing of dispute settlement clause, the parties can insert arbitration final clause, i.e., a clause which aims to make the arbitral award final (non-appealable).

Ethiopian arbitration law allows appeal for those who are dissatisfied by the awards. Any party to arbitration proceeding may appeal under some specified conditions. However, they can waive the right of appeal but the waiver will not have any effect unless made with full-fledged consent (Art 350(2) of Civil Procedure Code).

Appeal is a procedure where by a party displeased by a decision of a lower court goes to a court of higher material jurisdiction. It can also be a process of asking a substantial change to a prior decision. Rober Allen Sedler, a renowned author on Ethiopian Civil Procedure, defines appeal as, “an application by a party to higher court to set aside or revise a decision of a subordinate court.” The court which is seized has the discretion to conduct de-novo hearing (re-hearing the case without any reference to the prior judgment.) However, Sedler argues that an appeal means a review of the case and not a retrial of the case by the appellate court. Does this exclude de-novo­ hearing? I will leave the question unanswered as the reader may be interested to read more about it. The grounds of appeal will involve errors of law and fact. Either party may appeal against any final judgment rendered in lower courts.

Art 348 of the civil procedure code says that the judgment may confirm, vary or reverse the decree or order from which the appeal is preferred. Appeal is a basic right for any party who is not satisfied with the rendered judgment. This article does not aim to talk much about appeal, but would directly move to appeal in arbitration.

If the parties save their right to appeal, art 351 will be applicable. Nevertheless, if the parties decide to make the arbitral award final, then they have the right to set it aside as per 356 of the Civil Procedure Code. The analogy interpretation of provisions regarding hearing and making of appeal from a judgment will apply to arbitration (Art 350(3). The court which has jurisdiction will be the court which would have had appellate jurisdiction had the dispute been referred to court.

What makes appeal in arbitral awards very interesting are the grounds laid down under art 351 and the decision rendered by Cassation Court Cassation No. 42239/2003. The case between Danni Drilling and National Mineral Corporation Pvt Ltd Co, is worth looking at. The court decided that “clauses disallowing appeal, commonly referred to as arbitration final clause, is against the constitution, proc 454/97 and 25/88. Therefore, it has to be struck down and the disgruntled party, National Mineral Corporation Pvt Ltd Co, has the right to lodge an appeal.

The cassation court tried to reason out its judgment by saying that disallowing appeal will be contrary to “uniform interpretation and application of law.” Further, the constitution, proc 454/97 and 25/88 have granted cassation bench a power to render final decisions in any judicial matter in the country, the responsibility to ensure equal treatment of citizens before the law by uniform interpretation and application of it. The court finally decided that the previous judgment given regarding arbitration final clause (Cassation No. 21849) is altered and inapplicable any more.

From this decision, few questions arise: is judicial review similar to appeal? Can a court override parties’ agreement to make arbitral award appealable? What is the difference between setting aside an award and appeal? What is the purpose of incorporating provisions to set aside an award if you let appeal despite the existence of arbitration final clause?

To begin with, appeal in arbitration is contentious by itself. There are arguments for and against appeal in arbitral awards. Ironically, both of the arguments invoke intention of the legislature and some interests of the public towards arbitration to defend their position. I intend to write more about this at another time. But for the time being, I will confine myself to present my argument regarding the principle of party autonomy in relation to the aforementioned decision.

Party autonomy is recognized in modern arbitration laws. Its role can be clearly noticed in international arbitration. Party autonomy is a choice of law doctrine that permits parties to choose the law of a particular country or sovereignty to govern their contract that involves two or more jurisdictions. Recognizing party autonomy serves many purposes, interalia, it ensures the continuation of smooth commercial transactions and gives certainty to traders. Both at national and international level party autonomy has certain restrictions. For instance, it cannot go contrary to the public policy and are not allowed to arbitrate non-arbitrable matters.

Except these restrictions, parties are allowed to settle any matter through arbitration (The issue of arbitrability of cases if left to national laws). A reader must be cognizant that Ethiopian arbitration law does not specifically indicate arbitrable and inarbitrable matters. Except matters related to administrative contract, criminal matters, nothing is found about arbitrability in Ethiopia. Thus, we must infer these matters from case law and published reports of arbitral awards.

Bearing this in mind, it would be logical to ask the fairness of the judgment. I strongly believe that, supported by art 350(2) of the civil procedure code, parties have the right to make the arbitral award final, i.e., waive their right to appeal. After the waiver, no competent judicial organ must be allowed to allow appeal. The civil procedure code was weary enough to set a different procedure if a party who formerly agreed to make the award final suddenly decides to do so.

Of course, cassation court can review judgments, but cannot in any ground grant appeal in the existence of arbitration final clause. The parties have prerogatives to make an arbitral award final. The intentional waiver of appeal means that the parties have given up their right and opted for setting aside procedure (Art 356). It will be against both parties’ freedom to contract and the policy reasons behind protecting freedom of contract.

In my next article I will try to explain the difference between judicial review and appeal. Moreover, I will try to explain the procedures of setting aside an award and appeal.


Michael Teshome

I am a Corporate law and arbitration expert. I am very, very much fascinated by international arbitration: commercial, maritime, and investment. The more I read about arbitration, the more I want to know. I would also like to specialize on the subject matter, which I think is helpful to Ethiopia in the future. In my personal life, I like to hang out with my friends and have fun. After all, I think life is short. Moreover, I like to read books, watch movies, travel a lot, which has become recent addiction, and learn new things. I also want to learn how to make a good documentary, which I want to develop as a hobby. I also like to blog here at Abyssina Law. 

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