19 Jun
Written by 

Ethiopia’s Arbitration Regime and the New York Convention

I say 1958 was a year the international arbitration world took a remarkable move. The UN and other parties interested in international arbitration embarked an international convention to recognize and enforce foreign arbitral awards. The convention was signed in New York, The New York Convention to Recognize and Enforce Foreign Arbitral Awards (NYC), and it became the most popular convention in the whole wide world. The major trading nations, those that appear to be antagonistic have signed it without any kind of reservation. Thus far, round about 150 countries have signed and ratified it. Even, it is hailed as the “successful convention drafted by the UN.”

NYC aims to create a favorable environment for the recognition and enforcement of foreign arbitral awards, seeks to put a uniform system for the enforcement of international arbitral awards, plan to craft a standardized and homogenous procedure for recognizing and enforcing foreign arbitral awards. NYC is applicable to both international and domestic arbitral awards: art I(1) says, “… it shall also apply to arbitral awards not considered as domestic awards where their recognition and enforcement are sought.”

Inevitably, the introduction of NYC has helped the international arbitration community to move one step higher. Prior to its enactment (the 1923 Geneva Protocol was the governing rule), nation states have had their own grounds and criterion for enforcing foreign arbitral awards.

Under NYC, states are under the obligation to recognize an agreement to arbitrate, though some questions like granting judicial provisional measure before the constitution of the tribunal. When the court of a nation state is seized of an action in matter in respect of which the parties have made an agreement, it has to refer decline jurisdiction and refer the parties to arbitration (art II(3)).

The specificity and main achievement of NYC is that it has adopted only 4 grounds enforcement of an arbitral award (art V of NYC): if the arbitration agreement is void, signed under incapacity; the award debtor was not given prior notice and was not heard; the issue was inarbitrable or the award contains decisions beyond the scope of the submission to arbitration; the composition of the arbitral tribunal was not in accordance with the parties’ agreement; the award is not yet binding on the parties or has been set aside by a compete authority; the subject matter of the dispute is incapable of being submitted to arbitration; and, the recognition and enforcement of the award is contrary to public policy.

The issue of public policy is open ended and vulnerable to debate. It is never easy to find a definition of public policy; had it not been States mutual interest to protect the trading interest, it could have easy to deny enforcement of an award into two hostile states. 

Ethiopia’s grounds for enforcing foreign arbitral awards are found in art 461 and 458(a) of the civil procedure code (CPC). These articles lay down six different types of grounds for refusal of enforcement of foreign arbitral award:

a.     Reciprocity as per art 458(a);

b.    The award has been made following a regular arbitration agreement or other legal act in the country where it is made;

c.  The parties had equal rights in appointing arbitrators and they have been summoned to attend the proceeding;

d.     The tribunal was duly constituted;

e.    The award does not relate to matters which under the provisions of Ethiopian law is inarbitrable or is contrary to public moral or order;

f.    The award is of such nature that it can be enforceable under conditions laid down under Ethiopian law.

I admit some of these grounds are also incorporated in art V of the NYC; yet, some grounds are still obsolete. For instance, reciprocity has been retracted in the NYC- the reason being it is more of political than serving the purpose of arbitration and protecting the prevailing interest of the parties. Had reciprocity been adopted as a ground to enforce international arbitral awards, many awards would have faced insurmountable problem: Chinese arbitral awards will not have been enforced in the US.

The logical question that would ensue from adopting reciprocity as a ground for refusal of enforcement is how an award creditor can corroborate there is reciprocity in a certain arbitral case law? Let us take the following example: an Ethiopian party instituted arbitral proceeding against his Chinese counterpart in Switzerland and agreed to use American contract law and England’s procedural law. The institution chosen is ICC and the seat of the tribunal will be in Geneva.

The Ethiopian party won and wanted to enforce the award in Addis Ababa against the Chinese party assets in Ethiopia. According to art 461(1(a) and 458(a) of CPC, the award creditor has to prove reciprocity. How can you prove reciprocity? In which country would reciprocity be requested: US, UK, Switzerland- each of these countries are closely connected to the case? Can reciprocity be used in arbitration, I mean, arbitration is not aligned to any national legal system; it is distinct and derives its jurisdiction from contract. So, what kind of logical explanation is given to persuade the international arbitration world Ethiopia still needs reciprocity as a parameter?

There are some judicial case laws on reciprocity. The infamous Paulos Pappasionos case where the Supreme Court of Ethiopia refused to enforce a judgment rendered in Greece just because the court said that Ethiopia’s judgment is unenforceable in Greece. The Supreme Court said that

“The only way to prove that another state allows execution of Ethiopian judgments is by showing a treaty of judicial assistance signed between Ethiopia and that state. If such a treaty does not exist, then the requirement of reciprocity is not satisfied.”

I am always bewildered by Ethiopia’s refusal to ratify the NYC. I could not think of any reason but judicial hostility towards arbitration. From the context of its enactment, from reading the travaux preparatories the convention is not determined to serve a political goal, rather only commercial. The country needs to become an arbitration friendly nation.

It can generate revenue just by becoming a seat for many international arbitral proceedings; it can also create an employment opportunity for many young law practitioners and other professionals. I think reviewing some of the grounds of enforcement, liberalizing Ethiopia’s arbitration law and modernizing it is much more important. I think reciprocity has to be taken aback because it does not serve commercial interest, subdues party autonomy and frustrates process of arbitration in general. As dr. Samuel Tsahle puts it: “recognition and enforcement grounds should, as much as possible, be cosmopolitan in nature.”

What do you think?

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.