What would you answer if you are confronted with a question: is appeal a fundamental right? Would you say yes, no or neither? I think the argument leans towards yes, does not it? Art 20(6) of the constitution affirms the right of any person to “appeal to the competent court against an order”; yet, I do not aim to discuss appeal in courts, but its general perception in arbitration.
Before any arbitration proceeding is underway, it presupposes a valid dispute settlement clause. In the book prepared by FreshFields Law Firm, called The FreshFields Guide to Arbitration and ADR, a valid arbitration clause should include inter alia applicable law, arbitrating institution, whether or not the tribunal will grant provisional measures, exclusion of appeals, and language of arbitration.
The civil code and the civil procedure code aspire to govern arbitration proceeding from its beginning until an award is executed. Among the main issues that I find unanswered and perplexing is the question of appeal in arbitration. Art 350 et seq of Ethiopian Civil Procedure Code (CPC) is devoted about appeal, set aside of an award. The CPC looks more liberal than expected: it allows for parties to contractually waive their right to appeal, commonly referred as finality of arbitration clause. Appeal against arbitral awards is made in the same way as appeal from judgments is conducted. Art 352 specifies the court that has appellate jurisdiction: it is the “appellate court which would have had appellate jurisdiction” had the case been filed to a court.
Black’s Law Dictionary defines appeal as a proceeding undertaken to have a decision reconsidered by a higher authority; especially the submission of a lower court’s or agency’s decision to a higher court for review and possible reversal. Taking this definition into account, any civil procedure law lays down grounds of appeal. When it comes to arbitration, the conditions for making an appeal are stipulated under art 351. It remains debatable whether the conditions indicated under art 351 should be considered as a standard or ground of appeal. Art 350(1) of the code uses the term “condition”. I think the terminology chosen by the drafter makes the concept of appeal against arbitral awards vaguer.
It would have been better if the legislature differentiated between standard and ground as they did on art 356 of CPC. Leaving this discussion aside, which I hope to return to it in another post, I would like to frame a question for the reader: would Ethiopian law allow arbitrating parties to contractually limit or expand the “conditions” of appeal stated under art 351? To restate it, if parties are allowed to fully waive their right to appeal, would it be logical to assume that they can contractually limit the “conditions” of appeal?
The issue of appeal is not that much dealt under Ethiopian arbitration regime; however, there is a decision and legal provisions when it comes to judicial review. Art 80 of the constitution, art 2(4) of Proclamation 454/1997, cassation is given the ultimate judicial power over any decision rendered by any judicial organ (art 4 of CPC).
To illustrate, in a recent cassation decision no 42239 (National Mineral Corporation v Danni Drilling PLC), it was decided that the arbitration finality clause is inapplicable because by virtue of the constitution and proclamation 454/1997, cassation’s power is not susceptible to be limited by contract. It even went on to change what was previously decided: cassation no 21849 gave cognizance to the arbitration finality clause. It upheld the parties’ agreement and justified its decision by using art 350(2) of CPC. Hence, the more recent precedent dictates us to exclude arbitration final clause if the case is going to be referred to the cassation bench.
I brought this case for the purpose of illustrating the difference between appeal and judicial review. Their basic distinction lies in entertaining error of law and mistakes of facts: the former go through error of law and mistakes of fact; while the latter is only bound to see error of law. Judicial review is a constitutional doctrine that grants authority to courts to review a lower court’s legal findings.
Art 351 discusses the “conditions” of appeal. From the wordings of the provision, I think it seems to be very wide and general. It appears to be quite easy for any aggrieved party to appeal against an arbitral award rendered by the arbitrators.
To learn more about the appeal, it became must for me to refer to American jurisprudence. I want to caution my readers that the case of appeal in arbitration is not settled in American case law – nor the Supreme Court has rendered a stare decisis precedent.
Ironically, both arguments for and against contractually limiting the grounds of appeal against arbitral awards use “public policy” as a ground: those who support contractual limitation of grounds of appeal put forward parties’ freedom of contract, which apparently is a fundamental notion in law of contract; whereas, those who are against the concept say that the grounds of appeal advocate due process right of parties that underpins an essential constitutional right.
To illustrate, the 5th and 9th circuits have upheld expansion of judicial review for errors The Fifth and Ninth Circuits have upheld the contractual expansion of judicial review for errors of law (Fifth) and errors of fact or law (Ninth), primarily based on the rationale that arbitration is a creature of contract, and that courts must attempt to honor the parties' intentions as much as possible.
Basically, these cases point out the fact that it is possible for parties to expand the grounds of review under American Arbitration Act known as Federal Arbitration Act (FAA). Supporting the 5th and 9th circuit, the 3rd decided in Roadway Package Sys., Inc. v. Kayser (2001 WL 694508 (3d Cir. 2001) that parties may privately contract for judicial review other than that mandated by the FAA, but that they must clearly express that choice in the agreement to arbitrate.
On the other hand, the 10th circuit restated the standard set in a case law called Bowen v. Amoco Pipeline Co., [254 F.3d 925 (10th Cir. 2001] and said: “no authority clearly shows private parties to determine how federal courts review arbitration awards and permitting such review would destroy the fundamental character of arbitration.”
Basing these case laws and arguments advanced by the courts, I have tried to formulate my argument on contractual limitation or expansion of “conditions” of appeal against arbitral awards. I am a proponent of a modern, forward-looking and party-friendly arbitration regime. The supremacy of party autonomy should be sustained. The parties chose arbitration as a dispute settlement mechanism.
Among the specificities of arbitration one is that parties can entrust the tribunal with any power, save for arbitrable issues. Art 350(2) allows the complete waiver of appeal against arbitral awards if they are consciously made; therefore, what would be prejudicial to the parties’ due process right, antagonistic to the judicial sovereignty if they are allowed to contractually limit the grounds of appeal?
General contractual provisions affirm that unless an object of a contract is against law, moral and possible, they can be executed. If disputant parties consciously decide to limit the “conditions” of appeal, would there be any unlawful, immoral or impossible thing?
Giving parties the upper hand in their own dispute settlement mechanism is, one way or another they can be controlled during the execution process, one characteristics of a party-friendly arbitration law. The main reason why contracting parties choose to defer to arbitration is looking for inter alia certainty. The conditions listed down under art 351 are so broad that they create uncertainty and cast doubt on the process itself, as, at the end of the day, the award debtor will appeal and apply for stay of execution.
Well, still one question might be popping out: appeal is a constitutional guarantee, so why can parties retract or diminish its value by contractual limitation? Should constitutionally guaranteed rights be subject to parties’ freedom? It is a question open for debate. I argue for contractual limitation of grounds of appeal; whereas, you are welcome to counter-argue.