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The Quest to modernize: Is acceding to the New York Convention the right thing for Ethiopia?

It would be appropriate to begin by saying few words about the New York Convention for the Recognition and Enforcement of Foreign Arbitral Awards which came into being in 1948. By the way, our Civil Procedure Code was enacted in 1948 E.C; while the convention was passed in 1948 G.C. Now, simply put, it is a very popular convention in the international arbitration community and is used to enforce an arbitral award (both commercial and non-commercial) in another country.

The main point of this post is not to explain the nature of the convention, but to ask if Ethiopia’s initiation to accede to the convention is the right thing. Recently, the Ethiopian government is weighing pros and cons of approving the instrument. It is inviting legal professionals and major stakeholders to speak their concerns or forward their comments on the advantages or disadvantages of signing the New York Convention.

From the outset, I am one of those who advocate acceding to the convention: this move can have political and economic advantages. It will create a perception that Ethiopia is ready to embrace major changes which are considered to be attractive to foreign investors. However, it must be underlined that just because a country is part of the convention, it does not necessarily mean that investors will keep coming. There are so many factors that attract or deter them that are unrelated to signing the convention.

Yet, the perception of appearing to be modern is much better than clinging on an obsolete arbitration system. Our current arbitration system approves court interference than ensuring the independence of arbitration proceedings. In the 21st century, this kind of attitude might not be much appreciated. 

Nevertheless, there are so many things the government of Ethiopia has to do before signing the New York Convention.

1. Adopt a more flexible and arbitration-friendly law:- Of course, the convention deals with recognition and enforcement of foreign awards- it is more related with articles found in the Civil Procedure Code /article 456-461/. Interestingly, grounds for rejecting or enforcing a foreign arbitral award are more or less similar with article 5 of the New York Convention. Nonetheless, this does not suffice: for example, our law rejects the concept of recognition of awards: For an undisclosed reason, it assumes that an award will come to court only for execution. Other than this, appeal (article 351) against awards is more popular than set aside procedure (article 356). As to me, article 5 of the Convention seems to disallow appeal against international awards. Furthermore, provisions found in the Civil Code /art 3325 et seq/ seem to be outdated. They fail to properly outline what is arbitrable/inarbitrable, appear to give more discretion to judges than arbitrators (tend to consolidate judicial supremacy) and some provisions like article 3339 are really vague. I believe these have to be fixed or decision makers need to devise a plan to amend them before announcing the news about joining the convention.     

2. Do inventory on the current awards against Ethiopia:- New York Convention has a retroactive effect: an award creditor can come to enforce an award which was rendered before the convention was signed (this shows that we have to be cautious to while making reservations. The reservations will be governed as per the Vienna Convention on the Law of Treaties). If Ethiopia decides to accede the convention before doing a proper inventory outlining awards (the principal amount, interest, costs & expenses) given against us, it can entail more liability than privileges. Therefore, the government must gather its resources and do such an inventory.

3. Weigh the impact against the background of Cassation’s power:- As per the decision given under 42239, the Cassation retains the power to review a final arbitral award. The Cassation used the power granted in the Constitution to justify its reason. Even if article 350/2/ says that parties have the right to waive their right to appeal, the Cassation made a decision that it is the highest judicial authority in the country. This kind of enforcing judicial supremacy may not always be acceptable in the international arbitration community. To exemplify, we can look at the reason given by the arbitrators in the “Salini v Addis Ababa Water & Sewage Authority” case. Accordingly, we must make sure that signing the convention does not go against Cassation’s power.

4. Train professionals (judges and interested lawyers) to understand the essence of the convention:- Few professionals are familiar with the New York Convention. Their exposure is so limited that they always try to understand the Convention vis-à-vis the Civil Procedure Code. These people can neither advise a client properly nor render a just decision. This can be a major drawback. Training judges and other professionals will eventually bring attitude change, i.e. professionals who believe that modernizing and integrating with the rest of the world will eventually help the country. Thus, the government must prioritize to train these judges and has to create a platform to train other professionals.

5. Also, I suppose that it is time to begin drafting a codified private international law. It is unthinkable to make Ethiopia a venue/seat for international arbitration without a robust arbitration and private international law. We have to compete with other African nations like Rwanda, Egypt, Kenya and South Africa to make Ethiopia a favorable venue/seat for arbitration. These nations perform economically better than us; manage to create a good environment for arbitration by taking all the necessary steps. We are just starting and part of beginning the job involves enacting a private international law.   


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Friday, 19 July 2024