31 January 2012 Written by  Wondwossen Wakene

Arbitration of Administrative Contracts

Arbitration in general

Arbitration is one of the alternative dispute resolution mechanisms that we have. When we say it is part of the Alternative Dispute Resolution (ADR) mechanism, we do not forget the controversy behind arbitration and the categorization of the same as Alternative Dispute Resolution mechanism. Some, taking arbitration by its outcome, resist accepting that it is really an alternative since it does not give the chance to the parties as to its execution.  In this sense, we are saying that arbitration is one of the Alternative Dispute Resolution mechanisms by taking the fact that it is optional for the parties whether to take their case to a judge appointed by the state or judge appointed by them. Arbitration is reference of a dispute to an impartial person or persons, called arbitrators, for a decision or award based on evidence and arguments presented by the disputants. The parties involved usually agree to resort to arbitration in lieu of court proceedings to resolve an existing dispute or any grievance that may arise between them. Arbitration may sometimes be compelled by law, particularly in connection with labor disputes involving public employees or employees of private companies invested with a public interest, such as utilities or railroads. Amicable settlement is a desirable solution for business disputes and differences.  It can occur before or during the litigation or arbitration of a dispute and can often be facilitated through the aid of third party (the neutral) acting in accordance with these rules.

In the first place, arbitration is a contract by which parties decide to resolve their disputes by a person duly appointed by them. Despite litigation, arbitration has different advantages. Arbitration is more flexible and adaptable as well as quicker as and more efficient than litigation.

Economically, ADR mechanisms including arbitration significantly reduce case congestion in courts. Out of court resolution of disputes reduces burdens both of courts as well as judges’. Hence arbitration saves the state’s resources as well as the judge’s time.

The economic and social implication of arbitration makes it more preferable than litigation. Especially in Ethiopia, the experience is native so it needs no further domestication. The society’s way of life i.e. its communal nature makes ADR mechanisms preferable than litigation. In communal societies where the face-saving practice has a wide speared acceptance, litigation has undesired consequences. Here the group is more important and indeed fundamental than the individual. The group is the refuge of the individual and it is protected at any cost. Conciliation plays a very important part in African law since the community life and group isolation give rise to a need for solidarity. As a result Africans always seek unanimity through dialogue, since only conciliation can put an end to disputes.

A society with a face –saving value wants to solve disputes in a win-win condition. The win-lose arrangement has negative implication on the status quo ante of such a society. From this point of view, ADR should be harnessed. . The recourse to legal actors and proceedings is costly emotionally debilitating, and potentially counterproductive .It is to meant that now it is a common knowledge that existing justice system is not able to cope up with the ever increasing burden of civil and criminal litigation . The problem is not of a load alone. The deficiency lies in the adversarial nature of judicial process which is time consuming and more often procedure oriented.  There is growing awareness that in the bulk of cases court action is not appropriate recourse for seeking justice. Alternative Dispute Resolution mechanism  is a process where disputes are settled with the assistance of a neutral third party generally of parties own choice: where the neutral is generally familiar with the nature of the dispute and the context in which such a dispute normally arise; where the proceedings are informal, devoid of procedural technicalities and are conducted, by and large, in the manner agreed by the parties; where the dispute is resolved expeditiously  and with less expenses: where a decision making process aims at substantial justice, keeping in view the interests involved and the contextual realities. In substance the ADR process aims at rendering justice in the form and content which not only resolves the dispute but tends to resolve the conflict in relationship of the parties which has given rise to that dispute.

Arbitrability: What is it?

Fortunately or unfortunately all matters submitted to arbitration may not be arbitrated. There is a further distinction between matters that cannot be arbitrated. This will lead us to one other discussion in arbitration called the arbitrability of matters.

Matters amenable to arbitration are called arbitrable matters and those not amenable as non-arbitrable matters. What do you think is the importance of such distinction?

The concept of arbitrability is in effect a public policy limitation upon the scope of arbitration as a method of setting disputes. Each country may decide, in accordance with its own public policy considerations, which matters may be settled by arbitration and which may not.  Often the arbitration clause is ineffective since it will be unenforceable. Moreover, recognition and enforcement of an award may be refused if the subject matter of the difference is not arbitrable under the law of the country where enforcement is sought.

Arbitration purely is a policy consideration. It is however also a private consideration. The law may clearly prohibit arbitration of a matter. The contract of arbitration might even do the same. Even when the contract authorizes arbitration, if the law prohibits arbitration, the same may not take effect.

What is the position of Ethiopian law from this angle?

No matter how careful you might be in drafting contracts you cannot totally avoid disputes especially in complex contractual undertakings. In such cases, the questions, whether or not we may submit the dispute to an arbitral tribunal? Can we allot a place in the contract to regulate its arbitration?  Are there special conditions which necessitate extra- judicial adjudication of administrative contracts? are of paramount importance.

The next discussion will therefore be devoted to consider the above questions.

In Ethiopia there are legal documents appropriate to consider the legality of the arbitration of administrative contracts. One is the Civil Code and the other is the Civil Procedure Code. Finally we have Proclamation No. 430/2005.

According to the civil procedure code, administrative contracts are not amenable to arbitration. Article 315(2) reads: “No arbitration may take place in relation to administrative contracts as defined in article 3132 of the civil code or in other case where it is prohibited by law in the civil procedure code”. But nothing to that effect or even similar to that is stated in anyone of Articles 3325-3346 of the civil code dealing with arbitration in general.

Article 315(4) of the civil procedure code further says “nothing in this chapter shall affect the provisions of Articles 3325 – 3346 of the civil code”.

Confusingly, those provisions embodied in Articles 3325 -3346 do not mention anything about the arbitrability of administrative contracts. To be clear Articles 3325 – 3346 are silent on the issue. If so, what is the implication of the reference made to them by the civil procedure code? Does it mean that administrative contracts are not subject to arbitration because nothing allowing their arbitration is said in the civil code provisions? Or does it mean that the silence in the law is acceptance of their arbitrability?

Please consider this excerpt from THE FORMATION, CONTENT AND EFFECT OF AN ARBITRAL SUBMISSION UNDER ETHIOIAN LAW (Bezzawork Shimelash, Journal of Ethiopian Law, Vol. XVII, 1994)

Last modified on Friday, 14 September 2012 14:03