- Introduction
Investment in Africa and business deals with African parties are often made against a background of real and perceived risks.1 Among other things, foreign parties often fear that African courts lack commercial focus, efficiency, and propriety that they are used to elsewhere.2 They tend to prefer arbitration, for this reason, not to mention much higher chances of enforcement around the world. Many domestic businesses likewise see arbitration as a better alternative to litigation in courts. It is, therefore, believed that issuing laws that are conducive to arbitration can help countries promote legal security and thus bolster confidence in their commercial and investment environment.3
Ethiopia has, cognizant of the foregoing, conducted a major overhaul of its arbitration regime in the last couple of years. The Federal Supreme Court has in a recent landmark case followed suit by adopting an arbitration friendly interpretation. We attempt to give an overview of these developments in what follows.
- The New Laws
Ethiopia has, as part of a recent reform drive, adopted: - a) The Arbitration and Conciliation Proclamation No. 1237/20214 and b) The New York Convention Ratification Proclamation No. 1184/20205. The effect is that the UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards of 1958 (hereinafter the New York Convention) applies in Ethiopia subject to the declarations made by Ethiopia.6 Besides, the 1960 Civil Procedure Code continues to apply to aspects of arbitration that have not been covered by the foregoing laws.7
The most far-reaching impacts of these reforms center around: - a) the coordination of the relationship between arbitral and judicial proceedings b) rules regarding interim measures and c) recognition and enforcement of foreign arbitral awards. We proceed to have a brief look at each of them.
- Relationship between Judicial and Arbitral Proceedings
A smooth conduct of arbitration is possible only if the complex relationship between judicial and arbitral proceedings is well regulated. The new arbitration regime of Ethiopia attempts to achieve that. It provides for how jurisdictional issues between courts and tribunals are to be resolved. It also deals with the role of courts and tribunals in the issuance and enforcement of interim measures.
3.1 Jurisdictional Disputes
Two goals that could potentially conflict permeate commercial arbitration. There is, on the one hand, the desire to make arbitration an effective alternative to litigation by protecting it from unwarranted intervention by courts. On the other hand, there is the need to ensure the legitimacy of arbitration by ensuring it is based on the consent of the parties. The Arbitration Proclamation 1237/2021 has come up with rules that aim at balancing these conflicting goals.
3.1.1 Referral to Arbitration
The Proclamation starts by laying down the ground rule that aims at preventing disruptive court interference in arbitration. It prohibits courts from intervening in arbitration except where court intervention is specifically provided for in the proclamation (Art. 5). This mirrors the rule under the 2006 UNCITRAL Model Arbitration Law, Art. 5.8
Modeled after Art. II of the New York Convention, Art. 8(1) of the Proclamation also imposes on the Ethiopian court the positive obligation to refer to arbitration any 'suit falling under an arbitration agreement.' The court is required to dismiss such a suit and direct the parties to arbitration. This provision is not limited in its scope to arbitration agreements providing for the conduct of arbitration in Ethiopia. It applies irrespective of the country in which the arbitration is envisaged to take place per the arbitration agreement. It gives effect to arbitration agreements in general, hence supporting arbitration worldwide.
3.1.2 Competence-Competence
The Arbitration Proclamation goes on to vest in the arbitral tribunal jurisdiction to decide on its own jurisdiction. Art. 19(1) states in relevant part "the tribunal shall have the power to determine the existence or non-existence of a valid arbitration agreement between the parties ... and whether it has jurisdiction to hear the case...." The tribunal has, thanks to this new rule, the power to decide on the foundation, content, and extent of its own jurisdiction. This has aligned Ethiopian law, on this point, with the 2006 UNCITRAL Model Arbitration Law Art 16(1).
This is a major departure from the 1960 Civil Code approach.9 Arbitrators could decide on their own jurisdiction, under Art. 3330 of the Ethiopian Civil Code, only when such power had been vested in them in an agreement to arbitrate. The parties could not confer on the arbitral tribunal the power to decide on contestations over the validity of the arbitration agreement itself. Hence, making an allegation, even a manifestly false one, challenging the very existence or validity of the arbitration agreement would suffice to derail the arbitration. The new law makes resort to such obstructionist tactics futile.
3.2 Interim Measures
The Arbitration and Conciliation Proclamation confers on a party to an arbitration agreement the right to petition a court for the grant of interim measures in support of arbitration. Such a request may be made before the arbitral proceeding is initiated or thereafter (Art. 9). An arbitral tribunal may likewise grant interim measures. The interim measures that may be granted include measures aimed at the preservation of evidence, property in dispute, and assets or funds against which an award may eventually be enforced (Art. 20(2)).
The Proclamation also sets out the conditions under which interim measures may be granted. The party seeking an interim measure must demonstrate that harm that is unlikely to be adequately compensated by an award of damages is likely to take place, if no interim measure is taken. Such harm must also outweigh the harm that will be inflicted on the opposing party, if the measure is granted (Art. 21). The party that requested an interim measure is liable to make good the damage sustained by the other party, if the grant of interim measure is proven to have been inappropriate (Art. 22(6)).
Interim measures granted by arbitral tribunals are binding in Ethiopia irrespective of the country in which they were granted. Ethiopian courts are required to enforce them (Art. 25(2). This is, of course, subject to the rules on the recognition and enforcement of foreign awards.
The elaborate regulation of interim measures under the Arbitration and Conciliation Proclamation stands in stark contrast with the legal reality that prevailed prior to its issuance. Art. 3325 to 3346 of the Civil Code and Art 315 to 319 of the Civil Procedure Code that dealt with the conduct of arbitration are completely silent about interim measures.
- Recognition and Enforcement of Foreign Arbitral Awards
Ethiopia's accession to the New York Convention has changed Ethiopia's arbitration landscape drastically. We proceed to look at the two major changes engendered by this move.
4.1 Recognition and Enforcement of Ethiopian Awards Abroad
The New York Convention has been ratified by 172 countries to date.10 The most significant obligation the parties to the Convention assume is to recognize and enforce awards made in member countries. Arbitral awards made in Ethiopia can now be recognized and enforced in most jurisdictions. This has removed the biggest technical hurdle to the conduct of international arbitration in Ethiopia. It is now easier for Ethiopian parties to convince their foreign counterparts to agree to arbitration in Ethiopia.
This is a big advantage to Ethiopian businesses, especially to the small and medium sized enterprises. They do not have to be hauled before international arbitral tribunals in foreign capitals that invoke and apply foreign procedures, rules and laws of which they have little understanding. Settling their dispute via arbitration in Ethiopia also helps them reduce expenses significantly.
4.2 Recognition and Enforcement of Foreign Awards in Ethiopia
The interplay among the Ethiopian laws indicated under 2 above results in the creation of two parallel legal regimes.11 One set of rules applies to the recognition and enforcement of foreign arbitral awards that have been excluded from the scope of the application of the convention by the ratification proclamation 1184/2020. Another set of rules applies to those that fall within the ambit of the convention. Let us first look at those that fall outside the scope of the convention.
4.2.1 Recognition and Enforcement of Non-convention Awards
Ethiopia has acceded to the New York Convention subject to the 'reciprocity' and 'commercial' declarations that Article I (3) of the convention allows to be made. Hence, Ethiopia is under no convention obligation to enforce awards made in more than a dozen countries that are not parties to the convention. Some of these countries are Ethiopia's own neighbors like Somalia, Eritrea and South Sudan, with whom Ethiopia has significant trade.12 Ethiopia is, similarly, under no obligation to recognize and enforce foreign awards that result from relationships that are deemed not 'commercial' under Ethiopian law.
Ethiopia has on top of the foregoing declarations, crafted its own temporal reservation under Art 3 of Proclamation No. 1184/2020. The article states, the convention applies in Ethiopia "with respect to arbitration agreements concluded and arbitral awards rendered after the date of its accession to the Convention." A cumulative reading of the two requirements restricts the application of the Convention to arbitral awards resulting from arbitration agreements signed after Ethiopia's accession to the Convention (i.e. 24 August 2020). It could take several years for a contract to result in a dispute and for the arbitration to be finalized. This is likely to be the case with major transactions and infrastructure projects that are meant to be implemented over several years. Thus, there will still be many foreign awards, at least in the short term, which will fall outside the scope of the convention. The enforcement of these non-convention awards will, therefore, continue to be subject to 'reciprocity" as provided for under the Civil Procedure Code. We can reach such a conclusion from a cumulative reading of Art. 53(2)(a) & 77 of the Arbitration Conciliation Proclamation and the 1960 Civil Procedure Code Art. 461(1)(a) and 458(a).
This situation raises the question of how exactly Ethiopian courts understand reciprocity. Ethiopian courts used to take a very restrictive view. Yusra Abdulmuein and others v. Mr. Abdulkeni Abdulmuein, Cassation File No. 78206, is a good example. The Cassation Bench of the Federal Supreme Court ruled in that case that reciprocity is fulfilled if a party seeking enforcement proves either Ethiopia has a treaty obligation to enforce the foreign judgment or the foreign country in which the judgment was given enforces Ethiopian judgments. We note, at this juncture, that the reciprocity rule applies to both judgments and awards under the Civil Procedure Code.
Fortunately, the Cassation Bench of the Federal Supreme Court has now taken a very liberal approach to the establishment of reciprocity. In Heighten Incorporated v. Ministry of Agriculture (Cassation File No. 225202). The Ministry of Agriculture resisted, in this case, the enforcement of a GAFTA arbitral award given in England in favor of Heighten incorporated in Oct 2018. The Ministry argued, among other things, the reciprocity requirement under Art. 461(1) of the Civil Procedure Code had not been met.
The award creditor contended that the English Arbitration Act of 1996 provides for recognition and enforcement of foreign awards even where the award is made in a country that is not a party to the New York Convention. So, an Ethiopian award would be enforced in England on this ground, it argued. The Cassation court ruled that reciprocity is to be established not only by adducing a treaty obligation or a proof that an Ethiopian award has in the past been enforced in the country where the foreign award was made. It ruled, the laws and practice, in general, regarding the enforcement of foreign awards not covered by treaties must be considered to determine whether an Ethiopian award would be enforced in the country concerned. It then remanded the case to the Federal High Court, instructing it to determine whether Ethiopian awards would be enforced in England by assessing the law and practice in England by making use of expert testimony, if need be.
Reciprocity is fulfilled under this liberal interpretation if the country in which the award was made has domestic laws that require the enforcement of foreign awards irrespective of their country of origin. Arguably, reciprocity is likewise established if in practice the courts of the country in which the award was made enforce foreign awards despite the absence of any treaty or statutory obligation to that effect.
4.2.2 Recognition and Enforcement of Convention Awards
There are yet no reported cases involving the enforcement of foreign awards based on Ethiopia's New York Convention obligation. This is due, in part, to the recent accession of Ethiopia to the Convention. That Ethiopia introduced a temporal restriction limiting the applicability of the convention to awards resulting from arbitration agreements concluded after Ethiopia's accession to the Convention may have contributed as well. That said, foreign awards from around the world will start to be recognized and enforced in Ethiopia, based on the New York Convention, in no distant future.
- Conclusions
Ethiopia has conducted a major overhaul of its arbitration regime in the last couple of years. The new arbitration proclamation provides for how jurisdictional issues between courts and tribunals are to be resolved. It has also brought clarity to the topic of interim measures.
Besides, arbitral awards made in Ethiopia can now be recognized and enforced in most jurisdictions thanks to Ethiopia's accession to the New York Convention. It is now easier for Ethiopian parties to convince their foreign counterparts to agree to arbitration in Ethiopia. That said, the enforcement of foreign awards that result from arbitration agreements that predate Ethiopia's accession to the convention will continue to be subject to 'reciprocity". The same holds true for awards made in countries that are not parties to the convention. Fortunately, the Cassation Bench of the Federal Supreme Court has recently taken a very liberal approach to the establishment of reciprocity. A broad assessment of the laws and practice regarding the enforcement of foreign awards must be conducted to determine whether an Ethiopian award would be enforced in the country concerned.
Footnotes
1. Stephan Wilske and Jade G. Ewers, Why South Africa Should Update Its International Arbitration Legislation: An Appeal from the International Arbitration Community for Legal Reform in South Africa, 28(1) JOURNAL OF INTERNATIONAL ARBITRATION 1 & 4 (2011)
2. Id.
3. Oladiran Ajayi and Patricia Rosario, Investment in Sub Saharan Africa: The Role of International Arbitration in Dispute Settlement, available at: www.jdsupra.com/documents/11313b50-b485-478d-b198-de8a3949f843.df, last visited on 03 June 20224.
4. Arbitration and Conciliation Proclamation No. 1237/2021
5. The Convention on the Recognition and Enforcement of Foreign Arbitral Awards Ratification Proclamation No. 1184/2020, Federal Negarit Gazeta, 26th Year No. 21 (2020).
6. UN Convention on the Recognition and Enforcement of Foreign Arbitral Awards (1958).
7. Civil Procedure Code Decree No. 52/1965, Negarit Gazeta, 25th Year, No. 3.
8. UNCITRAL Model Law on International Commercial Arbitration 1985 with amendments as adopted in 2006.
9. The Civil Code of the Empire of Ethiopia, Proclamation No. 165/1960, Negarit Gazeta, 19th Year. (1960).
10. Overview of the Status of UNCITRAL Conventions and Model Laws, available at https://uncitral.un.org/sites/uncitral.un.org/files/media-documents/uncitral/en/overview-status-table.pdf, last visited on 07 Jun 2024.
11. Arbitration and Conciliation Proclamation 1237/2021, Art 53 and 77 of; New York Convention Ratification Proclamation No. 1184/2020, Article 2 and 3 and Civil Procedure Code Articles 461 and 458.
12. Overview of the Status of UNCITRAL Conventions and Model Law, cited above.
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