Finality of Arbitral Awards Under the New Arbitration Proclamation 1237/2021

Introduction

Concerning the finality of arbitral awards, the previous approach in Ethiopia was that an arbitration award was not final unless the arbitration agreement contains a finality clause. Even those arbitral awards based on agreements with a finality clause may be reviewed by the Federal Supreme Court Cassation Bench (the Bench) based on basic errors of law. But, arbitral awards given abroad were not subject to review by the Bench.?

Recently, Ethiopia enacted an?Arbitration and Conciliation Working Procedure Proclamation. According to this proclamation, arbitral awards are final unless agreed otherwise. It is also possible to waive the right to take the case to the Bench for basic errors of law.

This article deals with first, the previous status of the law and court decisions; secondly, it discusses the changes made in the proclamation.

The Previous Approach: An Arbitral Award Is Not Final Unless The Seat Is Abroad

The previous approach is underpinned in the provisions of the?Civil Procedure Code, and the?FDRE constitution. Under the?Civil Procedure Code, as stipulated in Article 350, an arbitration award is appealable unless parties agree otherwise with full knowledge. So, in principle, an arbitral award is not final.?

And, the?FDRE constitution, under Article 80/3(c), bestows the Federal Supreme Court Cassation Bench with the power of reviewing ‘any court’s?decision containing a basic error of law, and its decisions are considered as law and are binding on all lower courts. This has been backed by the Federal Courts Re-Amendment Proclamation Number 454/2005, Article 2/4, and Federal Courts Proclamation Number 25/1996, Article 10.

In relation to the Bench’s power of reviewing arbitral awards, two questions of law always arise. One is whether decisions of ‘any court’, as stated in the?FDRE Constitution, include arbitral awards or not, and second, whether an arbitral award that emanates from an arbitration agreement with a finality clause can be reviewed by the bench or not. The Bench itself has passed decisions in relation to these questions.

In?National Motors Corporation V. General Business Development (2007), the Bench held that the phrase ‘any court’ also includes arbitral awards; but declined jurisdiction on the basis that the parties had agreed on the award to be final. In other words, an arbitral award that emanates from an arbitration agreement with a finality clause is final that cannot be reviewed by any court including the Bench.?

After three years, however, in?National Mineral Corporation PLC V. Dani Drilling PLC (2010), the bench reversed its previous decision and held that no finality clause precludes the Bench from reviewing an arbitral award with a basic error of law. Seid Demeke, in his?case comment, and Mintewab Afework, in her?blog post, criticized this decision as against the international experience and denies the parties’ right to waive their right to appeal.

Confirming its stand, the Bench, in?Consta Joint Venture V. Ethio-Djibouti Rail Way Corporation?(the Consta case), stated that the bench has jurisdiction over an arbitration award with a finality clause, in accordance with the international experience and previous decision of the Bench, as far as the seat of arbitration is Addis Ababa and the applicable law is Ethiopian law. In this case, Consta JV is an Italian company and the Ethio-Djibouti Rail Way Corporation is a joint enterprise of the government of Ethiopia and Djibouti. The case was administered by the Permanent Court of Arbitration (PCA) but the seat of arbitration was in Addis Ababa, Ethiopia. While the applicable substantive law was Ethiopian law, the applicable arbitration rule was the?European Development Fund Rules?(EDF Rules). In this case, the bench took, among others, the seat of arbitration as a factor for determining its jurisdiction.?

Later on, in?Agricom International SA V. Ethiopian Trading Business Corporation?(the Agricom case), the Bench declined jurisdiction on the basis that the seat of arbitration was not in Ethiopia. In this case, Agricom is a Canadian company, and Ethiopian Trading Business Corporation is a government-owned enterprise. The applicable substantive law is Ethiopian laws, the applicable procedural law is the?Grain Feeds Trading Association Rules Number 125?(GAFTA Rules), and the seat of arbitration was London.

The last two cases are international arbitration cases. The bench assumed jurisdiction in the Consta case but declined in the Agricom case.?

The Agricom decision did not reverse the previous Consta decision; rather it delimited the power of the Bench to review final arbitral awards. Reading both decisions together, it reveals that the Bench has the jurisdiction to review final arbitral awards with a legal seat in Ethiopia, but not if the legal seat is abroad. The bench in distinguishing the Agricom case from the National Mineral case underlined that the legal seat of the national mineral case was in Ethiopia and has no relevance for the Agricom case.?

The Bench is of the opinion that it is the seat of arbitration that has exclusive jurisdiction of reviewing an arbitral award.

In the Consta case, the Bench stated that the courts of the legal seat have a supervisory role, and, citing article 34 of the?UNCITRAL Model Law, any application to challenge the award must be submitted to these courts. Furthermore, article 34 of the EDF rules require parties to consider the award as a final judgment given by their own courts. Thus, it gives the Bench the mandate to review this award.?

Similarly, in the Agricom case, the Bench decided that it is only the English courts that have the jurisdiction to review the award as the seat of the arbitration is in England subject to English procedural and Ethiopian substantive laws. It rejected the respondent’s argument that the Bench has the power to review any basic error of Ethiopian law be it substantive or procedural and irrespective of the place where it was applied.

The Proclamation’s Approach: Presumption Reversed But Cassation Continued

The?Arbitration and Conciliation Working Procedure Proclamation?Number 1237/2021 came up with a different approach from the previous one both in terms of appeal to the appellate courts and review by the Bench.?

In Article 49/1, the?Proclamation?changed the previous law’s presumption that arbitral awards are appealable unless parties agree otherwise. It reversed this presumption and states that arbitral awards are final unless otherwise agreed by the parties in their arbitration agreement. Thus, arbitral awards are presumed to be final. However, as stated in article 46, decisions of the tribunal in relation to modes of payment of the arbitration fees are appealable to the Federal First Instance Court.?

Regarding the Bench’s power of reviewing an arbitral award on the basis of a basic error of law, the?Proclamation, in its Article 49/2, states that arbitral awards may be reviewed by the bench unless otherwise agreed. According to this provision, parties are at liberty to waive their right to take arbitral awards to the bench for review. But this waiver must be an express waiver, and failure to insert a waiver agreement will automatically entitle the aggrieved party to request a review from the bench.

Therefore, the?Proclamation?is different from the previous approach in terms of appeal and review by the Bench.

This article was first published on ZEELAW.