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IJRAR19W1496 International Journal of Research and Analytical Reviews (IJRAR) www.ijrar.org 955

RETHINKING THE ETHIOPIAN CIVIL CODE

GOVERNING COMMERCIAL ARBITRATION IN

THE LIGHT OF UNCITRAL MODEL LAW

Afewerki G/slassie G/yohannes *

* LL.B, LL.M, Lecturer in Law, Adigrat University School of Law, Tigrai, Ethiopia.

Abstract

This article explores the law governing the Ethiopian commercial arbitration in the context of the international

principles and conventions. The article analysis whether the current legal regime is up to date and consistent with

the UNCITRAL Model Law principles and standards. In order to examine this scenario, the law governing

commercial arbitration in Ethiopia was particularly examined in light of the main provisions of international

commercial arbitration instruments such as the UNCITRAL Model Law, the UNIDROIT Principles, and UCC.

Comparisons with the international commercial arbitration by focusing on the purpose and scope of applicability of

the arbitration agreement, the formation and content of the arbitration contract, the applicable laws, rules, and

procedures, and the emerging issues and trends in the international commercial arbitration was the main concern.

The author argues that the Ethiopian commercial laws governing the commercial arbitration are incompatible with

the international instruments as well as with the newly emerged issues and trends of international commercial

arbitration. The Ethiopian commercial arbitration law is designed mainly to address the domestic arbitration.

Finally, I urge for revisiting and amending the substantive and procedural aspect of the Ethiopian laws governing

commercial arbitration in the line of the principles and standards of international instruments.

Key words:

Commercial arbitration, UNCITRAL Model Law, UNIDROIT, UCC, Civil Code, Civil Procedure Code

1. Introduction

As a dispute resolution mechanism, arbitration has long gained prominence among governments and

inter/multinational organizations, for instance most contracts now contain clauses that mandate parties explore

arbitration options in the event of a disagreement.1 A party in the commercial arbitration requires taking the

advantage of comprehensive and friendly standards and principles of national legislation with respect to its

enforceability, party-control, neutrality, privacy and confidentiality, cost-effectiveness and speed.

1 See Wuraola O. Durosaro (2014), The Role of Arbitration in International Commercial Disputes, International Journal of Humanities Social

Sciences and Education (IJHSSE), Volume 1, Issue 3, p.1.

http://www.ijrar.org/



At international level, nowadays, arbitration is commonly considered as a preferred dispute resolution mechanism at

the international commercial dealings. International commercial disputes are normally settled through arbitration

mechanism. There is a move also for reconsidering the fundamental principles and standards of commercial

arbitration in line with the persistent economic and technological advancements. The UNCITRAL Model Law covers

all stages of the arbitral process from the arbitration agreement to the recognition and enforcement of the arbitral

award and reflects a worldwide consensus on the principles and important issues of international arbitration practice.2

It is acceptable to States of all regions and the different legal or economic systems of the world. It is advisable to

follow the model as closely as possible since that would be the best contribution to the desired harmonization and in

the best interest of the users of international arbitration, who are primarily foreign parties and their lawyers.3

Akin to other developing countries, Ethiopia is actively involved in hunting the foreign investment and international

trades. In particular, the process of transforming its economic, trade, and investment areas to attract international

multi-corporations requires advanced ways of dispute resolution mechanisms i.e. arbitration. All such new

developments require Ethiopia to put in place a dispute settlement system which can accommodate international

commercial disputes.

In Ethiopia, the issue of commercial arbitration is governed by the 1960’s Civil Code and 1965’s Civil Procedure

Code. Currently, Ethiopia never revised the provisions governing the commercial arbitration. Besides, Ethiopia is not

currently a party to a New York Convention on the recognition and enforcement of foreign arbitral awards and the

Washington Convention on the Settlement of Investment Disputes between States and Nationals of Other States.

Hence, the Ethiopian arbitration law is not consistent, simplified, and modernized in light of the international

commercial instruments. To analyses this assertion, critical investigation made on the provisions of the UNCITRAL

model Law.

This work is aimed to assess the compatibility of the Ethiopian commercial arbitration in light of international

instruments such as the UNCITRAL Model Law, the UNIDROIT Principles, and UCC. The first part deals with the

general overview of the concept of commercial arbitration at the Model Law. The second part focuses mainly on the

critical appraisal of commercial arbitration at the international instruments with a special emphasis on the purpose

and scope of applicability of the arbitration agreement, the formation and content of the arbitration contract, the

applicable laws, rules, and procedures, and the emerging issues and trends in international commercial arbitration.

The last part addresses the commercial arbitration in Ethiopia.

2 See INTERNATIONAL COMMERCIAL ARBITRATION ASSESSMENT, EUROPEAN BANK FOR RECONSTRUCTION AND

DEVELOPMENT, REPORT ON THE RESULTS OF THE ASSESSMENT IN THE CIS (ARMENIA, AZERBAIJAN, GEORGIA,

KAZAKHSTAN, KYRGYZ REPUBLIC, MOLDOVA, RUSSIA, TAJIKISTAN, TURKMENISTAN, UKRAINE, UZBEKISTAN)

AND MONGOLIA, April 2007, at 3 3 Ibid




2.1 Overview of the law of governing arbitration in Ethiopia

2. Part one-General overview of the international instruments

2.1 The UNCITRAL Model law

The UNCITRAL model law (the Model law)4 was adopted by the UN on June 1985. It was aimed at establishing a

comprehensive and uniform law of arbitral procedures and international commercial5 arbitration practice in all states.6

In other words, it was designed to harmonize the then disparities on arbitration laws of national laws and thereby

develop an acceptable legal or economic system for different states.7 The Model law addresses all procedures of the

arbitral process from the process of formation of arbitration agreement and recognition and enforcement of an arbitral

award. Hence, it was a groundbreaking for many countries to base their arbitration law on it, even though it was

revised by the UN in December 2006 to include an allowance for the requirement of an arbitration agreement to be in

writing to be defined in very broad terms.8

The Model Law intended to achieve four policy objectives.9 The first objective is to limit the role of national court in

commercial arbitration and allowing the parties to be free to choose how their dispute will be determined.10 The

second policy objective is to establish defined core mandatory provisions to ensure fairness and due process in the

arbitration proceeding.11 Thirdly is to ensure the provision of a framework for the conduct of commercial arbitration,

so that in the event of the parties being unable to agree on procedural matters, the arbitration would nevertheless be

capable of being completed; and lastly is to establish provisions which would aid the enforceability of awards and

clarify certain controversial practical issues.12 The intention of the Model Law is to ensure that arbitral institutions

have autonomy and are independent from court interference save for few allowances which are meant for support of

the arbitration process.

The Model law has three parts. The first part deals with the international commercial arbitration13 and the second part

address the explanatory note by the UNCITRAL secretariat on the model law on international commercial

4 See the Preamble to the UNCITRAL Model Law,

http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf (last visited July 2020) 5 Although the UNICITRAL Model law contains the words “International Commercial Arbitration”, it does not define the term

“Commercial” in its main provision. But in its foot note, it is defined as follow; The term “commercial” should be given a wide

interpretation so as to cover matters arising from all relationships of a commercial nature, whether contractual or not. Relationships of a

commercial nature include, but are not limited to, the following transactions: any trade transaction for the supply or exchange of goods or

services; distribution agreement; commercial representation or agency; factoring; leasing; construction of works; consulting; engineering;

licensing; investment; financing; banking; insurance; exploitation agreement or concession; joint venture and other forms of industrial or

business cooperation; carriage of goods or passengers by air, sea, rail or road. 6 See UNCITRAL Model Law on International Commercial Arbitration, available on UNCITRAL’s website

at http://www.uncitral.org. 7 Ibid 8 See Redfern and Hunter on International Arbitration, 5th Edition, Oxford University Press, 2009. 9 See The UNCITRAL Model Law, supra note, 6. 10 Ibid 11 Ibid 12 Ibid 13 Arbitration is considered to be international in nature when according to Article1 (3) of the UNCITRAL Model Law if it falls within the

following three ambits:

i. If the parties to the arbitration have at the time of completion of the agreement, their places of business in different places.


http://www.uncitral.org/pdf/english/texts/arbitration/ml-arb/07-86998_Ebook.pdf

http://www.uncitral.org/



arbitration14 and the final part dictates about recommendation on the interpretation of some articles and paragraphs of

the Model law with regard to recognition and enforcement of foreign arbitral award.

According to the preamble, the objectives of the Model law are: recognizing arbitration as a method of settling

dispute; develop harmonious international commercial relation; establish a unified legal framework to settle a dispute

arising from international commercial relation through fair and efficient manner; create a uniform law of arbitral

procedures; and facilitate the recognition and enforcement of foreign arbitral award.

With regard to the scope of the application of the Model law it applies to the agreement concluded between the

signatory member states and any other state/s. on the matters of international commercial arbitration, except the

application of this Model law is excluded by the explicit provision which precludes the certain disputes may not be

submitted to the arbitration. Other than this fact, the basis of jurisdiction to the applicability of this Model law is

clearly stated under Article 1/3 of thereof.

The Model law was adopted by many countries. The first country which adopted this law was Hong Kong15 and

followed by Australia,16 Canada,17 and Nigeria18. At this time, over sixty-five countries19 have promulgated their laws

in light of the Model law, out of which nine are African countries20 including our neighbor Kenya21 and Uganda.22

2.2 UNIDROIT Principles

The principles of international commercial contracts (UNIDROIT Principles)23 adopted in 1994 by the international

institute for the unification of private law as a result of intensive research and deliberation.24 The objectives of the

UNIDROIT Principles is to establish a workable set of rules on international commercial relation throughput the

world in spite of having disparities in legal traditions, economic and political condition of the countries. Its goal is to

reflect such principles in their underlying general policy. With regard to its content, the UNIDROIT Principle of

international commercial contracts incorporates about general provision of contract; formation of contract; validity of

the agreement; interpretation of terms and other conducts; content; performance, and non-performance of contracts.

ii. If one of the following places is situated outside the state in which the parties have their places of business (a) the place of

arbitration if determined in or pursuant to the arbitration agreement, (b) any place where a substantial part of the obligation the

commercial relationship is to be performed or the place with which the subject matter of the dispute is more closely connected.

iii. The parties have expressly agreed that the subject matter of the arbitration agreement relates to more than one country. 14 International commercial arbitration is a form of arbitration where the parties have their places of business in different countries, or the

subject matter of the arbitration relates to more than one country, or a substantial part of the obligation of the parties are to be performed

outside the countries of their places of business. 15 See Sutton B, Hong Kong enacts the UNCITRAL Model Law, ARBITRATION INTERNATIONAL, 72, 75 (1990). 16 See Finlay A, An Overview of Commercial Arbitration in Australia, JOURNAL OF INTERNATIONAL ARBITRATION 99, 104 (1987). 17 See Brierly N, Canadian Acceptance of International Arbitration, 40 MAINE LAW REVIEW 288, 291 (1988). 18 See Ezejiofor, The Nigerian Arbitration and Conciliation Act: A Challenge to the Courts, JOURNAL OF BUSINESS LAW 81, 82(1993). 19 Visit

http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html for (last visited May 10, 2020). 20 For example, Egypt (1994), Kenya (1995), Madagascar (1998), Mauritius (2008), Nigeria (1988), Tunisia (1993),

Uganda (2000), Zambia (2000) and Zimbabwe (1996). 21 See Act No. 4 of 1995 of Laws of Kenya. 22 See The Arbitration and Conciliation Act, 2000 of the laws of Uganda. 23 See UNIDROIT Principles of International Commercial Contracts (2010). Available at http://www.uncitral.org/uncitral/en/index.htm.

(Last visited May 10, 2020). 24 Ibid


http://www.uncitral.org/uncitral/en/uncitral_texts/arbitration/1985Model_arbitration_status.html

http://www.uncitral.org/uncitral/en/index.htm



The UNIDROIT Principles takes in to consideration the continuous changes of trade practices across the world

caused by the technological advancement and economic developments. It aspires to create good faith and fair dealing

by imposing a general obligation on the parties to act so as to establish standards of reasonable behavior and fairness

at international commercial relation.

2.3 The Uniform Commercial Code (UCC)

The Uniform Commercial Code (UCC)25 is the comprehensive set of rules and regulations regarding commercial

transactions. It is the result of harmonizing the law on commercial transactions in all fifty states of the United States

of America. The UCC is a joint project of the Uniform Law Commission and the American Law Institute. The UCC

code imposes standards for processing checks and other types of commercial paper. Often it is applied to the property

secured by a bank where the title is held until the borrower pays off the balance of the financing. Companies that

conduct business transactions outside of their home state must comply with the applicable UCC law, including when

leasing equipment, selling goods, borrowing money, and establishing contracts. Although the UCC code regulates

dealings involving personal property, it does not govern real property such as land or any structures attached to land.

By and large, the UCC address the following subject matters under the consecutive numbered provisions of the code.

Those are:

Article 1: Definitions and general provisions. It deals with definitions as well as the rules of interpretation of

the provisions.

Article 2: Sales and Leases. It applies to transactions of goods; it does not apply to any transaction which

although in the form of an unconditional contract to sell or present sale is intended to operate only as a

security transaction nor does this Article impair or repeal any statute regulating sales to consumers, farmers or

other specified classes of buyers.

Article 3: Negotiable Instruments. This section covers drafts (including checks) and notes representing a

promise to pay a sum of money. An instrument is negotiable if it can be transferred to another person and

remains enforceable against the person who originally made the promise to pay.

Article 4: Bank deposits and Collections. This section provides rules for check processing and automated

inter-bank collections. Article 4A covers fund transfers, not including electronic fund transfers.

Article 5: Letters of credit. These are typically issued by a bank or other financial institutions to business

customers in order to facilitate trade.

Article 6: Bulk sales, auctions, and liquidations of assets. Many states have determined this topic is obsolete

and the Uniform Law Commission has recommended repeal.

Article 7: Documents of title, including warehouse receipts, bills of lading, and other documents typically

used for commercial trade.

Article 8: Investment securities, used for the system of holding securities through intermediaries.

25 See Uniform Commercial Code, Vol. 10 (2007).




Article 9: Secured transactions, involved with the granting of credit secured by personal property; for

example, agricultural liens, promissory notes, consignments, and security interests

3. Part two-Critical appraisal of commercial arbitration at the international instruments

3.1 The Purpose and scope of applicability of commercial arbitration agreement at international level

Arbitration is a private way of adjudicating dispute outside of any judicial system, though it is enforceable in a

national court.26 In most instances, parties choose arbitrators and rules of arbitral institution.27 In addition, parties can

choose place and language of arbitration.28 The decisions are also final and binding. In resolving their dispute, parties

have a substantial autonomy and control over the process of arbitration. Parties in arbitration want to escape from the

fear of “home court advantage” and provide a neutral form and thereby secure fair hearing.29 Today, international

commercial arbitration has become the norm for dispute resolution in most international business transactions. In

their arbitration agreement, the parties can select the rules that will govern the procedure, the location of the

arbitration, the language of the arbitration, the law governing the arbitration, and frequently, the decision-makers,

whom the parties may choose because of their particular expertise in the subject matter of the parties’ dispute.30

Arbitration in international commercial disputes is believed to contribute to market integration by safeguarding and

improving the efficiency of international private transactions.

3.2 Formation and content of arbitration contract at international level

The arbitration agreement is commonly confined in the clause that is embedded in the parties’ commercial contract.

Such agreement clause must be entered before the dispute has been raised. However, if there is no arbitration clause

in the parties’ agreement, they can rarely enter in to a submission agreement, when both parties have agreed though it

less likely to agree on such agreement once dispute rose. Hence, it is generally better for parties in the arbitration to

agree to arbitrate when they are in good terms.

In most jurisdictions, the arbitration clause is separate and distinct agreement. The doctrine of separability permits the

arbitrators to hear and decide the dispute even if the main contract is terminated, never existed, or invalid for various

reasons.31 In addition, the arbitration agreement is required to valid. In particular, the enforcement of international

agreement is determined by the New York convention.32 Under this convention, the validity of arbitration agreement

is decided based on the following requirements. The first requirement is that arbitration agreement is required to be

in writing and signed by the parties.33 Under the New York convention, the other requirement is, the dispute between

26 See Margaret L. Moses, The Principles and Practice of International Commercial Arbitration, (1st ed., 2008) at 55. (here after Margaret) 27 Ibid 28 Ibid 29 Ibid 30 Id p17 31 Id 18 32 Id19 33 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 1958, Art 11/2.




the parties must be “in respect of a defined legal relationship, whether contractual or not”.34 Even though most

arbitration agreements are contractual by their nature, there are non-contractual relationships such as tort law. The

other requirement for arbitration agreement to be enforceable is that the subject matter has to be capable of being

settled by arbitration.35

In addition to such requirements, the New York Convention under Article II/3 provides that the arbitration agreement

is enforceable only and only if it is not “null, void, inoperable or incapable of being performed”. In particular, an

arbitration agreement is considered as null and void when there is lack of consent as a result of fraud, duress,

misrepresentation, or undue influence.36 When a particular dispute is barred by res judicata an arbitration agreement

is called inoperable.37 Moreover, an arbitration agreement is taken as incapable of being performed when it is too

vague, confusing, contradictory, or any other unforeseeable condition has been happened.38 When parties draft

arbitration clause they are required to spell out and include every essential requirement and other additional

provisions in the agreement.

3.3 Applicable laws, rules, and procedures in international commercial arbitration

Arbitration is governed by the rule of arbitration which the parties have adopted and by the law of the place of

arbitration. The modern tendency, however, the great weight is given to autonomy of the parties and non-intervention

of national courts at first instances unless the law provides. In particular, in any contract that includes an agreement to

arbitrate the commercial dispute, the autonomy of party is considered as an important element of arbitration.39 Parties

choose a law to regulate the contract. Such law is a substantive law which is likely to be the national law of one of the

contracting party. In particular, under the contract of the sale of goods, it is governed by the international law such as

United Nations Convention on Contracts for the International Sale of Goods (CISD).40 The rules and procedures that

will be used in arbitration are part of this agreement. Apart from the substantive laws which guides the tribunals

decision on the merits of the case, the internal process of the arbitration and the external relationship between the

arbitration and the courts are regulated by the procedural laws.41

34 New York Convention Art.II. 35 In most jurisdictions, for example, issues such as criminal matters, child custody, family matters, and bankruptcy are not arbitrable. It

would be against the law or the public policy of the local jurisdiction to try to arbitrate disputes in these areas. In addition, in patent law, the

validity of the patent will generally not be arbitrable because that is considered to be an issue for a local regulatory agency, or for a court. On

the other hand, disputes arising out of an agreement to license a patent normally would be arbitrable, because those disputes are basically

contract disputes. Increasingly, disputes involving antitrust laws, which were formerly considered inappropriate for arbitration, are being

arbitrated. Securities issues are also arbitrable, at least in the United States. Some tribunals have held that issues of bribery are not arbitrable,

but more recently, commentators and courts have taken the position that a mere allegation of illegality should not relieve a tribunal of

jurisdiction to determine the dispute, including the question of illegality. In sum, most disputes today are considered to be arbitrable, except

for those that fall within clearly defined areas such as criminal law, family law, and patent law. 36 See Margaret, supra note 26, p. 32 37 Ibid 38 Id p. 33 39 See Margaret, supra note 26, p. 55. 40 See U.N. Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 1489 U.N.T.S,

http://www.uncitral.org/pdf/english/clout/CISG-digest-2012e.pdf ; http://www.cisgac.com/default.php?sid=128. 41 See Alastair Henderson, Lex arbitri. Procedural law and the seat of arbitration, Singapore academy of law journal, 26 SAcLJ (2014). (here

after Alastair)


http://www.uncitral.org/pdf/english/clout/CISG-digest-2012e.pdf

http://www.cisgac.com/default.php?sid=128



Currently, the role of various laws and their application to the international arbitration is the subject of debate.

Among such debates include how the concept of lex mercatoria42 applies properly at international commercial

arbitration, the extent of discretionary power of arbitrators in selecting applicable law and the methodology they

should apply, the duty of arbitrators to apply the law are among others.

International commercial arbitration will involve more than one system of law or of legal rules: (a) the law governing

the parties’ capacity to enter into an arbitration agreement; (b) the law governing the arbitration agreement and the

performance of the agreement; (c) the law governing the existence and proceedings of the arbitral tribunal; (d) the

law governing the substantive issues in dispute (applicable law); and (e) the law governing recognition and

enforcement of the award. Standing from this, the following are some of the key issues to be addressed under this

section.

3.3.1 Delocalization of international arbitration

This argument favors on the theory of that international arbitration should not be restrained by the national laws of

the place where the arbitration agreement is entered.43 The proponents of this theory argue that international

arbitration should be detached from the law of seat and the states do not have any concern about the dispute of the

parties who are not its citizens. Instead, the pertinent to apply over the dispute is the law applied by the court at the

place of the enforcement of the award. Additionally, they oppose the court interferences during the arbitration

process.

The delocalization debate has exerted a powerful and valuable influence on modern arbitration by promoting the

widespread modern consensus that the national laws should be permissive, non-interventionist, and respectful of the

party‘s autonomy wherever possible.44 A number of international tribunals support the delocalization of international

arbitration by saying that arbitral proceedings should be detached from the local jurisdictions.45 According to them,

arbitration is an institution without a forum and without a geographic basis. Arbitration is part of no state’s judicial

system. The arbitrator has no allegiance or connection to any single country. Parties have the sole power to decide on

it.

42 Lex mercatoria refers to the body of rules of international commerce which have been developed by the customs by the field of commerce

and affirmed by the national courts. The term lex mercatoria comes from the Latin and means merchant law. This term had been used during

the medieval times by the merchant in Europe to name the body of commercial law. 43 See Margaret, supra note 26, p. 50 44 See Alastair, supra note 41, at 11. 45 Ibid




3.3.2 The Lex Mercatoria

A number of commentators have agreed that it is very vague to define and apply the concept of lex mercatoria.46

Generally speaking, it is defined as follow;47

A loosely organized system of transnational legal principles, rules and standards derived from the usages,

customs, and practice of international commerce.

General principles of law, transnational rules, a method of decision making.

Customary commercial law.

“Transnational substantive rules of law and trade usages and the method of their application to international

economic transactions.”

A set of substantive rules developed to regulate international trade in the business community, which are

derived “not only from international commercial dealings, standard clauses, international conventions and

arbitral awards but also from various sets of legal rules issued by the International Chamber of Commerce

(ICC) or other international organizations.”

From the above given definition, one can conclude that the term lex mercatoria can be summarized as the common

practice which incorporates international commercial rules, general principles of law, standards, and trade usages. A

typical example of such practice is UNIDROIT Principles of International Commercial Contracts.

The application of lex mercatoria is determined when the contracting parties under their contract expressly and

explicitly stated their contract will be governed by the international law or lex mercatoria. In particular, states of the

parties should have a commercial contract so as to avoid the application of either national law. The lex mercatoria

may also come into play when two parties choose it as the law governing their contract, or when no choice of law is

made, and the arbitral tribunal decides to apply the lex mercatoria.

3.3.3 The parties’ choice of law

The choice of a suitable system of national law is the most common choice in international commercial contracts. The

reason for the selection of a particular national law may be because of its connection with the parties to the contract;

or it may be simply because the parties regard it as a system of law which is well suited to govern modern

commercial relations. International arbitrations are also governed by municipal procedural law and most frequently

by the law of the jurisdiction in which the arbitral tribunal sits.48 This law, known as the lex loci arbitri, may be

crucial in resolving procedural issues that arise.

46 Such concept lacks certainty and predictability. Many writers agree that it was developed out of customary system in Europe during

medieval times. It concerns with the dealings of merchant and called the law of merchants. 47 See Margaret, supra note 26, at 61-71. 48 Ibid




According to the Model Law, the parties are free to agree on the rules of law applicable to the substance of the

dispute. The Explanatory Note of the UNCITRAL Secretariat49 clarifies that the clause allows the parties a wider

freedom of choice than simply pointing out to a certain jurisdiction. Example, the ‘rules of law’ wording allows the

parties to designate the generally recognized principles of international law as the rules applicable to the substance of

the dispute. Failing the express choice of the rules of law by the parties, the arbitral tribunal is given the right to apply

the conflict of rules which it considers to be applicable. In all cases tribunals shall decide in accordance with the

terms of the contract and take into account the usages of the trade applicable to the transaction. Another provision of

the Model Law stipulates that an arbitral tribunal decides ex aequo et bono or as amiable compositeur only if the

parties have expressly authorized it to do so.

Even though the basic content of lex arbitri is varies from country to country, in the modern arbitral jurisdiction it can

be described as follow.50

It regulates matters internal to arbitration such as the composition and appointment of tribunal, requirements

for arbitral procedure and due process, and formal requirements for arbitral award;

It address the external relationship between the arbitration and the courts, whose powers may be supervise and

supportive, such as interim relief, procuring evidence form third party and securing the attendance of

witnesses, the removal arbitrators and setting aside or arbitral awards;

It regulates the broader external relationship between arbitrators and the public policies of that place, which

includes matters such as arbitrability.

Most parties choose a national substantive law to govern their contract, and a place of arbitration whose lex arbitri

will govern the arbitral proceedings. Typically, when the parties have chosen a law, the arbitrators will apply that

law. To ignore that choice could cause an award rendered by the arbitrators to be set aside on the grounds that the

arbitrators exceeded their authority, or that the arbitral procedure was not in accordance with the agreement of the

parties. The procedural law of the arbitration will be considered the arbitration law of the seat. The lex arbitri, which

governs the arbitral proceedings, is almost always the law of the place of arbitration. It is sometimes referred to as the

procedural law, or as the curial law.

“A good example of a country’s lex arbitri is the UNCITRAL Model Law on

International Commercial Arbitration. Although it has been adopted in fifty plus

countries, regions, and states, it has not always been adopted uniformly. Nevertheless,

in most jurisdictions that have enacted it as their international arbitration law, the

major elements are the same. The Model Law covers the formal validity of the

arbitration agreement, and the obligation for a court to refer parties to arbitration,

unless the agreement is void. It limits interference of the court in arbitration matters

49 Ibid 50 See Alastair, supra note 41, p 3.




and permits parties to seek interim relief from a court without losing the right to

arbitrate. It deals with the composition of the arbitral tribunal, challenges to

arbitrators, jurisdiction of the tribunal, and the tribunal’s powers to order interim

measures. It regulates the arbitral proceedings, basically providing that the parties can

agree on how the proceedings will take place. It also provides that if the parties do not

agree, then the tribunal can determine how the arbitration will proceed. It has rules

pertaining to the award, settlement, recourse against the award, and recognition and

enforcement of the award.”51

Choice of law questions arise in proceedings before both national courts and arbitral tribunals. Choice of law

questions can be referred either to national courts concerning enforcement of arbitration agreements and awards or to

obtain ancillary judicial assistance.52

When we come to the rules governing the Arbitral Proceedings, if parties choose the arbitration rules, such rules

should be enforced. Besides, concerning the law governing the arbitration agreement, in various jurisdictions, the

arbitration agreement is valid if it is designed in accordance with the requirements of the law chosen by the parties or

the law applicable to the principle contract. The issue of which law applies to arbitration agreement becomes

complicated when the parties has failed to choose a seat of arbitration or a governing law.

3.3.4 Arbitral Proceedings and Awards

The Model Law specifies that the parties shall be treated equally and shall be given full opportunity to present their

case. The parties are free to agree on the number of arbitrators, on the procedure of their appointment and challenge,

on the place and language of arbitration, and, importantly, on the rules related to the arbitration procedure. The

UNCITRAL text establishes liberal requirements to the form and content of arbitral awards.

The national legislation varies significantly in the area and often restricts the freedoms of the parties as compared to

the Model Law. The restrictions often include requirement(s) to the number, qualifications, or the procedure of

appointment and challenge of arbitrators. Some States limit the freedom of the parties to determine the procedure of

arbitration.

3.3.5 Recourse

The Model Law exclusively limits recourse against arbitral awards to setting aside. The UNCITRAL text includes a

closed list of grounds on which courts are allowed to set aside awards; a statute of limitations of three months applies

to such action.

51 See Margaret, supra note 26, at 64. 52 See Alastair, supra note 41, p 4.




3.3.6 Recognition and Enforcement

The Model Law stipulates that arbitral awards shall be recognized as binding and are enforceable upon application to

the competent court and provides a closed list of grounds that allow courts to refuse to enforce awards. These

provisions apply irrespectively of the place where the award was made, and, hence, the UNCITRAL text equally

treats domestic and foreign awards.

The Model Law also spells out the procedural requirements to recognize and enforce an award. According to the

amended version of the Law, the revised provisions on the form and the content of arbitral awards, have excluded the

requirement for a party to submit the original document of the arbitration agreement (or a certified copy thereof) to

courts when seeking to enforce the award, which was made pursuant to that agreement.

According to the results of the Assessment, similarly to the Scope of Application category, the recognition and

enforcement of awards is a contentious issue. This is even truer with relation to foreign arbitral awards. The national

legislation varies significantly.

3.4 Emerging issues and trends in international commercial arbitration

Over the past few years, international arbitration has become a growing preferred mechanism for resolving a dispute

for international contracts and investment, though it prevailed by default.53 In particular, multinational corporations

have spent their decision and time in crafting and selecting the arbitration clause to protect their confidentiality and

proprietary nature.54 Companies operating across more than two countries opt for international arbitration over

domestic courts for various reasons. The primary reasons are to avoid perceived biased and take the advantage of

flexibility offered by the international arbitration.55 Parties can choose the applicable law, the seat of arbitration, the

arbitration institution, the arbitrators, the jurisdictional scope, and the general procedure and conduct of the

arbitration, all of which can provide efficiency advantages over domestic courts as well as important legal and tactical

advantages customized to the subject matter of the dispute.56 The basis of selection such advantages is based on

neutrality and impartiality of the legal system as well as the familiarity of parties and subject matter to the law.57

The major independent arbitration organizations such as International Chamber of Commerce (ICC), the London

Court of International Arbitrations (LCIA), and the American Arbitration Association (AAA) have redrafted their

international arbitration rules since 1996.58 Changes are taken on rules governing administered arbitration. This

practice is in contrast to ad hoc arbitration, where the individual parties operate the arbitration under procedures

fashioned by individual negotiation and agreement on programs, or by adoption of an established set of arbitration

53 See KIMBERLEY CHEN NOBLES, EMERGING ISSUES AND TRENDS IN INTERNATIONAL ARBITRATION, CWSL Scholarly

Commons, (2012) at 1-4. 54 Ibid 55 Ibid 56 Ibid 57 Ibid 58 See Michael P. Malloy, Current Issues in International Arbitration, University of the Pacific Scholarly Commons, Vol.15 (2002) p.3.




rules by agreement of the parties.59 Many of the revisions to the ICC, AAA and LCIA rules appear to be modest

technical changes to operational provisions. They are designed with the effect of having uniformity and predictability

in the settlement of international commercial disputes. Completion among arbitration institution was encouraged.

As the international arbitration become a popular in resolving commercial disputes, the subsidiarity and supremacy in

the context of delocalization of arbitral awards become an autonomous principles and approach to arbitral

proceedings.60 Moreover, cross cultural difficulties in arbitral practice and other competing legal traditions that may

affect the arbitral proceedings such as examination of witnesses, the role of tribunals, submission of pleadings in oral

or written, and use of expert evidence tends to be harmonized.

Currently, most commercial codes including UCC considers the common business practice or trade usage as

important interpretative sources for courts to consider when resolving contract disputes. In drafting contract

provisions, consideration should be taken on trade usages. The UCC looks to trade usage as part of the "agreement,"

unless clearly contradicted by prior dealings, course of performance, of the express language of the contract."61

In particular, when we investigate the status of agreement to arbitrate, arbitral proceedings, and arbitral awards at

international level, some national laws allow arbitrators to take various measures like proceedings on ex parte basis

and discovering documents.62 Even though arbitrators lack to enforce coercive orders, they can demand the help of

national courts to realize their objectives.63 There is also an effective enforcement regime of multilateral and bilateral

conventions and treaties that guarantees the recognition and enforcement of arbitral awards, regardless of their place

of origin, in most of the major trading nations of the world.

With regard to the arbitration institution, there are emerging trends to simplify their procedures and increase their

market share by enacting procedures that encourage business globally.64 For instance, arbitration institutions such as

the International Bar Associations (IBA), UNCITRAL and others are revising their arbitration guidelines and rules

since 2010 to minimize the level of cost and delay, streamline evidence production, increase confidentiality, and

simplify overall procedures, at every minimal than the court system.65 In this regard, the institutional revisions

address conferencing of evidentiary procedures, modernized electronic discovery, and statements by witnesses, expert

testimony, oral testimony, privilege claims, and the concept of good faith are discussed below.

Concerning with the conferencing of evidentiary evidence, the revised rules allows parties on arbitral tribunal to

introduce evidence at the earliest time to achieve efficient, economic, and fair process during arbitration proceedings.

This protects confidentiality. In reducing the overall time and cost during arbitral tribunal, the revised rules

introduced a modern electronic discovery in the production of evidence. The revised rule also avoids a long-lasting

59 Id p.4 60 Id p5 61 See Uniform Commercial Code, 1-205 and 2-208. 62 See Bobette Wolski, Recent Developments in International Commercial Dispute Resolution: Expanding the Options, Bond Law Review,

Volume 13, Issue 2 (2001) p.8. 63 Ibid 64 See KIMBERLEY, supra note 53, p.11-16. 65 Ibid




ambiguity on witness statements. Accordingly, in most jurisdictions, discussing witness’s prospective testimony with

the witness is proper and avoids a potential procedural deception.

Under the revised rules, expert is required to be independent and impartial. These revisions help to increase the

reliability and fairness of dispute resolution through arbitration. Oral testimony is also simplified under the revised

rules when it is requested by the tribunal or the party. Oral testimony can be supported through video conferencing

and other new technologies. The revised rules also introduced the concept of good faith to the evidentiary process of

international arbitration.

The UNCITRAL Model Law, since 2010, various revisions have been made in harmonizing its procedures. Most

importantly, the amendment addresses on the following issues;66

The revised rules now require the statements of claim and defense to set out the legal arguments and be

accompanied by all supporting documents and other evidence relied upon.

The revised rules provide additional details regarding the award of interim measures to provide uniformity in

the application of interim measures in arbitration.

Under the revised rule, a tribunal applies the substantive law it deems the most appropriate without regard to

conflicts of law rules, provided that there is no express choice of law by the parties.

The revised rules provide for a right to external review and correction of fees charged by arbitrators.

The revised rules now include provisions permitting multi-party arbitration (i.e., greater than two parties),

which increase the utility of the arbitration system and harmonize its procedures with other modern arbitral

rules.

The revised rules now include procedures to object to experts appointed by the tribunal.

Finally, the UNCITRAL is in the process of drafting new rules directed at increasing transparency,

particularly with respect to selection, payment, availability, and past performance of arbitrators.

4. Part three-Commercial arbitration in Ethiopia

4.1 Overview of the law of governing commercial arbitration in Ethiopia

In Ethiopia, the issue of arbitration is governed under the 1965 Civil Procedure Code67 and 1960 Civil Code68. It is

considered as a milestone for the introduction and development of arbitration and its proceedings. The Civil Code69

regulates the substantive aspect of the arbitration whereas the Civil Procedure Code70 addresses the procedural aspect

of arbitration. In particular, the substantive part includes provisions with regard to the form and signing of an

arbitration agreement, the appointment, replacement and removal of an arbitrator and other provisions relating to the

constitution of an arbitral body. Besides, the procedural part deals with arbitration proceedings, making of awards,

review of awards, and the requirements and procedures for the enforcement of foreign awards.

66 Ibid 67 See Civil Procedure Code of the Ethiopia, 1965, Proc. No.165, Neg. Gaz. Year 25, No.3. (here after Civil Procedure Code) 68 See Civil Code of the Empire of Ethiopia, 1960, Proc. No.165, Neg. Gaz. Year 19, No.2. (here after Civil Code) 69 See Arts.3325-3346 of the Civil Code 70 See Arts.350-357 and Arts.315-319 of the Civil Procedure Code




Before the codification process of the 1950s and the following, arbitration was taken as part of traditional dispute

resolution mechanisms.71 Even though the lexical meaning of arbitration in Ethiopia is assimilated to “Shimguilina”

but the later has a wider conceptual meaning than the modern so called arbitration.72 In addition, with regard to the

investment and mining issues, the dispute is settled by the arbitration by the pertinent legislations.73 Bilateral

investment treaties to which Ethiopia is a party also serves as the source of resolving state-state and investor-state

disputes by way of arbitration.74

Currently, Ethiopia is not a party New York Convention on the recognition and enforcement of foreign arbitral

awards and the Washington Convention on the Settlement of Investment Disputes between States and Nationals of

Other States. Hence, the Ethiopian arbitration law is not drafted as simplified and modernized was as defined under

the UNCITRAL Model Law. The Ethiopian arbitration law designed mainly to address the domestic arbitration.75

With regard to the arbitration institution, Ethiopia has a single forum for arbitration i.e. the Addis Ababa Chamber of

Commerce and Sectorial Associations Arbitration Institute. However, many cases are settled through ad hoc

arbitration.

The term arbitration is defined under Article 3325 of the Ethiopian civil code as it is “contract whereby the parties to

a dispute entrust its solution to a third party, the arbitrator, who undertakes to settle the dispute in accordance with the

principles of law.” In addition, arbitrators are only entrusted with the question of fact as stipulated under the same

provision sub Article 2. With regard to the formation of arbitration agreement, the formation of contract stated under

the general law of contract can be considered.76 When the arbitration agreements are drafted both substantive and

formal requirements are required.77 Substantive requirements include consent, capacity, offer and acceptance; the

formal requirements in arbitration agreements includes oral or written.78 The Ethiopian arbitration is raised as a

peculiar law when the provision stipulated under Article 3326 of the Civil Code requires an arbitral submission to the

third party arbitrators. This can be considered as a means to establish a private judicial system. Besides, this provision

also determines the capacity of parties to bring their dispute for arbitration. A similar connotation is stated under

Article 315 of the Ethiopian Civil Procedure Code and it says “No person shall submit a right to arbitration unless he

is capable under the law of disposing of such right”.

With regard to the arbitral process, parties have a freedom in appointing and selecting the members of arbitrators in

equal manner. Their freedom is not only limited to the appointment of arbitrators but also in deciding the identity,

number, qualification and jurisdiction of the arbitrators.79 Arbitrators can be appointed either at arbitral submission or

71 See Hailegabriel G. Feyissa (2010), THE ROLE OF ETHIOPIAN COURTS IN COMMERCIAL ARBITRATION, MIZAN LAW

REVIEW Vol. 4 No.2, p4-5. (here after Hailegabriel) 72 Ibid 73 the Mining Operations Proclamation No. 678/2010 and the Energy Proclamation No. 810/2013 74 https://www.mehrteableul.com/index.php/component/k2/item/13-overview-of-commercial-arbitration-in-ethiopia 75 See Hailegebriel, supra note 71, p.6. 76 See Arts,1678-1730 of the Civil Code 77 See Hailegebriel, supra note 71, p.10 78 Ethiopia recognizes arbitration agreement can be drawn in both forms i.e. it can be drawn in the form required by the law for disposing of

the right to which the arbitration agreement relates. Read the acontrario provision of Art.3326/2 of the Civil Code. 79 See Art.33311 of the Civil Code.


https://www.mehrteableul.com/index.php/component/k2/item/13-overview-of-commercial-arbitration-in-ethiopia



subsequently (Art.3331/1 of the Civil Code). Parties are at liberty to state the manner of the appointment and the

number of arbitrators in their arbitral submission either to be one or several. In the absence of prior agreement, the

manner of appointment and the number of arbitrators is limited to appoint one party from each party. If there is no

agreement on the appointment of arbitrators, the court has a power to appoint arbitrator at the request of one of the

parties.

As said earlier, the procedural aspect of the arbitration is governed by the Civil Procedure Code through Arts315-319.

According to Art.315 of this Code, parties may settle their dispute by arbitration where they have agreed in a written

agreement or where arbitration is required by law. However, arbitration cannot be undertaken on administrative

contracts or in any other issues prohibited by law.80 Parties are also required to have legal capacity.

4.2 Critical comparison between the Ethiopian civil code and the UNCITRAL Model Law

The close reading of Article 3326/2 of the Civil Code states that the arbitration submission agreement required to be

made in a special form is required to be in writing and registered in a public notary. However, the UNCITRAL Model

Law allows the electronic communication between parties so long as it is readable and accessible in one hand and

accepted the existence of agreement by the other party.81

Arbitration proceedings in Ethiopia looks like as a litigation of regular courts. This conception can be read from

Article 3345 of the Civil Code and Article 317/1 of the Civil Procedure Code similarly dictates that the tribunal

procedure, execution of award and appeal to be followed by the arbitration tribunal shall be as the same as that of

litigation in ordinary courts.

Even though the role of courts in Ethiopia in resolving a commercial dispute is supposed to have a minimal

intervention but national courts are intervening in the commercial arbitration process against the primary purposes

and merits of arbitration i.e. expediency, convenience, confidentiality, and maintaining future business relationship.

The intended interests of parties, such as resolving dispute at earliest time with a minimum cost, to smooth their trade

and investment by way of arbitration through confidentiality. At international level, such as in UK, Kenya, and

Uganda, the role and intervention of court in arbitration is prescribed by saying “except as provided in this arbitration

act, no court shall intervene in matters governed by this act”.82 In most jurisdictions including the Model Law

restricts the jurisdiction of courts to only such matters as provided for the arbitration act and recognizes the policy of

party’s autonomy in the arbitration proceedings and tribunals.

With regard to the principle of separability, the Ethiopian Civil Code remains silent. In most jurisdictions, the

doctrine of separability permits the arbitrators to hear and decide the dispute even if the main contract is terminated,

never existed, or invalid for various reasons. In particular, the arbitration agreement cannot be affected by the

80 See Art.315/2 of the Civil Procedure Code. 81 See Article 7/4 of the UNCITRAL Model Law 82 See Julius Cosmas (2015), THE STATE OF INTERNATIONAL COMMERCIAL ARBITRATION IN TANZANIA: A COMPARATIVE

CRITIQUE AND CALL FOR THE REFORM, US-CHINA LAW REVIEW Vol. 12, p9-10.




termination of the main contract. However, when the Ethiopian Civil Code stipulates the role of arbitrators under

Article 3330/3, arbitrators have no power to decide on the validity of arbitral submission. This makes the provision

unclear and the purpose sought to be achieved under this provision do not convey the autonomy of the power of

arbitrators. Besides, arbitration on administrative contracts is prohibited as per Article 315/2 of the Civil Procedure

Code and this is stated in wrong way that should not be the case.

The procedural aspect of the Ethiopian arbitration should be reconsidered to answer the question about the issue of ex

parte proceedings and the production of discovering evidences. In addition to this, when the arbitration law in

Ethiopia is redrafted, regard should be given to the common business practice or trade usages as a source of

instrument for interpretation for courts. Finally, the institutional revisions under the Ethiopian commercial arbitration

should address conferencing of evidentiary procedures, modernized electronic discovery, and statements by

witnesses, expert testimony, oral testimony, privilege claims, and the concept of good faith are not sufficiently

addressed.

Concluding remarks

The Ethiopian arbitration law governs only the domestic arbitration and it is not drafted as simplified and modernized

as prescribed under the UNCITRAL Model Law. Besides, Ethiopia has not yet ratified the New York Convention and

International Convention for Settlement of Investment Disputes. One may think that, ratifying the New York

Convention by Ethiopia can avoid the problems associated with the grounds and requirements for recognition and

enforcement of foreign arbitral awards. Arbitration law in Ethiopia is not drafted in light of the UNCITRAL Model

Law. However, commercial arbitration at the international level has become a suitable legal regime in resolving

commercial disputes. In particular, it is an important private adjudication process for resolving commercial disputes

in the modern world.

In this paper as it has been predominantly discussed, arbitration proceedings in Ethiopia resembles as a litigation of

regular courts. Moreover, unlike in the UNCITRAL Model Law, the institutional commercial arbitration such as the

issue of conferencing of evidentiary procedures, modernized electronic discovery, and statements by witnesses,

expert testimony, oral testimony, privilege claims, and the concept of good faith in the law governing the Ethiopian

commercial arbitration are not sufficiently addressed. Ethiopian courts have extended power in the arbitration

process. This impedes the primary purposes and merits of arbitration process i.e. expediency, convenience,

confidentiality, and maintaining future business relationship between parties to the commercial contract and

investors. The Ethiopian commercial arbitration law is also silent with regard to the principle of separability.

Arbitrators have no power to decide on the validity of arbitral submission and arbitration on administrative contracts

is also prohibited. The procedural aspect of the Ethiopian arbitration do not answer the question that may be raised in

the issue of ex parte proceedings and the production of discovering evidences

Finally, the existing Ethiopian legal regime on commercial arbitration is incompatible with the basic principles and

standards of international commercial instruments. The Ethiopian government should reconsider the substantive and




procedural aspects of commercial arbitration so as to comply with the intended passage of the country in liberalizing

the country’s economic policy and thereby integrating the country’s trade and attract the foreign direct investment

opportunities from the international community. Therefore, critical revision should be made with regard to the

substantive, formal, procedural, and institutional arrangement on the law governing the Ethiopian commercial

arbitration in accordance with the international commercial arbitration instruments.

REFERENCES

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1. Alastair Henderson, Lex arbitri. Procedural law and the seat of arbitration, Singapore academy of law journal, 26 SAcLJ

(2014).

2. Bobette Wolski, Recent Developments in International Commercial Dispute Resolution: Expanding the Options, Bond

Law Review, Volume 13, Issue 2 (2001)

3. Brierly N, Canadian Acceptance of International Arbitration, 40 MAINE LAW REVIEW 288, 291 (1988).

4. Ezejiofor, The Nigerian Arbitration and Conciliation Act: A Challenge to the Courts, JOURNAL OF BUSINESS LAW

81, 82(1993).

5. Finlay A, An Overview of Commercial Arbitration in Australia, JOURNAL OF INTERNATIONAL ARBITRATION

99, 104 (1987).

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REVIEW Vol. 4 No.2 (2010).

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(ARMENIA, AZERBAIJAN, GEORGIA, KAZAKHSTAN, KYRGYZ REPUBLIC, MOLDOVA, RUSSIA,

TAJIKISTAN, TURKMENISTAN, UKRAINE, UZBEKISTAN) AND MONGOLIA, April 2007.

8. Julius Cosmas, THE STATE OF INTERNATIONAL COMMERCIAL ARBITRATION IN TANZANIA: A

COMPARATIVE CRITIQUE AND CALL FOR THE REFORM, US-CHINA LAW REVIEW Vol.12, (2015).

9. KIMBERLEY CHEN NOBLES, EMERGING ISSUES AND TRENDS IN INTERNATIONAL ARBITRATION,

CWSL Scholarly Commons, (2012).

10. Margaret L. Moses, The Principles and Practice of International Commercial Arbitration, (1st ed., 2008)

11. Michael P. Malloy, Current Issues in International Arbitration, University of the Pacific Scholarly Commons, Vol.15

(2002).

12. New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards, (1958).

13. Redfern and Hunter on International Arbitration, 5th Edition, Oxford University Press, 2009.

14. Sutton B, Hong Kong enacts the UNCITRAL Model Law, ARBITRATION INTERNATIONAL, 72, 75 (1990).

15. The Act No. 4 of 1995 of Laws of Kenya.

16. The Arbitration and Conciliation Act, 2000 of the laws of Uganda.

17. Uniform Commercial Code, Vol. 10 (2007).

18. Wuraola O. Durosaro (2014), The Role of Arbitration in International Commercial Disputes, International Journal of

Humanities Social Sciences and Education (IJHSSE), Volume 1, Issue 3.

Websites

1. UNCITRAL Model Law on International Commercial Arbitration, available on UNCITRAL’s website at

http://www.uncitral.org.

1. U.N. Convention on Contracts for the International Sale of Goods, Apr. 11, 1980, S. Treaty Doc. No. 98-9 (1983), 1489

U.N.T.S, http://www.uncitral.org/pdf/english/clout/CISG-digest-2012e.pdf ;

http://www.cisgac.com/default.php?sid=128.

2. UNIDROIT Principles of International Commercial Contracts (2010). Available at

http://www.uncitral.org/uncitral/en/index.htm. (Last visited May 10, 2020).


http://www.uncitral.org/

http://www.uncitral.org/pdf/english/clout/CISG-digest-2012e.pdf

http://www.cisgac.com/default.php?sid=128

http://www.uncitral.org/uncitral/en/index.htm



Laws

1. Civil Code of the Empire of Ethiopia, 1960, Proc. No.165, Neg. Gaz. Year 19, No.2.

2. Civil Procedure Code of the Ethiopia, 1965, Proc. No.165, Neg. Gaz. Year 25, No.3.

3. Energy Proclamation No. 810/2013

4. Mining Operations Proclamation No. 678/2010


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