18 February 2012 Written by  Tefera Eshetu and Mulugeta Getu

Arbitration

Arbitration

This is the most widely used and commonly known type of ADR. "It is the submission of a dispute between two parties to a third impartial (arbitrator) with the agreement that the decision of the arbitrator will be binding and final. It is a quasi-judicial procedure that avoids the formality, delay and expense of normal trial." (Gilbert's Law Dictionary). Before we move on to the discussion about arbitration under Ethiopian laws, let's see some points and controversies about it in the general jurisprudence.

Though it is known as arbitration commonly, there are other kinds of hybrid kinds of proceeding. These hybrid forms are not purely arbitration or conciliation/mediation as the case may be, but share some ideas with arbitration or conciliation/mediation. Fast–truck arbitration is one kind which is accelerated kind of arbitration applied in some disputes which requires quick disposition.  The very objective of this type of arbitration is to get rid of some substantive and procedural laws set by the state to regulate arbitration to facilitate speedy award being given. The other hybrid types are MEDOLA and MED – ARB, as the name speaks for them, these are the hybrid of mediation and arbitration to dispose of a single case. The procedure starts with mediation and if not successful will be immediately followed by arbitration, which have more binding effect than mediation. But none of these hybrid kinds of arbitration are experienced in Ethiopian laws and practises these days.

The other point which should be raised at this junction is its similarity with court litigation. There are two different opinions about this matter. The dominant view is that which say arbitration is one kind of ADR though it shares some common character with court litigation. They further say that arbitration can be called as the extreme kind of ADR since it has some adjudicative character similar to that of court litigation. The other opposing view states that arbitration should not be viewed as ADR but it is one kind of court litigation. The latter sites the binding nature of the outcome (award) as an example. These arguments shows us at least the fact that there are some character arbitration shares with court litigation and the fact that arbitration is more procedural and rigid than any other kinds of ADR.

It is only to remind you some points about arbitration that you have discussed in the first and second chapter. Under Ethiopian law, arbitration is regulated in more detail than any other kinds of ADR.  The civil code provisions of Arts 3307 – 3346, civil procedure provisions which are scattered in different parts of the code, the family code, labour codes are only some of them. This by it self shows us how arbitration has got a place under Ethiopian law. Below we will see some of prevailing legal principles under Ethiopian law in different sub headings.

 

Sources of Arbitration and Arbitral Submission

A. Source of Arbitration

The first thing we have to see here about the valid source of arbitration, which is either consent or sometimes from the law. Arbitration emanates either from consents of parties or from law. (Art. 315(c)).

a) Consent (agreement) – when arbitration emanates from agreement, the arbitral submission should fulfil requirement of valid contract (Art. 1678 c.c.) and observe mandatory laws:  parties should have the capacity to contract and dispose of that right without consideration, the contract should be in a written form and other forms required by law for disposing the right without consideration (Arts. 3326 c.c. and 315 c.pr.). But in case where the law provides an issue for arbitration, tutors on behalf of minors or interdicted persons can make it, and no special form is required for their agreement (Art. 3327 c.c.). In addition, full consents of parties and requirement of lawful and immoral object of agreement is mandatory.

Arbitral submission can be a separate document or an arbitration clause attached to the contract creating the right that creates the dispute. Such dispute may be an existing one or future disputes which may arise out of contract or other specific obligation (Art.3328 c.c.). Jurisdiction of arbitrator in the submission should be interpreted strictly. An arbitrator can do such but he cannot decide over the validity of the submission if contested (Arts. 3329 and 3330 c.c.).

b) Law: - In certain matters, like family dispute, the substantive law provides a compulsory arbitration (e.g. family matters – arts 725- 728 c.c.). In such cases either the law itself provides details of arbitration proceedings or let it to parties determination (agreement) in which the agreement or the contract should observe the above applicable rules.

B. Arbitral Submission

About the arbitral submission, here is a journal article

THE FORMATION, CONTENT AND EFFECT OF AN ARBITRAL SUBMISSION UNDER ETHIOIAN LAW (Bwzzawork Shimelash s - Journal of Ethiopian Low Vol XVII, 1994

INTRODUCTION

Despite the fact that the Ethiopian society had been  traditionally using arbitration through the system of referring disputes to a third person called ‘shimagile’ and  despite the fact that we have elaborate and modern laws  on arbitration (since 1960), there is  still gross  unfamiliarity with  the meaning and application  of  arbitration . There are times when foreign researchers have come to the conclusion that Ethiopia does not have any arbitration laws at all? There are also times when certain initiations have attempted to draft separate arbitration laws governing international arbitration in the belief that the present laws have major deficiencies in this respect. Many a time, enterprise managers simply refer a dispute to arbitration in Paris under the International Chamber of Commerce without bothering to know whether we have such a thing as arbitration law or whether there are mandatory provisions. The purpose of this paper, therefore, is a modest one. It is an attempt to familiarize those who are interested in the use and application of arbitration, i.e. students, lawyers, businessmen and managers, with our major arbitration laws. Since the subject  of arbitration  is quite wide, I have  regrettably limited myself to the examination of the law on arbitral agreement  -what it is  how it is concluded, what its contents are and  its legal effect . I have found it useful to add a section on applicable law in international arbitration. One more thing, the paper deals only with arbitration based on agreements concluded by the parties voluntary. It does not deal with compulsory arbitrations. Hence, family arbitrations, labour arbitrations and arbitrations through what were called the Central Arbitration Committees are not covered.

PART I FORMATION OF AN ARBITRAL SUBMISSION

  1. A. Definition and Nature of an Arbitral Submission

Arbitration, as a device of dispute settlement, is founded on an agreement called arbitral submission. Arbitral submission is the term consistently used both by the civil code as well as by the civil procedure code. In this  paper , however , we  shall be using the terms  arbitral  submission and arbitral agreement interchangeably since the  French  master –text from which  both the  Amharic  version  and the English version of the Civil Code are translated uses the  term “la convention  d’arbitrage” which means arbitration agreement .

The  term arbitration clause is also sometime used in the  civil code and the  maritime code, this too, is an  arbitral  agreement, the difference  being that the  agreement is  inserted  as a clause in  the main contract  made by the parties instead of having a separate agreement  dealing  with arbitration.

Article 3325 (1) of the civil code defines an arbitral submission as a “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.”. It is also provided that only questions of fact may be entrusted to the arbitrator (Art. 3325(2)) and also that the arbitrator could be one or several (Art. 3331(2)). As a contract, arbitral submission is subject, firstly, to the special provisions dealing with arbitration, and secondly, to the general provisions of contracts in General, Title XII, Book IV, of the civil code (Art. 1676(1-2)).

An arbitral submission, though a contract, is however, peculiar in many respects. One of its peculiarities has been put succinctly by Lord Macmillan thus:

“…The other clauses set  out the obligations which the  parties  undertake towards  each other  hinc inde, but the arbitration clause  does not  impose on one of the  parties an obligation in favour  of the other. It embodies the agreement of both parties that, if any dispute arises with regard to the obligations which the one party has undertaken to the other, such dispute shall be settled by a tribunal of their own constitution.” (Heyman and another v. Dar wins Ltd. form Eric Lee, Encyclopedia of   Arbitration Law, Lioyd’s of London press, 1984 sec. 3. 1. 3. )

In arbitral submissions ( or arbitration clauses ), as stated above, the obligations that the parties undertake  are not  towards  each other  but rather they both undertake  to submit the resolution of their  dispute to a person or persons called arbitrators .

Another peculiarity of the agreement is that, in the words of Rene David, there is an  “interplay of two conventions  one between  the parties (submission to arbitration ), and the other between the parties and the arbitrators (receptum arbitri) (“Rene ‘David, Arbitration in International Trade, kluwer publishers, Deventer /Netherlands, 1985,p. 78.). This interplay of two conventions is obvious from the definition of arbitral submission itself where it is stated “the arbitrator, who undertakes to settle the dispute …. The mechanism of arbitration entails not merely the appointment of any arbitrator but a willing arbitrator, that is why it is provided thus: “the person appointed as an arbitrator shall be free to accept or to refuse his appointment” (3339). The second convention which David called ‘receptum arbitri’ appears into the picture, then, when the arbitrator accepts the appointment.

The fact that parties are able, through arbitral submission, to create their own private regime of administration of justice is another peculiarity. By this mechanism, parties can have their own ‘private judges’ outside the court system and if they both continue subjecting themselves to this mechanism throughout, there  is a possibility  of settling their dispute up to  the end  without the intervention of the authorities.

  1. B. THE FORMATION OF AN ARBITRAL AGREEMENT

How is an arbitral agreement? One has to refer to the general provisions dealing with the formation of contracts, i.e. Arts. 1678 – 1730 of the civil code. An arbitral agreement is formed and completed where the offer for arbitration made by one party is accepted by the other party with out reservation. Such offer and /or acceptance “may be made orally or in writing or by signs normally in use or by a conduct such that, in the circumstance of the case, there is no doubt as to the party’s agreement.” (1681 of the c. c.)

The negotiation  that took  place  between the  Ethiopian  Import -  Export  Corporation (ETIMEX)  and a Dutch  Cooking oil supplier by the name B.V. Vereenigde olifarieken (Oilos) is a good illustration of the  point in question.( Legal Department file, ETIMEX. A suit based on breach of contract was instituted against oilos in Rotterdam and the court had decided in favour or: ETIMEX.)

The  tender document issued by  Etimex after specifying  the  type and  quantity of the  product  and other terms, invited  foreign suppliers by telex  to  submit their offer. This under Ethiopian                              law, is a declaration of intention and not an offer.

Oilos, as one of the competitors submitted its offer by telex. The offer was accepted by ETIMEX and a contract of sale was concluded by the parties. Up to this point there was no mention of arbitration. After this, ETIMEX asked Oilos to send a draft supply contract in which was included:

“The parties hereby agree to submit all disputes arising out of or in connection with this contract to arbitration in Rotterdam in accordance with the rules for Arbitration of the NOFOTA.”(Netherlands oils, Fats and oilseeds Trade Association.)

ETIMEX, after receiving this offer for arbitration, sent its reply by amending the arbitration clause thus:

“Arbitration: Any dispute arising out of or in connection with this contract is to be submitted to ICC (International Chamber of Commerce), Paris for arbitration.”

The reply of ETIMEX did not confirm to the terms of the offer and hence was deemed to be a new offer for arbitration. If this new offer had been accepted by Oilos, we could have said the arbitral agreement was formed or concluded. But unfortunately dispute in the meantime arose between the parties and no agreement was reached on arbitration. The case as it is, however, abundantly demonstrates the process of forming or concluding an arbitral agreement and also its  separableness from the main contract.

  1. C. THE  CAPACITY  OF PARTIES TO MAKE AN ARBITRAL  AGREEMENT

Even though establishing a principle  regarding capacity of  persons is not  with in the  domain   of  procedure law,  our  civil  procedure  code provides thus: “No person  shall  submit a right to  arbitration  unless he is  capable   under  the law  of  disposing of  such right.” (Art. 315 of the civil Pr. C.). As stated earlier, even here the code uses the phrase ‘unless he is capable under the law’ implying that capacity is governed by other substantive laws. Accordingly, the principle regarding the capacity of persons to arbitrate as laid down in the civil code reads:

“The capacity to dispose of a right without consideration shall be required for the sub-mission to arbitration of a dispute concerning such right.” (Art. 3326 of the C. C)

Where the party to an arbitral agreement is a physical person, the basic requirement that he must be capable, i.e. free from all disabilities is obvious. Where the party is a juridical person, such person must be endowed with a legal personality. This too is obvious. Rather, we are concerned, here, with the content of the additional requirement, i.e. “the capacity to dispose of a right without consideration.”

We have said earlier that arbitral agreements are not ordinary agreements. They are agreements that subject parties to different and private type of dispute settlement process. They “may lead to a solution of the dispute other than that which would be given by the courts?”( R. David, Arbitration in.. P. 174.). Hence, it is necessary that the parties must have the power to dispose of the right in question, in the words of the Amharic version, “without price”.

Where the parties are acting on behalf of other persons either physical or juridical, then, a special authority to settle a dispute by arbitration is required. That special authority is derived from the principal who has the necessary capacity. Where the principal is a juridical person, such as, a business organization, it is derived from its governing body, i.e. the board of directors.

So much for capacity at the level of physical persons and business organizations - It is at the level of public bodies  such  as the  state, public administrative  authorities and  public enterprises  that  more controversial  points could be expected to arise, considering the fact  that the  interest of the public is involved in their  transactions. So, the question is: do these bodies have the capacity to make arbitral agreements? If so, to what extent?

Let us take first, the Ethiopian state. In the civil code, it is stated that the state is “regarded by law as a person” and that as such it has “all the rights which are consistent with its nature.” (Art 394 C. C). If the distinction is not to be stressed between the state and the government, we see that the Ethiopian Government, for instance in a   petroleum agreement, is allowed to submit a dispute to arbitration. (Petroleum Operations Proclamation, No. 295/1986, Art. 25). We also see that the state, as one of the parties in a joint venture agreement, can settle disputes by arbitration (Joint venture council of state special Decree, No 11/1989, 4(1), 36.). Other than these, we have not found a general provision that expressly allows or expressly prohibits the state from making an arbitral agreement. In these circumstances, the easier answer would have been to say that the state does not have the capacity to submit to arbitration. But that would be unrealistic. The state is the source of all rights and obligations and of all laws (including the provision on capacity). It is also the trustee of all public property. It follows, therefore, that as long as the right which is to be the subject of arbitration belongs to that state, and not to someone else, i.e. individual citizens or groups, it can be said that the state has  the capacity to make arbitral agreements.

Regarding the capacity of public authorities and public enterprises, after making a short survey of various legislations, we find amongst them three categories: Those with no express power   to submit to arbitration, those with limited power and those with express power to do so.

Public authorities such as the Ethiopian Science and Technology Commission (Proclamation No.62/1975.) are conferred with such powers like entering into contracts, suing and being sued, pledging and mortgaging property. The power to submit to arbitration is not expressly given to them. The same is true for such public enterprises like the Agricultural Inputs Supply Corporation (Proclamation No. 269/1984). On the  other  hand, we see  that  public enterprises like  the  Ethiopia  Domestic Distribution  Corporation   and the Ethiopia  Import-Export  corporation  have  the  power  to  settle  disputes out of  court  (Presumably this includes arbitration) only with the   permission of their supervising minister (Legal Notice No. 104/1987. Art.12 (3) and Legal Notice No. 14/1975 and public Enterprises Regulation No. 5/1975, Art 7(2)). Then there are  many  public authorities  which  are  expressly empowered to  submit  disputes  to  arbitration like the Civil Aviation or the  National  Water  Resources Commission which are empowered to  settle disputes out of court (Proclamation No. 111/1977.Art. 8(18)  Proclamation No.217/1981,Art .8(16)). Public enterprises like the Blue Nile Construction Enterprise (Proclamation No. 234/1982, Art. 10(2) (C)) are also given similar power . The conclusion to be made is, therefore. that in the case of public authorities  and public  enterprises, the  power to submit a  dispute to arbitration  is not  to be presumed and that they need either an express  power, or in the case of some  public enterprises, special permission to do  so.

  1. D. THE FROM AND PROOF OF AN ARBITRAL AGREEMENT

Form requirements are associated with the question of whether an arbitral agreement can be made orally or in writing. In this regard, Article 3326 (2) of the civil code, which   is the main source on this point provides thus:

“The arbitral submission shall be drawn up in the form required by law for disposing without consideration of the right to which it relates.”

According to this Article, admittedly quite a difficult one, the special rules of from for disposing a right without consideration to which the submission relates must be followed.

On the question of capacity to submit to arbitration, (see section C above) it is indeed necessary to require that one have the widest right. That  seems  to be the reason for  the  existence  of the phrase  “the  capacity to dispose  of a right  without  consideration”. But, on the question of form as of to why the phrase “for disposing without consideration” is added in  Art . 3326 (2), is to say the least, most confusing. In fact, if we follow the provision strictly, we may reach an absurd conclusion as shown below.

Let us say, for example, the right over the dispute concerns the transfer of an immovable property. For the disposition of a right over an immovable without consideration (donation) the law requires that it be made in the form governing a public will, i.e., it must be written by the donor or by any person under the dictation of the donor, it must be signed by the donor and by four witnesses. Now, if the parties who are involved in the transfer of that immovable property want to submit their dispute to arbitration, it means their submission must be drawn in the form described above. It must be written by the parties themselves or by any person under their dictation, signed by them and by four witnesses. It is really doubtful whether this is the intention of the legislator.

As a result, one is at a loss to determine, in a definite manner, the “formality” required regarding arbitral submission. In spite of this, some transactions like the transfer of a right over an immovable or over a ship, or over a business, and long term contracts like guarantee, or insurance policy are required by law to be in written form and be attested by two witnesses. To submit disputes that arise from any one of these contracts to arbitration, therefore, it would be safer and advisable that the submission be concluded in a written form and also be attested by two witnesses. Many other transactions, however, like the sale of goods or contract of carriage of goods (except a contract of carriage of goods by sea), or construction contracts are not required to be in writing. It is the contention of this writer that if disputes arise out of these transaction, submission to arbitration can be made orally, although, as Schmitthoff has rightly said they are rare in practice and “import…an element of uncertainty with respect to the implications and enforcement of the arbitration agreement” (Clive M.  schimitthoff’s Export Trade the Law and practice of International Trade, London, Stevens and Sons 1986, 8th edition, P. 583. In practice, we recommend a written arbitral submission that is carefully drafted.). In these situations, the parties have the option of having their submissions in writing. The implication of this is that a mere document signed only by the parties or an exchange of letters, or telex or telegrams would be sufficient. If the necessity of proving the arbitral submission arises, the burden of proof is on the party who alleges its existence. And according to the source of the legal relationship involved, he may have to present the “formal” instrument, or the written documents or witnesses, or other means of evidence.

The manner of making an arbitral agreement varies according to the wishes of the parties. Where the dispute between the parties is an existing one, they can refer their dispute to arbitration by a separate document. If, on the other hand, the dispute is a future one, they can either refer it to arbitration by a separate document or can insert their submission as a clause (called an arbitration clause) of the main contract.


THE CONTENT OF AN ARBITRAL SUBMISSION

(Parts omitted)

  1. B. THE POWER OF THE ARBITRATORS

Delimitation of the arbitrator’s power is the second matter that may be dealt with in the arbitral submission. The parties, of course, do not have to provide anything about this because the arbitrator, once he is appointed, shall settle the dispute, i.e. hear evidence and deliver an award in accordance with the principles of law. The necessity to delimit the arbitrator’s power arises when the parties wish to narrow or widen his power than what is already provided by law. The situations where that is made possible and the limitations thereof prescribed by the law are discussed below.

  1. 1. The dispute between the parties may involve both questions of law is and questions of fact. In both cases, the arbitrator is required to settle the dispute in accordance with the principles of law. The parties, cannot, in contracts to some foreign laws where it is allowed, empower the arbitrator to act as ‘amiable compositeur’, i.e. decides on the basis of equity or  fairness. This basic policy of the  Ethiopian law  is also  reflected in the maritime  code where it is provided:

“An Arbitration clause inserted in a bill of lading may in no event grant to the arbitrators the power to settle a difference by way of composition.”(Art. 209 Maritime Code)

True, the civil procedure code (Art. 317) envisages a possibility whereby the parties could, through their submission, exempt the arbitrator from deciding according to law.  But, this is a clear contradiction of the substantive law and cannot be tenable (See Sedler, Ethiopia civil procedure P. 387). On the  other hand, where the  parties wish to narrow the arbitrator’s  power  they  can  instruct  him only to establish a point of fact, for example, the occurrence or  non- occurrence of an  earthquake, without deciding  on the legal consequences  following there from (Art. 3325 of the C. C)

  1. 2. There is one area –variation of contracts- where the parties can widen the arbitrator’s power beyond that of deciding upon legal or factual dispute. On this subject, Art. 1765 (civil code) provides:

“When making the contract or thereafter, the parties may agree to refer to an arbitrator any decision relating to variations which ought to be made in the contract, should certain circumstances occur which would modify the economic basis of the contract.”

As can be observed from the article, the power to vary or modify a contract is different from the ordinary power in that the arbitrator with such a power would decide on and regulate the future relationship of the parties concerned.

  1. 3. The power of the tribunal to decide on its own jurisdiction called “kompetenz-kompetenz” in foreign legal systems (UNCITRAL Model law on International commercial Arbitration Note by the secretariat, A/CN 9/309, 25 march 1988, P. 6.) is another area that may need delimitation by the parties. The parties, in particular, may authorize the tribunal to decide disputes relating to its own jurisdiction. Suppose one of the parties, raises an  objection alleging  that the  tribunal has no jurisdiction  because it is made up of one arbitrator instead of  three, or that  the dispute brought  before it is  not covered in   the submission, the  implication of the above authority  is  that the tribunal would have the power to decide on such  objection. On the other  hand, if the  parties wish  to go  beyond this and empower the tribunal to  decide on whether  the arbitral  submission is or is not valid, that , I am  afraid , is not permitted  because  Art. 3330 (3) (civil code) mandatory provides: “The arbitrator may in no case be required to decide whether the arbitral submission is or is not valid.” (The French master - Text as translated by Elias Daniel reads:   “the arbitrator may in on case be called upon to rule on the question of whether the arbitral submission is or is not valid.”)

The implication of this mandatory provision is  that if any  jurisdictional   objection  based on invalidity of  an  arbitral submission is  raised, the power to  decides such  issue  rests  not  on the  tribunal  but  on the court. The policy behind this rule also seems to be a sound one because the arbitrator, unless so restricted, may be inclined, in order not to lose his fees, to decide always in favour of having jurisdiction.

In this connection it must be realized that some international arbitration rules particularly that of the ICC Arbitration Rule Art. 8(3) which give the arbitrators the power to decide on such issues violate the mandatory provision of Ethiopia law.

C. SPECIFYNG ‘ARBITRABLE’ DISPUTES

An arbitral submission must specify which dispute is referred to arbitration. Specially where  the submission  related to future  dispute  (where  the dispute was  not  known at the  time  of making the submission) the law  provides that “this shall not  be valid unless it concerns  disputes which  flow  from  a contract or other  specific legal obligation” (Art. 3328 of the C. C.).

The intention of the parties whether they have chosen a “narrow arbitration clause” or a “broad arbitration clause” is determined by the words they have  used in the  submission. A formation such as “a dispute arising under  the contract” is  held  to be a narrow one while “all disputes  arising out of the contract or in connection with it” is considered a broad  one. If a case is brought in  Ethiopia, there is little doubt that the courts  will   follow similar lines  because  they  will enforce an arbitral an arbitral  submission only  when  they are convinced that the dispute  is “ covered by the submission” (Art, 3344 C. C).

In one case the arbitrator assumed jurisdiction on a formulation that read:  “If a difference arises as to the amount of any loss or damage such difference shall…. (be settled by  arbitration ).”  But the Supreme Court revised the Award on the ground that the dispute relating to liability of the   insurer was not covered by the submission.

As I have stated above, specifying a dispute is important.  But, the more important point (that  may well affect  the  legality of the  arbitration process) is that  the dispute  must be  capable  of settlement by arbitration. The Civil procedure code (Art. 315) in which this principle is strangely laid down provides: “No arbitration may take place in relation to administrative contracts as defined in Art. 3132 of the civil code or in any other case where it is prohibited by law.”

If this provision had been placed in the civil code rather than in the civil procedure code or alternatively, or if the civil code had similar provision, no one would have dared to make an issue out of it. But  because  of this  stated  situation, the  question  of whether or not  administrative contracts  are  capable  of settlement by  arbitration has continued  to be  a subject of  much  controversy…..(Parts omitted)


THE EFFECT  OF AN ARBITAL SUBMISSION

  1. A. BINDING NATURE  AND ENFORCEABILITY

An agreement made between parties to settle their dispute by arbitration is binding on them and it shall be enforced as though it was law. If both parties, knowing the  binding nature of their  agreement,  wholly  comply with it,  the arbitral  tribunal  created  by  them  will  proceed with  the  hearing  of the case  and will deliver  an award, to  the  exclusion  of the  courts. On the  other  hand,  if one of the  parties, in disregard  to the  arbitral  agreement,  institution  an action in a court  of law, the other  party  has  the  discretion  to  consider the  agreement  to have  lapsed and  continue to  defend his case there.

The  binding  nature  of the agreement and the necessity of  enforcement   appears  in head-on    fashion   when  one of the  parties, in disregard  to the  arbitral  agreement  institutes  an  action in a court  of law  while the  other  party  wants  to  take  the  case  to  arbitration. It  is in  relation  to this  situation  that  Article  3344(1)  ( civil  code)  entitled “penalty for non- performance”  provides  thus:

“ where a party to an  arbitral submission  brings  before the  court a dispute  covered  by the  submission, refuses  to perform  the acts  required for  setting the  arbitration  in motion  or claims that  he  is not bound  by the arbitral  submission, the other  party  may in  his  discretion  demand  the performance  of the  arbitral  submission or consider it to  have  lapsed in respect  of the  dispute in question.”

In the  hypothetical  situation described above, the courts in Ethiopia, in contrast  with  some  countries like England  where  they  have  a discretion, are  bound  to  decline  their  jurisdiction  and  refer  the parties  to  arbitration. This is what the courts do in practice   as well. In the case between Agricultural Marketing Corporation (AMC) and Ethiopia Amalgamated (High court, civil File No. 1101/82.), AMC instituted an action in the High court against the defendant claiming around Birr ten million. The defendant submitted a preliminary  objection alleging that since  the  parties  had  earlier  concluded  an  arbitral  agreement, the  court  should refer the case  to  arbitration, struck  out  the suit and referred the case to  arbitration, even though the arbitral tribunal  contemplated  by the  parties was not yet set up.

  1. B. Some  preconditions

Before referring   the dispute to  arbitration, however, it  is incumbent upon the court to  ascertain : a)  That there  is a valid agreement to  arbitrate, b) that  arbitral  submission covers the dispute  at hand, and  C)  that the  submission has   not  lapsed . These will be discussed one by one.

1. The defendant who wishes  to raise a preliminary  objection on  the ground that the  claim is to  be settled  by arbitration or that  the dispute is the subject of  arbitration, is  expected  to  raise  this  objection  at the  earliest  opportunity, otherwise it  shall be  deemed to have  been  waived. Now if the plaintiff, in his reply alleges that there was no valid agreement, the  case shall be  referred to  arbitration  only  after this issue  has  been  ascertained and  decided  by  the  court. The issue may as  well be  complex  especially when  defective  arbitration  clauses are  involved.

2. The second condition is the one concerning the ambit of the arbitral submission. The court will give effect to the arbitral submission only when the “dispute is covered by the submission”. In one  insurance  case I cited  earlier  (Insurance  corporation V. Gebru  and  Lemlme), where  the  arbitral   clause  covered  only  “differences  arising  as to  the amount  of any  loss or  damage” the insurances  objected to  the jurisdiction of the arbitrator by saying that the  dispute on liability  was not covered by the  submission.  To illustrate our point better, however, let us reverse the situation and assume that Gebru and Lemlem brought their claim to court. Let us also assume further that the Insurance corporation objected to this and demanded   performance of the arbitration. If this  situation  occurs,  the court  after ascertain the  nature  of the  dispute  involved, will, no doubt, reach the conclusion ( just as  Supreme  court has reached the same conclusion) that  the plaintiffs  claim  based  on liability   is not covered by  the submission which  talks  of amount  issue only.  Hence, it will continue hearing the case.

3. The third condition concerns the non- lapsing of the arbitral submission. An arbitral submission that has lapsed cannot   be enforced. The  burden  of proof lies on  the  party  who  alleges  the  lapsing,  normally the  plaintiff  who  wants  to  pursue  his  case  in court. Any one of the following could be the causes for lapsing of the arbitral agreement (Arts. 3337, 3338 and 3344 C. C.).

a) Default of an arbitrator named in an arbitral submission,

b) Death of  one of  the parties before appointing  an arbitrator , and

c) Acts  of the  party demanding arbitration  such as bringing  a claim before  a court (excepting  actions to preserve  rights from  extinction) or refusal to set  the arbitration in motion.

If the factors enumerated above are proved to the satisfaction of the court, it will reject the defendant’s   demand for arbitration and will continue hearing the case. Otherwise, it will reject the plaintiff’s arguments and refer the dispute to arbitration. …..

 


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