Scope and Parties to International ADR
In the field where there exists the involvement of more than one parties or interaction among human beings, it might be inevitable to think of the possible existence of disputes. Human relation ship is becoming diversified backed by modern technologies. The world’s commercial and diplomatic relation requires the involvement of at least more than one nation or citizens of a nation. Trade is becoming a global phenomenon which requires the involvement of more than one nations or citizens or entities of different nations. It is also becoming impossible this time to think of internal peace and security with out having smooth diplomatic relation ship with the neighbour and even other states far from once geographical location. Border disputes are also common between states especially after the mid of the 20th century as a result of a lots of independences in Africa, Asia and even in Europe. Extra – territorial crimes it self is one treat to the peace and stability of the international community which involves the cooperation of the nations of the world in making sure that criminals did not get a shelter in a nation other than where the crime was committed and are duly prosecuted. Dispute may arise in the extradiction policy of one nation and the ambition of the other nation to prosecute the suspect. These give rise to the existence of differences or disputes which cannot be easily adjudicated by the formal courts of one of the nations involved there under.
These are some examples of international disputes that are frequent in the current global relations. The question to be raised at this very junction is that can we take all these and other kinds of disputes before ADR tribunal and get a valid and enforceable, before the international community and the disputants, out come from it? Do we have subject matters of dispute which can’t be safely entertained by ADR? The other related issue is about the capacity and identity of parties who can be a party before international ADR? The latter question is a kin to the controversy over the subjects of international law; sovereign nations and international organizations only or individual citizens and private institutes as well?
For instance, research has been done about the adequacy of the settlement of trade mark disputes occurring over the world by Rosanne T. Mitchell (Rosanne T. Mitchell, Resolving Domain Name-Trademark Disputes: A New System of Alternative Dispute Resolution Is Needed in Cyberspace, 14 OHIO ST. J. ON DISP. RESOL. 157 (1998), Cardozo Journal of Conflict Resolution). This article contends that current dispute resolution procedures are inadequate for alleviating trademark controversies over Internet domain names. The author believes expansion of the number of generic top level domains and registrars around the globe requires the implementation of an alternative dispute resolution system. Mitchell argues that this system will eliminate uncertainties in determining an appropriate forum and will dramatically decrease litigation time and expenses. The International Ad Hoc Committee's proposal, facilitated by the World Intellectual Property Organization ("WIPO"), attains these goals by providing three dispute resolution procedures: (1) on-line mediation; (2) on-line expedited arbitration; and (3) administrative challenge panels. The author contends that this proposal embodies an optimum solution for insufficient conflict resolution methods. Thus, Mitchell proposes that the United States government and WIPO should adopt this method to effectively resolve all trademark domain name disputes.
International arbitration has proved a useful method of settling some territorial disputes between nations. The question remains, however, as to whether arbitration is an appropriate dispute resolution mechanism to settle ethnic-based claims to land and a research was done on this area (Carla S. Copeland, Note, The Use of Arbitration to Settle Territorial Dispute, 67 FORDHAM L. REV. 3073 (1999), Cardozo Journal of Conflict Resolution). This research addresses the issue by examining three separate arbitration proceedings that have each involved a territorial dispute: (1) the Rann of Kutch arbitration between Pakistan and India; (2) the Taba Area arbitration between Israel and Egypt; and (3) the arbitration between the two Bosnian entities over the Brko area, as provided for by the Dayton Accords. The note concludes that the use of arbitration to solve territorial disputes can be successful only where the parties are committed to resolving the dispute peacefully through arbitration and that such a commitment is unlikely if the dispute involves an issue of vital national importance. Thus, this note contends that an attempt by the international community to force states to arbitrate such disputes may discourage future parties from using the procedure.
Another research was done to determine whether or not mediation works well in public disputes like armed conflict and deadly conflict and peace making role of mediation. In each of these types of dispute mediation has proved it self to be an effective kind of dispute settlement either in resolving the conflict totally or by mitigating the degree of contention. Peace keeping role of mediation is witnessed, for example, in Senator G. Mitchell’s role in mediating the peace talks that led to the Good Friday/Belfast Agreement in 1998 in Northern Ireland. The conflict is often expressed in religious terms as a clash between Catholic and Protestants as a great many Protestants want to keep Northern Ireland in union with the United Kingdom (Unionists) and where a great many Catholics favour Northern Ireland becoming part of the Republic of Ireland (Nationalists). Senator G. Mitchell was appointed as a chair of all party talks and it ends with agreement.
In the field of armed conflicts the effort of Carter Centre’s International Negotiation Network (INN) to mediate one of the longest civil wars in African history between the government of the People’s Democratic Republic of Ethiopia (PDRE) and the Eritrean People’s Liberation Front (EPLF) in 1989 can be mentioned. Lead by the then president of USA, Carter, the two parties have made a partially successful two round meeting in Atlanta – USA and Nairobi – Kenya which ends with agreement on procedural matters. Mediation was tested in deadly conflicts of Bosnia and Rwanda
The above discussion makes clear the experience of different kinds of ADR in resolving international conflicts of different nature. Public disputes which would get a challenge in the domestic jurisdiction of ADR have been freely and fruitfully entertained in the international relations. Thus, we may say that it would be difficult to say that there are subject matters of a dispute in the international level which can’t be entertained by ADR.
In case of capacity of parties before international ADR, the same conclusion can be reached and say that as long as a party has a cause of action and as long as both of the disputants are consented, it would be the obligation of the panel or tribunal to enforce the interest of the parties. This is witnessed from the provisions of different international documents. In arbitration, a party's ability or obligation to arbitrate an international dispute arises from its consent as a signatory to a contract that contains an arbitration clause. Article 1 of the AAA's International Arbitration Rules provides that an international arbitration shall occur "where parties have agreed in writing to arbitrate disputes." The 1958 United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention), the legal framework by which the international community has chosen to regulate the enforcement of arbitral agreements and awards, imparts a similar writing requirement.
The effort made above shows us that the limitation we have in domestic jurisdiction of ADR over public interest cases would not arise in international relation as most of the disputes between states are resolved by using ADR. In addition, public international law denies parties other than sovereign states and some international organization with the right to be a party before it. This will not happen in ADR as private individuals, private commercial and civic institutes, states and group interests are freely entertained before it.
- Category: Alternative Dispute Resolution
- Hits: 12010
The need for ADR in International disputes
We have different forums with the power to entertain disputes and give binding disposition to the dispute there under. The most dominant and binding one is that which derives its power from the supreme laws, i.e. constitution, of each nation to entertain disputes with in the nation’s jurisdictional limit. In addition, customary and alternative kinds of dispute resolution mechanism supplement the function of courts of law by entertaining disputes of different kinds in the domestic relations. The spheres of functioning of these devises are mostly limited to the disputes that arise in the national level. If the dispute has some nature of international dispute, it is not to mean that these forums established in the national level do not have jurisdiction to entertain the case. The issue here is about the conflict of interest that might arise between the disputants as to forum and law, and the nations and also the enforceability of such out comes in the other nation. International treaties have tried to address these conflict of interest issues and make court decisions much smoother and enforceable in other nations.
Further, international tribunals have been established by the UN to serve as a forum for international disputes. Most nations of the world are making their diplomatic and commercial relations much smoother by the help of their institutes, i.e. UN. Though, there is unlimited number of critiques against the enforceability and reasonableness of decisions given by UN dispute settlement systems, huge number of international disputes are well addressed by it. The panel established under WTO is also the other most widely acceptable dispute settlement mechanism entertaining a wide range of international trade disputes raised among the member states.
What necessitated ADR in international disputes in the existence of all these different kings of mechanism function well in different kinds of disputes? Do you think that there are a lot more kinds (subject matters) of disputes not yet addressed by these mechanisms we have seen so far? Or is that because the enforcement of decisions or out comes of these mechanisms have got obstacles?
A. Extra – territorial relations of citizens – With the increasing concept of ‘Globalization’, the interaction of citizens with other person or entity who is not a citizen of him is not uncommon. To survive as a state and to have a civilized nation peacefully established on the willingness of the subjects, the government should encourage such kinds of commercial and social interactions. The state is bound by its commitment to give protection to its and its citizens’ interests. As long as there is relation, commercial or other, it is inevitable for a conflict to arise from that relation. It will be wise to look for effective means of dispute settlement for such kind of dispute where the outcome will get recognition from all parties and which secure the enforceability of it as well. At this time ADR can be thought as a best alternative.
B. Limitations of the domestic courts - As it has been explained earlier the jurisdiction of domestic courts is limited to the matters related with the citizens’ interest and sometimes in the interests of public. Stated differently, state courts might have not jurisdiction to matters arised in international disputes for some times the other party is not clearly under the jurisdiction of the court so that enforcement of such kinds of court decisions will be obstacles. That means citizens might not get the opportunity to get the decision enforced and thereby exercise their rights. Especially, when one of the parties is not an Ethiopian and/or if he doesn’t have any property under Ethiopian jurisdiction, the decision given against him will not be easily enforced unless there is reciprocity in between the nations. The other thing is when there is a conflict of interest between the nations where the two disputants belong to. This happens where, for instance, both of the nation claims to have primary jurisdiction over the matter, when there is no reciprocity agreement to the enforceability of decisions given in one state to the other one. The parties, in such instances, prefer alternative meanses of getting justice by taking their grievances to ADR based on the sole consent of the disputants.
International Arbitration by J.S. Verma (taken from a book entitled, Alternative Dispute Resolution, Univ. Law Publishing. P. 13)
I. Need for International Arbitration,
The growth of international trades bound to give rise to international disputes which transcend national frontiers and geographical boundaries. For the resolution of such disputes the preference to international arbitration vis-à-vis litigation in national courts is natural because of arbitration being preferred to litigation in courts and the foreign element being preferred in the international arbitration to the domestic elements in the national courts. This is also because there is no international court to deal with international commercial disputes. “In situations of this kind, recourse to international arbitration in a convenient and neutral forum is generally seen as more acceptable the recourse to the courts as a way of solving any dispute which can’t be settled by negotiation.” (Alan Redforn and Martin Hunter, Law and Practice of International Commercial Arbitration, 2nd ed. P. 26.)
The rationale and purpose of international arbitration should be to provide a convenient, neutral, fair, expeditious and efficacious forum for resolving disputes relating to international commerce.
Basic features which are uniform in the legal framework for resolution of international commercial disputes “can be broken down in to three stages; (i) jurisdiction, (ii) choice of law, and (iii) the recognition and enforcement of judgements and awards.” (Jonathan Hill, in the Law Relating to International Commercial Disputes, para. 1.1.3).
The trend towards growing judicial intervention which tends to interfere with arbitral autonomy as also finality is a significant factor to be kept in view. The need is to reconcile and harmonise arbitral autonomy and finality with judicial review of the arbitral process. National law differ on this issue. UNCITRAL Mode Law attempts to promote harmony and uniformity in this sphere. The aim is to ensure arbitral autonomy coupled with neutrality or impartiality in the arbitral process by the composition of the arbitral tribunal by competent and impartial members with ensures equality between the parties and full opportunity to them to present their case. Total exclusion of judicial intervention does not match with the current trend but the scope of judicial supervision needs to be reduced to the minimum. The source of authority of the international arbitral tribunal is the agreement of the parties and not the mandate of the State. The choice of the law applicable is also determined by the provision in the arbitral agreement. With the increased arbitral autonomy the requirement of reasons for the award is greater. Apart from transparency in the arbitral process, it also acts as an inherent check on the arbitrators and discloses to the party the basis of the award and the logical process by which the conclusion was reached by the arbitrators. The presence of the reason also regulates the scope of judicial supervision.
Informality of the arbitral process permits relaxation from strict rules of evidence and it reduces costs and delay which are often unavoidable in litigation. However, observance of basic principles of natural justice cannot be dispensed with.
Appropriate provisions for enforcement of award are essential to impart efficacy to international arbitration.
C. To promote of Access to Justice – It is not only on the national level that peoples will be denied of the right to have access to courts, but some times it happens in the international relations as well. For instance, it happens when none of the domestic courts of the disputants assume jurisdiction over the matter. In other words, some times the national courts where the disputants belong to me may not have the jurisdiction to entertain the case according to their own national laws. In such instances, the parties will not get access to any of the courts and the only alternative for them will be to look for ADR based on their free consent.
“Following its exponential development in US, the ADR movement was exported to many parts of the world. National courts in Europe, stymied by the volume of transborder litigation, have been attracted to ADR. Members of the European Union see ADR as a way to facilitate access to justice, a fundamental right contained inn Article 6 of the European Convention for the protection of Human rights and Fundamental Freedoms. Growing interest in ADR in the European Union has also resulted in a Green Paper proposing greater use of alternative process in civil and commercial matters, and efforts are currently underway to develop a European Code of Conduct on mediation.” (International Conflict Resolution; Consensual ADR Process, American Case Book Series, Thomson west Pub, 2005, p. 18)
D. Development of e-commerce – Most of the time we think of three parties involved in ADR, the two disputants what ever there number may be and the third neutral intermediator. But these days, it becomes common to see ADR as a square or rectangle instead of a triangle. The fourth party, the new presence in the table, is the technology that works with the mediator or arbitrator. Interest in this fourth party has been fuelled by the emerging cyber market place, a market place of transactions taking place over the internet, known as e-commerce. These buyers and sellers need access to cost effective and efficient means to resolving disputes that arise from these online transactions. These buyers and sellers need a dispute resolution process that is inexpensive- one in which the costs are much lower than the purchase price of the commodity. Going to court or convening mediation are not viable resolution methods for these modest transactions.
“The development of e-commerce also increased the need for ADR. Given the difficulties of processing e-commerce disputes in a global e-market place, on-line dispute resolution has become an attractive alternative, particularly in small disputes. When ADR processes, such as mediation and arbitration, occur in the on-line environment, it is often referred as online dispute resolution (ODR).
In the context of civil disputes ADR processes, such as negotiation and mediation, introduced a civilized way to resolve international conflicts. They were designed to overcome the limitations and failures of domestic judicial processes and the lack of a binding international public process.” (International Conflict Resolution; Consensual ADR Process, American Case Book Series, Thomson west Pub, 2005, P. 19-20)
E. Influence of the UN Charter – The traditional dispute settlement procedures available under international law are enumerated in Article 33 of the UN Charter;
1. The parties to any dispute, the continuance of which is likely to endanger the maintenance of international peace and security, shall, first of all, seek a solution by negotiation, enquiry, mediation, conciliation, arbitration, judicial settlement, resort to regional agencies or arrangements, or other peace full means of their own choice.
2. The Security Council shall, when it deems necessary, call up on the parties to settle the dispute by such meas.
Negotiation is generally acknowledged as the most fundamental of these processes. The most common process for international dispute settlement, however, are the diplomatic or the consensual methods – mediation and good offices, enquiry, and conciliation. The consultation process, although not mentioned in Article 33 of the UN Charter, is a species of negotiation that should be considered as part of the traditional package of processes for the resolution of international disputes. Together with pre-negotiation activities, such as public peace processes, coalition-building, dialogue groups, and co-existence practices, theses processes offer a panoply of choices for dispute and conflict resolution practitioners. (p. 20)
This provision of the UN Charter and the general trend in the world towards ADR as a means of settling dispute makes the disputants to put trust and confidence on the procedure. The recognition of ADR in the charter as a first option before resorting to the International Court of Justice (ICJ), a court established under the umbrella of the UN by its charter, dictates the easy enforceability and the quality of ADR outcomes. It is also considered as a preliminary proceeding before going to ICJ.
F. The Limitation of International Courts – Internationally well functioning tribunals like the International Court of Justice (ICJ) and Criminal Court of Justice (CCJ) of the UN and the Dispute Settlement Body of the WTO have lots of limitation. The first one is the identity of the parties that have the right to institute a case or defend their case before these tribunals. It is only sovereign sates and some times international organizations that can be a party before the ICJ. By the same taken, the WTO tribunal accepts claims only from member states. In terms of the subject matters which can be seen by these tribunals, all; cases can’t be entertained before them. Most of the time ICJ entertains disputes “concerning issues related to frontiers and maritime boundaries, territorial sovereignty, the non-use of forces, non-interference in the internal affairs of States, diplomatic relations, hostage-taking, the right of asylum, nationality, guardianship, rights of passage, and economic rights.” (International Conflict Resolution; Consensual ADR Process, American Case Book Series, Thomson west Pub, 2005, p. 42). In the other hand, CCJ has jurisdiction to adjudicate only the gravest offences affecting the international community: genocide, crime against humanity and war crimes. The WTO tribunal entertains disputes in the implementation of any of its documents, like the GATT.
Though, these tribunals try to cover most of the possible disputes in terms of subject matters, the right of the international community to take its cases before them is not fully guaranteed. Thus, we have a lot more parties who do not have a right before any of these tribunals, like individuals, NGOs, companies etc. By the taken, we have some more subject matters of disputes which can’t be entertained in any of these tribunals, like ownership of property, tort claims etc. ADR tries to fill these gaps or matters which are not well addressed by these well known tribunals of the world.
The purpose of this sub-section is to give detail about ADR involvement in insurance as a contract and discuss in general and specifically the extent parties’ right to waive their right to institute 1st instance substantive litigation, differentiating insurance matters which could be taken to ADR and not. In addition, we will discuss the types of ADR which are recognized in settling insurance disputes and selecting the one which is best, and also discuss as to how the number and identity of third parties which are involved are determined including their role, qualification and steps followed by them by referring to legal provisions and the practical facts we have realized during our interviews and case study.
The insurance relationship is a contract that may involve more than two persons, the insurer, in exchange for the payment of consideration (called premium) agrees to pay for loss caused by specific events. The beneficiary is the person to whom the insurance proceeds are payable. The insured is the person whose life is covered by a life insurance policy or the person who acquires insurance on property in which he\she possesses an insurable interest (Law for Business, seventh edition, A. James Barnes, Terry Moretied Dowrkin, Eric L. Richard ).
When the parties agree and sign an insurance policy which contains Arbitration clause, it is presumed that they have consented to be bound to settle their dispute by Arbitration. The agreement of insurance presupposes the meeting of mind of the parties that any reservation or restriction by one party shall not affect his agreement unless it is communicated to the other.
Kinds of ADR Recognized in Insurance
Types of ADR means are not few in number. However, the most widely used are three in number. The first one is Negotiation, a consensual bargaining process in which the parties attempt to reach agreement on a disputed on potentially disputed matter. And secondly Mediation is a method of non- binding dispute resolution involving a neutral third party who tries to help the disputing parties reach a mutually agreeable solution. And the last one is Arbitration which is a method of dispute resolution involving third parties who are usually agreed to by the disputing parties and whose decision is binding. Accordingly we will discuss how the above methods are applied in dispute arising in relation to insurance contract.
- A. Negotiation
It is a mechanism by which the parties solve their problems without the involvement of third parties. In this processes the parties’ diligence, commitment and confidentiality is substantial. And this shows that Negotiation is consensual means of ADR. Most of the time insurance companies prefer Negotiation to solve their disputes in order to maintain their customers and to preserve their future relationship with the insured. The insurance company uses different ways of communication to invite the insured in order to negotiate with them. Such as, through phone communication and by giving notice. This is the most efficient method especially during the policy issuance time and the first stage of most kind of disputes. In the latter case if they fail to agree, they will proceed to the other advanced kind of dispute settlement mechanism.
- B. Mediation
It is a mechanism whereby the parties nominate a third party and willingly produce their case before him in order to resolve their dispute. Most of the time insurance companies use Mediation in order to solve a dispute which arises between the insured and third party. Though most companies recognize arbitration in their policy as a means of dispute settlement, in effect, they start with mediation and some time if mediation fails to pull the parties together, court proceeding starts. The elders of the community or some times experienced lawyers will be called to serve as a mediator. The effect, the procedure and other matters there under will be regulated under the general provisions we have since the policy said nothing about mediation, but only about arbitration.
- C. Arbitration
It is a mechanism by which parties submit their case to the third party who renders binding decision. Most of the insurance companies in Ethiopia as stated in their insurance policy adhere to the settlement of disputes through Arbitration (Insurance policy of Nile Insurance Company, Nib Insurance Company, Hibret Insurance Company ).
The way of nominating an arbitrator depends on the wordings of their arbitration clause in their insurance policy. The insurance policy of some insurance companies suggests the appointment of the arbitrators by both parties. For instance we can see the content of Arbitration clause No.4.11 of Nib Insurance Company (S.Co.):-
“All differences in amount arising out of this policy shall be referred to the decision of an arbitrator to be appointed by both parties. If they are unable to agree on a single arbitrator then two arbitrators will be appointed each party appointing one arbitrator within one month of being require so to do by the other party. Failing that the party demanding Arbitration shall proceed with a sole arbitrator appointed by him. Where two arbitrators are elected by the parties they shall jointly appoint an umpire who will preside over all their meetings. The conduct of the Arbitration shall be as provided by the relevant law.”
Some other insurance companies even if they include Arbitration clause in their insurance policy, the policy fails to determine the way of nomination of arbitrators and their numbers. Rather it refers the provisions of the Civil Code (Article 3331 of the Civil Code ) to be applied with these factors as the case may be (Insurance Policy of Nile Insurance Company ). The arbitrators may be any person as far as the parties are consented and most of the time the arbitrators are expertise in the area of the dispute. The decision rendered by an arbitrator is final and binding up on the parties.
Question: Which kind of ADR do you think is best to settle insurance disputes and why? Can we employ different kings of ADR according to (depending on) the nature of the dispute?
188.8.131.52. Insurance Matters Which Could Be Taken to ADR.
In principle, when a dispute arises it is the court which is expected to solve such dispute. But there is also other means of solving a dispute, i.e. ADR. When we take the matters which can be taken to ADR in to consideration, all disputes cannot be resolved by ADR. Here, the question is all about whether there is public interest in the outcome of the dispute. As the interest of the general public cannot be determined by individuals who are not responsible to the public, we have to refrain from taking such kind of matters to ADR. Putting this general idea in mind, we are going to see the matters especially related to insurance. In insurance a dispute may arise from two different matters:-
- A. Between the insured and the insurer
In any kind of business transactions including insurance the occurrence of dispute is inevitable and in insurance, dispute could happen between the insured and the insurer. In order to resolve such dispute parties can take their case either to the court of law or to ADR. But before deciding in such matter parties must adhere to the policy which the insurance company issues and signed by them.
In terms of subject matter which can be taken to arbitration, most insurance policies allow “all differences” while others only “differences in amount”.
“If any difference arises as to the amount of any loss or damages such difference shall, independent of all other questions, be referred to the decision of an arbitrator…” (AWASH, UNITED, Workmen’s Compensation Policy, Conditions No. 14)
“If any difference arises in connection with this Policy such difference shall independent of all other questions be referred to the decision of arbitrator…” (AWASH Fire and Lightening Policy, Conditions No. 18))
So, if there is Arbitration clause in their insurance policy a dispute that arises between them must be first taken to Arbitration. In the absence of such clause it is up to the discretion of the parties to choose the means to resolve their problem. But when we see the practice of the insurance companies, I meet in Dire Dawa, Companies prefer to solve their dispute by ADR rather than the exhaustive court litigation in order to maintain their customers.
Here is a case about the interpretation of the policy and which matters can be taken to Arbitration decided by the federal first instance court of Addis Ababa Lideta division given on 17 April 1997 E.C (file No 42694 in the case Ato Ayenew Abebe Vs united insurance company).
Ato Ayenew Abebe is the owner of lorry plated 3-14740 E.T. The car get insured in the defendant company by policy No 01-4-03574 on 6 February 1987 E.C where by the company undertakes to pay all damages the car may face. The value of the car at that time was 400,000 birr and it was so in the renewal of 1996 E.C also. Art 8 of the policy reads as '' All differences arising out of the policy shall be referred to arbitrations decision''.
Unfortunately the car get crushed and totally come out of use on 6 may 1996 E.C while travelling from Addis Ababa to Gondar around Abbay Bereha falling to 130 meters cliff with its 150 quintal cement on it. The driver of the car escapes from the disaster by jumping out of the car when it is falling in to the cliff. The police of the Wereda made investigation about the event that the peril is covered by the policy for the reason that the car faces the accident in normal course of movement.
The insured immediately come and request the recovery from the insurer company on 14 July 1996 E.C. The insured Ato Ayenew gave notice to the insurer demanding reimbursement of total damager of birr 400,000 birr. Unlike this situation the company kept silent on the notice and all requests of the plaintiff remained unanswered.
On his defence for the court claim of the plaintiff, the defendant raised many objections among the objections raised by the company is that the court has no jurisdiction because the case has to be referred to arbitration pursuant to the arbitration clause. The court over ruled this preliminary objection of jurisdiction and continued to entertain the subject matter of the case until final decision is given on 29 September 1999 E.C.
The court takes into the meaning of the term of arbitration clause of the policy as presented to it in Amharic translation. The Amharic version of the policy has been considered to mean a difference "....arising on...." instead of “arising out of” the policy. The court used “arising on” to interpret and come to conclude that it is a dispute only about the terms or on the face of the contract. When continuing the analysis the court stated that there is no disagreement about the terms written on the contract. It has said that the plaintiff instituted his claim basing on and in accordance with the contract and this means there is no disagreement about the policy and so the arbitration clause cannot be applied.
Disputes subject to arbitration, according to the court's reasoning, are those composed of disputes on the wording of the contract. The case in hand doesn't contain such disputing word in the contract and so it is with the validity and wording of the contract so that it is not subject to arbitration.
It seems that, the court departs from the principle of interpretation of the contract. When we see the reasoning of the court on deciding the matter as not arbitrable, the court read the translation as “dispute arising on the contract ". This leads us to mean that disputing parties have to quarrel on the wordings written under the contract. When interpreting the term “arising on" to mean disputes on the wording of the contract, the court departs from the rule of interpretation of contracts specified under Arts.1732-39 of the C.C.
Art. 1734 of the C.C. obliges the court to search out the common intention of parties. Here, it means that what was to mean in saying that word in each of the parties' mind is determinant job, the interpreter has to figure out parties' understanding to the word is essential in interpreting the contract. In our case at hand what parties intended when saying “arising out of” or “arising on” (in translation) has to be ascertained first. The intention of both parties towards the cause of the dispute is clear, that is about the liability or not of the defendant as per the contract to the plaintiff and to what extent. This can be required only after the happening of the event.
I would like to raise another important issue as to which version of the policy should be considered overriding in case of disparity between the original English version and the interpreted Amharic version. In most, if not all, instances insurance policies are prepared in English version and only when required before authorities that it will be interpreted to Amharic version.
- B. Between the Insured and third party
A dispute may arise between the insured and third party in a case where the insured or his property causes damage to a third party. In this case, the insurance policy will not govern the matter since the third party injured is not a party to it (Principle of Privity of contract - terms of a contract will only be binding as between the parties to the contract.). Instead, provisions of the Commercial Code, for instance, Liability insurance provisions will apply (Articles 685-688). Thus, pursuant to Article 685 of the Commercial Code, matters as between the insured and the third party injured may be settled either in the court or by amicable settlement.
When we see the practice of the insurance companies (particularly Dire Dawa, for instance, Nib Insurance Company), most of the time those companies which have vested interest and allowed by the law to intervene (Article 41 of the Civil Procedure Code, See also Article 687 (1) of the Commercial Code) chooses Mediation to solve such dispute between the insured and third party. For the reason of the companies’ desire to maintain their future relationship with the insured and to preserve the good attitude of the public towards them Mediation is preferable.
Parties’ Rights to waive their Right to institute 1st instance substantive litigation
As a principle any party who claims that his right has been infringed have a right to take his case to the court with good cause (Article 33(2) of Civil Procedure Code ). But this does not mean that parties have no right to settle arguments between them by means other than court litigation. Because of the time, money and personal resources that get tied up in litigation, businesses and individuals are increasingly turning to alternative to trials to settle disputes.
Disputants have absolute right to agree to settle any dispute among them by ADR means as they enter in to a contract, that is in their agreement or they even can agree for such means after such dispute arises. In insurance contract, the insurance company and the insured shall agree as to their relationship by a document called an insurance policy (Article 657(1) of the Commercial Code ).
Under their insurance policy, many companies found in Ethiopia incorporate a clause that stipulates the handling of any differences, or some times only the claim over the amount of payment, that in case may happen between them and their customers. In such clause most of them prefer Arbitration means to settle disputes arising out of their insurance policy. (Insurance Policy of Nile, Nib, Hibret, Awash, United Insurance Companies).
“All differences arising out of this Policy shall be refered to the decision of an arbitrator to be appointed in writing by the parties in difference, or if they cannot agree up on a single arbitrator to the decision of two disinterested persons as arbitrators, of whom one shall be appointed in writing by each of the parties within thirty days after having been required so to do in writing by the other party. In case either party shall refuse or fail to appoint an arbitrator within thirty days after receipt of notice in writing requiring an appointment, the other party shall be at liberty to appoint a sole arbitrator and in case of disagreement between the arbitrators, the difference shall be referred to the decision of an umpire who shall have been appointed by them I writing before entering on the reference and who shall sit with the arbitrators and preside at their meetings. In the event of the death of an arbitrator or umpire, another shall in each case be appointed in his stead by the party or arbitrators (as the case may be) by whom the arbitrator or umpire so dying was appointed. It is hereby expressly stipulated and declared that it shall be a condition precedent to any right of action or suit upon this Policy that the award by such arbitrator, arbitrators or umpire of the amount of the loss or damage if disputed shall be first obtained.” (UNITED I. C., Private Vehicle, Commercial Vehicle Policy, Condition No. 8).
“If any difference arises as to the amount of any loss or damages such difference shall, independent of all other questions, be referred to the decision of an arbitrator…” (AWASH and UNITED Insurance Companies, Workmen’s Compensation Policy, Conditions No. 14).
“If any difference arises in connection with this Policy such difference shall independent of all other questions be referred to the decision of arbitrator…” (AWASH I. C., Fire and Lightening Policy, Conditions No. 18)).
The binding nature of such clause is unquestionable. It is clearly stipulated that terms included in a contract by mutual agreement of the parties will be binding between them as if it is law (Article 1731(1) of the Civil Code ). Thus, insurance contract being a contract, terms included in the insurance policy binds both parties and if they choose to settle their differences by Arbitration, such must be the first means to be taken when dispute arise between the parties. Whether viewed in terms of morality or of economic efficiency, the law should enforce as far the parties make their own law by the terms of their agreement. It is unnecessary to look outside rules as regulators of their conduct and they will probably find the results more satisfactory than if such rules were thrust up on them (Commercial Law by Roy Goode ).
Furthermore, courts also often require parties involved in certain kinds of disputes to try alternatives in an effort to get the parties to settle before trial. Since our law follows the theory of declaration of will (intention) (George Krzeczunowich, Formation and Effect of Contract in Ethiopia Law, FOL A.A.U 1983, pg.13 ), the court in order to decide the cases brought before it must look first of all at the parties’ concrete expression (Article 1680(1) of the Civil Code).
In one case decision (Ato Chanie Markoss Vs Hibret Insurance Company, Federal 1st Instance Court, Dire Dawa, File No.10560) the court have dismissed a case instituted before it by reasoning that the parties have agreed to settle any differences between them which arises based on the insurance policy by Arbitration. The court said that the parties have to exhaust this first, meaning that before coming to the court they have to try to settle their disputes by Arbitration in accordance to their agreement.
Ato Chane Markos, in this case, is the owner of code 00018Dr. FIAT BUS which is insured in the defendant company by policy no 06-24-0005. Unfortunately the car collided on 6 Dec. 1996 E.C. in Alemaya Wereda. After a lots of notices by the plaintiff to get compensated, lastly the plaintiff instituted file demanding 77,894 birr before federal first instance court of Dire Dawa on 28 Sept. 1997 E.C.
The defendant objected the jurisdiction of the court arguing that the case has to be seen to arbitration as it was referred by the policy. In defending this objection the plaintiff, in his counter defence, argued that the clause (Art.9 of the policy) is simply a policy written by the defendant where the plaintiff gives no willingness to be bounded by it that it shall not bind me. Secondly, even said binding, there is no officially established arbitrator in the country and the clause can not be implemented in such circumstance. Thirdly, the court should sustain preliminary objections only those listed under Art. 244 of C. Pr. C., and so on.
The court decided in favour of the defendant saying that the case has to be referred to arbitrator(s). The court tried to support its decision with reasons that parties agreed to refer all their disputes to arbitrators before taking it to court of law. As per Art 1731 of C.C. it is a law between them and so their case has to be referred to arbitration. As regards the counter claim of the plaintiff, that it has to be specified under Art. 244 of the C.Pr.C, the court said that the said article is illustrative than exhaustive. It is not prohibited to accept other objections which are not listed there. As the principle of Civil laws, all not prohibited are permitted. Therefore, the case has to be seen by arbitrator(s) before court litigation.
The court, in my view, made a surprising analysis with the appropriate law to reach decision. The answer for the argument of the plaintiff that the policy is prepared only by the defendant and the plaintiff gives no consent to be bound, is really appropriate. This means the plaintiff had sufficient information about the arbitration clause in the time of the conclusion of the policy. It is beyond our objective to discuss about the validity of insurance policy as a contract, and hence it is better to pass over this part of the argument.
But the problem, I can see is that, the court failed to answer the argument that there is no state established arbitrator. Actually this may be for the reason that it is easy and obvious. As we have discussed in chapter one and as the definition infers arbitration involves choosing a judge to one self. This directly takes us to conclude the existence of state established arbitrator worth's nothing for arbitration clause to be implemented. Even there were established arbitrators, they couldn't see the case between the parties unless the latter agreed to refer to them. But if the plaintiff wants establish arbitrator for any other center as already established arbitrator in the country.
Moreover, the court effectively interprets Art. 244 C. Pr. C. but failed to apply. The court understood Art. 244 C. Pr. C. to be illustrative than exhaustive and this is well constructed legal analyze (Robert Allen Sedler Ethiopia civil procedure pp.174 ). Those listed under the said article as a ground for preliminarily objection, are not exhaustive and the courts can sustain other preliminary objections out of listed under the article. When we come to its application to the case in our hand, it worth nothing whether it is illustrative or exhaustive. The court's conclusion that, the objection is out of the list, is not correct. Art. 244(2) (a) & (g) are talking about this type of objections. Therefore, the objection is among those listed under the article. The decision of the court sustaining the objection is right that the case has to be subjected to arbitration. But this is not for the reason that Art. 244(2) is illustrative than exhaustive. This is because the principle is listed under Art. 244 (2) (a) & (g) of C. Pr. C.
After the decision of the court both parties have nominated arbitrators each and the dispute is now in the hands arbitrators.
All in all, the parties have a right to waive their right to institute 1st instance substantive litigation by stipulating a clause in their insurance policy which states that differences between them will be settled by ADR means, Arbitration in our case, and this clause as discussed above have a binding effect as between them and must be the first resort to turn to solution. The court it self should try to enforce the policy which manifests the interest of the parties.
ADR is a mechanism that encourages disputants to arrive at a mutually negotiated understanding with a minimum outside help. In business transaction the existence of dispute is inevitable and in order to solve such dispute parties use ADR as a means instead of going to court litigation which is costly and exhaustive. Parties to an insurance contract may agree and include Arbitration clause in their insurance policy or they may agree after the occurrence of the dispute. The existence of such clause in their policy makes the decision given by the arbitrators binding as that of court. Without exhausting the remedy available in the Arbitration they cannot take their case to the court. They may also resolve their dispute by Negotiation before even going to Arbitration and to the court, in the absence of any Arbitration clause in the insurance policy. If in any case third party is involved the matter will be resolved by Mediation.
Ethiopia has undergone lots of revisions and amendments in her legal regime regarding labour laws in the different political regimes we experience. It is because that the political system and belief we adhere has got a significant relation and impact as well on the liberalization or otherwise of the labour or industrial relation. What makes legal regimes regulating labour law different from the others is also that different laws are implemented to guide the relationship of different groups according to the nature of the work (e.g. house servants), the identity of the employer (e.g. civil servants) and sometimes according to the status of the employee ( e.g. managers). It is not the intention of this sub section to deal this categorization more than this. Rather to look the latest proclamation No 377/2003 in relation to the settlement of disputes other than the labour divisions of the regular courts.
We have three kinds of forums recognized by this proclamation to entertain labour dispute and give valid disposition accordingly; regular courts, labour relation board, and ADR (like Arbitration, Conciliation, strike, look out, collective bargaining). In this part we will see only some of the ADR means employed in labour dispute and the working of the Labour Relation Board.
ADR is a means to achieve justice without the interference of the government. It is not usually lead by the will and whim of the government. But exceptionally the government may have a limited interest in the ADR proceedings, for instance in labor cases the government plays some role in conciliation proceedings. This part will try to deal with this situation in detail.
ADR in labor relation is aimed in maintaining industrial peace and security towards the all round development of the country. Furthermore since disputes are bound to arise ADR lays down the procedures necessary for their expeditious settlement. We also aimed at addressing various ADR methods and their legal effects as are used in the labor proclamation. Furthermore we will see how labor disputes are settled at various levels. The other issues dealt with are the salient features of each dispute settlement methods, in an attempt to familiarize the reader with the legal framework of available dispute settlement methods in the labour law.
Conciliation is an activity conducted by a private person or persons appointed by both parties jointly or the ministry at the request of either of the parties for the purpose of bringing the parties together and seeking to arrange between them voluntary settlement of dispute which their own effort alone could not have produced. (Art 136 (2) of labour proc.).
Nomination is an inherent right of the parties (Art 3318 of the civil code). The parties may entrust a third party with a mission of bringing them together and if possible settling the dispute between them. They can transfer their right to appoint a conciliator to third party when they are not in a position to know the best conciliator. In addition, the conciliator can be appointed at the request of the parties by institution or by third party.
When we come to labor dispute, the question as to who appoints the private person mentioned in article 136(1) of the labor proclamation the Amharic version seems very clear than the English one. In the Amharic version the conciliator is appointed by the disputing parties or the ministry at the joint request of the parties but the English version of the same article says “by a private person or persons appointed by the Ministry at the joint request of the parties”. What exactly mean ‘private person’ is not clear in the English version. But the Amharic one speaks about conciliators nominated by the disputants for mattes under Article 143. The Amharic version seems to reflect the intention of the legislator more accurately; because article 143(1) clearly states that the parties can resort to conciliation or arbitration of their own choice rather than the ministry. And secondly the proclamation under article 141(1) imposes obligation up on the ministry to assign the conciliator once a labor dispute is reported by other parties.
We have to kinds of conciliation by considering the definition Article 136(1) and Articles 141 - 143 of the same by looking the identity of the person who nominates the conciliators, i.e. the disputants themselves or the Ministry. Article 136(1) left the option open as to who nominates the conciliator; either by the will and interest of the disputants or by the Ministry “at the joint request of the parties”. When the parties themselves nominate the conciliators it is a kind of conciliation recognized under Article 143(1) and there is no limitation of the king of dispute, collective or individual, in this regard. But if the conciliators are nominated by the Ministry, it will be regulated under Articles 141 and 142, and it is only collective labour disputes that can be entertained by this panel.
The other issue here is the seemingly inconsistency between Articles 136(1) and 141 whether the consent of both of the disputants or only one of them suffices the Ministry to nominate conciliator for them. Article 136(1) speaks about “joint request of the parties”, whereas the latter article reads that the Ministry shall appoint conciliators when a collective labour dispute “is reported to the Ministry by either of the disputing parties”. One line argument here is that to look the very purpose of ADR proceeding in general and conciliation in particular and try to find out the answer for these seemingly inconsistence articles. Any of the disputants should not be compelled to submit his or her cases for the conciliators nominated by the Ministry if he or she prefers the labour board over this panel. Other wise how could we say it an alternative? This may lead us to give effect to Article 136 over Article 142 and hence the Ministry will be obliged to secure the consents of the disputants as to their willingness to submit themselves to the panel before nominating the conciliators. The other line of argument says that it is public policy which compels collective labour disputants to the conciliation proceeding though one of them prefers labour board over conciliation. Do you think that it is the intention of the legislator to compel the disputants to do so?
In principle conciliation is a consensus oriented joint problem solving process and does not seem to be compulsorily imposed on the parties but in exceptional cases disputants are obliged to bring their case before conciliator, this is true in disputes arising out of co-operative societies (ART 46,Co- Operative Society Proc. No. 147\98). The reason behind compulsory conciliation is encouraging the party initiating it, by saving him from being seen by other parties as a weaker party.
The reading of art 158 (2) of labor proclamation shows that the disputing parties before they strike or lockout partially or wholly shall make all efforts to solve and settle all their disputes through conciliation. In case of Art 157(3) cumulatively taken with art136 (2) of labor proclamation neither have workers the right to strike out nor employers have the right to lockout in cases of essential public undertaking (Art. 136(2) Labor Proc.).
So conciliation is offered by the legislature to serve as appropriate labor dispute settlement means. Generally parties sit together put all the playing cards on the table so as to say, negotiate in good faith and mutually concede a jointly favored settlement which may finally lead them into a mutually agreed solution for the dispute.
As to the determination of the number of the conciliators, there are two arguments. The first one argues their number should be odd while the other says it should be even. One line of argument is that it should be even because the disputant acquire equal opportunity to select conciliator. This means that if one party selects a conciliator the other party also selects another. The other argument is that the number of conciliator should be odd. Even though these arguments are presented, the number of conciliator does not matter as the conciliator does not give a binding decision, so the number of conciliators is not limited.
Individual labor disputes can not be taken to Ministry nominated conciliator, so it is possible to say such kind of conciliation is made for collective labor disputes (Arts141 -142 of the labour law). The proceedings in conciliation could take place either with a neutral third party conciliator assigned by the ministry or appointed by the parties themselves. Naturally, the disputing parties involved in the labor dispute will try to settle their point of disagreement through a process of communication in the absence of a third party otherwise known as negotiation. This is the most effective and advantageous means of settling disputes. However, the fact remains that, not all disputes are solved through negotiation.
Arbitration as pointed out under article 143 of the labor proclamation is recognized as alternative means to conciliation which are provided under art 136,141 and 142 of the above cited proclamation. In conciliation either of the parties can submit their case to the ministry which appoints the conciliator. But alternatively the parties can appoint an arbitrator with out reporting to the minister. This provision also states that the appropriate law shall govern the settlement of dispute by the arbitrator. The appropriate law might mean the provisions of civil and civil procedure code.
Arbitration is one of the ADR means which helps the parties to adjudicate with out going to the court litigation or some administrative tribunal. Arbitration seems more rigid than the other ADR means and also more flexible than court litigation. Even though that may not be typically the same with the court proceeding and also the third party in the dispute or the arbitrator give binding decision over the dispute ;because of these procedural activities it is more rigid than the other ADR means’s. When we compare it with the courts or administrative tribunal litigation, it is more flexible.
Much has not been said about Arbitration under the labour law when we compare it with the place of conciliation. It only recognizes arbitration as one alternative means of settling labour disputes. This shows us that conciliation is preferable to settle labour disputes than arbitration. Thus, it will be necessary to resort to the civil code and the civil procedure code provisions to guide the procedure.
It is an inherent right of the parties to nominate the third party or the arbitrator though Article 143 doesn’t expressly say so and anything as to the determination of the number of third party. But when it say that parties can take their case to arbitrators or conciliators other than the one nominated by the Ministry, it is declaring that the parties can nominate their own arbitrator for the settlement of the dispute. It is noticed as well that there is no Ministry nominated arbitrator in such case.
In relation to the effect of the award one thing has been said under Article 143(2) of the code. As per the civil procedure code Articles 350 – 357, appeal from the award or setting aside of the award is permitted on the grounds listed there under. Article 143(2) in broader term speaks about these rights of the parties. In case of conciliation, for instance, if the parties fail to agree on the matter, they can either take the matter to the labour board if it is a collective labour dispute or to the labour division court if the matter is an individual labour dispute as a first instance case. But if the proceeding is arbitration first we don’t expect ‘agreement’ in the strict sense but only ‘award’ and this award may satisfy the interest and desire of both or only one of them or none of them though it is not advisable such to happen. In any of the instance any of the parties can take to appeal or setting aside of the ward to the labour board in case of setting aside of collective labour dispute, or to first instance courts in case of setting aside of individual labour dispute, or to the high court in case of appeal of any type of dispute. This seems the interpretation of Article 143 in line with the other relevant laws regulating the matter.
From the reading of Article 143 we may refer that all kinds of dispute whether individual or collective labour disputes can be entertained by arbitration proceeding unless there is an express prohibition in other parts of the law.
As to the matters related with the way of nomination of the arbitrators, the nature of the proceeding, the costs of the proceeding, the duty and right of the parties as well as the arbitrators, effect and enforcement of the award the general provisions of the civil code and the civil procedure code will apply.
Labour Relation Board
Labour relation board is the other king of organ duly established to address the grievances in the industrial relation of the nation when. This organ has a first instance jurisdiction over collective labour disputes. The question here is, is the labour relation board purely adjudicatory organ? Can we equate the procedures and the rules applied in the board with the same of the courts?
The minister shall assign the members of the board according to the proportional representation of trade unions and employers association including a chairman and two qualified members on matters of labor relation. This board can entertain cases and pass binding decisions or compromise the parties as to the appropriate end to their issues pursuant to art 147 of the proclamation.
To address this issue it is better to see some provision of the labor proclamation, civil code and civil procedure code. Article 149(5) of the labor proclamation provides that the ad-hoc or the permanent board shall not be bound by the rule of evidence law and a procedure applicable to the court of law. But it may inform it self in such a manner as it thinks fit. From this provision we can understand that the LRB is entrusted with unlimited discretion where it can the case in a flexible and informal manner as it thinks fit in informing itself as empowered by article 148 of the proclamation. But cumulative reading of article 3345(1) of the civil code and article 317 (1) of civil procedure code we can understand that, even an arbitrator do not have such extended discretion of disregarding the evidence and other adjective and procedural laws of the state.
Article 150(3) of the said proclamation in reaching its decision the board should take in to account the substantive merit of the case and need not follow strictly the principle of substantive law followed by the civil code. Under article 147(4) states that order and decision of the board shall be considered as those decided by the civil court of law. This provision gives the same effect for the decision of the board with the court decision. We will get the same wordings about the states of awards given by arbitrators under Article 319(2) though homologation by the court is additional requirement for the award to get enforced.
Article 147(1)(a) and 150(1) strictly and expressly obliges the board to try to conciliate or compromise the parties before giving any sort of decision of its own. It shows us that at least at the earliest stage of the proceeding it should conciliate but not adjudicate the matter. The other rules under Articles 147ff of the labour law as well resemble the civil procedure rules of arbitration.
Finally, it is noted that conciliation, Arbitration are not the only organs entertaining labour disputes alternative to court litigation. Even the objective of the labour Relation Board is not purely to act as an adjudicatory organ but to serve as a conciliator at least at the earliest stage of the proceeding. In addition we have other ADR types duly recognized under the labour law, i.e. self help. The effective implementation of these meanses will help parties to end up their grievances by extra- judicial devises amicably.