ETHIOPIAN CONCILIATION AND ARBITRATION CENTER (ECAC)

The Legal and Institutional Framework and the Future of Arbitration in Ethiopia:
Prospects, Challenges and Possible Solutions

Essay

Prepared by: SUFIYAN ADEM ABDA

Fourth Year Law Student at Debre Tabor University

Student ID Number: DTU12R2583

Submitted to: ECAC

Submission date: 25/06/2023

Debre Tabor, Ethiopia

Abstract

Arbitration is one of the ways to resolve disputes. Arbitration in Ethiopia has a long history but
has not served at the required level. This paper analyzes the history of arbitration in Ethiopia, the
current practical changes on the ground as well as the opportunities ahead for arbitration. For
this essay the author overviews the laws of Ethiopia and look at the legal basis of arbitration. The
author uses the various literature and research on the subject as a source.

Introduction

People with business, investment, contractual and various relationships with each other may get
into conflict for various reasons. whatever the cause of the conflict, there is no doubt that the
conflict should be resolved in a way that benefits both parties. Arbitration is one of the ways in
which people in different relationships resolve disputes.1 In this essay the author analyzes in depth
the issues related to arbitration and the relationship between arbitration and Ethiopia. The first
thing the author looks at in this essay is the nature and definition of arbitration. Next it mentions
the history of arbitration in our country Ethiopia and looks at the practical situation of arbitration
today in detail. What the essay next looks at in detail will be the laws of our country that give
recognition and legal acceptance to arbitration and the bodies established to conduct arbitration.
This essay analyzes the current situation and identify the opportunities of arbitration and list the
potential problems of arbitration. It adds a detailed look at the benefits of arbitration in the
economic development of the country. The essay finally lists solutions to the problems of
arbitration in the future and point out what needs to be done to get the benefits of arbitration
properly.

1
Muluken Seid, Ethiopia’s New Arbitration Law: An Overview of Major Changes, unpublished, May, 2021 (hereafter 1

cited as Seid)
What is arbitration?

Arbitration is defined slightly in different ways from one country to another.2 Due to this fact there
is almost no universally agreed upon definition for arbitration. The first evidence of this lies in the
fact that many of the relevant international treaties have chosen to talk about the necessity of
arbitration without defining it.3 For example, the United Nations International Trade Law
Commission, which developed a model law on international trade, did not define arbitration.
Similarly, arbitration is not defined in the New York Convention on the Recognition of Foreign
Arbitration Awards.4 It follows that with regard to the definition of arbitration, it seems that
countries have chosen to define it according to their cultural and social realities. Despite this,
various scholars have tried to define arbitration in many different ways.5

Among the many definitions of arbitration given at various times, the author has chosen the
following definition for the purpose of this essay. “Arbitration is essentially a very simple method
of resolving disputes. Disputants agree to submit their disputes to an individual whose judgment
they are prepared to trust. Each puts its case to this decision maker, this private individual. He or
she listens to the parties, considers the facts and the arguments, and makes a decision. That decision
is final and binding on the parties and it is final and binding because the parties have agreed that
it should be, rather than because of the coercive power of any state.”6 Arbitration, in short, is an
effective way of obtaining a final and binding decision on a dispute, or series of disputes, without
reference to a court of law. The definition of arbitration given above contains various elements
that help explain exactly what arbitration is.

The first with the phrase 'disputants agree to submit their dispute...' indicates that disputes can
only be resolved through arbitration if both parties agree to settle their problems through arbitration
and that arbitration is not at the whim of one party or it shows that it cannot be due to government

2
Gidey B. Assefa, The Concept and History of Arbitration in Ethiopia, University of Manchester, November, 2
2021(hereafter cited as Assefa)

3
Id
4
Id
5
Id
6
Hailegabriel G. Feyissa, The Role of Ethiopian Courts in Commercial Arbitration, Mizan Law Review, January,
2011(hereafter cited as Feyissa)
pressure. The second is the phrase 'whose judgment they are prepared to trust...' which
indicates that both parties have great confidence in the body they have chosen to resolve their
dispute and are ready to accept the decision of this body. Another element of this definition is the
phrase ' is final and binding...' which means that the decision of a third party chosen as arbitrator
by the two parties to the dispute is final and binding. One thing that should not be forgotten here
is that the decision of a third party chosen as arbitrator can only be final if the two parties to the
dispute agree that the decision given by the arbitrator will be final.

There is nothing in our country's laws about the definition of arbitration in the same way as
international treaties.7 However, the federal supreme court has attempted to define arbitration in
some of its decisions. For example, in the judgment of case number 38794 volume 9 in the dispute
between Mr. Mukamil Muhammad and Mr. Mifta Kadir, the cassation bench has defined
arbitration as follows:

“……ግልግል የሚባለው የሽምግልና ዘዴ ደግሞ ግራ ቀኙ ተከራካሪ ወገኖች ጉዳያቸውን በ3ኛ ወገን አቅርበው የግልግል ዳኛው
የሚሰጠውን ውሣኔ የሚቀበሉበት መንገድ ነው”8

When translated to English

“.... arbitration is a dispute settlement method where the left and right parties to the dispute present
their case to a third party and accept the decision of the arbitrator judge.”

The federal supreme court's definition can be assumed to be somewhat similar to the above
definition. In general, arbitration is one of the ways of resolving disputes in which both parties
submit their disputes to a third party of their choice and the third party considers their case and
gives a final decision and both parties accept the decision.9

History of arbitration in Ethiopia

In Ethiopia, the country's society has had various ways of resolving conflict since ancient times.10
Although it has different names and contexts in different parts of the country, many of the conflict
resolution methods are similar. For example, the 'jaarsummaa' of the Oromo and the 'shimglina' of

7
See Assefa p. 2 3
8
Id, p. 4
9
Id
10
Feyissa
the Amhara are very similar to the present modern arbitration. However, it must be noted that
modern arbitration has been legally recognized since the 1960s when the country started adopting
codified laws. Here the promulgation of the Civil code and the Civil Procedure Code of the 1960s
played a major role.11 The Civil code gives legal recognition to arbitration while the Civil
Procedure Code covers the manner in which arbitration is conducted.12

In Ethiopia, the arbitration process was very similar to that of the permanent court.13 For example,
article 3345 of the Civil Code14 and article 317(1) of the Civil Procedure Code state that the
procedure to be followed by arbitration shall be the same as that of the ordinary court.15 What
should be understood here is that even then, the arbitration process was not as complicated and
tedious as the court process.

The provisions in the civil code had two major problems at the time.16 The first is that the civil
code tried to give a definition of arbitration and stipulated that arbitration can only be conducted
if required by law.17 This means that if the parties themselves resolved or agreed to resolve the
dispute through arbitration, their agreement would not have legal recognition. Secondly, there were
few cases legally recognized to be settled by arbitration and only domestic cases.18 Therefore, most
of the cases that should have been resolved by arbitration such as investment cases were not
resolved by arbitration.

The current status of arbitration in Ethiopia

After a long time, our country Ethiopia is undergoing major reforms in all directions. The reform
of the country's laws to bring them in line with international and regional realities is the foremost
of these.19 For example, the recently passed Arbitration and Conciliation proclamation no.
1237/2021 has improved many things. The first of the changes brought about by this law is one

11
Assefa 4
12
Id
13
Id
14
Civil Code of the Empire of Ethiopia, Proclamation no. 165/1960, Negarit Gazeta no.2, 1960

15
Id, article 3345 and article 317(1) of the civil procedure code
16
Assefa
17
Id
18
Id
19
Assefa
regarding the powers of arbitrators.20 Before the promulgation of this law, arbitrators could not
determine the validity of an arbitration agreement even if they had the power to determine their
jurisdiction.21 But by this proclamation they have this power. The other novelty introduced by the
proclamation is in the scope of application of the Arbitration laws. This law shall apply to domestic
and foreign arbitrations in Ethiopia.22

Legal framework of arbitration in Ethiopia

Modern written law in Ethiopia began in the 1960s. Laws enacted during this period include the
civil code, the law of civil procedure and the law of trade and business organizations. Laws passed
in the 1960s that recognize arbitration include the Civil code and the Civil Procedure Code.23 Both
these laws give legal recognition to arbitration and clearly state that both parties to the dispute can
voluntarily resolve their disputes through arbitration.24

In addition, articles 208,328,482 and 657 of the Ethiopian Commercial Code provide legal
recognition that both parties can resolve their disputes through arbitration.25

Article 34(5) of the Constitution of the Federal Democratic Republic of Ethiopia clearly states that
personal disputes may be resolved outside the courts through customary and religious means.26

In addition to the above, the Petroleum Agriculture Act, 1978 E.C. 295/1978 is one of the laws
recognizing arbitration. The law provides that in the event of a dispute between the contractor and
the Ethiopian government, the dispute can be resolved through arbitration under the terms of the
petroleum contract.

The investment proclamation no. 1180/2019 states that in the event of a dispute between the
government of Ethiopia and the foreign investor regarding the investment agreement and any

20
Id 5
21
Id
22
Id
23
Id
24
Id
25
Id
26
Constitution of The Federal Democratic Republic of Ethiopia, Proclamation no. 1/1995. Federal Negarit Gazeta no.
1, 1995
agreement between the foreign investor and the government of Ethiopia they may agree to resolve
the dispute through arbitration.27

Council of Trade Chambers and Sectoral Associations Establishment Proclamation No 341/1996.

Under Article 15 of the proclamation, the parties to the dispute can resolve their dispute through
arbitration in the event of a dispute between the business community.28

Another law to facilitate arbitration was passed in 1998 E.C. Under article 6(7) of the proclamation,
the primary purpose of the proclamation is to facilitate the settlement of disputes through
arbitration. and provide that the authority shall issue guidelines on how disputes arising in
connection with the procurement of products may be resolved by arbitration.29

More than 23 bilateral investment agreements signed by Ethiopia so far stipulate that foreign
investors can sue Ethiopia in international arbitration forums.30

The Labor proclamation no. 1156/2012 E.C. article 144 provides that disputes can be resolved
through arbitration.31

Accordingly, many laws give legal recognition to arbitration and the most important one is the
Arbitration and Conciliation Proceedure Proclamation No. 1237/2013 E.C. The law shares many
guidelines from the model law of the International Trade Law Commission in a way that addresses
existing problems.32

In general, arbitration in Ethiopia is legally recognized by the above and other laws.

27
Assefa 6
28
Id
29
Id
30
Id
31
Id
32
Ethiopian Conciliation and Arbitration Working Procedure Proclamation no. 1237/2021, Federal Negarit Gazeta no.
27, April, 2021(hereafter cited as proc. no. 1237/2021)
Institutional framework of arbitration in Ethiopia

The arbitral tribunals may be established permanently or temporarily.33 These institutions have
their own systems of rules for managing the arbitration process and have been established in our
country at various times.34

Arbitral tribunals can be divided into two categories: international and domestic.35 For the purpose
of this essay the author focuses on domestic institutions but examples such as the Singapore
Arbitration Center and the Nairobi Arbitration Center can be mentioned.

There are various arbitration institutions in our country and they are described as follows.

The first arbitration body established in Ethiopia was the arbitration chamber of the council of
trade and sectoral associations of Addis Ababa. The institution was established by proclamation
no. 341/1995 E.C.36

Followed by the establishment of the Arbitration and Conciliation Center in Ethiopia. The center
provided conciliation and arbitration services in matters such as business, labor and employment,
construction and family and was later dissolved.37

The third was the Ethiopian Negotiation and Arbitration Center. The organization was established
in 2012 E.C with the intention of replacing the former Ethiopian conciliation and arbitration
center.38

Followed by arbitral tribunal/chamber of the Ethiopian council of trade and sectoral associations.
In addition, the recently passed proclamation No. 1237/2013 E.C established Ethiopian arbitration
and conciliation center.39 It should be noted here that arbitration centers can also be established by
the private sector. Proclamation no. 1237/2013 E.C has given the Federal Attorney General the
power of supervision as well as licensing.40

33
Feyissa 7
34
Id
35
Assefa
36
Id
37
Id
38
Id
39
Id
40
Proc. no. 1237/2021
The future of arbitration and its benefits in economic development

Following the reforms that Ethiopia has been undertaking to improve arbitration laws, there are
vast opportunities for the private sector to participate in this area. As a result, many of the most
controversial cases in court in the future are expected to be resolved through arbitration.

More than arbitration saves time and money, the role it plays in the relationship between the two
parties is very important. People who settle disputes through the courts can then have a hard time
making it a working relationship again. But people who resolve disputes through arbitration can
work together again as if nothing had happened. This plays an important role in bringing about an
overall peaceful economic growth.

Problems and challenges facing arbitration in Ethiopia

It is indisputable that arbitration has great advantages as a means of resolving disputes. However,
in Ethiopia, many cases that should have been resolved by arbitration have repeatedly bothered the
courts. This may have a variety of reasons. The author cites the following reasons as the main ones.

1. Lack of awareness of the country’s public on arbitration

Although the society of the country has been resolving disputes in various ways according to its
culture and traditions, it cannot be said that it has a deep understanding of the modern arbitration
we are talking about. Lack of awareness can be understood in various ways.41

The first is the low awareness of the issues that can be resolved by arbitration (arbitrability). There
is a lack of understanding in the community to knowingly use it as the previous experience is that
the court orders the settlement of cases by arbitration on its own initiative. The second is a lack of
awareness that arbitration decisions are binding and final. This is due to the fact that if the cases
decided through arbitration are not enforced by the court, it will reduce the acceptability of
arbitration in the society. The other is to treat arbitration and other traditional ways of resolving
disputes as one and the same. Lack of understanding that arbitration is conducted by a body with
knowledge of the matter including lawyers.

2. Lack of sufficiently trained and skilled human resources

41
Feyissa 8
Previously, the attention paid to arbitration in the country was low compared to some neighboring
countries. Consequently, there is no sufficient manpower in the country with knowledge on the
subject. Arbitration in itself is a discipline that requires a variety of professional practices. This
means, for example, that a legal professional may find it difficult to resolve a construction issue
through arbitration. And a person with legal skills must additionally be familiar with diplomatic
issues to resolve investment disputes through arbitration.42

3. The absence of an international arbitral tribunal despite the fact that Addis Ababa is the
seat of many international diplomats and the African union.

If there was an international arbitration institution in Ethiopia, it would have had a significant
impact on the actual state of the country's economic development. Especially the investment
sector.43

Solutions to the problems facing arbitration

The author recommends the following measures to solve the above problems and get the desired
results from arbitration.

1. Providing awareness-raising education in various ways to enhance public awareness of

arbitration.
2. Imposing a legal obligation on people to settle their disputes by arbitration in advance if
the matter can be settled by arbitration when a dispute arises between them.
3. Imposing a legal requirement that when individuals enter into contracts, they must agree
to an arbitration-clause in their contracts.
4. Teaching arbitration as an independent subject from undergraduate level and looking at
international experiences to develop human resources with sufficient knowledge of
arbitration.
5. Adjusting the country's arbitration laws to bring them in line with international realities.
6. As a rapidly developing country with a large economy, it is necessary to understand the
importance of having an international arbitral tribunal in Ethiopia and work to bring it to
the country.

42
Id 9
43
Id
References

1. Gidey B. Assefa, The Concept and History of Arbitration in Ethiopia, University of

Manchester, November, 2021
2. Muluken Seid, Ethiopia’s New Arbitration Law: An Overview of Major Changes,
unpublished, May, 2021
3. Hailegabriel G. Feyissa, The Role of Ethiopian Courts in Commercial Arbitration, Mizan
Law Review, January, 2011
4. Constitution of The Federal Democratic Republic of Ethiopia, Proclamation no. 1/1995.
Federal Negarit Gazeta no. 1, 1995
5. Ethiopian Conciliation and Arbitration Working Procedure Proclamation no. 1237/2021,
Federal Negarit Gazeta no. 27, April, 2021
6. Civil Code of the Empire of Ethiopia, Proclamation no. 165/1960, Negarit Gazeta no.2,
1960

10