International Arbitration Through the Prism of Users from a Developing Country, Ethiopia

By Elodie Dulac (Senior Associate, King & Spalding, Singapore)

Ethiopia is a developing country which is increasingly attracting foreign investment and is “new” to international arbitration.  It is of course not an isolated example in this respect.  I picked Ethiopia because it is a country I have been regularly travelling to for the past few years.  It is interesting to hear the perspective on international arbitration of Ethiopian lawyers and businessmen.  For those who will be involved in international transactions, most of these transactions will not be high-value ones going to the top 5 arbitration institutions and arbitration seats worldwide.  These are not the users of international arbitration most of us are usually exposed to.  How available is international arbitration to them in practice, or how available do they perceive it to be?

Ethiopia has one of the world’s fastest growing economies.  Foreign investment is on the rise.  The Government has shown an increasing willingness to attract foreign investment and to lift restrictions on it, notably by adopting a new Investment Proclamation and a new Investment Regulation in 2012.  When one looks at the dispute resolution options, the Ethiopian judicial system presents challenges so that this option is viewed with limited enthusiasm even by local actors.  There is a growing awareness of international arbitration.  There is in fact a long tradition of arbitration and alternative dispute resolution in Ethiopia, known as Shimguilina.  Therefore, Ethiopian lawyers and businessmen are generally receptive to the idea of resolving disputes through arbitration.

However, while the possibility of international arbitration is increasingly acknowledged, it has still to become a practical option for a large proportion of Ethiopian businesses involved in international transactions, which for most will not be high-value ones.  For this category of transactions, having an international arbitration in one of the European capitals under the auspices of the ICC or another leading international arbitration institution is at this point largely viewed with incredulity by Ethiopian lawyers and businessmen.  The prevailing perception is that it is expensive, unaffordable, and a game by westerners for westerners.  The knowledge of international arbitration is still in infancy, notably due to the fact that legal practitioners in Ethiopia are generalists and have not had yet much experience of international arbitration.  This is bound to change over time but, in the meantime, it is difficult to rally them to the idea that arbitration, let’s say in Geneva under the ICC Rules, is not as expensive as it sounds and that there are cost saving measures the parties can adopt.  For instance, internet is not widely available, and when it is, is usually slow; phone lines are not always of good quality or stable; videoconferencing is a remote possibility, so the idea of cost-saving measures by relying on technology is hardly realistic at this stage.  There is a need for a more approachable type of international arbitration for this category of disputes, at the regional or sub-regional level.

International arbitration with a seat in Addis Ababa or under the auspices of an Ethiopia-based arbitration centre is unlikely to become a viable option in the foreseeable future (leaving aside contracts to which the Ethiopian Government is a party and in which it may impose a seat in Addis Ababa).  The legal framework for international arbitration in Ethiopia is outdated.  The provisions on arbitration (which do not distinguish between domestic and international arbitration) are scattered between the 1960 Civil Code and the 1965 Code of Civil Procedure, and suffer from ambiguities, inconsistencies and gaps.  A draft new arbitration law was submitted to the Ethiopian Ministry of Justice a few years back but has been shelved.  Similarly, Ethiopia’s becoming a party to the New York Convention was tabled before the Ministry of Justice over six years ago, but is at a stalemate.  Ethiopia is still not a party to the New York Convention.  One explanation advanced for the lack of political will to make the necessary reforms and encourage international arbitration is the memory of the Salini cases against the Ethiopian Government and Ethiopian state-owned entities in the year 2000s (which famously included in one of these cases the arbitral tribunal proceeding with the arbitration in disregard of an anti-arbitration injunction by Ethiopian courts).[1]  By law, only one arbitration centre is allowed in Ethiopia, the Arbitration Institute of the Addis Ababa Chamber of Commerce and Sectoral Associations.  While its case load of domestic arbitrations has been increasing, international arbitration is likely to be out of reach of the Arbitration Institute as long as the legal framework has not been revised.  This is to an extent a missed opportunity given Addis Ababa’s regional standing as the seat of the African Union, and it being easily accessible travel-wise.

Looking at options at the regional level, in contrast to Asia, no African seat of arbitration or arbitration centre has truly emerged yet.  There isn’t as of today the African equivalent of Singapore, Hong Kong, the Singapore International Arbitration Centre or the Hong Kong International Arbitration Centre in Asia.  This is a gap which needs to be filled for international arbitration to become a widespread practical option not limited to high-value transactions for actors from African countries such as Ethiopia.  Mauritius is positioning itself as the African seat of choice.  It passed an International Arbitration Act in 2008, which it amended in 2013,[2]  and which is amongst the most arbitration-friendly worldwide.  Mauritius is a party to the New York Convention.  In addition, the 2013 amendments to the International Arbitration Act provide that international arbitration matters will be heard by judges from a panel of “Designated Judges”, i.e. these judges will have expertise in international arbitration.  Mauritius launched an international arbitration centre, the LCIA-MIAC Arbitration Centre, in 2011.[3]  Mauritius is therefore in a good position to become “the” African seat.  At the sub-regional level, Rwanda is making efforts to establish itself as an international arbitration hub for East Africa.  To do so, it ratified the New York Convention in 2006, passed a new arbitration law in 2008, and established the Kigali International Arbitration Centre (“KIAC”) in 2011, which aims at attracting not only domestic disputes but to become a regional international arbitration centre.[4]  Rwanda and the KIAC are likely to have some appeal to East African parties, if only because the cost will look less prohibitive to the users.

Mauritius, and to an extent Rwanda, are at an early stage of establishing themselves as regional or sub-regional international arbitration hubs.  It remains to be seen how these will be endorsed by African users but the demand for an African seat is there.