By Yehualashet Tamiru
Ethiopia has recently ratified the New York Convention on Recognition and Enforcement of foreign arbitral awards (commonly known as the New York Convention). Ethiopia has formally acceded to the Convention and as of November 22, 2020, the Convention becomes fully implemented. In the ratification Proclamation, Proclamation No. 1184/2020, Ethiopia has made two declarations and one reservation.
The ratification proclamation made two reservations: reciprocity and commercial reservations.
Reciprocity is one of the reservations recognized under the New York Convention. According to Article 1(3) of the Convention, Contracting States may declare that they will apply the Convention to the recognition and enforcement of awards made only in the territory of another Contracting State. This principle of reciprocity can protect the nationals of the Contracting State where the enforcement of a foreign judgment is sought, against the bias of Contracting State where a foreign judgment or award was made. It also reaffirms the principle of state equality and mutuality in international relationships. The reciprocity reservation has been used by approximately two-third of the Contracting States.
Various courts have held that when a Contracting State makes the reciprocity reservation, it will apply the New York Convention only to the awards rendered in the territory of a state which is a party to the Convention.
In this regard, one of the controversial issues is whether the nationality of the litigant parties is relevant. Unlike the Geneva Convention on the Execution of foreign arbitral awards, New York Convention considers the nationality or citizenship of the parties irrelevant. Courts have consistently held that the nationality of the parties is irrelevant for the purpose of establishing reciprocity. What matters the most is that reciprocity exists between the State where the award was rendered and the State where recognition and enforcement were sought.
The second reservation is that the New York Convention only applies to disputes arising out of legal relationships considered as commercial under the national law of the State making such declaration. There are no clear criteria as to what constitutes commercial transactions.
As a matter of practice, courts have interpreted the scope of this phase to be broad. For instance, a court in India has construed the phrase as being one of the “largest import” encompassing “all the business and trade transactions are any of their forms.” A United States court has similarly held that the notion of “commercial relationship” is broad, noting that its purpose is only “excluding matrimonial and other domestic relations awards, political awards, and the like.
As a matter of practice in the area, the following legal relationship has been deemed to be commercial transactions: a cereal purchase contract, a charter-party, a contract for the provision of consulting service, a contract for the shipment of goods, an agreement for the division of property and businesses, a joint venture agreement to establish and operate a chain of stores, a seamen’s employment contract, a contract for the reorganization of a company and buyout of shareholders, a contract for the reorganization of a company and buyout of shareholders, a contract for the construction of a nitro phosphate plant, and dispute between corporate shareholders regarding the proceeds of a stock transaction.
However, in some cases, the courts have indicated non-commercial matters. For instance, an Indian court held that a contract for the supply of technical know-how in return for a fee was not a commercial contract. In another case, the United States court held that a dispute arising out of proceedings to disqualify counsel was non-commercial.
Ethiopia made a declaration that is not part of New York Convention. Article 3 of Proclamation No. 1184/ 2020 made a declaration as to the time of application. Accordingly, the Convention only applies in the Federal Democratic Republic of Ethiopia with respect to Arbitration Agreements concluded and Arbitral Awards rendered after the date of its accession to the Convention.
Normally, under Ethiopian law enforcement of foreign judgments and arbitral awards are executed as per the conditions laid down under the Civil Procedure Code. As per Article 468 of the Civil Procedure Code, foreign awards may not be enforced in Ethiopia unless the following conditions are met: Reciprocity, the award has been made following a regular arbitration agreement or other legal act in the country where it was made, the parties have had equal rights in appointing the arbitrators and they have been summoned to attend the proceedings, the arbitration tribunal regularly constituted, the award does not relate to matters which under the provisions of Ethiopian laws could not be submitted to arbitration or is not contrary to public order or morals, and the award is of such nature as to be enforceable on the condition laid down in Ethiopian laws.
Out of the above six conditions, the first requirement of reciprocity has practically made enforcement of foreign arbitral awards in Ethiopia impossible. For reciprocity to exist the parties must prove that the state where the award was made would, reciprocally, recognize and enforce arbitral awards made in Ethiopia.
The Federal Supreme Court has further interpreted the principle of reciprocity in the Paulos Papassinus case, stating that the only way to prove that another state allows execution of Ethiopian judgments is by producing a judicial assistance treaty signed between Ethiopia and the other State. Without such a treaty, the Court ruled that reciprocity is not considered to have been met. This meant that even if the party seeking enforcement could produce proof of recognition and enforcement of an Ethiopian award by the other state party, Ethiopian courts would not entertain it short of a judicial assistance treaty. There is only one such treaty with the Republic of China which was concluded in 2017.
However, this stance has been reversed by the Federal Higher Court decision in a case between Goh-Tsibah Menkresellassie v. Dr. Bereket Habte Sellasi, indicated that the absence of the treaty of judicial assistance should not limit the rights of private citizens: and that in the absence of an agreement to the contrary between the two states, it would be inappropriate to refuse the enforcement of a foreign judgment simply because there exists no treaty of judicial assistance.
Yehualashet Tamiru is Associate at MTA, Adjunct Lecturer at AAU and can be reached via email@example.com