By Muluken Seid | 1 May 2021
In April 2021, the Ethiopian Parliament passed the Arbitration and Conciliation Proclamation No. 1237/2021, ushering in a new era for arbitration law in the country. Previously, arbitration matters were loosely scattered across the Civil Code and Civil Procedure Code, making Ethiopia’s legal framework outdated and investor-unfriendly. The new proclamation is a major overhaul, bringing Ethiopia in line with modern international arbitration practices and setting the foundation for institutional arbitration.
Key Changes Introduced by the New Law
A) Emphasis on Party Autonomy
One of the most groundbreaking shifts is the move from a mandatory legal framework to one driven by party autonomy. Of the 50 arbitration-related provisions, nearly half explicitly allow parties to agree otherwise. This means default rules now apply only when parties haven’t specified their own terms on key issues like:
- Appointment of arbitrators
- Interim measures
- Place and language of arbitration
- Oral hearings and amendments
- Expert witnesses
- Costs and appeals
This marks a dramatic change from the old law, which attempted to regulate nearly everything regardless of party preference.
B) Legal Framework for Arbitration Centers
Previously, there was no clear legal recognition or support for arbitration centers. The new proclamation rectifies this. According to Articles 2(3) and 18, both government and private entities may establish arbitration centers. Addis Ababa currently hosts:
- Addis Ababa Chamber of Commerce Arbitration Institute
- Ethiopian Chamber of Commerce Arbitration Center
- Ethiopian Mediation and Arbitration Center
Now, the government is also expected to launch state-backed centers, potentially modeled after international institutions like China’s CIETAC.
C) Limited Court Intervention
Article 5 outlines a critical rule: courts must not intervene in arbitration proceedings unless explicitly authorized by the law. This protects the independence of arbitration while still allowing judicial support when necessary — particularly in enforcing awards, which only courts can do.
D) Exclusion of Non-Arbitral Matters
The new law also makes clear what cannot be arbitrated, including:
- Divorce, adoption, guardianship, and succession
- Criminal and tax cases
- Bankruptcy and business dissolution
- Land disputes and lease issues
- Administrative contracts and disputes under public authorities
- Consumer protection and competition cases
Such clarity is preferable to a vague or open-ended legal framework.
E) Recognition of Competence-Competence Principle
The competence-competence doctrine—the idea that a tribunal can rule on its own jurisdiction—is now clearly recognized under Article 19. This is critical for avoiding unnecessary court delays. Unlike the older law, tribunals now have power to rule on:
- Their own jurisdiction
- The existence and validity of the arbitration agreement itself
F) Power to Issue Interim Measures
Historically, arbitrators in Ethiopia lacked authority to issue interim protection measures, leaving parties dependent on courts. The new law changes this. Now, tribunals can issue orders like:
- Preservation of evidence or assets
- Restraining orders
These are now recognized and enforceable — a huge boost for the credibility of arbitration in Ethiopia.
G) Appeal Rules Reformed — Partially
The old law allowed wide grounds for appeal, including errors of law or fact, undermining finality. While the new law doesn’t fully restrict appeals, it now requires express party agreement for any appeal to be considered. In absence of such agreement, no appeal is allowed. However, cassation review is still possible in cases of fundamental legal error or invalid awards.
Other Notable Innovations
The proclamation introduces several modern concepts aligned with global arbitration standards:
- Seat of arbitration
- Distinction between international vs. domestic arbitration
- Definition of commercial matters
- A flexible approach to arbitration agreements
These changes are expected to boost investor confidence and promote international commercial arbitration in Ethiopia.
Conclusion
The Arbitration and Conciliation Proclamation No. 1237/2021 is a transformative step in Ethiopia’s legal journey. By modernizing arbitration law, limiting court interference, and opening the door to institutional arbitration, Ethiopia is signaling its commitment to a business-friendly legal environment. For local and foreign investors alike, this is a welcome and long-overdue reform.
