Addis Ababa

University
School of Law
ADR Group Assignment
Title: Judicial Scrutiny of Arbitral Awards (Appeal
and setting Aside)

Members ID
1. Nura Jarso LGR/0224/09
2. Muleta Korme LGR/0443/09
3. Jamiee Adem LGR/3126/09
4. Keweti Kufa LGR/1827/09
5. Taweldebrhan Mamo LGR/1424/09

Submitted to: Mrs. Martha

Belete
Submission Date: May 21, 2021
Table of Contents

1. Introductory Concept of Judicial Scrutiny of Arbitral Awards.............................1

2. The comparison between the New Arbitration proclamation No. 1237/2021 vis a

vis the Ethiopian Civil Procedure Code...................................................................2

3. Judicial review of arbitral award: practice of Ethiopian courts..........................4

4. Comparative study of the issue: USA and UK......................................................5

5. Conclusion and Recommendation.........................................................................7

1. Introductory Concept of Judicial Scrutiny of Arbitral Awards
Arbitration, which is an Alternative Dispute Settlement (ADR) Mechanism, is one of the oldest
means of dispute resolution. Arbitration is a procedure in which a dispute is submitted, by
agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. 1
As opposed to mediation, in arbitration, arbitrators make a binding decision on the dispute. By
agreeing to arbitrate, the parties confer full legal authority on the arbitrators to render a final and
binding decision. As one type of ADR mechanism, arbitration has several advantages for the
parties which includes, but not limited to, confidentiality, analysis of the issue at hand by
arbitrators who are experts in certain fields and finality of an award. It’s a private process in a
sense that parties exclude the state's intervention in the settlement of their dispute. It can be
argued that the two most important inherent features of arbitration are finality and party
autonomy.2

Limited interference of courts, in form of Appeal or Setting Aside, may be justified in this
dispute settlement mechanism. Various relevant laws put in place a review and/or appeal
mechanism of arbitral award for different policy considerations. At this juncture, it is important
to raise that the review of courts on arbitration awards should be limited and proportional to the
benefit the state is seeking to achieve. It should not, in any way, frustrate the foremost benefit of
arbitration, the effective settlement of disputes. 3 There are listed grounds for setting aside or
appeal against the arbitral decision under the Ethiopian civil procedure code and Proclamation No.
1237/2021.

In this essay, after this introductory concept of judicial scrutiny of arbitral awards, we will attempt to
look into judicial scrutiny of arbitral award as governed under the civil code, civil procedure code and
the New Proclamation No. 1237/2021. Then, comparative study will be made regarding the judicial
scrutiny of arbitral awards under the most developed legal system like USA and UK. Judicial scrutiny of
arbitral as being practiced by Ethiopian courts will be reviewed. Then, we will forward our conclusion
and recommendation.
1
https://www.wipo.int/amc/en/arbitration/what-is-arb.html Accessed on May 15, 2021
2
Gelila Haile Diguma, Judicial Review of Arbitral Awards by Courts as a means of Remedy: a Comparative
Analysis of the laws of Ethiopia, the United Kingdom and the United States, p. 1 (2018) Available at:
http://www.etd.ceu.edu/2018/diguma_gelila.pdf Accessed on May 15, 2021.
3
Ibid.

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2. The comparison between the New Arbitration proclamation No. 1237/2021
vis a vis the Ethiopian Civil Procedure Code
In order to preserve the basic essence or merits of arbitration, the modern arbitration law tries to
limit the court intervention at any cost. This is very important especially in commercial
arbitration that the award should be final. And the privacy and autonomy of parties should be
protected and given effect. Basically, the two most recognized way of judicial scrutiny or review
of arbitral award recognized by both our laws are appeal on award and the application for setting
aside of an award.

So let us see now how this issue of judicial scrutiny of arbitral award is seen both under previous
law and proclamation basically in comparison manner.

In previous law: judicial appeal on the merits of arbitral awards, with complete disregard to the
express agreement of the parties on the finality of the award is allowed under article 351 of civil
procedure code. This provision laid down the grounds for application of appeal and the
proclamation also includes this ground of appeal in art Article 5, 41, 43 and Sub-Article (2) of
Article 44(see these articles for the grounds appeal). Both under the previous law and the
proclamation the court that has the appellate jurisdiction has jurisdiction, had it not been
submitted for arbitration. But the main disparity, Unlike the Civil Procedure Code, the
Proclamation adopts a presumption that arbitral awards are final and not appealable unless the
parties agree otherwise in their arbitration agreement4.

In the proclamation, Article 49(2) of the Proclamation allows parties to apply for cassation
"where there is a fundamental or basic error of law", but parties may waive the right of appeal.
Thus, unless the parties are able to agree to waive judicial review for errors of law, the potential
for second-guessing final arbitral awards still exists through the appeal process.5

But In article 351 of civil procedure code stipulated the grounds of appeal to formal court on
arbitral award. But this article made it clear, the exclusion of cassation review mechanisms of

4
Written by, white and case LLP/ Ethiopian modernized arbitration frame work
5
ibid

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arbitral award (Civ.Proce.Co excludes review on the merit for ―basic error of law as a default
rule). The article didn’t mention the term cassation review6.

Moreover, when we see the legislation that establish and empowers FSCC (see art.80(3) and
art.10 of FDRE constitution and proc. no 25/1996), Neither of the two legislations, in defining
the cassation power, however hard we stretch on the meaning of the words, provides that the
Federal Supreme Court has a cassation review power over arbitral awards. If that is so, can we
conclusively hold that the Federal Supreme Court has no cassation power over arbitral awards
under the previous law (civil code + civ. Proc. code). this seems logical for court’s intervention
in to a dispute settlement mechanism which, for legitimate and fully justifiable reasons, calls for
judicial exercise of restraint7.but a Federal Supreme Court Cassation Bench argued, that the
waiver provision of Article 350 does not preclude the Bench from reviewing arbitral awards for
fundamental errors of Ethiopian law. The problem is also encountered in a recent case between
Ethiopia and Djibouti (represented by Chemin de Fer Djibouto-Ethiopian) and Consta JV,

Under article 50 of the proclamation the manner in which an arbitration award can be set aside is
recognized in a very exhaustive and clear manner. There is exhaustive list of grounds in which a
court may set aside the arbitration award. This includes the incapacity of the parties to
arbitration, the arbitration agreement becoming null and void, one of the parties not having an
equal right to participate in the proceeding, when the arbitrators received a bribe or acted in a
way that affected their independence and impartiality or when the tribunal acted without having
jurisdiction or exceeded what transpired under the arbitration agreement.

The provision also includes the fact that an application to have the award set aside shall not be
acceptable if it has been enforced by Ethiopian court (article 50 subs 3) which not there in civil
procedure code.

Under the proclamation the court may set aside the arbitral award if, the matter upon which the
award is based is not arbitral under the Ethiopian arbitration law and recognition and
enforcement of the arbitral award creates problem on public morality, policy or national security
(see 50 sub)
6
Birhanu Beyene Birhanu* the cassation review of arbitral award, Does the law authorize it. P.116
7
Ibd.p119

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In the civil procedure code (art 355 and356) stipulated the fact that parties can apply for the
setting aside of arbitral award based on grounds listed within specific time of 30 days starting
from the date of rendition of award: article 357 of the code also stipulate the fact that if the
application for setting aside is allowed the decision of arbitrators will be null and void, but if
rejected the decision of arbitrators will be given effect and the award will be final.

So, when we compare the two laws, the grounds for are not the same or there is much disparity
on the ground of setting aside:

In the new proclamation the grounds are based on capacity of the parties, if the agreement is null
and void, inequality of the rights, exceeding of jurisdiction, and the problem with the behavior of
arbitrators like taking bribe or partiality etc. but when we come to the grounds in the previous
law, the grounds are much limited and it left some reasonable grounds of above in the
proclamation. It only considers the application grounds based on submission agreement
invalidity, inability to act together of the arbitrators, unauthorized surrender of authority by
arbitrators. The proclamation also lists in the other grounds in which the court can set aside the
award, such as if the matter is not arbitral under Ethiopian law and the based on the issues of
public morality, policy and national security. This is not there under the previous laws.

3. Judicial review of arbitral award: practice of Ethiopian courts

Under the Ethiopian arbitration law there are three recourses where parties can challenge arbitral
awards, the first is appeal. party can appeal from the awards of arbitrators to ordinary courts
based on the grounds listed under article 351 of the Civil Procedure Code (CPC). However,
parties can waive this right of appeal provided that they are with full knowledge of the
circumstance8. The grounds of appeal are: i) inconsistency, uncertainty or ambiguity of the award
or when the award is wrong in matters of law or fact; ii) the arbitrator omitted to decide maters
referred to him; or iii) irregularities of proceeding and misconduct of arbitrator9.

Despite the existence of parties' autonomy in providing arbitration finality clause, a recent
decision by the Ethiopian Supreme Court of Cassation Bench struck down a waiver agreement

8
Ethiopian Civil Procedure Code, 1965, Art. 350-357

9
Ibid, Art. 351

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that prohibited the parties from appealing their case. The case is between National Mineral Corp.
Pvt. Ltd. Co. v. Danni Drilling Pvt. Ltd. Co. The Federal Cassation Bench relied on article 80 (3)
of the FDRE Constitution, Proclamation No.454/1997, article 356 of the CPC and the purpose of
arbitration in its decision to strike down the arbitration finality clause. The Bench states that the
mere existence of a waiver agreement cannot preclude a dissatisfied party from appeal, if the
decision of the arbitral tribunal contains basic error of law10.

The Case: National Mineral Corp. Pvt. Ltd. Co. v. Danni Drilling Pvt. Ltd. Co.19 2.111.

Facts and Issues

The case related to gold mineral drilling contract entered between National Mineral Corp. Pvt.
Ltd (the appellant) and Danni Drilling Pvt. Ltd. Co (the respondent), where it initially has been
submitted to arbitral tribunal. the appellant appealed to Federal Supreme Court; the court
dismissed the appeal based on article 337 of the CPC. The appellant also argued that the arbitral
decision was without taking in to account the Civil Code provisions concerning rules on
interpretation of contract; and further alleged that the overall decision of the tribunal was without
relevant evidences. While ruling on the first issue, the Cassation Bench stated that the case has
to be evaluated alongside the background of Proclamation No. 454/1997 and the Ethiopian
Constitution that give mandate to the Cassation Bench to ensure uniform interpretation of laws
throughout the country. The Bench further noted that the mere fact that the parties’ consent to
give arbitration finality clause does not necessarily imply their intention to avoid their right to
appeal. In addition, the Bench accredited that the grounds of appeal from arbitral awards are
mentioned under article 351 of the CPC; and confirmed that this provision including article 356
do not provide a way to cassation procedure in order to entertain an appeal from arbitral awards.

4. Comparative study of the issue: USA and UK

In USA, according to the Federal Arbitration Act, the U.S. courts are not principally conferred
with the right to re-consider and decide on the legal points which have already been determined

10
Mekelle University Law Journal Vol.3 No. 1 (2015) Court Review of Arbitral Awards through the Power of
Cassation: A Case Comment on National Mineral Corp. Pvt. Ltd. Co. v. Danni Drilling Pvt. Ltd. Co. p 1
11
Ibid p 127

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in arbitration12. Nor is there an appeal mechanism for error of law (in contrast to the
proclamation). Rather, the act envisages “strictly limited” grounds for judicial review in order to
render the arbitration mechanism efficient and cost-effective13. At the heart of this approach lies
the “strong presumption in favor of enforcing arbitration awards. In particular, this peculiarity
has been intensified with the Supreme Court decision in Hall Street Associates v. Mattel Inc,
which raised two key suggestions that have gained wide acceptance across the U.S. courts. As a
starting point, suffice it to say that review of arbitration awards is very limited in order not to
frustrate the foremost goals of arbitration, namely effective settlement of disputes, inexpensive
and swift.

The first point to be made is that, under the Federal Arbitration Act, the parties are not compelled
to resort to the courts for confirmation of the arbitration award.( this in complete agreement with
our new proclamation) Rather, such obligation arises only where they stipulate in the arbitration
agreement that the award will be final and binding insofar as it is confirmed by the court wherein
the award is made or by any other court chosen by the parties (this also true in the proclamation
no 1237 of arbitration and reconciliation ) It is clear in the U.S.

So, to sum up in US, even though it is agreeable that there should be judicial intervention in
some aspects of arbitration, due regard should be paid to ensure that the arbitration process is not
frustrated.14 Judicial review due to procedural irregularities is reasonable since; no one could
seriously quarrel with empowering courts to vacate awards issued by corrupt arbitrators or
arbitrators who denied parties fair hearings15. In the presence of such injustice, it is not
reasonable and expected of a judicial system to sit idle, it should definitely intervene. This is
exactly what the FAA has chosen to do.16

UK: The English Arbitration Act allows parties to appeal for error of law (unlike the US federal
act). For judicial review of arbitration awards for error of law, parties do not need an express
Devrim Deniz Celik : Judicial review under the UK and US Arbitration Acts: Is arbitration a
12

better substitute for litigation? Page 14

13
Ibid
Gelila Haile Diguma: Judicial Review of Arbitral Awards by Courts as a means of Remedy: a
14

Comparative Analysis of the laws of Ethiopia, the United Kingdom and the United States. P.16
15
ibid
16
ibid

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provision in their arbitration agreement to that effect. This is in sharp contrast with the position
under the U.S. law and Ethiopian law. the grounds of appeal under the Federal Arbitration Act
are treated as exclusive and cannot be increased by contract. The explanations above will support
the proposition that this mechanism has adverse effects on the duration and cost of arbitration.
Under the Arbitration Act, courts interfere where challenge of an award is brought based on
defects like lack of substantive jurisdiction, serious irregularity and appeal on question of law17

5. Conclusion and Recommendation

In conclusion, the new proclamation no 1237/2021 which is liberal and progressive arbitration
law, limits the judicial scrutiny of arbitral award by giving effect to the principle of finality and
effective enforcement of arbitral awards. It also gives much place to the parties’ agreement as too
the judicial involvement, in complete contradiction with the previous law (civ. code +civ. proc.
code) which disregard the agreement of parities and increase the involvements of courts. Under
this new proclamation, the very contentious issue of cassation review of arbitral awards for the
merits of basic error of law is given legal avenues, but the parties should agree to that effect. But
in this previous law though FSCC review the award, there is no clear-cut law for the
authorization.

Finally, we want to forward the followings recommendations:

1. The new proclamation totally excludes judicial scrutiny of arbitral decisions when the
parties agree to that effect or, even when the parties didn’t explicitly agree to the judicial
intervention, the court may not review the case in anyway. This has a serious implication
on fairness since the bargaining power of the parties could mismatch in the private
arbitration. So, we recommend for amendment of the proclamation to give a little room
for the court to review the case, at least when the parties are silent about the judicial
intervention for the sake of fairness.
2. Owing to the far liberal approach followed by the new proclamation which is to mean the
weight given to the finality of arbitration, it is a high time to set up strong and

17
Supra not 7 p. 31

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 professional arbitration tribunals in order to ensure that the parties right wouldn’t fall at
the mercy of unprofessional and unexpert amateur arbitrators.

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