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On February 13, 2020, Ethiopia became the thirty-third country in Africa to ratify the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (New York Convention). Ethiopia’s decision to join the other 163 countries that have acceded to the New York Convention is important, because it increases Ethiopia’s attractiveness as a safe destination for foreign investment and takes Ethiopia off the list of significant African economies that had abstained from accepting the New York Convention.

Authors: James P. Duffy IV Clément Fouchard

africa sergey pestere

I.  The New York Convention

The New York Convention is one of the most successful international treaties in the world, with 164 signatories (including Ethiopia) having acceded to it.1 In relevant part, the New York Convention requires the courts of signatory states to perform two duties that are critical to the effective functioning of the international arbitration regime.

First, the New York Convention requires courts of signatory states to refer disputes subject to an arbitration clause to arbitration and to decline to exercise jurisdiction over the merits of those disputes.2

Second, the New York Convention requires the courts of signatory states to enforce arbitral awards (typically only if issued in other signatory states) and to convert those awards into judgments of the enforcement court pursuant to streamlined procedures to which only limited defenses can be raised.3

Ratification of the New York Convention substantially improves the arbitration regime within a signatory state, both directly, by incorporating into national law the provisions of the New York Convention, and indirectly, by leading the judiciary to become more supportive of arbitration. Ratification also signals that a country has a favorable business environment that is friendly to foreign direct investment. It is that latter objective that helped influence Ethiopia’s decision to ratify the New York Convention.4

II.  Ethiopia’s recent economic growth

Ethiopia has witnessed stunning economic growth over the last two decades, and has propelled itself from one of the poorest countries in the world to one of the fastest growing in only 20 years. In 2000, Ethiopia was the third poorest in the world, with more than half of its population living below the global poverty line.5 By 2018, however, Ethiopia was the third fastest growing country of 10 million or more people in the world as measured by GDP per capita,6 and by 2016, its poverty rate had fallen to 24 percent.7 In short, Ethiopia has become “the fastest growing economy in the region” according to the World Bank.8

To continue that growth, however, Ethiopia needs to better develop its private sector, which Ethiopia aims to do by attracting foreign direct investment.9 Ratifying the New York Convention furthers that plan and helps dispel concerns that arise from annulment decisions like those that occurred in the recent Consta case.10