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
III. Pro-arbitration trends in Sub-Saharan Africa
Ethiopia’s ratification of the New York Convention is also part of a larger pro-arbitration trend that has developed in Sub-Saharan Africa in recent years. In addition to Ethiopia, the Seychelles ratified the New York Convention in March of this year, Sudan ratified it in 2018, Angola in 2017, and the Democratic Republic of the Congo in 2014.11 Consequently, only a few countries in Sub-Saharan Africa remain notable holdouts.
Additionally, there have been several regional initiatives that have further promoted arbitration as a dispute resolution mechanism. As an illustration, in late 2017, the Organization for the Harmonization of Business Law in Africa (OHADA), which is comprised of 17 west and central Sub-Saharan African states, enacted a revised Uniform Act on Arbitration, and revised arbitration rules for the Common Court of Justice and Arbitration that include several modern features for more efficient conduct of arbitral proceedings and increased transparency.12 Those revised arbitration rules align with the UNCITRAL Model Law and now include investment arbitration within their scope.13
Lastly, following the announcement of China’s Belt and Road initiative, the Shanghai International Arbitration Center entered into a cooperation agreement with several African institutions in 2015 to create the China-Africa Joint Arbitration Centre (CAJAC), which established offices in both Shanghai and Johannesburg.14 The CAJAC exists for the express purpose of providing a cost-effective forum for resolving commercial disputes between Chinese and African parties and offers another forum for resolving commercial disputes involving foreign investors.
Consequently, while Ethiopia’s ratification of the New York Convention is a significant development, it is merely part of a larger regional trend to promote arbitration as a dispute resolution mechanism throughout Sub-Saharan Africa.
IV. Conclusion
Ethiopia’s ratification of the New York Convention is a welcome development that will benefit not just Ethiopia, but foreign investors too. Parties with business interests in Ethiopia should closely follow the New York Convention’s implementation there.
- See New York Convention Status, available at: uncitral.un.org
- New York Convention, Arts. II.1, II.3.
- Id., Arts. III-V.
- “Ethiopia Joins New York Convention,” African Law & Business (February 21, 2020) (relating that Ethiopia ratified the New York Convention as part of a suite of economic reforms designed to attract foreign direct investment).
- “Ethiopia’s Economic Miracle Ride is Set to Turn Into a Bumpy Road,” Quartz Africa (February 4, 2020).
- Id.
- The World Bank, Ethiopia Overview.
- Id.
- Id.
- See “Spotlight on Ethiopia as it Annuls a Euro 20 Million Arbitral Award,” Kluwer (August 14, 2018) (describing chilling effect on foreign direct investment arising from annulment proceedings).
- Id.
- See Arbitration Rules of the Common Court of Justice and Arbitration.
- OHADA UAA, Art. 3 (stating that “L’arbitrage peut être fondé sur une convention d'arbitrage ou sur un instrument relatif aux investissements, notamment un code des investissements ou un traité bilatéral ou multilatéral relatif aux investissements.”)
- See CAJAC, About Us, available at: shiac.org.
Client Alert 2020-247
