Legal comment on issues of arbitrability.

Dear Sir,

Reference is made to your request for a legal opinion on arbitrability

issue raised in connection with an arbitration case involving the claimant,
Chilalo General Contractor P.L.C and Oromia Water Resources Bureau.
From the extensive search that I could possibly conduct and gather, I
was able to realize that article 315 (2) of our Civil Procedure Code was not a
slip of pen that was drafted and inserted without any serious thought of its
significance as some Ethiopian authors commenting on the subject would like
us to believe. Algeria, Egypt, to mention the few, had similar provision
prohibiting state and public bodies to be party in an arbitration agreement.
Although the prohibition for the submission of state bodies in administrative
contracts became outdated following the adoption of its arbitration law in
1997, Egypt still requires the approval of the competent minister with respect
to any arbitration clauses in administrative contract.1
Writers commenting on the arbitrability issue of state bodies assert that
public policy and special economic or social interest are overriding
consideration underlying the prohibition. An argument infavoure of non-
arbitrability of public bodies is put forward on the ground that "...(on)
important policy implications, the states desire to preserve the jurisdiction of
their own courts of law: this preference is based on the assumption that an
arbitral tribunal would not be able or willing to apply the law as accurately as
judicial court would." The same author further cited the argument of writers
who maintain this position alleging "...to pay more attention to the will of the
parties, rather than to rules of national law."2

1
The International Comparative Legal Guide to: International Arbitration 2007, Regional
Overview Middle East/Africa. By Dr. Mohamed S.E. Abdel Wahab, PP. 475.
2
National Rules On Arbitrability and The Validity Of An International Arbitral Award: The
Example of Disputes Regarding Petroleum Investment In Russia. By Giuditta Cordero Moss
PP 1.

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 Commenting on the rational of the arbitrability rule, this author again
emphasized "the arbitrability rule is meant to preserve the jurisdiction of the
courts of law in certain areas of law that are deemed to deserve a particularly
accurate application of the law. This affects particularly, areas of law with
public policy implications where the public interest is deemed to prevail
against the freedom of the parties to regulate their own interests. The legal
system does not consider private mechanisms of dispute resolutions as
sufficiently reliable in this context and wishes to maintain the jurisdiction of
3
its own national courts of law."
Ethiopia's position is generally to disallow arbitrability of public bodies
concluding administrative contract. There fore, no arbitration may take place
in relation to administrative contracts.4 This situation greatly limits public
bodies to resort to arbitration as one mechanism of dispute resolution. In fact,
as Professor Sedler noted, "most contracts with the government would fall in
this category."5 We may agree or disagree on the rational behind this law but
not on the application of a mandatory provision.
Both parties to the arbitration argued that the arbitration should
continue notwithstanding the clear and unequivocal prohibition for the
submission of state bodies in any arbitration proceeding. None of them
however, sufficiently argued and put forward any evidence to substantiate
their position to set aside the aforementioned provision of the civil procedure
code.
Although the respondent insisted that the Oromia Water Resources
Bureau is a development oriented bureau and not an administrative bureau, a
proclamation to provide for the reorganization and redefinition of powers and
duties of the executive organs of the Oromia regional state no 87/2004
indicated the same bureau as one executive organ mandated to implement the
state policies and perform administrative duties in accordance with article 4(1)
(c). Further more, article 8(1) (i) of the same proclamation stated the Water
3
Ibid. PP. 11
4
Concluded in accordance with the civil code of Ethiopia, 1960 Article 3132(2).
5
Ethiopian Civil Procedure, By Robert Allen Sedler, 1968, PP.388.

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Resource Development Bureau as one of the 14 administrative council of the
region.
Finally, article 13 (1) (10) of the proclamation re-established the Water
Resource Development Bureau and stipulated its detailed legal powers and
duties under article 23 of the proclamation. Therefore, as an administrative
body, contracts concluded by this bureau is deemed administrative contract
that is prohibited to enter in to arbitration agreement or submit to arbitration
proceeding.
Both parties also argued that they agreed to submit to the arbitration
proceeding and insisted that it was inappropriate to raise the arbitrability issue
by the tribunals. In deciding arbitrability issue, it is important to consider
waiver of arbitrability. But, as I have noted above the mandatory prohibition
under our civil code for state administrative bodies not to submit to arbitration
must be honoured as a matter of legal requirement and regardless of the will
or interest of the concerned state body. Even if the arbitrators opt not to
comply with the mandatory provision of the civil procedure code and proceed
to issue the award, unless the parties voluntarily enter in to a shadowy
agreement to execute the award, courts will not accept and enforce for it is
flagrantly contrary to the applicable law.
All other objections raised in the parties' submissions deserve very little
attention, as they do not address the issue in dispute from the standpoint of
the law.
In conclusion, it is important to note that if the legislator really wanted
state bodies to enter in to an arbitration agreement or submit to arbitration
proceeding, there is no reason why it does not allow the concerned body by
expressly permitting it through, such as, the numerous loan ratification
proclamation, which is the case in most World bank financed projects or issue a
specific, sometimes conditional permission, as it did under article 10(3) of the
Ethiopian Roads Authority Re-establishment proclamation no 87/1997, Article
8(2)(f) of The Re-establishment and Modernization of Customs Authority, and

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article 6(11) of the Agency for Government Houses Establishment Proclamation
No 555/2007.
Attached herewith, please find copy of some of the major reference
materials quoted in this memo and the enlightening online discussions I held on
the subject with my ADR trainers, one of whom, I had the honour to introduce
with your Excellency.
Even though I believe I have very limited knowledge on the subject, I
feel quite honoured to thank you for your kind request to get my legal opinion.