Introduction
Despite the existence of an arbitration agreement, a party’s right to arbitrate may be waived due to its subsequent conduct. These conducts vary from jurisdiction to jurisdiction. While the most common ground is a party’s participation in a court proceeding in relation to the same matter, a party’s failure to pay the arbitration fee has also been accepted as a ground for a waiver in Canada, France, the US, and Sweden (see here, here, and here).
On the Other hand, the new Ethiopian Arbitration and Conciliation Working Procedure Proclamation No. 1237/2021 (Ethiopian Arbitration Law) contains three grounds that deny parties’ right to rely on the arbitration agreement. This post addresses these grounds for waiving the right to arbitrate under the current Ethiopian arbitration law.
Grounds for Waiver of the Right to Arbitrate
- Failure to Appoint an Arbitrator
In May 2020, in Ethiopian Airlines v GAD Construction PLC, GAD Construction PLC (GAD), responding to Ethiopian Airlines’ objection that the Federal High Court had no jurisdiction, argued that Ethiopian Airlines cannot rely on the arbitration agreement because it failed to appoint arbitrators despite the repeated request to do so for about a year.[1] It further argued that Article 1771(1) of the Civil Code gives GAD the right to cancel the contract when the other party fails to perform its duties. However, the Federal Supreme Court Cassation Division held that the defendant’s failure to establish an arbitral tribunal when it was requested by the plaintiff does not give the plaintiff the right to cancel the arbitration agreement and take the case to the court.
This position has been changed by the new arbitration law. Article 12(4) of the arbitration law provides as follows:[1] Ethiopian Airlines v Gad Construction PLC, Federal Supreme Court Cassation Decision, File No. 173830, 23 May 2020.
“Where the contracting party who has initiated the arbitration has notified the other party to participate in the appointment of arbitrator or properly notified to designate a co-arbitrator from his side and if he fail (sic) to reply within 30 days or deny the existence of an arbitration agreement, the requesting party shall have the right to cancel the agreement in his own time and submit his suit to the court.” (Emphasis added)
As per this provision, if a party, notified to appoint an arbitrator, fails to reply within thirty days, the other party may unilaterally cancel the arbitration agreement and submit the dispute to the courts. As a result, the party that failed to reply cannot rely on the arbitration agreement to object to the court’s jurisdiction.
This ground is also recognized in section 5(2) of the Swedish Arbitration Act 1999 (as amended in 2019) which states that a party who failed to appoint an arbitrator in due time forfeits its right to invoke the arbitration agreement as a bar to the court’s jurisdiction.
2. Denying the Existence of An Arbitration Agreement
Even if the defendant replies within thirty days, it waives its right to arbitrate if it denies the existence of an arbitration agreement, as seen from Article 12(4) of the arbitration law quoted above. However, this does not seem to include scenarios where the plaintiff continues the arbitration by establishing an arbitral tribunal through an appointing authority. A similar provision is found in section 5(1) of the Swedish Arbitration Act
3. Participating in Court Proceedings
Another ground for a waiver of the right to arbitrate is a party’s participation in court proceedings. Article 8(1&4) of the arbitration law reads as follows:
“1. Where a suit falling under an arbitration agreement is brought before a court and the defendant raises preliminary objection that the parties agreed to resolve their disputes through arbitration agreement, the court shall dismiss the suit and the parties to resolve their dispute in accordance with the arbitration agreement.
4. The arbitration agreement shall be deemed null and void if it is not raised under preliminary objection.” (Emphasis added)
The defendant’s failure to object to the jurisdiction of the court at the preliminary stage nullifies the arbitration agreement and takes away the defendant’s right to arbitrate. No arbitral proceeding may be commenced after that.
Conclusion
The Ethiopian arbitration law, similar to the Swedish Arbitration Act, provides three grounds of waiver of the right to arbitrate. Unlike the Swedish Arbitration Act, however, it is not clear if a party’s failure to pay its portion of arbitration fee gives the other party the right to unilaterally cancel the arbitration agreement and take the case to the court.
[1] Ethiopian Airlines v Gad Construction PLC, Federal Supreme Court Cassation Decision, File No. 173830, 23 May 2020.