On 13 February 2020, Ethiopia’s parliament approved accession to the 1958 Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the “New York Convention” or the “Convention“). Ethiopia will become the 163rd state signatory and the 39th African state to accede following the recent accessions of the Seychelles, Cabo Verde and Sudan.
Ethiopia’s Council of Ministers supported the move to join the Convention in December 2019 and the Ethiopian parliament approved the accession by proclamation (the “Proclamation”) on 13 February 2020. Further to Article XII.2, the Convention will come into force for Ethiopia on the 90th day following the deposit of its instrument of ratification or accession.
Consistent with Article I.3 of the New York Convention, contracting States are able to ratify or accede subject to certain reservations. The Ethiopian parliament is reported to have adopted the Proclamation subject to two common reservations. Ethiopia will apply the Convention (i) on the basis of reciprocity to the recognition and enforcement of awards made only in the territory of another contracting State, and (ii) only to differences arising out of legal relationships, whether contractual or not, which are considered as commercial under the laws of Ethiopia.
The Proclamation also reportedly provides that the Convention will only be applicable to arbitration agreements concluded after the date of Ethiopia’s accession. The implication of this provision is that any outstanding awards made prior to Ethiopia’s accession to the Convention will not be enforceable in Ethiopia under the Convention. Such a restriction may also be significant in the context of long term contracts related to investment in Ethiopia. One consideration for parties to such contracts is whether amending or restating any arbitration agreement, if commercially achievable, would be legally effective to bring the arbitration agreement (and any subsequent arbitral award) within the scope of the Convention.
The accession to the New York Convention is a further step in Prime Minister Abiy Ahmed’s broad drive to implement political and economic reform aimed at boosting economic growth, liberalising the economy and making Ethiopia more attractive to foreign investors.
For further information, please contact Chris Parker, Partner, Hannah Ambrose, Senior Associate, or your usual Herbert Smith Freehills contact.