The Normative Basis for Decision on the Merits in Commercial Arbitration: The Extent of Party Autonomy

AuthorSeyoum Yohannes Tesfay
PositionSeyoum Yohannes Tesfay??LLB, LLM), Assistant Professor of Law at Addis Ababa University. The author also practices law on a part-time basis.
The Normative Basis for Decision on the
Merits in Commercial Arbitration:
The Extent of Party Autonomy
Seyoum Yohannes Tesfay
This article examines the extent of party autonomy in determining the norms that
apply to the substance of a commercial dispute in arbitration. Particularly, it
analyses ‘principles of law,’ the normative basis for arbitration under Ethiopian
law. The article further explores whether parties to arbitration are at liberty to
mandate the application of foreign law, rules of law and equity. It also examines
whether a ‘mandate to settle’ is enforceable under Ethiopian law. The article
concludes that Ethiopian law allows maximum flexibility to parties as regards to
the determination of norms applicable to the substance of a commercial dispute.
The law can even be construed as recognising ‘mandate to settle’.
Key terms
Commercial arbitration, party autonomy, principles of law, foreign law, rules of
law, equity, mandate to settle, amiable composition, Ethiopia.
Different jurisdictions have slightly differing laws as regards the normative
basis for decision on the substance of commercial disputes. In some
jurisdictions, arbitrators are required to decide according to ‘law’, in some
others according to ‘rules of law’1, and in yet others based on ‘principles of
law’. Even when identical terms are used, they are understood differently in
various jurisdictions. Jurisdictions also differ in the latitude that they give to
Seyoum Yohannes TesfayLLB, LLM), Assistant Professor of Law at Addis Ababa
University. The author also practices law on a part-time basis. His deepest gratitude goes
to Professor Matthias Lehmann, from the University of Bonn, for his comments on the
material from which this article evolved. The author would also like to thank the two
anonymous reviewers and all those who contributed to the publication of this article in
many different ways. He can be reached by email at:
1 UNCITRAL Model Law, on International Commercial Arbitration with amendments as
adopted in 2006, General Assembly Resolution 61/33 adopted on 4 December 2006. For
instance, Article 28(1) requires arbitrators to decide on substance of dispute based on ‘rules
of law.’
342 MIZAN LAW REVIEW, Vol. 10, No.2 December 2016
parties toward enabling them to choose foreign laws and non-legal norms to
resolve their differences.2 Moreover, the laws of some jurisdictions are silent
about the foregoing issues thereby necessitating interpretation.
Not all of these matters have been dealt with clearly under Ethiopian law.
Hence, parties that intend to settle their disputes by arbitration inquire about the
normative options open to them. Arbitrators dealing with specific disputes may
also be confronted with the question of the norms they should apply to the
substantive merits of the dispute before them. This question is discussed in
following sections with due focus on commercial arbitration. In particular, the
latitude that is provided –under Ethiopian law– to parties in choosing substantive
norms applicable to their dispute is examined.
The first section of this article deals with the arbitration agreement and its
role in the determination of the norms applicable to the substance of the dispute.
Section 2 dwells on ‘principles of law’, their meaning and role in the
determination of merits of the dispute. Section 3 examines the latitude that
parties have to choose foreign law and ‘rules of law.’ Equity, its different shades
of meaning and its role in substantive resolution of disputes is discussed in
section four. The last section dwells on whether parties may vest in an arbitral
tribunal power to modify the contract between them. Finally, some conclusions
are drawn with regard to the extent of party autonomy in the determination of
norms applicable to the substance of the dispute between them.
1. The Arbitration Agreement: Meaning and Relevance
An arbitration agreement is a contract by which two or more parties undertake
to resolve their dispute, if any, by arbitration. It has a number of purposes. The
first is ouster of a court which would otherwise have jurisdiction to resolve the
dispute. The second is empowering an arbitral tribunal to resolve the dispute, in
lieu of the court.3 Third and the most pertinent for our purpose, the parties’
choice of law governing the substance of the contract is usually made in this
contract itself.4 Owing to these reasons, among others, the agreement to arbitrate
is an indispensable precondition for commercial arbitration.5
2 Simon Greenberg et al (2011), International Commercial Arbitration: An Asia-Pacific
Perspective, New York, Cambridge University Press, pp. 101 to 102.
3 Id., p. 144.
4 Id., p. 101. In 2009, for example, 88% of parties to arbitration before the International
Chamber of Commerce, ICC made their choice of the applicable law.
5 Alan Redfern and Martin Hunter (2004), Law and Practice of International Commercial
Arbitration (London, Sweet and Maxwell, 4th ed.), p. 131. As a matter of exception parties
may be deemed to have agreed to arbitration without there being an arbitration agreement.
This is, for instance, the case if estoppel or similar other doctrine in a jurisdiction precludes
a party from objecting to arbitration because of its failure to raise the absence of arbitration

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