When Arbitration and Litigation Begin to Blur

When Arbitration and Litigation Begin to Blur

Jun 27 , 2026. By Yehualashet Tamiru ( Yehualashet Tamiru (yehuala5779@gmail.com) is a partner at Ethio Alliance Advocates LLP. )

The tension between a recent proclamation and the Cassation Bench’s jurisprudence exposes a deeper structural challenge, where constitutional interpretation, with the needs of modern arbitration, should reconcile. Extending a guarantee to arbitral awards is not desirable as a matter of policy. A restrained approach would respect party autonomy, preserve finality and keep only narrowly tailored judicial safeguards. That would better serve legal coherence and the wider economic purpose, argued Yehualashet T. Tegegn (yehualashet.t@ethioalliancelaw.com), partner at Ethio Alliance Advocates LLP.

The new arbitration law seeks to make arbitral awards final. A binding ruling from the Federal Supreme Court’s Cassation Division may make that promise harder to keep.

The recently enacted law on arbitration and conciliation working procedure makes one of its most important reforms in the area of appeals. It adopts an arbitration-friendly rule. Unless contracting parties expressly agree otherwise, an appeal against an arbitral award is not allowed.

The design makes it clear that arbitration should be efficient, neutral and conclusive, with courts playing a limited role after an award has been issued. It reflects a legislative choice to reduce judicial interference and to let parties settle commercial disputes through a process they selected in advance.

The law does not, however, shut the courthouse door entirely. It treats reviews by courts of cassation differently from an ordinary appeal. Recourse to cassation, on the ground of a fundamental or basic error of law, remains available in principle unless the parties expressly waive it.

The result is a narrow safety valve. The law favours finality, but it also seeks to prevent grave legal mistakes from surviving merely because the dispute was sent to arbitration.

In theory, this is a calibrated settlement between two values that often pull in opposite directions. There is the autonomy and finality of arbitration, as well as the legal system’s interest in correcting manifest injustice. An older but binding decision of the Federal Supreme Court Cassation Division now clouds the balance.

A bench of seven Justices held that the parties’ agreement cannot exclude access to cassation review. The Justices grounded their decision mainly in constitutional principles rather than in subsidiary legislation.

Although the judgment was issued before the law was passed in 2018, its reasoning and binding force may remain intact. Its point turns on hierarchy.

If a Court ruling rests on constitutional interpretation, a later proclamation would not ordinarily defeat it, for constitutional provisions prevail over subordinate laws. Unless the Constitution is amended or a later judicial decision displaces the earlier ruling, the precedent may continue to shape how arbitration awards are reviewed.

The Cassation Bench reasoned that the right to petition for cassation is a constitutional guarantee under, and cannot be waived by contract. It provides that the Federal Supreme Court has “a power of cassation over any final court decision containing a basic error of law. Particulars shall be determined by law.”

That reading raises a basic interpretive problem. The constitutional text speaks of a “final court decision.” Arbitration is not a court proceeding. It is a private adjudicative process, created by agreement and conducted outside the formal judicial structure, and arbitral tribunals are not courts. Their awards, though binding, are not court decisions in the strict sense.

On a plain reading, cassation jurisdiction appears confined to final decisions rendered by courts. The English version of the Constitution, in particular, seems to limit cassation review to judicial determinations. The legislature may still design limited judicial controls over arbitration, including setting aside proceedings and rules for recognition and enforcement.

But treating arbitral awards as Court judgments for cassation purposes stretches the constitutional text and turns a narrow power of review into something closer to appellate supervision.

The Cassation Bench’s approach is controversial because it turns cassation into a non-waivable constitutional right. That weakens party autonomy, the principle on which arbitration largely rests.

Parties choose arbitration to define procedure, select applicable law and, most importantly, agree on finality. If that agreement can be reopened through cassation despite an express waiver, arbitration loses part of its distinct value.

The issue is not only doctrinal but also extends to economic policy and investors’ confidence. For businesses, that distinction is practical, as it shapes costs, timing, and trust in the dispute-resolution clause they sign before a disagreement ever reaches the tribunal.

International investors often choose arbitration because it offers neutrality, procedural flexibility and finality. A final and binding award, subject only to narrow judicial oversight, is central to the bargain. If local courts can revisit awards through cassation as a constitutional right, these investors may question whether arbitration in Ethiopia delivers what it promises.

The legal framework has long recognised the role of arbitration in investor-state disputes. The investment law affirms that disputes between foreign investors and the state may be settled through arbitration, either under contractual arrangements or applicable bilateral or multilateral investment treaties. That law signals a policy commitment to investment protection and to dispute mechanisms accepted in international practice.

Most bilateral investment treaties also make arbitration the principal dispute-resolution mechanism and state that awards are final and binding. A broad domestic cassation power could sit uneasily with these commitments. If awards can be reopened on alleged legal errors, the predictability of the investment regime may be weakened.

The effect could discourage investment, as foreign investors reconsider the legal risk attached to enforcement in Ethiopia.

The problem also calls into question the integrity of arbitration itself. Finality is closely linked to “res judicata”, the doctrine that a dispute once conclusively resolved should not be relitigated. In this sense, finality is more than a procedural preference; it supports authority, stability, and confidence in adjudicative outcomes.

Traditionally, res judicata rests on cumulative elements such as persona, the identity of the parties; petitum, the identity of the subject matter; and causa petendi, the identity of the legal and factual grounds. When these elements coincide in later proceedings, the earlier decision is treated as conclusive and binding.

The doctrine protects parties from repeated litigation, offers certainty and reinforces trust in dispute resolution.

Expansive cassation review can undercut these goals. If arbitral awards are routinely reopened on alleged errors of law, the line between arbitration and litigation begins to blur. Arbitration then becomes less of an alternative to courts and more of a first stage before Court proceedings.

The prospect weakens one of arbitration’s main attractions, a faster and more efficient route to closure. It may also encourage losing parties to treat cassation not as an exceptional safeguard, but as a routine second chance.

None of this means arbitral awards should be immune from judicial review. Comparative legal systems and international instruments such as the New York Convention recognise limited grounds for Court intervention. These include lack of jurisdiction, serious procedural irregularities and violations of public policy.

The limits are deliberate. They are meant to preserve fairness without turning courts into appellate bodies over arbitral tribunals.

A non-waivable cassation mechanism risks moving the balance toward intervention. Many arbitration-friendly jurisdictions confine Court involvement to narrow grounds and do not allow merits-based review of awards.

Ethiopia’s current trajectory may, therefore, put it at odds with prevailing international practice and weaken its position as an arbitration venue.

PUBLISHED ON Jun 27,2026 [ VOL 27 , NO 1365]