BizCLIR

Despite several decades of dormancy, the Ethiopian legal system that was created in the 1960s provides a solid foundation for the resolution of commercial disputes. The present challenge is to build the capacity of lawyers and judges—many of whom are relatively inexperienced—to better understand commercial transactions to accurately apply that system to business disputes. In addition to lack of commercial acumen, a range of stakeholders interviewed on the topic of courts’ handling of commercial matters consistently complained about the length of time it took to achieve a final decision in the courts, and of the generally inexperienced pool of judges that decided the cases.

It is not surprising, therefore, that the most prevalent form of commercial dispute resolution in Ethiopia is informal mediation or arbitration. From merchants in the sprawling Mercato open-air market in Addis Ababa to rural farmers and herders, parties will often seek out a mutually trusted mediator, or recognized village chief or council, to resolve their commercial disputes. These methods are well accepted by Ethiopians but generally apply best to basic commercial matters. Two arbitration and mediation centers have recently been created in Addis Ababa to handle larger and more sophisticated transactions. Although together they have accepted fewer than 20 cases in their first 2 years of operation, the centers offer great promise for providing businesses with a reliable dispute-resolution mechanism that is speedier and more private than the courts. These arbitration mechanisms appear universally accepted by the judicial and business communities, but awareness levels are currently low.

Looking forward, one can expect that cases heard by formal arbitration mechanisms will proliferate and court systems will improve. Ethiopia’s business sector is still relatively immature, and trade levels are low. As this condition changes, the commercial disputes to be resolved will become more numerous and complex, and the system must adapt to deal with them. The challenge will therefore be to match their pace of reform and their capacity to a high growth rate of new businesses and transactions. Efforts are underway to increase training of judges at the university level, in the newly established judicial training center, and while on the bench.