Managers’ Power, Ultra vires and Third Parties under Ethiopian Law: a Critique of Ethiopian Mineral Development SC v GTT Trading

Abstract

Synopsis of the Case
Ethiopian Mineral Development Share Company [hereinafter,
EMD], a public enterprise converted into a share company for
privatization purposes, as per the Privatisation of Public Enterprises
Proclamation1 [hereinafter, the Privatization Proclamation], had a
supply contract with GTT Trading. This contract was later canceled
unilaterally by the former. Subsequently, a dispute arose over the
legality of the unilateral cancellation of the contract by EMD. As Art
10(4) (2) of the contract envisioned arbitral settlement of disputes
arising out of the contract, GTT Trading proceeded to appoint
arbitrators with a view to set the arbitration in motion. Yet, EMD did not
appoint arbitrators, an act which delayed the arbitration process. As a
result, GTT Trading approached the Federal First Instance Court to
appoint arbitrators on behalf of the dilatory EMD. Before ruling on the issue, the Court invited EMD to submit
answers to the allegations. In its answers, EMD argued that (1) the
disputed matter is not arbitrable, and (2) even if it is arbitrable, EMD is
not bound to arbitrate as the arbitration agreement was signed, on
behalf of EMD, by the general manager, who did not have the power
to bind EMD to arbitration. Not convinced by the arguments of EMD,
the Federal First Instance Court ruled in favor of GTT Trading and
ordered EMD to select its own arbitrators so that the arbitration could
proceed.
On appeal, the Federal High Court upheld the decision of the
Federal First Instance Court. Yet, EMD proceeded to the Federal
Cassation Chilot claiming that the lower courts got the law wrong.