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

Abstract

Synopsis of the CaseEthiopian Mineral Development Share Company [hereinafter,EMD], a public enterprise converted into a share company for privatization purposes, as per the Privatisation of Public EnterprisesProclamation1 [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 FederalCassation Chilot claiming that the lower courts got the law wrong.