Vol. 8 No.2: The Convention on the Recognition and Enforcement of Foreign Arbitral Awards

Abstract

The Convention on the Recognition and Enforcement of Foreign Arbitral Awards, often referred to as the New York Convention, has established itself as a regulatory and enforcement instrument which is crucial to international trade. This is evident from the fact that more than 150 countries have so far ratified the convention. Although Ethiopia is one of the earliest signatories, it has not yet ratified the convention. Hence an inquiry into the possible rationale for Ethiopia’s reluctance is necessary. Such an inquiry can only be made by comparing the advantages and disadvantages of ratifying the convention, as any decision to withhold ratification, after signing, must have been motivated by an assessment of the pros and cons of the Convention. The advantages of ratifying the Convention are many. The major benefits include boosting a country’s goodwill as business friendly and contract enforcing, helping a country borrow on lower rate of interest and enhancing investor motivation toward lower rate of return on investment, ease of enforcing contracts abroad for domestic parties, ease of attracting foreign investment, and so on. The disadvantages are mainly two: that of impairment on sovereignty like any other treaty, and elimination of the opportunity for domestic traders to avoid payment of international debts. In view of the pros and cons higlighted above, it is fairly safe to conclude that there are more advantages than disadvantages in ratifying the 1958 New York Convention. This can be substantiated by the lack of any member country that has withdrawn from or renounced the Convention. Compared to the ICSID Convention from which some countries have withdrawn upon finding that its demerits outweigh its advantages, the absence of such withdrawals from the New York Convention indicates that ratifying it is not as worrisome as it is often thought from the outside. Therefore, it is high time for Ethiopia to consider ratifying this Convention.