HAPPY NEW YEAR
Just like last year 2012 was again a wonderful blogging year.
On January 18 chilot.me will celebrate its 2nd birthday.
You can celebrate with me by sending email, cards or if you are around Dire Dawa, buy me some ‘gift’
within two years chilot.me has shown great improvement.
Total views in 2011= 94,269
Total views in 2012=467,532
chilot.me is now one of top 15 Ethiopian websites and within top 100 websites in Ethiopia (#59)
- Those who visited and revisited my blog
- Those who sent me encouragement (223 friends) through contact me page
- Those who subscribed to my blog (845 friends)
- Those who commented on posts and pages
- Those who like and shared my posts
to two lawyers from America
1-Alem Taye, 234 Cool Stone Bend, Lake IN The Hills, IL 601565 for solving one of the critical problems of my blog. I had limited space on wordpress.com
Alem Taye upgraded the available space of the blog from 5 gb. to 25 gb. Thanks a lot
2- Addisu Zegeye Dubale
The WordPress.com stats helper monkeys prepared a 2012 annual report for this blog.
Here’s an excerpt:
About 55,000 tourists visit Liechtenstein every year. This blog was viewed about 460,000 times in 2012. If it were Liechtenstein, it would take about 8 years for that many people to see it. Your blog had more visits than a small country in Europe!
Index to Cassation Decisions Volume 13
Most of you are asking and waiting for the release of Cassation decisions volume 13 and 14 and I don’t have any good news. I frequently check their website. Still volume 12 is the last volume available. But I think, the next two volumes will be made available to the public soon. The index to Volume 13 is officially released. You can download it here or from the official web page of the Federal Supreme Court.
I have added a bookmark and a link to the table of contents, so that you can easily browse the contents of the document.
You can get the pdf version on the following link
Proclamation No. 761/2012
Telecom Fraud Offence Proclamation
WHEREAS, considering that telecom fraud is increasing and wide-spreading from time to time thereby encumbering the telecom industry to play an essential role in the implementation of peace, democratization and development programs of the country;
WHEREAS, recognizing that telecom fraud is a serious threat to the national security beyond economic losses;
WHEREAS, it has became imperative to legislate adequate legal provisions since the laws presently in force in the country are not sufficient to prevent and control telecom fraud;
NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows:
PART ONE GENERAL
1. Short Title
This Proclamation may be cited as the “Telecom Fraud Offence Proclamation No. 761/2012″
In this Proclamation, unless the context otherwise requires:
1/ “telecom service” means public switched telecom service, cellular mobile service, internet service, satellite telephone service, data communication service, telecom-centers or resale service, mobile or fixed private radio service, very small aperture terminal (VSAT) service, cable installation and maintenance service, telecom switches installation and maintenance service, the transmission or reception through the agency of- electricity or electromagnetism of any sounds, signs, signals, writing, images or intelligence of any nature by wire, radio, optical fiber, satellite or other electromagnetic systems or any other service designated as telecom service by the Ministry; and may not include broadcasting service and intercom connection;
2/ “telecom equipment” means any apparatus used or intended to be used for telecom service, and includes its accessory and software;
3/ “call-back service” means the use of dial tone of a foreign telecom operator for international connection without the knowledge of the domestic telecom operator or fraudulently making international calls in to apparent domestic calls and shall include services that are identified as call-back by the International Telecommunication Union;
4/ “Ministry” means the Ministry of Communication and Information Technology;
5/ “telecom service provider” means the Ethio-Telecom or any other person authorized to provide telecom service;
6/ “police” means the Federal Police or, as the case may be, regional state police;
7/ “regional state” means any state referred to in Article 47 (1) of the Constitution of the Federal Democratic Republic of Ethiopia and includes the Addis Ababa and Dire Dawa city administrations;
8/ “person” means a physical or juridical person
9/ any expression in the masculine gender includes the feminine.
TELECOM FRAUD OFFENCES
3. Offences Related to Telecom Equipment
1/ Without prejudice to the provision of sub-article (3) of this Article, whosoever manufactures, assembles, imports or offers for sale any telecom equipment without obtaining prior permit from the Ministry commits an offence and shall be punishable with rigorous imprisonment from 10 to 15 years and with fine from Birr 100,000 to Birr 150,000.
21 Without prejudice to the provision of sub-article (3) of this Article, whosoever uses or holds any telecom equipment without obtaining prior permit from the Ministry commits an offence and shall be punishable with rigorous imprisonment from 1 to 4 years and with fine from Birr 10.000 to Birr 40.000.
3/ The Ministry shall, in consultation with concerned bodies, prescribe types of telecom equipment the manufacturing, assembling, importation, sale or the use of which may not require permits, and set their technical standards.
4. Offences Related to the Provision of Telecom Service
Whosoever provides telecom service without having a valid license issued in accordance with the appropriate laws commits an offence and shall be punishable with rigorous imprisonment from 7 to 15 years and with fine equal to three times the revenue estimated to have been earned by the person during the period of time he provided the service.
5. Offences Related to Interception and Access
Whosoever without the authorization of the service provider or lawful user, or any other competent authority:
1/ obstructs or interferes with any telecom network, service or system;
2/ intercepts or illegally obtains access to any telecom system: or
3/ intercepts, alters, destroys or otherwise damages the contents of telephone calls, data, identification code or any other personal information of subscribers:
commits an offence and shall be punishable with rigorous imprisonment from 10 to 15 years and with fine from Birr 100.000 to Birr 150.000.
6. Using Telecom Service for Illegal Purpose
1/ uses or causes the use of any telecom network or apparatus to disseminate any terrorizing message connected with a crime punishable under the Anti-Terrorism Proclamation No. 652/2009, or obscene message punishable under the Criminal Code; or
2/ uses or causes the use of the telecom service or infrastructure provided by the telecom service provider for illegal purpose;
commits an offence and shall be punishable with rigorous imprisonment from 3 to 8 years and with fine from Birr 30,000 to Birr 80.000
Offence Related to Fraud of Service Charge
1/ fraudulently obtains telecom service without payment of a lawful charge thereof; or
2/ obtains telecom service by means of fraudulent payment charged lo another person;
commits an offence and shall be punishable rigorous imprisonment from 5 to 10 years and with fine equal to three times the charge estimated to have been avoided by the act.
8. Offences Related to Call-Back Service
1/ Whosoever provides call-back service commits an offence and shall be punishable with rigorous imprisonment from 5 to 10 years and with fine equal to five times the revenue estimated to have been earned by the person during the period of time he provided the call back service.
2/ Whosoever intentionally or by negligence obtains any call-back service shall be punishable with imprisonment from 3 months to 2 years and with fine from Birr 2.500 to Birr 20.000.
9. Offences Related to Illegal Telecom Operators
a) establishes any telecom infrastructure other than the telecom infrastructure established by the telecom service provider; or
b) bypasses the telecom infrastructure established by the telecom service provider and provides any domestic or international telecom service;
commits an offence and shall be punishable rigorous imprisonment from 10 to 20 years and with fine equal lo ten times the revenue estimated to have been earned by him during the period of time he provided the service.
2/ Whosoever intentionally or by negligence obtains any telecom service from an illegal operator stipulated under sub-article (1) of this Article commits an offence and shall be punishable with imprisonment from 3 months to 2 years and with fine from Birr 2.500 to Birr 20,000.
10. Other Offences
1/ Whosoever illegally manipulates or duplicates SIM cards, credit cards, subscriber identification numbers or data or sales or otherwise distributes illegally duplicated SIM cards, credit cards, subscriber identification numbers or data commits an offence and shall be punishable with rigorous imprisonment from 10 to 15 years and with fine from Birr 100.000 to Birr 150,000.
a/ by connecting any equipment to a public pay telephone or by using any other means obtains services which are not normally available through the public pay telephone; or
b/ obtains or causes others lo obtain telecom service from the telecom service provider by presenting false or forged service agreement or by fraudulently using the identity code of another person or by using any other fraudulent means;
commits an offence and shall be punishable with rigorous imprisonment from 3 to 8 years and with fine from Birr 30,000 to Birr 80(000
3/ Whosoever provides telephone call or fax services through the internet commits an offence and shall be punishable with rigorous imprisonment from 3 to 8 years and with fine equal lo five limes the revenue estimated lo have been earned by him during the period of time he provided the service.
4/ Whosoever intentionally or by negligence obtains the service stipulated under sub- article (3) of this Article commits an offence and shall be punishable with imprisonment from 3 months to 2 years and with fine from Birr 2,500 to Birr 20.000.
11. Offence Committed by Juridical Person
Where any juridical person commits an offence stipulated under this Proclamation, it shall be punishable with a fine the amount of which shall be equal to ten times the fine stipulated for the offence.
12. Confiscation of Property
The court, in deciding the penalty of an offender under this Proclamation, shall give additional order for the confiscation of any telecom equipment used in the perpetration of the offence.
13. Establishment of Technical Task Force
In order to prevent, investigate and control telecom fraud offence a national technical task force comprising members drawn from the concerned bodies shall be established.
14. Covert Search
Police may request the court in writing for coven search warrant where a telecom fraud offence has been committed or where he has reasonable ground that a telecom fraud is likely to be commuted.
15. Admissibility of Evidence
Without prejudice to the admissibility of oilier evidences to be produced in accordance with the Criminal Procedure Code and other relevant laws, the following shall be admissible in court in relation to telecom fraud offences:
1/ digital or electronic evidences;
2/ evidences gathered through interception or surveillance; and
3/ information obtained through interception conducted by foreign law enforcement bodies.
The Federal High Court shall have first instance jurisdiction over telecom fraud offences provided under this Proclamation.
17. Repealed and Inapplicable Laws
1/ Sub- article (1), (2) and (3) of Article 25 of the Telecommunication Proclamation No. 49/1996 (as amended by Proclamation No, 281/2002) are hereby repealed.
2/ No law or customary practice shall, in so far as it is inconsistent with this Proclamation, be applicable with respect to matters provided for under this Proclamation.
18. Power to Issue Regulation
The Council of Ministers may issue regulation necessary for the implementation of this Proclamation.
19. Effective Date
This Proclamation shall come into force on the date of publication in the Federal Negarii Gazela.
Done at Addis Ababa, this 4″‘ day of September, 2012
PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA
Proclamation No.769/2012 Investment Proclamation
You don’t write Parlament for Parliament. I just used that term to indicate the lawmaker’s lack of attention to spelling in legislative texts.
The House of People’s Representatives should have its own language editor. The English version of the legislative text is full of spelling errors. Recently I was working on statutory definitions of Ethiopian legal terms. What I realized is that the extent of the problem requires some attention by the law maker or the drafters.
Here are some examples of serious spelling errors in the English version of the legislative text.
P and R stand for Proclamation and Regulation respectively
The numbers represent the number of the proclamation and regulation and year of enactment.
e.g. R173/2009 represents Regulation number 173 of 2009
P372/03 stands for proclamation number 372 of 2003
The word with a spelling error is indicated in red followed by the correct word in bold
Pension [Pensione] (R173/2009) means an establishment offering lodging and breakfast services to tourist and other clients
(According to the Oxford Dictionary 8th ed. Pensione is small hotel or boarding house in Italy)
Documentary Film (R66/99) means a film recorded with the objective of broadcasting or disseminating natural, historical, cultural, political, economical, [economic] social conditions and other factual materials through television, cinema or other electronic screen transmissions
(According to the Oxford Dictionary 8th ed. Economical means giving good value or return in relation to the resources or money expended. Economic is defined as “of or relating to economics or the economy” Similarly, Political means “of or relating to the government or public affairs of a country” and Social is defined as “of or relating to society or its organization” Therefore economic not economical should be taken as the right word for the definition)
Rights to Lien (P372/03) it is a preferential rights of the warehouse man over the goods stored in a warehouse or over the pleadgee [pledgee] of warehouse recipts [receipts] or over the bailer or his transferee on the proceeds earned from sale of the goods, in relation to the cost incurred persuant [pursuant] to the provision of this proclamation to store, prepare pack, transport, insure and for Labour and professional work and incurred
Academic Staff (R132/2007) means any employee of the University College engage [engaged] in teaching or research activities
Accident (P273/03) shall mean an occurrence associated with the operation of an aircraft which takes place between the time any person boards the aircraft with the intention of flight until such time as all such persons have disembarked, in which:
(a) a person is fatally or seriously injured as a result of:
1) being in the aircraft, or
2) direct contact with any part of the aircraft, including parts which have come detached from the aircraft, or
3) direct exposure to jet blast, except when the injuries are from natural causes, self-inflicted or inflicted by other persons, or when the injuries are to stowaways hiding outside the areas normally available to the passengers and crew; or
(b) the aircraft sustains damage or structural failure which:
1) adversely affects the structural strength performance or flight characterstics [characteristics] of the aircraft, and
2) would normally require major repair or replacement of the affected component, except for engine failure or damage when the damage is limited to the engine, its cowlings or accessories; or for damage limited to propellers, wing tips, antennas, tires, brakes, fairing, small dents or puncture holes in the aircraft skin; or
(c) the aircraft is missing or is completely inaccessible
Animal (P267/02) means for the purpose of this proclamation domestic and wild animals includs [includes] sea animals and bees
Aviation personel [personnel] (P273/03) shall mean any individual who engages as pilot in command, co-pilot or flight engineer or any other member of the flight crew of an aircaft [aircraft] or who is involved in the inspection, maintenance, overhaul or repair of aircraft, aircraft engines, propellers or components or who serves in the capacity of air-traffic controller or aircraft dispatcher
Beekeeper (P660/09) means a person who is engaged in keeping of honeyhee [honeybee] colonies in hives
Commercial representative(P67/97) means any person who is not domeciled [domiciled] at the place where the head office of the business enterprise or business person he represents is situate, bound to such enterprise or business person by a contract of employment, and entrusted with the carrying out of only trade promotional activities on behalf and in the name of the business enterprise or the business person he represents without being a trader himself
Committee (R135/2007) means a property valuation committee established persuant [pursuant] to the Proclamation
Conciliation(P377/06) means the activity conduced [conducted] by a private person or person appointed by the Ministry at the joint request of the parties for the purpose of bringing the parties together and seeking to arrange between them voluntary settlement of a labour dispute which their own efforts alone do not produce to utilize a given State forest for a defined period of time
Conditions of work (P361/03) means the entire relations between the City Goverment [Government] and its officials and employees and shall include hours of work, salary, leaves, payments due to dissmissal, [dismissal] if any, health and safety, compensation to victims of employment injury, grievance procedure and other similar matters
Contraband (P60/97) shall mean the act or an attempt of or providing assistance of importing goods beyond the first or exporting beyond the last customs station in contravention of laws and regulations or possessing, selling or transfering [transferring] of such goods in a commercial level and it includes cooperation in such activities
Council of Inquiry (P250/01,) shall mean the Council of Constitutional Inquiry of the Federal Goverment [Government]
Customs Station (P60/97) shall mean any place designated as customs office at the port of entry or exit of goods, transit routs or at customs area for the controll [control] of import and export goods, collection of duties and taxes
Employer(R91/2003) means any government, private or non-governmental institution or international or regional orgnaization [organization] or person employing graduates of higher education institutions including self-employed graduate of the same
Fish (P315/03) means any fish species, crustanceans, [crustaceans] mollusks, including their eggs, spawn fries or fingerlings
International Animal Health Certificate (P267/02) means a certificate issued by the vererinary [veterinary] administration of the exporting country certifying the state of good health of animals, semen, embryo/ova, and hatching-eggs destined for export
Psychotropic Substance (P176/99) means any substance subject to control according to psychotropic Substances Convention of the United Nations ratified by Ethiopia. This shall also included [include] a substance that is categorized as psychotropic substance by the Authority
Public Private Partnership (P649/09) mean [means] investment through private sector participation by a contractual arrangement between a public body and a private sector enterprise, as the concessionnaire, [concessionaire] in which the concessionnaire [concessionaire]:
a) undertakes to perform or undertake any construction project or service or lease concession;
b) assumes substantial financial, technical and operational risks in connection with the performance of a public function or use of government property; and
c) receives consideration for performing a public function or utilizing government property, by way of fees from any public funds, user levies collected by the concessionnaire [concessionaire] from users or customers for a service provided by it, or a combination of such consideration
Restricted Seed (R16/97) means seed prohibited from being imported into Ethiopia or exported from Ethiopia or seed put under resetriction [restriction]
Road (P80/97) means highway or any other road classified and disignated [designated] as part of the national road network and includes bridge on those roads
Serious Ethical Violations (P433/05) means any ethical violation entailing dismissal as per appropriate code of conduet [conduct] regulation
Conflict of Laws in Labour and civil cases
In a conflict of law case, a court is expected to address three basic issues:
- Determining the presence judicial jurisdiction
- Determining the applicable law to solve the dispute
- Determining whether a foreign judgment should be given recognition by domestic courts
Before these three issues are addressed, the court is primarily tasked with determining whether the case is really a conflict of law case or not?
So, how does a case become a conflict of law case? A short to the question is that it becomes a conflict of law case, it contains a foreign element. What then is a foreign element?
“When a case is said to contain a foreign element, the reference(s) may be of three natures __ personal, local, or material __ in that, respectively illustrated, if one of the parties of the case is a foreigner (including one from another federating unit) or the transaction of any nature took place, totally or partially, abroad (outside the forum state) or, finally, the object of the dispute (property, esp. immovable property) is situated in another state (including a member of federation); the case is said to contain a foreign element.” (Araya Kebede and Sultan Kasim, Conflict of laws teaching material, sponsored by Justice and Legal System Research Institute)
The draft conflict of rules also defines foreign element in the following way.
Art.4. Foreign Element
Foreign element refers to:
- A personal nature and may pertain to nationality, domicile or residence of the interested parties; or
- A local nature and may pertain to the place where facts occur or contracts are made from which the juridical situation arises; or
- A material nature and may pertain to the place where the property to which the juridical situation applies is situated.
According to article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996, when a case is related to private international law, the Federal High Court will have first instance jurisdiction to solve the dispute. This article is not a conflict of law rule regarding judicial jurisdiction in conflict of law cases. It simply gives exclusive material jurisdiction to the Federal High Court, to address the above three questions of conflict of law disputes. What follows is a brief summary of the way this article is understood by lower courts and the cassation bench.
1. Conflict of laws in labour cases
1.1. Determining the governing law by the agreement of the parties
Applicant: Foundation Africa
Respondent: Ato Alemu Tadesse
Cassation File Number: 50923
Date: 19-9-2003 (E.C.)
An employment contract between the employee and employer made in Ethiopia, for a work to be performed in Ethiopia, stipulating a foreign law to govern any dispute arising between them is invalid. The presence of such contract does not oust the ordinary material jurisdiction of first instance court in labour disputes.
In a similar case, [C.A.S. Consulting engineers salezgiter GMBH vs. Ato Kassahun Teweledeberhan Cassation File Number 54121 Date 1-3-2003 (E.C.)] where the parties indicated German Law to be the applicable law to solve their disputes, it was held that such contractual provision is not valid. The case by its nature is not a case “regarding private international law” as provided in article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996. As a result, it is the Federal First Instance Court not the Federal High Court who has jurisdiction over such matter.
1.2. Employment contract made in a foreign country
Applicant: Ato Bezabeh Eshetu
Respondent: Salini construction
Cassation File Number: 60685
Date: 21-6-2003 (E.C.)
When the employment contract is made in a foreign country, it is a case regarding private international law. Hence, the Federal High Court will have first instance jurisdiction as per article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996. But, it should be noted that, this does not imply Ethiopian courts will assume judicial jurisdiction merely because the contract was made in a foreign country. The fact that a certain case is a ‘case regarding private international law’ only confers a power on the Federal High Court to determine whether Ethiopian courts have judicial jurisdiction and if yes to determine the applicable law. In short, article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996 simply gives material jurisdiction exclusively to the Federal High Court.
2. Conflict of laws in civil cases
2.1. Extra-contractual liability (foreign company not registered in Ethiopia)
Applicant: Ethiopian Electric Light Corporation
Respondent: Dragados Construction
Cassation File Number: 42928
Date: 12-5-2002 (E.C.)
This case relates an action by applicant for compensation for damage caused by respondent while doing business in Ethiopia. Respondent argued that it a foreign company registered according to the law of Greece and domiciled in Athens. It also stated that it is not registered in Ethiopia. Based on these facts, respondent challenged the jurisdiction of the Federal First Instance Court, because the conflict of law rules apply to determine courts having jurisdiction and the applicable law. The Federal Instance Court accepted this argument and ruled that it does not have jurisdiction over the case. On appeal, the ruling of the lower court was affirmed by Federal High Court on the ground that the mater falls within its first instance jurisdiction.
The cassation bench reversed both decisions of the lower courts. The bench in its reasoning stated that damage was caused in Ethiopia while respondent was doing business in Ethiopia. The case was brought to the court where the damage caused. Therefore, the Federal First Court should exercise jurisdiction according to article 27(1) of the Civil Procedure Law.
2.2. Contract made in Ethiopia with a foreigner
Applicant: Global Hotel Private Limited Co.
Respondent: Mr. Nicola As Papachar Zis
Cassation File Number: 28883
Date: 26-3-2000 (E.C.)
The fact that one of the parties in litigation is a foreigner does not automatically make the case ‘a case regarding private international law.’ The defendant should necessarily challenge the jurisdiction of the court on the ground that Ethiopian law is inconsistent with the law of his nationality or domicile. If the foreign party does not invoke lack of jurisdiction of Ethiopian courts, the case is not a private international law case.
Proclamation No. 760/2012
A PROCLAMATION REGISTRATION OF VITAL EVENTS AND NATIONAL IDENTITY CARD
WHEREAS establishing a system of registration of’ vital events plays a key role in planning political, social and economic developments in providing different social and economic services to citizens and in making the justice administration expedient and effective
WHEREAS it has become necessary to create accessible, comprehensive and compulsory registration system on the basis of which citizens can effect proper and timely registration of vital events
WHEREAS the issuance of national identity cards to citizens has become important for the protection of national security and for providing efficient services to citizens by the public and private sector
NOW THEREFORE in accordance with Article 55 sub-article (1) and (6) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows
Click on the link below to read full text
The Duty to serve: Cassation Bench on the legal effects of employer-sponsored Tuition Assistance
As an employee, you have a duty to serve your employer diligently. But, you don’t have a duty to continue serving your employer for life. If you ever feel like leaving, you are free to resign even without any valid ground (Article 31 of the labour proclamation No. 377/2003.) The only procedural requirement is giving a one month prior notice. Failure to give notice results in your liability to pay compensation (a maximum of your thirty days wages) to the employer (Article 45 of the labour proclamation No. 377/2003.)
But, is it always true that an employee does not have a duty to continue serving his employer at least for a limited period of time? There is one exception (limitation?) to the freedom of the employee to leave his employment. That is when the employer has covered education expenses of the employee and there is an express of employee to continue his employment for a limited period of time. The nature of this contractual obligation is not absolute rather it is alternative. This is to mean that the employee has still a choice either to serve his employer or reimburse all the expenses of education.
The following is a very brief summary of the position of the Cassation Bench of the Federal Supreme Court on issues related to the duty to serve.
My summary is based on the following six cases decided by the bench Continue reading →
Consequential loss in Insurance Cases: Review of Cassation Decisions
One of the basic principles of insurance applicable to property insurance is the principle of indemnity. This underlying principle provides that compensation payable to the insured upon occurrence of loss to his property could not exceed the actual value of the property at the time of loss. This principle is clearly stated in article 678 of the commercial code. However, the clarity of the provision didn’t save courts from giving contradictory decisions in determining the amount of compensation to be paid to the insured. When a dispute as to the amount of compensation arises, some courts took a position that the amount payable should be equal to the maximum amount specified in the insurance policy. In order to justify their position courts usually rely on article 665 of the commercial code which imposes an obligation on the insurer to pay “the agreed sum” within the time specified in the policy or when the risk insured against occurs or at the time specified in the policy. In principle a court does not make a mistake if interprets “the agreed sum” as “the amount stated in the insurance policy.” It becomes a mistake if a court applies it to property insurance or insurance of objects.
Article 665 of the code is found in the general provisions applicable to all forms of insurance contract. Hence, the relevance of the provision is limited to determining the time of making payment. As regards the amount of compensation it could only make sense if it is made applicable to life insurance policies. As the value of a human body or life could not be valued, the amount to be paid at the time of materialization of risk is left to the agreement of the parties. The principle of indemnity does not apply to such type of insurance. In property insurance cases article 678 of the code always prevails over the general insurance provisions.
Consequential loss and principle of indemnity
One of the challenges in applying the principle of indemnity in insurance cases is the issue of consequential loss. The commercial code does not make any reference to consequential loss and whether the insurer has an obligation to make payment for such type loss in the absence of a specific policy to this effect. Consequential loss in short refers to lost of profits and income resulting from harm to or destruction of one’s insured property. It is an indirect loss since it is not a result of a direct act but a loss incurred due to the consequences or results of the act. If a commercial vehicle insured against collision is totally destroyed the owner in addition to the direct loss of his property incurs an indirect loss of income as a consequence of the loss of his vehicle. This will be usually loss of income from the time of destruction of the vehicle until he is paid compensation by the insurer. Now the question is: is it possible to claim for such type of consequential loss under Ethiopian insurance law?
In this regard the position of the Federal Supreme Court Cassation Bench is that the insurer has an obligation to compensate the insured for consequential loss. The absence of any clear provision in the insurance policy providing coverage for consequential loss is not a valid ground to relieve the insurer from his liability. What if there is an exclusion clause in the policy? According to the cassation bench, the insurer’s obligation is still effective even though the policy clearly excludes compensation for consequential loss.
However, this firm position of the cassation bench could not be taken as a full answer to the question raised above. Depending on the nature of the claim by the insured ‘consequential loss’ may refer to loss caused as a result of an act (harm to or destruction of one’s insured property) or it may also be similarly used to refer to loss caused as a result of an act of a party (i.e. an act of the insured.) An act of the insurer causes consequential loss on the insured when there is unjustified delay in making payment upon occurrence of loss.
According to article 665 of the commercial code compensation should be paid within the time specified in the policy or when the risk insured against occurs or at the time specified in the policy. If the policy does not provide such time, then payment should be effected immediately (Article 1756 of the Civil Code.) Unjustified delay constitutes non-performance of contract entitling the other party to claim damage caused to him by non-performance. (Article 1771 sub article 2 of the Civil Code)
It is only in this sense that the decisions of the cassation bench could be understood and analyzed. This is important because in most of the decisions no clear distinction is made between consequential los as a result of the act and as a result of the insurer. The absence of clear distinction is not totally the fault of the bench. The parties are also partially responsible for the confusion. When one looks in to the argument of the insured and the insurer, they tend to be at variance in understanding the underlying issue and even in the usage of terminology. Usually the insured claims “compensation for the loss of income” and the insurer challenges such claim on the ground of the absence and/or exclusion of consequential loss in the insurance policy. Yes it is true that a party is not entitled to compensation for loss of income as a result of loss of his insured property. However, what the insured is really demanding by “consequential loss” or “compensation for the loss of income” is payment of compensation for delay of non-performance of the insurance contract. This usually happens when the insurance company delays payment or refuses to compensate the insured upon occurrence of loss.
Consequential Loss in Liability Insurance Cases
Applicant Ethiopian Insurance Company
Respondents 1.Ato Demesie Werekeneh
2. Genesis Farms Ethiopia Pvt.
Cassation File Number 27565
Date: Hidar 24-2000 E.C.
Court: Federal Supreme Court Cassation Bench
In this case, a vehicle belonging to 2nd respondent caused a total damage on 1st respondent’s vehicle. Applicant became a party to the case as it has insured 2nd respondent’s vehicle. The value of the 1st respondent’s vehicle was estimated to be 80,000 br. (Eighty thousand birr). In addition to this amount 1st respondent also claimed 18, 300 br. (Eighteen thousand three hundred birr) lost income for 211 days.
Applicant challenged the claim for lost income on the following two grounds:
- 1st respondent should not be compensated twice for a single loss, as compensation for the loss of income will have the effect of double compensation.
- 1st respondent could not claim compensation for the loss of income caused as a result of damage to his property, without having consequential loss insurance policy.
The cassation bench, responding to applicant’s 1st argument stated that once 2nd respondent is found liable for causing total damage to 1st respondent’s vehicle there is no reason it could not be liable for the loss of income to 1st respondent as the result of the damage. As regards the second argument the bench said:
“Applicant has not argued (or submitted similar argument) that the insurance policy it issued to respondents excludes consequential loss”
In other words, it held a position that consequential loss is always payable unless the insurance company shows to the satisfaction of the court that it is excluded by the insurance policy.
The cassation bench may not be criticized for its analysis of consequential loss but, for its failure to relate it to the maximum liability of the insurance company. Applicant was made a party to the case because it insured the liability of 2nd respondent. Since this is a liability insurance case the applicable provisions are articles 685 to 688 and of the Commercial Code and the general provisions of insurance (articles 654 to 674 of the Code.) Irrespective of the type of insurance article 665 sub article 2 of the code states that the insurer’s liability shall not exceed the amount specified in the policy.
If the maximum liability of applicant in the insurance policy is 80,000 br. (Eighty thousand birr), then that is the only amount it is obliged to pay. Even assuming that the policy limit is above 80,000 br. (Eighty thousand birr) the insurance company is still not liable to consequential loss. In liability insurance case, the nature and extent of liability of the insurer is determined based on the terms and conditions of the policy. If the policy only provides coverage against the liability of insured as a result of direct damage to the property of third parties, then there is no contractual or legal ground to make the insurer liable for consequential loss. The bench found 2nd respondent liable for the loss of income caused to 1st respondent. However, how this liability is transferred to the applicant insurance company is not clear.