Consequential loss in Insurance Cases: Review of Cassation Decisions (Part I)


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

Case One

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:

  1. 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.
  2. 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.

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Regulation no. 4/2010 Regulation for the issuance of certificate of professional competence to private auditors and accountants


Regulation no. 4/2010

Regulation for the issuance of certificate of professional competence to private auditors and accountants

WHEREAS, the Office of the Federal Auditor General has been empowered, under the Office of the Federal Auditor General Establishment Proclamation No. 669/2010, to issue and renew certificates of professional competence to private auditors and accountants as well as to supervise the proper fulfillment of the activities of private auditors and accountants and to suspend and cancel their certificates of professional competence where they undertake their activities inappropriately;

WHEREAS, Article 22(1) of the Office of the Federal Auditor General Establishment Proclamation No. 669/2010 has provided that the Office of the Federal Auditor General discharge the above responsibility in accordance with a regulation to be issued by the House of People’s Representatives;

NOW, THEREFORE, in order to determine the procedure for the Office of the Federal Auditor General to issue and supervise certificate of professional competence of private auditors and accountants and to suspend and cancel of those inappropriately undertake their activities, the House of Peoples’ Representatives in accordance with the Office of the Federal Auditor General Establishment Proclamation No. 669/2010 Article 22(1) has issued this Regulation as follows Continue reading →

WORKING TOWARDS RESTORATIVE JUSTICE IN ETHIOPIA: INTEGRATING TRADITIONAL CONFLICT RESOLUTION SYSTEMS WITH THE FORMAL LEGAL SYSTEM


WORKING TOWARDS RESTORATIVE JUSTICE IN ETHIOPIA: INTEGRATING TRADITIONAL CONFLICT RESOLUTION SYSTEMS WITH THE FORMAL LEGAL SYSTEM

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Dr. Julie Macfarlane Professor of Law, University of Windsor, Ontario Canada, juliem@uwindsor.ca.

Most legal scholars study the formal legal system, focusing on principles of law and state-sanctioned procedures and institutions.[1] However, we know that this is only one aspect of the complex landscape of dispute resolution. In every country, community, and organization, systems of informal dispute resolution systems – often based on community customs or familial relationships, or embedded in institutional practices – run alongside the “official” state sanctioned processes. Despite their lack of formal authority and legitimacy, these informal alternatives may have as great, or even greater, an impact on the lives of those who use them as the state-sanctioned system. A growing interest in informal systems of dispute resolution has spawned a vibrant literature representing the intersection of many disciplines, including law, anthropology, sociology, and social psychology. Scholars of conflict resolution in their various disciplinary guises explore the substance and the role of informal systems of disputing and dispute resolution and their relationship, if any, to the formal legal system.[2]

This paper considers how the multiple realities of dispute resolution in any environment affect the work of conflict resolution practitioners. Conflict resolution practitioners are almost always invited in by representatives of the formal legal system, and their work generally focuses on managing – and perhaps reforming – this system. In practice, they cannot ignore the existence of parallel informal systems of conflict resolution that may undermine or distract from the formal state system. These may include structured alternatives to law, such as religious tribunals or community mediation programs. There may be other, more informal but equally significant family or community-based processes which provide their own social order outside the legal system. Whatever form an informal system takes, it is a mistake to overlook or underestimate its impact on the formal legal process and any reforms or innovations planned there. Whether invited to assess existing systems, or to develop new processes or models, practitioners and consultants often find themselves mediating between formal and informal systems already in place.

The second part of this paper focuses on a particular example of the intersection of a formal and an informal system in the development of an innovation – Restorative Justice (RJ) programming – within the formal criminal justice system. It describes my experience working in the People’s Republic of Ethiopia and efforts to introduce RJ as an alternative regime within current criminal system. The dilemma facing reformers in Ethiopia – though this initiative is supported by the highest levels of government and the judiciary – is how to affect reform of the criminal justice system in a way that harnesses the energy of Ethiopia’s vibrant culture of informal tribal conflict resolution processes. In many regions of Ethiopia and especially those far from regional centers, these informal processes are in fact more influential and affect the lives of more Ethiopians than the formal system, which is remote from the lives of many ordinary people. How can the formal justice system become an appealing and appropriate alternative to customary justice for Ethiopians who have little or no contact with the formal justice system? How can RJ principles be legally entrenched in a way that is compatible with community traditions and customs of dealing with conflict, yet maintain the oversight of the State to ensure that human rights and due process are respected? And perhaps most important of all, how can trust and collaboration be enabled between the key players – the tribal elders and the officers of the state system – for the good of Ethiopia’s many diverse communities?

Despite the focus of this paper on Ethiopia, there are many lessons here for RJ programming in the West, which still wrestles with the dilemma of its relationship with the formal criminal justice system.[3] The issues I encountered working in Ethiopia are familiar ones in the West. Those committed to RJ question whether working with the state will dilute or undermine “alternative” approaches and whether the state can be trusted to be the steward of RJ programs. Whose justice is Restorative Justice – the individual actors, their communities, or the state which must enforce and oversee its outcomes? Many would argue that the very essence of RJ is its fidelity to intuitive and organic forms of informal justice within any given community, and that its adoption by a State machinery inevitably detracts from that authenticity.4 Throughout this paper, I shall reflect on parallels these challenged for RJ models and similar issues which arise wherever dispute resolution systems are provided and administered – often by distinctive religious and cultural groups – as an alternative to the state system, civil or criminal. What is the relationship between such informal systems and the formal justice system? Can the formal and informal systems work together? How should the interests of cultural diversity on the one hand, and respect for universal rights of due process and equality on the other, be balanced when it comes to the relationship between state and non-state justice systems?


[1] Austin Sarat & Susan Silbey, Dispute Processing in Law, 66 DENV. U. L. REV. 472, 459–462 (1989).
[2] For an anthropological analysis, see LAURA NADER, LAW IN CULTURE AND SOCIETY (1997) and SALLY ENGLE MERRY, GETTING JUSTICE AND GETTING EVEN: LEGAL CONSCIOUSNESS AMONG WORKING CLASS AMERICANS (1990); in sociology see, for example, PATRICIA EWICK & SUSAN SILBEY, THE COMMON PLACE OF THE LAW: STORIES FROM EVERYDAY (1998); and in peace studies see, for example, JOHN BURTON & FRANK DUKES CONFLICT: PRACTICES INMANAGEMENT, SETTLEMENT AND RESOLUTION, (1990).
[3] See section “The Case of Ethiopia,” infra.

INTERPRETATION OF CONTRACTS UNDER ETHIOPIAN CIVIL CODE: SUBJECTIVE OR OBJECTIVE METHOD?


INTERPRETATION OF CONTRACTS UNDER ETHIOPIAN CIVIL CODE: SUBJECTIVE OR OBJECTIVE METHOD?

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Hussein Ahmed Tura

(LL.B, LL.M, Lecturer, Wolaita Sodo University, School of Law.

Email: hatura7@mail.com)

Introduction

Formation and interpretation of contracts are influenced by the objective and subjective theories of contracts. Objective theory of contracts gives emphasis to the contractual assent that is “determined by analyzing external evidence” rather than the subjective or internal intention of the contracting parties[1]. This theory regards contract formation on the basis of communication, and not cognition. On the other hand, the subjective theory of contract holds the view that “subjective assent has little to do with external perceptions, but rather is concerned with whether the parties each subjectively intended to make the contract.”[2]

Interpretation of contacts plays a crucial role in the domestic and international business transactions. However, the legislatures, courts, and the legal academies of different countries of the world present considerably diverging views on the issue of the intent of the parties in the process of interpretation. For instance, in the European Union, the courts in the common law countries (the UK, Ireland) have voiced a preference for relying on objective manifestations of the parties’ intentions (objective method of interpretation); while in the other Member States (Germany, Austria, France, Italy) the doctrine of the subjective interpretation takes precedence.

The Ethiopian legal system is characterized by its reception of substantial elements from continental law and common law legal systems. Though there are many concepts from the common law legal system particularly incorporated in the procedural laws, it has been pictured for its zealness to the continental law legal system due to the fact that its substantive laws have been mainly transplanted from this legal system. Nevertheless, since the two legal systems currently are mixed or at least mixing, it is difficult to conclude that the substantive laws, mainly Civil Code, of Ethiopia are solely influenced by continental legal system. One has to conduct the empirical research to reach genuine conclusion, particularly, whether subjectivist civil law’s theory of contract solely influence the formation and interpretation of contracts under Ethiopian Civil Code or whether there is influence of the objectivist common law theory of contracts.

The purpose of this essay is to examine the extent to which the rules of contract interpretation under the Ethiopian Civil Code are influenced by the objective and subjective theories of contracts. With the view to substantiate the theoretical aspect with the practical reality in light of contract interpretation in Ethiopia, the essay will examine the approach followed by the Federal Supreme Court in deciding one of the cases involving contract of sale of immovable presented before it.


[1] Wayne Barnes, The French Subjective Theory of Contract: Separating Rhetoric from Reality, (Works-in-progress presentation, Texas Wesleyan University School of Law, August 26, 2008), p.5

[2] Ibid

OVERVIEW OF CORPORATE GOVERNANCE IN ETHIOPIA: THE ROLE, COMPOSITION AND REMUNERATION OF BOARDS OF DIRECTORS IN SHARE COMPANIES


OVERVIEW OF CORPORATE GOVERNANCE IN ETHIOPIA:

THE ROLE, COMPOSITION AND REMUNERATION OF BOARDS OF DIRECTORS IN SHARE COMPANIES

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Hussein Ahmed Tura

(LL.B,  LL.M, Lecturer, Wolaita Sodo University, School of Law.

Email: hatura7@mail.com)

Abstract

Good corporate governance is an important pillar of the market economy and it enhances investor confidence. A strong and balanced board of directors is necessary as a supervising body for the executive management of a company with dispersed ownership. The Ethiopian company law does not have adequate legislative provisions on governance issues related to the separation of supervision and management responsibilities, and on the composition, independence and remuneration of board of directors in share companies. Besides, the draft Commercial Code has not yet been finalized. This article critically examines Ethiopia’s company law with specific reference to the powers, composition and remuneration of board of directors in light of internationally recognized best practices and principles of corporate governance. It argues that there is a need to distinguish between corporate governance and corporate management in Ethiopian company law, and that the board should be suitably composed of non-executive and truly independent members who should be professionally competent. Furthermore, directors’ remuneration should be incentive-oriented based on company and individual best performance, subject to the caveat against excessive amounts of remuneration that go beyond the achievement of this purpose.

Keywords:

Corporate governance, powers of board of directors, composition of board of directors, remuneration of board of directors, share companies, Ethiopia.

DOI http://dx.doi.org/10.4314/mlr.v6i1.2

Acronyms:

BIS Bank for International Settlement

CEO Chief Executive Officer

GTP Growth and Transformation Plan

LSE London Stock Exchange
MFI Micro Financing Institutions
NBE National Bank of Ethiopia
OECD Organization for Economic Cooperation and Development SEBI Securities and Exchange Board of India

______________

Introduction

Good corporate governance enhances the confidence of investors in the companies and positively contributes towards the overall business environment.1 Well-governed companies often draw huge investment premiums, get access to cheaper debt, and outperform their objectives.2 Good corporate governance requires competent board of directors as a supervising body for the executive management of a company. In companies with dispersed ownership, shareholders are usually unable to closely monitor management, its strategies and its performance for lack of information and resources.3 Hence, the function of non-executive directors in one-tier board structures and supervisory directors in two-tier board structures is to fill the gap between the uninformed shareholders as principals and the fully informed executive managers as agents by monitoring the agents more closely.4

The Commercial Code of Ethiopia (hereinafter the Commercial Code) incorporates provisions pertinent to the governance of share companies.5 However, such provisions are inadequate to address specific issues in corporate governance related to board of directors such as separation of roles of non-executive directors and CEOs, composition and independence of the board as well as director’s remuneration. Moreover, proclamations and directives governing financial share companies in Ethiopia do not sufficiently address the aforementioned issues.

This Article examines the law pertinent to the governance of share companies in Ethiopia with specific reference to the powers, composition and remuneration of board of directors with a view to identifying deficiencies in the company law and suggests the solutions in light of internationally recognized best principles and practices of corporate governance. It contends that the supervisory powers of the board should be separated from the management responsibilities of the executives of share companies in the relevant laws. It also argues that the composition and independence of directors should be reconsidered. Moreover, it examines the effects of quantum of directors’ remuneration on the integrity of share companies, independence of directors and the retention of competent and diligent directors. It further provides some conclusions based on the findings of the study.

 

Advertisement Proclamation No. 759/2012


PROCLAMATION No. 759/2012          DOWNLOAD (.pdf)

A PROCLAMATION ON ADVERTISEMENT

WHEREAS, advertisement plays a significant role in the economic, social and political development of the country, by influencing the activities of the public in commodity exchange or service rendering;

WHEREAS, advertisement makes a significant contribution in establishing healthy market competition in the market-led economic system of the country;

WHEREAS, advertisement, if not regulated, may harm the rights and interest of the people and the image of the country;

WHEREAS, it is necessary to clearly define the rights and obligations of advertising agents,

advertisement disseminators and advertisers;

NOW, THEREFORE, in accordance with Article 55(1) of the Constitution of the Federal Democratic Republic of Ethiopia, it is hereby proclaimed as follows: Continue reading →

Some unusual facts about repeal in Ethiopia (Part III)


This is the last part of ‘some usual facts about repeal in Ethiopia.’  It discuses the power of the rime minister to repeal a law and the sudden action of parliament to repeal its ‘law-making law’

Power of the prime Minister to repeal a law

Article 74 of the F.D.R.E. Constitution grants wider powers to the prime minister of the country. Even though, the Constitution allows conferring more powers to the prime minister other than those indicated in article 74 by issuing a law to this effect, in practice almost all the proclamations that define the powers and duties of the executive organs, do not provide for additional powers. Usually there will be simply a reference to article 74 of the constitution.

“The  powers  and  duties  of  the  Prime  Minister  of  the  Federal  Democratic  Republic  of  Ethiopia shall  be  as  specified  under  Article  74  of  the Constitution.” [Article 3 of Proclamation No. 691/2010 Definition  of  Powers  and  Duties  of  the  Executive  Organs of  the  Federal  Democratic  Republic  of  Ethiopia  Proclamation]

My intention here is not to discuss the extent and scope of the power of the Prime Minister, rather to raise a question about his power of repealing a law. Does the Prime Minister have a power to repeal a law? Surely he does not have any power to repeal a law issued by the highest law making organ (The House of People’s Representatives.) What about regulations issued by the Council of Ministers and directives of administrative agencies? Looking at article 74 of the Constitution, it in no way provides such power to the prime minister. This similarly holds true for the laws of Addis Ababa Administration even though the administration is accountable to the federal government. On the other hand, the House of People’s Representatives is not constitutionally authorized to make a law empowering the prime minister to repeal a law.

Now, it is time to read article 3 sub article 3 of Proclamation No. 87/1997 (Addis Ababa City Government Charter Proclamation)

“The regulations, Directives and Decisions of the Addis Ababa City Government may be suspended or repealed by the Prime Minister of the Federal Government where they are deemed to be Prejudicial to the National Interest”

The scope of this provision seems to be limited to subordinate legislation, since it only mentions regulations and directives. Hence, it may be argued that the provision applies only to subsidiary legislation of the City Council. However, a brief look at some of the regulations issued by Addis Ababa administration, does not suggest that the term ‘regulation’ is used to refer to a law issued through delegation by a body subordinate to the city council. For instance the Addis Ababa City governmental information provision and standardization regulation number 34/2010 is issued by the City Council, which is the legislative organ of the administration. Even assuming that ‘regulation’ is a delegated legislation does not justify the power of the prime minister. The House of People’s Representatives by granting a repeal power to the prime minister clearly goes beyond the limits of its law making power as provided in the constitution.

The good news is that Addis Ababa City Government Charter Proclamation No. 87/1997 is totally repealed by the Addis Ababa City Government Revised Charter Proclamation No. 311/2003 (The repealing law is also repealed by the Addis Ababa City Government Revised Charter Proclamation No. 361/2003.) The current law which repealed previous legislations (Proclamation No. 361/2003) including subsequent amending proclamation (Proclamation No. 408/2004 Addis Ababa City Government Revised charter (Amendment) Proclamation) does not provide any power of repeal to the prime minister.

Parliament repealed its own ‘law-making’ law

Until 2006, the House of Peoples’ Representatives regulated its own legislative procedure by issuing a law (i.e. a proclamation) to this effect. All of a sudden it repealed its own ‘law-making’ law. The title of the repealing law is:

Proclamation No. 503/2006 The  Proclamation  to Repeal the  Amended Proclamation  of the House of  Peoples’  Representatives  Working  Procedure  and  Members’  Code of Conduct  Proclamation

Article 2 of the proclamation reads:

“[Article] 2 Repealed Laws

The  Amended  Proclamation  of  the  House  of  Peoples’  Representatives  working  procedures  and members’  code  of  conduct  proclamation  No. 470/2005 is hereby repealed in full.”

The first law enacted by parliament regulating the legislative procedure is Proclamation No. 14-1995 House of Peoples’ Representatives legislative Procedure Proclamation. After a year it was amended by Proclamation No. 33-1996 House of Peoples’ Representatives Legislative (Amendment) Proclamation. Both Proclamations were repealed by Proclamation No. 271/2002 House of Peoples’ Representatives Legislative Procedure, Committees Structure and Working Proclamation. The repealing law was again repealed by the Federal Democratic Republic of Ethiopia House of Peoples’ Representatives Working Procedure and Members’ Code of Conduct (Amendment) Proclamation No. 470/2005. For the last time Proclamation No. 470/2005 is now ‘repealed in full’ by Proclamation No. 503-2006 (Repeal of the Amended HPR Working Procedure and Members Code of Conduct Proclamation)

So, why did parliament choose to abolish any law regulating the law making process? Actually, what parliament has done is substituting the proclamation governing the legislative procedure by its own internal regulations. In short, it decided that the legislative procedure should not be regulated by a proclamation published in the Negarit Gazeta, but by an internal regulation not accessible to the public. Be it a proclamation or a regulation, the contents of any legislative procedure will be adopted by a majority vote of the house. Practically, it seems it doesn’t make a difference. Yes it true, if it is a regulation it is not subject to the requirement of signature by the Nation’s President to be effective. It may also be said the regulation will be valid in the absence of publication in the Negarit Gazeta.

As indicated in the preamble of the repealing law, the sudden move by parliament seems to emanate from Article 59 sub article 2 of the constitution. The provision reads:

“The House shall adopt rules and procedures regarding the organization of its work and of its legislative process.”

It may be said that this provision of the constitution allows parliament to regulate the legislative procedure by its own internal regulations. However, this could not be submitted as a convincing ground justifying repeal of Proclamation No. 470/2005. Parliament is expected to provide a practical necessity or a goal to be achieved in choosing a regulation over a proclamation. The preamble part simply states ‘…it has become necessary…’ without providing a single instance of the necessity.

Here is the preamble part of Proclamation No. 503-1998

“WHEREAS,    the  House  is  expressly  provided  by Article  59(2)  of  the  constitution  of  the  Federal Democratic  Republic  of  Ethiopia  to  adopt  rules  and procedures  regarding  the  organization  of  its  work  and of its legislative process;

WHEREAS,  it  has  become  necessary  to  issue regulation  in  accordance  with  the  constitution regarding  the  working  procedures  of  the  House,  as practiced in other countries;

WHEREAS,  it  has  become  necessary  to  repeal  the Amended  proclamation  of  the  House  of  peoples’ Representatives  working  procedures  and  members’ code of conduct, and there by replace it by regulation”

If Article 59(2) of the constitution was the real justification, does it mean that the House of People’s Representatives was acting contrary to the constitution until the time it repealed Proclamation No. 470/2005? By the way I am so surprised by the fact it took more than 10 years for parliament to realize the existence of article 59 sub 2 of the constitution.

So, which regulation now regulates the legislative procedure? As I have said it before one of the problems of a regulation is its inaccessibility. Some lawyers may have knowledge that currently, the law making process of parliament is governed by regulation No. 3/2006 (The House of Peoples‟ Representatives of the Federal Democratic Republic of Ethiopia Rules of Procedures and Members‟ Code of Conduct Regulation.) But I doubt whether they have access to it. Previously the regulation used to be on official web site of the HPR, now it could not be found.

I was lucky to get the English version of the regulation and you can also get it here.

Click HERE to read/download regulation No.3-2006

Pages: 1 2

Some unusual facts about repeal in Ethiopia (Part II)


Double Repeal and repeal after indefinite period of time

It is difficult even for law makers to remember each and every law they have amended and repealed. With the ever increasing quantity of legislations issued by the law maker and subordinate organs, sometimes it may happen that a provision of the law be repealed twice. Here are two instances:

A.)  Proclamation No. 287/2002 (Tax on Coffee Exported from Ethiopia (Amendment) Proclamation) is an amendment to Proclamation No.99/1998 (Tax on Coffee Exported from Ethiopia.) One of the provisions of the previous law which was amended by Proclamation No. 287/2002 is Article 4. This Article provides that the rate of Tax payable on Coffee exported from Ethiopia shall be 6.5% (six and point five per cent) of the FOB price. FOB is defined in the proclamation as selling price of coffee quoted at the port of loading, agreed between the Coffee exporter and his customer and approved by the National Bank of Ethiopia, from which freight and insurance costs are excluded.

Article 2(1) of Proclamation No. 287/2002 mainly amends the tax rate lowering  it to zero. It reads:

Article 4 of the proclamation is deleted and replaced by the following new Article 4.

“4. The rate of the Tax which has been 6.5% (six and point five per cent) shall be zero”

However, the deletion and replacement to article 4 of Proclamation No.99/1998 is a double repeal as it has already been deleted by Council of Ministers Regulations No.73/2001(Tax Amendment on Exported Coffee Council of Ministers Regulations.)

Article 2 of the regulation reads:

2. Amendment

Article 4 of the Tax on Coffee Exported from Ethiopia Proclamation No.99/1998 is deleted and replaced by the following new Article 4:

4. Rate of the Tax

1) The Rate of the Tax shall be 6.5% (six and point five per cent) of the FOB price.

2) Notwithstanding the provisions of Sub-Article (1) above, no tax shall be levied if the FOB price of the coffee exported is:

(a) Below 105 cents (one hundred five cents) per pound for washed coffee;

(b) Below 70 cents (seventy cents) per pound for unwashed coffee.

By way conclusion, it means that article 4 of Proclamation No.99/1998 was repealed by Proclamation No. 287/2002 after it [Proclamation No.99/1998] was repealed by Regulations No.73/2001.

B.)  Article 17(1) of the Census Commission Establishment proclamation No. 84/1997 states that the Population and Housing Census Commission Establishment Proclamation No.32/1992 is repealed. However, Proclamation No.32/1992 was again repealed for the second time by article 18(1) of Proclamation No. 180/1999 (Census Commission Establishment Proclamation)

The problem seems to have been created due to failure of parliament to set exact expiry date for Proclamation No.32/1992. Even though it [Proclamation No.32/1992] was expressly repealed by Proclamation No. 180/1999, its applicability was extended for indefinite period of time. According to article 19 of proclamation No. 84/1997, the previous proclamation (32/1992) will remain applicable with respect to census undertakings not completed and until such time that the Secretariat (of the Census Commission) is properly organized. Hence, someone has to wait until he/she is told that the Secretariat (of the Census Commission) is properly organized to verify whether the proclamation is active or not. It is a subjective condition and no one could for sure know that it is actually repealed. When I say no one, it includes the House of People’s Representatives. That is why it repealed the same law twice.

What is more interesting is article 20 of Proclamation No. 180/1999. It reads:

“Notwithstanding the provisions of Article 18 (l) of this proclamation, Proclamation No. 32/1992 shall remain applicable until such time that the Secretariat is properly organized.”

It may be confusing, but this article seems to suggest that Proclamation No. 32/1992 which was repealed twice is still active for some unknown time in the future… until such time that the Secretariat is properly organized! By the way, why was it so difficult to organize the secretariat of the Census Commission? [It took more than two years!]

Repeal for the unusual ground

Why is a law repealed? There may be so many convincing justifications to repeal a law, but definitely the following two cases are wrong [I mean may be unusual] answers to the question.

·         National Lottery Administration Re-establishment Proclamation No.535/2007

[Article] 22 Repealed and Inapplicable Laws

1/ The National Lottery Administration Re-establishment Proclamation No. 510/2007 .having not been published as endorsed by the House, is hereby repealed

·         Addis Ababa City Government Revised Charter Proclamation No. 361/2003

[Article] 67. Repealed Laws

1) The Addis Ababa City Government Revised Charter Proclamation No. 311/2003, having been published with its contents changed without following the Legislative Procedure, is hereby deleted and replaced by this Charter

Some unusual facts about repeal in Ethiopia


I was writing an article under a general title ‘Some unusual facts about repeal in Ethiopia’ After writing the first topic I found it good to break it down in to a series of posts. Here is the first part

Repeal of a court decision by law (Legislative review of Court Decisions?)

According to the 1995 Ethiopian Constitution, the House of Federation has a power to interpret the constitution. Although the meaning and scope of the ‘constitutional adjudication’ in general is subject to controversy among some legal scholars, practically we all agree that ordinary courts do not have any power over questions of constitutionality of a proclamation  issued by the House of People’s Representatives. The courts are even reluctant to exercise their power of review over the legality of subordinate legislations (regulations and directives) and administrative decisions.

So, as I have said there is no such thing as judicial review of legislation in Ethiopia. What about legislative review of judicial decisions? I mean what about giving power to the House of People’s Representatives to repeal or invalidate those court decisions which are manifestly erroneous or contrary to public interest. I guess most of you will strongly object to this odd ‘concept.’ Yes it is odd, but there is proof that parliament has repealed or invalidated existing court decisions after they were pronounced.

If you have doubt over the validity of this fact, just read Article 3 sub 2 of Civil Code As Amended Proclamation No. 639/2009. This law was issued in response to the position of courts (including the cassation bench) in giving meaning to article 1723 of the 1960 Ethiopian Civil Code. Sub article 1 of article 1723 provides that a contract creating or assigning rights of ownership or bare ownership on an immovable or an usufruct, servitude or mortgage on an immovable shall be  writing and registered  with a court or notary. To be honest this article is clear and does not need any interpretation. The problem is that it is applicable to mortgage contracts concluded with banks. In practice almost all bank mortgage contracts were not registered with a court or notary. Hence, the fate of such contracts were invalidation by court. This posed a great danger to banks, especially to the commercial Bank of Ethiopia as it results in the loss of huge amount of money not collected from borrowers.

Actually, it was a problem created by the banks, (as they have failed to comply with the requirement of registration) not by the courts. Any ways parliament thought it necessary to act immediately, to reverse the situation. Then it issued Civil Code As Amended Proclamation No. 639/2009. The title of the proclamation seems to suggest that it is amendment to article 1723 of the Civil Code. However, its content clearly goes beyond amendment.

The proclamation contains three important provisions.

1.      Article 2 Amendment

The title of Article 2 talks about amendment, but practically it partially repeals article 1723 sub article 1 of the civil code. Article 2 of the proclamation makes the registration requirement of contract of mortgage concluded to provide security to a loan extended by a bank or a micro-financing institution unnecessary. In effect it makes mortgage contracts concluded with banks and micro-financing institutions valid even though not registered with a court or a public notary. This applies to mortgage contracts concluded after the proclamation became effective.

2.      Article 3(1)  Transitory Provisions (Retroactive measure to previous contracts)

Clearly Article 2 of the proclamation was not sufficient to avert the then existing danger posed to banks. What about mortgage contracts concluded before the issuance of the proclamation? This was dealt in Article 3 sub 1 which reads:

“The validity  of  any  contract  of  mortgage concluded,  prior  to  the  effective  date  of  this Proclamation,  to  provide  security  to  a  loan extended  by  a  bank  or  a  micro-financing institution,  may  not  be  challenged  for  not being  registered  by  a  court  or  notary  in accordance  with  Article  1723  of  the  Civil Code.”

This will force courts to give effect to unregistered mortgage contracts concluded not only after the effective date of the proclamation, but also to those mortgage contracts concluded before the proclamation. You may say this is against the principle of non-retroactivity of laws, but thanks to the F.D.R.E. Constitution, it only provides for non-retroactivity of criminal laws not civil laws.

3.      Article 3(2)  Transitory Provisions (Retroactive measure to court decisions)

Even after amending article 1723 (1) and providing a solution to previous contracts, Parliament did not stop there. Before the issuance of the proclamation, courts have already started invalidating mortgage contracts for lack of registration. No one denies the decision of courts severely affected the interest of banks. So, what should be done? (if anything is possible to be done) What about invalidating (I mean repealing) the existing court decisions? That is too extreme and violation of the constitutional principle of separation of powers. However, principle gave way to saving the banks and the House of People’s Representatives invalidated the existing court decisions, rendered prior to the effective date of this Proclamation.

Here is the full text of the article

Article 3(2) of Civil Code As Amended Proclamation No. 639/200

Any court decision, rendered prior to the effective date of this Proclamation, to invalidate a contract of mortgage concluded to provide security to a loan extended by a bank or a micro-financing institution, for not being registered by a court or notary in accordance with Article 1723 of the Civil Code shall have no effect.

PROCLAMATION NO. 674/2010 A PROCLAMATION TO PROVIDE FOR THE REGISTRATION AND CONTROL OF PESTICIDE


DOWNLOAD Proc no. 674-201 Pesticide Registration and Control Proclamation

PROCLAMATION NO. 674/2010

A PROCLAMATION TO PROVIDE FOR THE REGISTRATION AND CONTROL OF PESTICIDE

WHEREAS, the use of pesticides for different purposes such as for raising crops, animal breeding and the protection of public health has been growing steadily;

WHEREAS, it is necessary to lay down a scheme of control which would minimize the adverse effects that pesticide use might cause to human beings, animals, plants and the environment;

WHEREAS, it is necessary to enact a comprehensive legislation to regulate the manufacture, formulation, import, export, transport, storage, distribution, sale, use and disposal of pesticides and other matters related thereto;

NOW, THEREFORE, in accordance with Article 55 sub article (1) of the Constitution of the Federal Democratic Republic of Ethiopia it is hereby proclaimed as follows:

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