ETHIOPIAN BANKRUPTCY LAW: A COMMENTARY (PART I) TADDESE LENCHO

 

About TADDESE LENCHO (profile is at the time this article written)

Currently a Lecturer, formerly the Associate Dean and Acting Dean of the Faculty of Law, Addis Ababa University; he holds LL.B (AAU), LL.M(University of Michigan Law School)

E-mail:tadboda@yahoo.com. r am grateful to all the assessors who kindly went through the draft version of this article and pointed to errors of one sort or 8Ilmher. Responsibility for al1 the errors that remain is all mine

DOWNLOAD Ethiopian Bankruptcy Law A Commentary (Part I) pdf

JOURNAL OF ETHIOPIAN LAW

VOL. XXII No. 2

December, 2008

ETHIOPIAN BANKRUPTCY LAW: A COMMENTARY (PART I)
TADDESE LENCHO

The bankruptcies came to us from Italy, bancorotto, bancarotta, gambarotta e la giustizia non impicar _. Every merchant had his bellch C banco..J in the place of exchange; and when he had conducted his business badly, declared himself Jallito  and abandoned his property to his creditors with the proviso thai he retain a good part of it for himself, be free and reputed a very upright man. There was nothing to be said to him, his bench was broken, banco rotlo, banca rotla ; he could even, in certain towns, keep all his property and baulk his creditors, provided he seated himself bare-bottomed on a stone in the presence of all the merchants. This was a mild derivation of the old Roman proverb solvere aut in aere aut in cute-, to pay either with one’s money or one’s skill. But this custom no longer exists; creditors have preferred their money to a bankrupt’s hinder parts.

Voltaire, Philosophical Dictionary, ‘Bankruptcy’

Introduction

It is no exaggeration to state that Ethiopian Bankruptcy Law (tucked away in the last Book of the Commercial Code) is the least known and hence the least practiced in Ethiopia. Since the coming into force of the Commercial Code in 1960, cases having to do with bankruptcy have been few and far in between.’ Why might this be? Is the defect in the law or in the economic environment? Is Ethiopian business environment immune from the natural laws of bankruptcy or has it always gone bankrupt without ever being noticed by the public or mediated by the law?’ The Economist magazine recently quipped that imagining capitalism (business enterprises) without bankruptcy is like imagining Christianity without hell. 3 Perhaps, that is what happened in Ethiopia.

The questions of why bankruptcy laws have become dormant are troubling questions. However, as troubling they are, they cannot be answered in categorical terms. An answer to these questions would require an extensive empirical study of the business environment and the historical factors that might have kept the bankruptcy laws of Ethiopia from having to see the light of the courts.

There is no shortage of theories as to why bankruptcy cases are not as common as the failure of businesses would suggest. One theory puts the blame on the freezing of commerce in the aftermath of the 1974 Ethiopian Revolution, tying the (mis)fortunes of the bankruptcy provisions to the Commercial Code in general.4 The problem with this theory is that it only explains why bankruptcy fell into disuse between 1974 and 1991. It does not explain the situation after 1991 when the economy of Ethiopia was more or less liberalized (seventeen years and counting!).

Another theory is lack of familiarity (of the legal community) with the provisions of bankruptcy in the Commercial Code. Lawyers are a critical piece in the application of the law. If lawyers do not know or understand the law, it is unlikely that the law will ever come to courts even if it were included in the Code. It is what Emperor Haile Sellassie J was emphasizing in his speech on the inauguration of the Journal of Ethiopian Law:

… We have observed that Ethiopia’s rapid progress demands the services of a large number of legal experts … capable of insuring the effective application of the laws

In a recent report commissioned by the USAID, this matter has been aptly emphasized:

There is little demand for change from the debtor side because so little is known about bankruptcy protection. The possibility of reorganization or’ protection arises not only from law, but from knowledge of the law, and that is quite limited.

The third theory points to the foreclosure laws and practices of Ethiopia as probable reasons for the eclipse of bankruptcy. According to the USAJD Commissioned report:

 lenders are using foreclosure law and practice instead of bankruptcy. Secured lenders can institute accelerated proceedings to repossess and liquidate security and do not need to start a bankruptcy action. Frequently, borrowers are’ captive to a single lender, with few other commercial obligations than their bank loan, so that foreclosure effectively deals with most of the debtor’s liabilities, although it does not permit rehabilitation or reorganization and often results in liquidation. 7

Foreclosure powers were granted to banks and selected other creditors only in the last decade and could not entirely explain why bankruptcy practices are not so common.8 It is perhaps nearer to the truth to conclude that multiple factors were conspiring to keep bankruptcy out of the limelight of the practice.

Although cases of bankruptcy have rarely been taken to courts, there are several reasons why one should write about Ethiopian bankruptcy law. First, it is barely known even among the otherwise savvy and seasoned lawyers of Ethiopia. Second, it has now been offered as an independent course for the last five or so years without any reference material. And lack of reference material is always a legitimate inspiration for writing (even if it were just an article). Third, since 1991, Ethiopia has taken on an economic policy whose driving engine is the participation of the private sector, and the private sector needs laws not just for its formation but also for its orderly winding up and possibly for its rehabilitation after bankruptcy.’ It is not that Ethiopia lacks these laws but they are unknown even among those who earn a living from their knowledge of the law.

This commentary is divided into two parts. In the first part, I intend to treat subjects like the background of Ethiopian bankruptcy law, its organization and structure, scope and meaning, and the tests for commencement of bankruptcy under Ethiopian bankruptcy law. In the second part, I intend to throw light on some of the other basic features of Ethiopian bankruptcy law and related subjects of composition and schemes of arrangement.

At the end of each part, I will provide some concluding remarks on what I think would be striking features of Ethiopian bankruptcy law. For these commentaries, I have relied upon as wide a range of literature on the subject of bankruptcy as I could get my hands on. But as repeated quotes and references in the footnotes show, I am indebted primarily to the 2005 UNCITRAL Legislative Guide on Insolvency Law of 2005 (hereinafter simply ‘UNCITRAL’ Guide’).l0 As far as I am concerned, ‘UNCITRAL Guide’ offers the latest and most comprehensive reference on the subject of bankruptcy. The ‘UNCITRAL Guide’ also provides alternative approaches on controversial points of bankruptcy, something one can rarely find in many other sources. .

Corrigenda to proclamations and Regulations

DOWNLOAD the pdf version of Corrigenda to proclamations and Regulations.

“A corrigendum of a legislative text is conventionally thought of as a mere rectification of obvious typing mistakes. It is done after the publication of a legislative text. Its purpose is to realign the published legislative text with the original will of the legislative body by removing mistakes that occurred in the publication process. A corrigendum does not contain any provisions on validity or entry into force. It derives its authority from the text it rectifies, including its legitimacy, legal force and the provisions on its temporal application.” Corrigenda in the Official Journal of the European Union: Community Law as Quicksand (Michal Bobek)

The term corrigendum (plural corrigenda) generally refers to an error that is to be corrected in a printed work after publication. It may also be used to denote list of errors in a printed work as a separate page of corrections, known as an errata page.  Merriam Webster(online dictionary)  defines corrigendum as “ an error in a printed work discovered after printing and shown with its correction on a separate sheet” \

In the following list you will find corrrigenda to proclamations and regulations. According to article 11(b) of House of Peoples’ Representatives working procedure and members’ code of conduct (amendment) proclamation no. 470/2005 the power to ‘undertake the technical correction, where deemed necessary’ is an exclusive power of the speaker of the house. There is no monitoring procedure to ensure that any ‘correction’ introduced by the speaker  does not alter or change the substantive content of the proclamation. What is worse, those errors to be rectified by the speaker are not the ones which are detected after publication. Article 11(b) of proclamation no. 470/2005 empowers the speaker to make correction prior to the publication of the proclamation in the Negarit Gazetta. This in effect means that the speaker of the house holds a law making power in the name of correcting errors. Any error before publication is an exclusive matter to be dealt to the house itself. Even though the basic purpose of corrigenda is to ensure that the published text is similar with the draft approved by the house, Ethiopian law making procedure deviates from the basic rules and principles of legislation acceptable in all legal systems.

The Council of Ministers does not have any legislative procedure which is official to the public and approved by law. Hence, no knows who actually makes correction to regulations.

Corrigenda to proclamations 

1. Corrigendum No. 1/1998 English version

[Repealed by Property Mortgaged or Pledged with Banks (Amendment) Proclamation No. 216/2000]

[Business Mortgage Proclamation No. 98/1998]

Property Mortgaged or Pledged with Banks Proclamation No. 97/1998 is hereby corrected by:

1. omission of the “,” after the word “buyer”, in Article 3, and insertion thereinafter of the phrase “or to take over the property, in consideration of its estimated value as specified in the contract of loan, and have the ownership thereof registered in its own name; in cases where bidders fail to appear upon a secon4 public auction having been held.”; and

2. omission of the “.” at the end, of Article 4, and addition thereinafter of the phrase “or take over the property, in consideration of its estimated value as specified in the contract of 19an,and have the ownership thereof registered in its own name; in cases where bidders fail to appear upon a second public auction having been held.”

2. Corrigendum No. 2/1999 Amharic and English version

[Ethiopian National Archives and Library Proclamation No. 179/1999]

The “2%” in “Article 8(2)” under Article 2(2) of the Investment (Amendment) Proclamation No. 168/1999 shall read “27%”.

3. Corrigendum No. 4/2009       Amharic and English version

[Federal Government of Ethiopia Financial Administration Proclamation No. 648/2009]

The statement under Article 60 of the Ethiopian Building Proclamation No. 624/2009 stated as “This Proclamation shall come into force upon the date of its publication in the Federal Negarit Gazeta” shall be read as “This Proclamation shall come into force after one year from the date of its publication in the Federal Negrit Gazeta.”

4. Corrigendum No. 4/2009   Amharic and English version

[Ethiopian Building Proclamation No. 624/2009]

In this Proclamation the statement under Article 60 stated as “ This Proclamation shall come into force upon the date of its publication in the Federal Negarit Gazeta” shall be read as “This Proclamation shall come into force after one year from the date of its publication in the Federal Negrit Gazeta.”

5. Corrigendum No. 5/2009 English version

[Transaction of Precious Minerals Proclamation No.651/2009]

The English version of Article 23 (1) of the Banking Business Proclamation No. 592/2008 which reads in its second line as “…. The international financial statements standards ….” Is hereby corrected and shall be read as “…international financial reporting standards..”

6. Corrigendum No. 6/2009   English version

[Transaction of Precious Minerals Proclamation No.651/2009]

The English version of the Micro-Financing Business Proclamation No.626/2009 writes the number Article “25” two times, accordingly the latter Article “25” is hereby corrected as Article “26”. Similarly the English version of this same Article 26 in the last paragraph of its sub article (1) which reads as “Birr 500,000” is hereby corrected and shall be read as “Birr 50,000

7. Corrigendum no. 1/2001 Amharic and English version (Amharic corrigenda is from the English corrigenda)

[Ethiopian National Security Council Establishment Proclamation No. 257/2001]

The Fuel price stabilization Fund Establishment Proclamation No. 247/2001 is hereby corrected as

follows: The word “from” after “working days” in Sub- Article (2) of Article 5 is deleted, and the phrase’ ‘of the month next to” is inserted therein.

8. Corrigendum No. 1/2002   Amharic and English version (Amharic corrigenda is from the English corrigenda)

[National Agricultural Input Authority Establishment Proclamation No. 288/2002]

The “Five (5) years” after the word “next” in sub-Article (1) of Article 28 of the Income Tax Proclamation No. 286/2002 shall read “three (3) years.”

9. Corrigendum No. 7/2010   Amharic and English version

[Income Tax (Amendment) Proclamation No.693 /2010]

Article  38  of  the  Definition  of  Powers  and  Duties of  the Executive Organs of  the Federal Democratic  Republic  of  Ethiopia which  reads  “This Proclamation shall come into force a year after  its  publication  in  the  Federal  Negarit  Gazeta.”  is hereby  corrected  and  shall  be  read as  “This Proclamation shall come into force on the  date  of  publication  in  the  Federal Negarit Gazeta.”

Corrigendum to Regulations

Corrigendum No. 1/1999   Amharic and English version

[Electricity operations Council of Ministers Regulations No. 49/1999]

The Customs Tariffs Council of Ministers (Amendment) Regulations of 25 December, 1998 is hereby corrected as follows:

a) the issue number “5thyear No. 27” shall read “5th year No. 51″; and

b) the page numbers “942” and “943” shall read “1025” and “1026” respectively.

Repeal of Corrigendum No. 1/998

Property Mortgaged or Pledged with Banks (Amendment) Proclamation No. 216/2000

The Property Mortgaged or Pledged with banks Proclamation No. 97/1998 is hereby amended as follows:

I) The correction made to Article 3 of Proclamation under paragraph (1) of Corrigendum No. 1/998 is hereby deleted and the phrase “or if no buyer appears at the second auction, to acquire the property at the t100r price set for the first auction and have the ownership of the property transferred to it” is inserted after the word’ ‘buyer” on the eighth line of the Article.

2) The correction made to Article 4 of the Proclamation under paragraph (2) of Corrigendum No. 1/1998 is hereby deleted and the phrase’ ‘or if no buyer appears at the second auction, it may acquire the property at the floor price set for the first auction and have the ownership of the property transferred to it” is added after the word.. “buyer” at the end of the Article.

ማረሚያ በአማርኛው ቅጂ ላይ

ማረሚያ[i]

[አዋጅ ቁጥር 351/1995 የከፍተኛ ትምህርት አዋጅ]

1)  አዋጅ ቁጥር 354/1995 ከገጽ 2368-2373 ተብሎ የወጣው የኢሚግሬሽን አዋጅ ገጽ ቁጥሩ የተጻፈው በስህተት ስለሆነ ገጽ ቁጥሩ ከ2268-2273 ተብሎ ይነበብ፡፡

2)  የኢትዮ-የመን የኢኮኖሚ የሳይንስ፤ የቴክኒክ ትብብርና የንግድ ግንኙነት ስምምነት ማጽደቂያ አዋጅ ቁጥሩ 174/1962 ተብሎ የተባለው በስህተት ስለሆነ አዋጅ ቁጥሩ 174/1991 ተብሎ ይነበብ፡፡

ማረሚያ ቁጥር 1/1994

[አዋጅ ቁጥር 257/1994 የኢትዮጵያ ብሔራዊ ደህንነት ምክር ቤት ማቋቋሚያ አዋጅ]

የነዳጅ ዋጋ ማረጋጊያ ፈንድ ማቋቋሚያ አዋጅ ቁጥር 247/1993 ከዚህ የሚከተለው እርምት ተደርጎበታል

በአንቀጽ 5 ንዑስ አንቀጽ (2) “እ.ኤ.አ.” ከሚለው ቀጥሎ “የሚቀጥለው ወር” የሚል ተጨምሮ ይነበብ

ማረሚያ ቁጥር 1/1994

[አዋጅ ቁጥር 288/1994 የብሔራዊ የግብርና ግብዓት ባለስልጣን ማቋቋሚያ አዋጅ]

የገቢ ግብር አዋጅ ቁጥር 286/1994 የሚከተሉት እርማቶች ተደርገውበታል፡፡

  1. አንቀጽ 13 (መ) “ከገቢ” ከሚለው ቀጥሎ “ግብር”የሚል ቃል ተጨምሮ ይነበብ
  2. አንቀጽ 87 ከንዑስ አንቀጽ (2)(ሀ) ቀጥሎ፤ “ለ) 20 ሺ ብር” የሚል ተጨምሮ ይነበብ::

ማረሚያ ቁጥር 2/1991

[አዋጅ ቁጥር 179/1991 የኢትዮጵያ ብሔራዊ ቤተ መዛግብትና ቤተ መጻሕፍት አዋጅ]

በኢንቨስትመንት /ማሻሻያ/ አዋጅ ቁጥር 168/1991 አንቀጽ 2(2) ስር ባለው “አንቀጽ 8(2)” “2 ፐርሰንት” የሚለው “27 ፐርሰንት” ተብሎ ይነበብ

የኢንቨስትመንት (ማሻሻያ) አዋጅ ማውጫው ስር የእንግሊዝኛው ቅጂ 373/2003 የተባለው በስህተት ስለሆነ 375/2003 ተብሎ ይነበብ

ማረሚያ ቁጥር 4/2001

[አዋጅ ቁጥር የኢትዮጵያ ሕንጻ አዋጅ]

በዚህ አዋጅ አንቀጽ 60 “ይህ አዋጅ በፌደራል ነጋሪት ጋዜጣ ታትሞ ከወጣበት ቀን ጀምሮ የጸና ይሆናል” የሚለው “ይህ አዋጅ በፌደራል ነጋሪት ጋዜጣ ታትሞ ከወጣበት ቀን ጀምሮ አንድ ዓመት ካበቃ በኋላ ተፈጻሚ ይሆናል” በሚል ይነበብ፡፡

ማረሚያ ቁጥር 4/2001

[የኢትዮጵያ ፌደራል መንግስት የፋይናንስ አስተዳደር አዋጅ 648/2001]

በኢትዮጵያ የህንጻ አዋጅ ቁጥር 624/2001 አንቀጽ 60 “ይህ አዋጅ በፌደራል ነጋሪት ጋዜጣ ታትሞ ከወጣበት ቀን ጀምሮ የጸና ይሆናል” የሚለው “ይህ አዋጅ በፌደራል ነጋሪት ጋዜጣ ታትሞ ከወጣበት ቀን ጀምሮ አንድ ዓመት ካበቃ በኋላ ተፈጻሚ ይሆናል” በሚል ይነበብ፡፡

ማረሚያ[ii]

[አዋጅ ቁጥር 374/1996 ቅርስን በሕገወጥ መንገድ ከሀገር ማስወጣትን፣ ወደሀገር ውስጥ ማስገባትንና ባለቤትነት ማዞርን ለመከላከል የተደረገውን ዓለም አቀፍ ስምምነት ለማጽደቅ የወጣ አዋጅ]

የኢንቨስትመንት (ማሻሸያ) አዋጅ ማውጫው ስር የእንግሊዝኛው ቅጂ 373/2003 የተባለው በስህተት ስለሆነ 375/2003 ተብሎ ይነበብ፡፡[iii]

ማረሚያ ቁጥር 7/2003

[የገቢ ግብር /ማሻሻያ/ አዋጅ 693/2003]

የኢትዮጵያ  ፌዴራላዊ  ዲሞክራሲያዊ  ሪፐብ ሊክ  አስፈፃሚ  አካላትን  ሥልጣንና  ተግባር  ለመወሰን  በወጣው  አዋጅ  ቁጥር 691/2003 አንቀፅ “8  “ይህ አዋጅ በፌዴራል ነጋሪት ጋዜጣ  ታትሞ ከወጣበት ቀን ከአንድ አመት  በኋላ  ጀምሮ  የፀና  ይሆናል፡፡”  የሚለው  “ይህ አዋጅ  በፌዴራል  ነጋሪት  ጋዜጣ  ታትሞ  ከወጣበት ቀን ጀምሮ  የፀና ይሆናል፡፡”  ተብሎ  ይነበብ፡፡


[i] ማረሚያው ቁጥር የለውም

[ii] ማረሚያው ቁጥር የለውም

[iii] ማረሚያው በአማርኛ ሆኖ የሚያወራው ግን ስለ እንግሊዝኛው ቅጂ ነው፡፡

 

2009/10 (2002 E.C.) Council of Ministers Regulations

Regulation no. 160-2009 National Lottery Administration Re-establishment

Regulation no. 161-2009 Coffee Quality Control and Transaction

Regulation no. 162-2009 Irrigation Development Investment Incentives

Regulation no. 163-2009 Wildlife Development, Conservation and Utilization

Regulation no. 164-2009 Council of Ministers Income Tax (Amendment)

Regulation no, 165-2009 Ethiopian Postal Service Enterprise Establishment

Regulation no. 166-2009 Work Permit Fees (As Amended)

Regulation no. 167-2009 Federal Hospitals Administration        Corrigendum no. 8-2009

Regulation no. 168-2009 Registration and Administration of Charities and Societies

Regulation no 169-2009 Acess to Genetic Resources and Community Knowledge Communitynity Rights

Regulation no. 170-2009 Ethiopian Electric Power Corporation Re·Establishment

Regulation no. 171-2009 Financial Intelligence Establishment

Regulation no. 172-2009 Re-Organization of the Management of the National Bank of Ethiopia

Regulation no. 173-2009 Classification of Tourist Facilities

Regulation no. 174-2009 Catering and Tourim Training Center Establishment

Regulation no. 175-2009 Genet Hotel Enterprise Establishment

Regulation no. 176-2010 Ethiopian Meat and Dairy Technology Institute Establishment (Amendment)

Regulation no. 177-2010 lnfomtttion Technology Park Corporation Establishment

Regulation No. 178-2010 Sesame and White Beans Transaction

Regulation no. 179-2010 Army Foundation Establishment

Regulation no. 180-2010 Textile Industry Development Institute

Regulation no. 181-2010 Leather Industry Development Institute

Regulation no. 182-2010 Metal Industry Development Institute Establishment

Regulation no. 183-2010 Metal and Engineering Corporation Establishment

Regulation no. 184-2010 Public Procurement and Property Disposal Service Establishment

Regulation no. 185-2010 Defence Construction Enterprise Establishment

Regulation no. 186-2010 Defence Construction Materials Manufacturing Enterprise Establishment

Regulation no. 187-2010 Construction Design Enterprise Establishment

Regulation no. 188-2010 Repealing of the Regulation for the Implementation of African Peer

Regulation no. 189-2010 Ethiopian Food Medicine and Health Care Adminstration and Control Authority Establishment

Can a civil case be a ground of res judicata in a labour case?

Case Brief

Applicant- Ermias Mulugeta
Respondent- Bekelecha Transport Share Company
Cassation File Number- 39471
Date of judgement- Hamle 29 2001

Read the decision of the court (Amaharic)

Issue: Wether failure to prove fault of employee by the employer in a labour case is a ground of resjudicata if a civil action is brought by the same employeer against the same employee alleging fault of the employee?

Ruling and reasonig of the court

The Cassation bench affirmed the decision of lower courts. The court relied on its own previous decision (Cassation File Number 36710) regarding the issue raised in this case. Accordingly it concluded that the issue to be framed in unlawful dismissal case is totally different from a civil action brought by the employer claiming restitution or payment for loss of or damage to property. The labour court may have decided that the employee has not committed fault, when the fault at issue is ‘being responsible for loss of property’ of the employer. Such decision is not a ground of res judicata if an action against the employee is brought by the employer claiming payment of the price of the property.

2010/2011 Council of Ministers Regulations

Reg no. 190-2010 Financial administration regulation

Reg no. 191-2010 The Ethiopian Health Insurance Agency Establishment

Reg no. 192-2010 Sugar Corporation Establishment

Reg no. 193-2010 Ethiopian Standards Agency Establishment

Reg no. 194-2010 National Metrology Institute Establishment

Reg no. 195-2010 Ethiopian National Accrediation Office Establishment

Reg no. 196-2010 Ethiopian Conrormity assessement Enterprise Establishmenl

Reg no. 197-2010 Ethio-Telecom Establishment

Reg no. 198-2010 Agricultural Transformation Agency Establishment

Reg no. 199-2011 Technical and Vocational Educatiorl and Training Agency Establishment

Reg no. 200-2011 Saint Paul Medical College Establishment

Reg no. 201-2011 Federal Micro and Small Enterprises Development Agency Establishment

Reg no 202-2011 Private Organizations Employees Social Security Agency

Reg no 203-2011 Public-Servants-Social-Security-Agency

Reg no. 205-2011 National Road Traffic Safety

Reg no. 206-2011 Vehicle Identification Inspection and Registration Fee

Reg no. 207-2011 Code of Practice of the Forticulture Sector

Reg No. 212 Ambo University Establishment

Reg No. 214-2011 Addis Ababa University Re-establishment

Reg No. 215-2011 Assosa University Re-establishment