Month: March 2024

By Dagnachew Tesfaye, DMLF Managing Partner

Ethiopia has been accepted to join the BRICS family starting from January 1/2024. Together with Ethiopia, Saudi Arabia, Argentina, Egypt, Iran and UAE have also joined the BRICS family.  This is part of the BRICS expansion process, said Cyril Ramaphosa, South Africa President. PM Dr.Abiy stated on the announcement that Ethiopia joined the BRICS family due to the fact that Ethiopia’s multi faceted ancient history, huge population with the majority being young and potential for fast economic growth. Green legacy and wheat production were the quintessentials of such potential economic growth. The support of China has been praised together with India and Russia. China even took the step to render a one year grace period for 2023-2024, on all debts Ethiopia has to discharge to China. Science, Military, Trade and Investment deals were also signed with India.

BRICS is an intergovernmental organization that has the core purpose of enhancing political and economic ties among member states. Bilateral relations among BRICS are treated in majority of the cases with the aim of non-interference, equality and mutual benefit. The colonial and unequal world order has been blamed by many to slow down economic development of the developing nations.

BRICS encompasses the New Development Bank(NBD), which assists public and private projects through loans, guarantees, equity participation and other financial instruments. Ethiopia, being a member of BRICS, shall benefit through NBD for its public projects on the pipeline.

In addition to NBD, BRICS has initiatives namely BRICS Contingent Reserve Arrangement (CRA) which is an arrangement for rendering support through liquidity and precautionary instruments in response to actual or potential short term balance of payments pressures. The CRA is considered as a version of the International Monetary Fund (IMF). Moreover BRICS has initiatives of the BRICS Payment System, the BRICS Joint Statistical Publication System and BRICS basket reserve currency.

The latest expansion of BRICS from 5 countries to 11 is aimed at strengthening South-South Cooperation and building a multi polar order that is treated on the basis of non-interference, equality and mutual benefit.

The Ethiopian government has applied, done the diplomacy and met the requirements for being a member of the BRICS. The House of People’s Representatives is expected to ratify the BRICS accession.

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By DMLF Team

The National Bank of Ethiopia issued Foreign Exchange Surrender Requirements of Banks(as amended) Directive No  FXD/83/2023 effective from August 11,2023. The Directive requires a bank to surrender 50% of the receipts from export of goods and services, 70% from private transfer (remittances) and NGO’s transfer to National Bank of Ethiopia. Such surrender has to occur every month within the first five working days of the next month. NBE shall credit the payment and settlement amount of the bank with equivalent amount in Birr at the prevailing buying and selling rate of the day(mid exchange rate).

This latest Directive repealed Directive No FXD/78/2022, effective from January 6,2022, which requires a flat rate surrender of 70% of receipt from export of goods and services, private transfer( remittance) and NGO’s transfer to NBE. 

The 2022 Directive repealed Directive No FXD/72/2021 that was effective as of September 01,2021, that requires a bank to surrender 50% receipt from export of goods and services, private transfer (remittance) and NGO’s transfer to the NBE every month.

On the other hand the Retention and Utilization of Export Earnings and Inward Remittance Directive No FXD/84/2023 effective from August 11,2023 allows exporters of goods and services to retain 40% of their exports earnings; recipients of inward remittance 20% in retention accounts. 10% of the foreign currency shall be surrendered to the client bank. 

The retention account holder shall have the right to utilize the foreign currency for import of goods and services payments without restriction provided that the account holder has the required business license to do so.

In addition, the account holder is free to sell all or part of the foreign currency held in the retention account at any time at a freely negotiating rate not exceeding the selling exchange rate of the day to their respective clients bank.

To sum up, the latest measure taken on surrender of foreign currencies returned the 2021 rate of 50% surrender for exporters but reaffirmed 70% for NGO’s and private transfer(remittance) of the 2022 Directives. The exporters and private remittances receivers are allowed to utilize their 40% and 20% retention respectively.  Utilization rights don’t extend to NGO’s.

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By Dagnachew Tesfaye, Managing Partner at DMLF

The Commercial Code of Ethiopia Proclamation No 1243/2021 provides the definition of good will on Article 112. The definition connotes good will as a result from the creation and operation of a business and is of a value which arises from relations between a trader and third parties who may require from him goods or services. To understand good will more, it is better to look into the definition given under Black’s Law Dictionary:

A business’s reputation, patronage, and other intangible assets that are considered when appraising the business, esp. for purchase; the ability to earn income in excess of the income that would be expected from the business viewed as a mere collection of assets. • Because an established business’s trademark or servicemark is a symbol of goodwill, trademark infringement is a form of theft of goodwill. By the same token, when a trademark is assigned, the goodwill that it carries is also assigned…. “

[Goodwill] is only another name for reputation, credit, honesty, fair name, reliability.” … “Good will is to be distinguished from that element of value referred to variously as going-concern value, going value, or going business. Although some courts have stated that the difference is merely technical and that it is unimportant to attempt to separate these intangibles, it is generally held that going-concern value is that which inheres in a plant of an established business.

Such good will has to be protected from unfair competition. Instances of unfair competition include trademark infringement, dilution of goodwill and trademarks, use of similar trade or firm names, simulation of product packaging or configuration, false advertising, passing off goods for those of another, and theft of trade secrets. 

Hence good will has to be protected. A trader may preserve his goodwill by instituting proceedings for unfair competition or by setting up the legal or contractual prohibitions provided in Article 29,39,53,118,130,131,166, and 167 of the Commercial  Code. 

A trader may claim damages under Article 2057 of the Civil Code from any person who commits an act of competition which amounts to a fault. Details on unfair commercial competition and its effects are prescribed by Trade Competition and Consumer Protection Proclamation 813/2013(TCCPP). No business person may, in the course of trade, carry out any act which is dishonest, misleading or deceptive, and harms or is likely to harm the business interest of a competitor. Article 8 of the TCCPP lists what it calls acts of unfair competition. These are:  a) any act that causes or is likely to cause confusion with respect to another business person or its activities, in particular, the goods or services offered by such business person; b) any act of disclosure, possession or use of information of another business person, without the consent of the rightful owner, in a manner contrary to honest commercial practice; c) any false or unjustifiable allegation that discredits, or is likely to discredit another business person or its activities, in particular the goods or services offered by such business person; d) comparing goods or services falsely or equivocally in the course of commercial advertisement;e) disseminating to consumers or users, false or equivocal information including information the source of which is not known, in connection with the price or nature or system of manufacturing or manufa cturing place or content or suitableness for use or quality of goods or services; f) obtaining or attempting to obtain confidential business information of another business person through his current or former employees or obtaining the information to pirate his customers or to use for purposes that minimizehis competitiveness; g) other similar acts specified by regulation to be issued for the implementation of this Proclamation. Hence, a violation of any of the provisions under Article 8 of the TCCPP is a fault and gives rise to an extra-contractual liability

In any event, where an act of unfair competition has been committed, there are civil, administrative and criminal liabilities. The Commercial Code on Article 113-114 cross connects the remedies to itself, the Civil Code of Ethiopia and TCCPP. A trader may preserve his goodwill by instituting proceedings by setting up the legal or contractual prohibitions provided in Article 29,39,53,118,130,131,166, and 167 of the Commercial Code. Furthermore, a trader may claim damages under Article 2057 of the Civil Code from any person who commits an act of competition which amounts to a fault

Under the TCCPP, the Trade Competition and Consumer Protection Authority Adjudicative Benches has for example judicial power on Article 32 to : c)to order payment of compensation in accordance with the relevant laws to business persons victimized by acts of unfair competition committed in violation of the provisions of Part Two of this Proclamation.

The administrative measures within the TCCPP include ordering: a) the discontinuation of the act pronounced unfair; b) the taking of any other appropriate measure that enables to reinstate the victims competitive position; or c) the suspension or revocation of the business license of the offender.  Any business person who has sustained damages arising from an act of unfair competition and claims payment of compensation may institute an action before the adjudicative bench of the Authority. 

On the other hand, the Administrative Penalties are also provided in the TCCPP. Any business person who violates the provisions of Article 8 of this Proclamation(unfair competition article) shall be punished with a fine from 5% up to 10% of his annual turnover.

In conclusion, goodwill is protected by the relevant provisions of the Commercial Code, Civil Code and special laws including but not limited to trade name, trade mark and intellectual property laws, and trade competition and consumer protection laws. A business may consist of other corporeal or incorporeal elements but a business’s main element is its goodwill. The protection accorded to goodwill in the Commercial Code is a major indicative of the significance of the matter.

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