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Local and Foreign Civil Society Organizations Registration and Benefits

By Dagnachew Tesfaye
Civil Society Organizations are administered by the Organizations of Civil Societies Proclamation No.1113/2019 (hereafter the Proclamation) done on March 12/2019 to be effective from the date of publication in the Federal Negarit Gazette.”. This brief article is divided into four parts. Part one shall deal with definitions. Part two shall look upon types of local organization, with emphasis on two of those types. Part three shall deal with the requirements for registration of local and foreign civil society organizations. And part four shall state the effects in terms of rights, responsibilities and income generation benefits to such registered civil organizations. A brief conclusion shall follow.
1. Definitions: The Proclamation defines local and foreign organizations. “Local Organization” are defined as a civil society organization formed under the laws of Ethiopia by Ethiopians, foreigners resident in Ethiopia or both. Here foreigners resident in Ethiopia are granted the right to establish local organizations. On the other hand “Foreign Organization” is defined as a non-governmental organization formed under the laws of foreign countries and registered to operate in Ethiopia;

2. Types of Local Organizations: Two or more persons may establish Local
Organization. Here on the Article 17 of the Proclamation there is a reference to ‘Indigenous Organization’. There is no definition of Indigenous Organization in the Proclamation. However, the Amharic version of Article 17, which is the prevailing one in terms of interpretation, refers to ‘Local Organizations’.
There are five types of Local Organizations. These are a/ An Association; b/ A Board-led Organization; c/ A charitable Endowment; d/ A charitable Trust; or e/ A Charitable Committee. For the purpose of this article, a focus shall be made only on the first two i.e. on association and a board-led organizations.

An Association is an Organization formed by five or more members and governed by a General Assembly as the supreme decision-making body; for the purpose of this Proclamation it shall include professional associations. The organizational chart of an association may have a General Assembly, Executive Committee, Manager, Auditor and other departments as may be necessary. Details regarding the structure and governance of an Association will be determined by its rules.

One the other hand a Board-led Organization means formed by two or more founders, its Board being the supreme organ. The Board shall have a minimum of five and a maximum of thirteen members. The first board members shall be designated by the founders. The term of service and appointment procedures for subsequent board members shall be prescribed by the rules of the Organization. Here the unique nature of Boar-led organizations is that persons who are related by consanguinity or affinity with the officers of the Organization may not be Board members. The organizational chart of A board-led Organization shall have a manager accountable to the Board and necessary staff as may be necessary. The particulars shall be determined by the rules of the Organization.

3. Documents Required for Registration of Local and Foreign Organization: An application for registration by Local Organization shall be signed by the founders and contain the following particulars: a) The minutes of the formative meeting indicating the names, addresses and citizenship of the founders; b) Copy of the identity card or passport of the founders; c) The name of the organization and its logo, if it has one; d) The objectives of the organization and its intended sector of operation; e) The Region where it intends to operate; f) The Rules of the organization approved by the founders; g) The Organization’s address.

On the other hand an application for registration of a Foreign Organization shall, in addition to the conditions mentioned from a-g above, be accompanied with the following documents: a) Duly authenticated certificate of registration showing its establishment from its country of origin; b) Duly authenticated resolution of its competent organ to operate in Ethiopia; c) Duly authenticated power of delegation of the country representative; Letter of recommendation from the embassy in which the charity is incorporated or in the absence of such by a competent authority in the country of Origin from Ministry of Foreign affairs of Federal Democratic Republic of Ethiopia and; d) A Work plan for a minimum period of two years.

4. Effects in Terms of Rights, Responsibilities and Income Generation Benefits of Registration: The Proclamation provides that any Organization which registered upon fulfillment the registration requirements provided in this Proclamation : a/ shall have legal personality; b/ Can sue, be sued and enter into contracts; c/ Without prejudice to laws that require special license, can operate in the sector of its choice; d/ to own, administer and transfer movable and immovable property. However, the proceeds from the disposal of the property may not be transferred as donation for the benefit of members or to another activity which is not its mission; and the Organization which transfer property shall inform to the Agency within 15 days; e/shall have the right to engage in any lawful activity to accomplish its objectives; f/ Local Organizations shall have the right to operate in Ethiopia or abroad, or implement objectives having global, regional or sub regional nature; g/ can implement project activities on its own or to provide financial and technical support to other organizations; h/ may propose Recommendations for the change or amendment of existing laws, policies or practices, or issuance of new laws and policies of those which have relationship with the activities they are performing. However, unless it is permitted with an other law Foreign Organizations and Local Organizations which are established by foreign citizens which are residents of Ethiopia may not engage in lobbying political parties, engage in voters education or election observations; i/ Foreign Organizations may implement project activities or work in partnership with Local Organizations by providing financial, technical or in kind support; j/ to the extent possible, Foreign Organizations by working in partnership with local and Governmental Organizations, can give support to build the capacity of Local Organizations; o) Shall have the right to move its properties from one region to another region or city administration, unless the Project Agreement states that such properties may not be transferred because they are necessary for the sustainability of a specific project it is implementing; p) Have the right to engage in any lawful business and investment activity in accordance with the relevant trade and investment laws in order to raise funds for the fulfillment its objectives. However, the profit to be obtained from such activities may not be transferred for the benefit of members; q) Shall have the right to solicit, receive and utilize funds from any legal source to attain its objective; r/shall get a written approval of the Agency to open a bank account. The Agency shall respond to requests for such approval within five days from receipt of the request; s/ All financial transactions shall be performed through a bank account opened by an Organization in its name; t/ All banks have the obligation to provide the bank statement of accounts held by any Organization to the Agency when requested. w/ The Bank Account transaction can be done in the context of the Organization rules; x/ No Organization may employ a Foreign National who is not given work permit under the relevant laws. Notwithstanding the stipulation above, a Foreign Organization shall not be barred from appointing a Foreign National as its country representative; y/ Foreign Nationals other than the Country representative may only be hired if the office granting work permit verifies that the work cannot be performed by Ethiopians. z/ The provisions of Sub-Article 3 shall not apply to Foreign Nationals who are not salaried employees but come to Ethiopia to professionally contribute by working as volunteers for a period not exceeding one year.

The responsibilities include a/ an Organization shall make the necessary efforts to ensure that its activities help to bring about sustainable development, contribute to the democratization process, promote the rights and interests of its members or enhance the profession they are engaged in; b/ an Organization which is established for the benefit of the general public or third parties shall ensure that its activities take into account the interests of women, Children, persons with disabilities, the elderly and others exposed to threat or vulnerable groups of the society; c/ an Organization cannot engage in sectors which require additional permit by law without getting the necessary permit from the relevant government bodies; d/ In performing their duties all members, officers and employees of the Organization have the responsibility to give primacy to the Organization’s interest and take the necessary precaution to avoid conflict of interest; e/the Administrative cost of an Organization established for the benefit of the general public or that of third Parties may not exceed twenty percent of its total income. For the purpose of this provision, “Administrative Expense” shall mean expenses which are not related to the project activities of an Organization but are necessary to ensure the continuity of an Organization and related to administrative activities, and shall include: salaries and benefits of administrative employees; purchase of consumables and fixed assets and repair and maintenance expenses related to administrative matters; office rent, parking fees, audit fees, advertisement expenses, bank service fees, fees for electricity, fax, water and internet services; postal and printing expenses; tax, purchase and repair of vehicles for administrative purposes, and procurement of oil and lubricants for the same; insurance costs, penalties and attorney fees. However the Agency may issue Directives regarding Organizations exempted from the application of 20% administrative expense rule.

Income generation related benefits include: a/ an Organization which engages in income generating activities in may do so by establishing a separate business Organization (company), acquiring shares in an existing company, Collect Public Collections or operating its business as a sole proprietorship; b/shall open a separate bank account and keep separate books of account for its business in accordance with the relevant commercial and tax laws; c/ the relevant tax, commercial registration and business licensing, and investment laws shall be applicable to income generation activities under this provision; e/ Income that is generated from income generating activities will be used to cover administrative and program costs of the organization; f/ the income and resources that are acquired from income generating activities shall not be transferred or shared for the benefit of members or workers of the organization; g/ when the Organizations Collect Public Collections, they shall inform to the Agency; and h/ An Organizations engaged in income generating activities based on this Article shall inform to the
Agency within fifteen days.

Conclusion: The Civil Society Proclamation has made registration of civil society organizations easier. Foreigners who reside in Ethiopia are allowed to form a local organization. It also included many benefits of registration. One of the important benefits is income generation benefits. Employment of foreigners shall follow work permit procedures. However foreign citizens can occupy the position of country representatives and up to one year non-salaried professional volunteer position.

The New Investment Regulation-Areas of Investment Open for Foreign Investors

By Dagnachew Tesfaye

The Investment Regulation No.474/2020 (hereafter the Regulation) was enacted following the Investment Proclamation No 1180/2020. It was done on the 2nd day of September 2020, to be effective on the date of publication in the Federal Negarit Gazette.

The Regulation is divided into eight parts that cover investment areas, investment permit, acquisition of existing enterprise and transfer of investment projects under implementation, procedure for suspension and revocation of investment permits, registration of technology transfer and collaboration agreements, condition for owning a dwelling house, provision of one-stop service, training and transfer of knowledge and skill to Ethiopian employees and repealed and inapplicable laws.

Any foreign investor can investment in investment areas that are not listed and reserved for a) joint investment with the Government, b)investment areas reserved for domestic investors, and c) investment areas reserved for joint investment with domestic and foreign investors.

This approach is a major shift from the previous investment regulation. The previous investment regulation lists down exhaustively areas of investment open for foreign investors. Foreign investors could not invest outside the listed investment areas. Now foreign investors can invest in all other areas of investment except those reserved for the joint investment with government and joint investment with domestic investors or areas of investment reserved for domestic investors.

“Domestic Investor” has been defined under the Investment Proclamation No 1180/2020 as an Ethiopian National; or an Enterprise incorporated Ethiopia and wholly owned by Ethiopian National; or the Government; or a Public Enterprise; or a cooperative society established as per the relevant law; or a Foreign National or Foreign Enterprise treated as domestic investor as per the relevant law or international treaty ratified by Ethiopia; pr an Enterprise incorporated in Ethiopia jointly between any of the investors specified above; or a Foreign National or Foreign Enterprise accorded a domestic investor investment permit as per laws which were in effect when the permit was issued and continues to operate in Ethiopia, provided that this applies only in respect of investments that are operational at the time of enactment of this Proclamation; or descendant of a foreign national that is accorded investment permit provided that this applies only in respect of investments specified in the same Sub-article;

On the other hand, on the same Investment Proclamation a ”Foreign Investor” has been defined as a Foreign National; or an Enterprise in which a Foreign National has an ownership stake; or an Enterprise incorporated outside of Ethiopia by any investor; or an Enterprise established jointly by any of the investors mentioned above ; or an Ethiopian permanently residing abroad and preferring treatment as a Foreign investor;

Areas of investment open for any investor to invest JOINTLY with the Government are: manufacturing of weapons, ammunition and explosives used as weapons or to make weapons, import and export of electrical energy, international air transport services, bus rapid transit services and postal services excluding courier services.

Investment areas RESERVED for DOMESTIC investors include banking, insurance, microfinance excluding capital goods finance business, transmission and distribution of electrical energy through integrated national grid system, primary and middle level health services, wholesale trade, petroleum, petroleum products, wholesale of own products produced in Ethiopia, excluding wholesale of electronic commerce; retail trade excluding retail of own products produced in Ethiopia, import trade excluding liqudified petroleum gas and bitumen, export trade of raw coffee, khat, oil seeds, pulses, minerals, hides and skins, products of natural forest, chicken and livestock including pack animals brought on the market; construction and drilling services below Grade 1, hotel, lodge, resort, motel, guesthouse, pension services excluding those that are star-designated, restaurant, tearoom, coffee shops, bars, nightclubs and catering services excluding star designated national cuisine restaurant services, travel agency, travel ticket sales and trade auxiliary services, tour operation, operating lease of equipment, machinery and vehicles, excluding industry specific heavy equipment, machinery and specialized vehicles; transport services excluding railway transport, cable-car transport, cold-chain transport, freight transport having a capacity of more than 25 tons and transport services reserved for joint investment with the government or domestic investors; making indigenous traditional medicines, producing bakery products and pastries for domestic market, grinding mills, barbershops and beauty salon services, smithery and tailoring except by garment factories, maintenance and repair services including aircraft maintenance repair and overhaul(MRO), but excluding repair and maintenance of heavy industry machinery and medical equipment, aircraft ground handling and other related services, saw milling, timber manufacturing and assembling of semi-finished wood products; medical services, customs clearance service, brick and block manufacturing, quarrying, lottery and sports betting, laundry services excluding those provided on industrial scale, translation and secretarial services, security services, brokerage services, attorney and legal consultancy services, and private employment agency services excluding such services for employment of seafarers and other similar professionals that require high expertise and international experience and network.

Lastly investment areas reserved for JOINT investment with domestic and foreign investors are feight forwarding and shipping agency services, domestic air transport services, cross country public transport services using buses with a seating capacity of more than 45 passengers, urban mass transport service with large carrying capacity, advertisement and promotion services, audiovisual services such as motion picture and video recording, production and distribution and finally accounting and auditing servises.

However a foreign investor jointly investing with a domestic investor on the above listed businesses cannot own more than 49% of the share capital of the newly formed joint investment company.

Therefore, except areas of investment reserved for joint investment with the Government, or investment areas reserved for domestic investors, or investment areas reserved for joint investment with domestic and foreign investors, the rest are open to foreign investors to invest.

The New Draft Commercial Code of Ethiopia

The Council of Ministers has approved the New Draft Commercial Code of Ethiopia on its Cabinet session on June 13,2020. It passed the draft law for the legislative organ i.e. the House of People’s Representatives. It said on its report that The 1952 E.C(1960 G.C) Commercial Code of Ethiopia has administered the commercial business environment of the country for past 60 years. However new business concepts and technologies that happened after wards that were not anticipated by the earlier law need to be covered now. So Ethiopia need to promulgate a law that can step up to the existing and future business environment and economy of the country. And also anticipate and cover for business and commercial happenings for the coming years.

New Investment Law in Ethiopia

By Dagnachew Tesfaye

Ethiopia has adopted a new investment law. The Proclamation is called the Investment Proclamation No.1180/2020(hereafter the Proclamation). It was done on April 2,2020 to be effective on the date of publication in the Federal Negarit Gazettee.
Purposes of the Proclamation: The major purposes of the proclamation are to increase the role of private sector investment in all sectors of the economy, to create fast track economic framework, to increase export performance, expand employment opportunity, to increase and diversify foreign investment inflow and transfer technology, skill and knowledge, to link foreign and domestic investments in broader areas, to promote equitable distribution of investments among the regions of Ethiopia, to leverage foreign capital to promote the competitiveness of domestic investors, to put in place an efficient system to implement the National Investment Objectives and such system to be transparent, predictable, and efficient for investment attraction, retention and expansion.

In the Proclamation, ‘Investment’ has been defined as expenditure of capital in cash or in kind or in both by an investor to establish a new enterprise or to acquire in part or in all, to expand or upgrade an existing enterprise. ‘Capital’ is also defined as local or foreign currency, negotiable instrument, machinery or equipment, building, working capital, property right, intellectual property right or other tangible or intangible business assets. ‘Investor’ is defined as a domestic or foreign investor who has invested capital in Ethiopia. ‘Domestic investors’ are defined to include among others a foreign national or foreign enterprise treated as domestic investor as pr the Ethiopian law or international treaty Ethiopia has ratified or a foreign national or foreign enterprise accorded a domestic investor investment permit earlier and continues to operate in Ethiopia and descendants of a foreign nationals. ‘Export- oriented non-equity based foreign enterprise collaboration’ is defined as a collaboration formed by a contractual agreement between a domestic investor and foreign enterprise in which the foreign enterprise provides among others guaranteed external market access, know-how of production of products for export, export business management know-how, export marketing know how and strategies for the supply of raw materials and intermediate inputs needed for export products.
Scope of the Investment Proclamation: The scope of application of the investment proclamation is in all investment sectors in Ethiopia except prospecting, exploration and development of minerals and petroleum.
Powers of EIC: The Ethiopian Investment Commission(here after Commission) is assigned the power to issue, renew, amendment, substitution, replacement and cancellation of investment permits, the issuance of investment permits and the expansion or upgrading permits for wholly foreign owned investments or joint investments by domestic and foreign investors, foreign nationals who are treated as domestic investors and investment areas that are eligible for incentives by a domestic investor. Sectors of investment in air transport services, the generation or transmission or distribution of electric power and the provision of communication services shall be carried out by the Ethiopian Civil Aviation Authority, the Ethiopian Energy Authority and the Ethiopian Communication Authority respectively representing the Commission. These later Authorities shall submit to the Ethiopian Investment Commission a quarterly report regarding services they rendered through delegated powers, and further study potential sector specific investment strategies and engage in investment promotion works. Regional investment organs shall administer investments, that are outside the scope of the Commission or Authorities mentioned above.
Areas of Investment: Areas of investment open to an investor as a principle are any area of investment that are not contrary to law, moral, public health or security. Except areas of investment reserved for joint investment with the government or domestic investors and for joint investment with domestic investors, all other areas of investment shall be open to foreign investors. The list of areas of investments by joint investment with the government or domestic investors, or joint investment with domestic investors or areas of investment open for foreign investors may be revised from time to time by the EIC Board.
Joint Investment with the Government or PPP: The government body assigned to receive interested private investors proposals in areas of joint investment with the government, as public-private partnership, shall be the Public Enterprises Holding Administration. The Agency shall follow procedures under the law and upon approval, designate a public enterprise or establish a new project company to invest as partner in the joint investment.
Forms of Enterprises: Investments may be carried out in the form of sole proprietorship, enterprises established in Ethiopia or abroad, public enterprises established with the relevant law and cooperative societies formed in accordance withe the relevant law. Any investment enterprise established abroad and registered in Ethiopia and all other enterprises registered in Ethiopia shall be governed by the Commercial Code of Ethiopia.
Minimum Capital Requirement: A foreign investor to be allowed to invest shall be required to allocate a minimum capital of USD 200,000.00(Two Hundred Thousand USD) for a single investment project. Where the foreign investor jointly invests with a domestic investor, the minimum capital requirement shall be USD 150,000.00(One Hundred Fifty Thousand). However, if the investment areas is in architectural or engineering works or related technical consultancy services, technical testing and analysis or in publishing works, the minimum capital investment shall be USD 100,000.00(One Hundred Thousand) or USD 50,000.00(Fifty Thousand) if the investment is made jointly with a domestic investor. The minimum capital requirement shall not apply to foreign investors re-investing his profits or dividends generated from his existing enterprise in any investment area open for foreign investors or persons elected as members of board of directors following the change of a private limited company to share company or a foreign investor buying the entirety of an existing enterprise owned by a foreign investor or the shares therein. Any foreign investor bringing investment capital into Ethiopia, need to registered it within one year and the obtain a certificate of registration. Such copy of certificate shall be sent to the National Bank of Ethiopia by the appropriate investment organ.
Investment Permit: foreign investors, domestic and foreign investors investing jointly, investors investing as domestic investors, domestic investors who invest in areas eligible for incentives and who seek to be beneficiary of such incentive and an investor seeking to expand or upgrade an existing investment which is eligible for incentives and the investor seeks to be beneficiary of such incentive shall obtain investment permit. However, a foreign national of Ethiopian origin treated as a domestic investor shall have the right to invest without acquiring investment permit in areas not eligible for incentives or in areas eligible for incentives by waiving his right to claim incentives. Also a foreign investor seeking to buy an existing enterprise in order to operate it in its current state or to buy shares of an existing enterprise shall obtain prior approval from the EIC. The Commission shall not deny or delay the approval without sufficient cause. Nevertheless, no investor is allowed to hold domestic and foreign investor permits simultaneously.
An investment permit is subject for renewal annually until the investor commences marketing his products or services. Once a business licence is acquired, the shall be no need to renew investment permit. The renewal request should be sough within one month after the end of a period of one year for which the permit was valid. Unless the investment organ is convinced of a sufficient cause for delay in commencing or completion of the investment project, the investment permit will be revoked within two years.
Transfer of investment project in the implementation phase: an investor wishing to transfer to another investor a project which is under implementation shall submit his request to the investment organ and obtain approval. The investment organ shall not deny or delay the approval without sufficient cause.
Any investor who is issued an investment permit shall submit a quarterly progress report and provide information concerning his investment whenever requested.
Technology Transfer Agreement: Any investor concluding a technology transfer agreement shall register such agreement with the EIC. Unregistered technology transfer agreement shall have no legal recognition with the EIC.
Collaboration Agreement: Any domestic investor who concludes, in respect of export, a collaboration agreement with a foreign enterprise who does not contribute capital shall have the agreement registered with EIC. A collaboration agreement that is not registered shall have no legal recognition with the EIC.
Investment Incentives: areas of investments, types and amount of investment incentives shall be determined by regulation.
Immovable Property Ownership: a foreign investor or a foreign national treated as domestic investor shall have the right to own immovable property necessary for his investment. Whereas, if such an investor who owns large investment may be allowed to own one dwelling house. The details of the later part shall be decided by a regulation. Immovable property as used in this provisions does not include land and the ownership of immovable property shall apply to investors who invested prior to the adoption of this proclamation.
Expropriation: the government may expropriate any investment for public interest, in conformity with requirements of the law, on a non-discriminatory basis, with adequate compensation corresponding to the prevailing market value paid in advance.
Remittance of Funds: a foreign investor shall have the right in respect of his investment to remit in convertible currency at the prevailing exchange rate on the date of transfer profits and dividends, principal and interest payments on external loans, payments related to technology transfer agreements, payments related to collaboration agreements, proceeds from the transfer of shares or conferral of partial or total ownership of an enterprise to another investor, proceeds from sale, capital reduction or liquidation of an enterprise and compensation paid on expropriation. Expats employed for investments carried out pursuant to this Proclamation whose permanent residence is outside of Ethiopia may remit their salaries accruing from their employment. However, a domestic investor investing jointly with foreign investor shall not be allowed to remit funds earned from the investment out of Ethiopia.
External Loan: An investor may acquires a loan from outside of Ethiopia for his investment and operate a foreign currency account in a bank in Ethiopia for the purpose of its investment following the directives of the National Bank of Ethiopia (NBE).
Expat employment : an investor may employ duly qualified foreigners for his investment in positions of higher management positions including chief executive officer, chief operation officer and chief finance officers as necessary, supervision, trainers and other technical professions. However, foreigners may be employed only when it can be ascertained that Ethiopians possessing similar qualification or experience required by the sector are not available.
Work Permits of Expats: The work permit of top management foreign workers shall be renewed without being required to comply with the conditions specified in this article in respect of other foreign workers. A work permit may be issued for a cohabiting spouse of any investor and a foreign worker employed. A work permit for employment in certain positions may be issued for up to three years and renewed every year. However an investor who employs foreigners shall be responsible for replacing within a limited period of time such foreign workers by Ethiopians by arranging and providing the necessary training. Renewal of work permit shall be done after ascertaining the non-availability of Ethiopian workers with similar qualification and of the concrete measure taken by the investor to train Ethiopian replacements. Where it is ascertained that a foreign worker is no longer required for the position he is employed, the EIC may decide not to renew or to cancel the work permit.
Visa Services: EIC or a delegated investment organ may facilitate the processing of visa application of foreigners coming into Ethiopia for investment purposes and that of the families (spouses, children and parents) of investors undertaking investments in Ethiopia. Visa may be issued to an investor intending to enter into Ethiopia, from a country that is not his home country, for investment purposes based on a support letter the EIC may offer. An owner or shareholder of an investment under this proclamation may be issued a five-year multiple visa based on the confirmation by the EIC. The general manager, board member or top management of an investment enterprise in Ethiopia and the Parent or holding company of the Enterprise may be issued a three year multiple entry visa based on confirmation by EIC. No single stay of any foreigner entering Ethiopia using multiple entry visa may exceed 90(Ninety) days.
One Stop Service: EIC or regional investment organs shall provide one-stop services to investors by coordinating relevant agencies and synchronize their daily functions.
Complaint Procedure in EIC: Any grievance shall be resolved using speedy, equitable and efficient procedure. Any investor who has grievance shall have the right to submit it to the appropriate investment organ. Such grievance shall follow the administrative chain and get final administrative decision. A written copy of the administrative decision shall be given to investor within 7(Seven) working days from the date from the date of the decision. If the investor has a grievance against the final administrative decision of EIC, then he can submit a complaint to EIC Board within 30(thirty) working days from the date the investor becomes aware of such decision. Then the Board shall give its decision within 90(Ninety) working days from the date of submission of the Complaint and a written Board decision will be given to the investor within 7(seven) working day.
Complaint procedure against Executive Bodies: An investor shall have the right to submit a complaint to the EIC against final administrative decision of any federal government executive body where such decision significantly affects the investment. The Federal executive body shall give to investor within 7(seven) working days a written copy of the final decision. The investor then has 30(thirty) working days to submit the final administrative decision to EIC. EIC shall engage with the government body and propose a recommended solution in writing within 30(thirty) days from the submission of the complaint. A written copy of the proposed solution shall be given to the investor within 7(seven) working days from the date the recommended solution is tabled. Still the investor may file a complaint to EIC Board against the EIC’s recommended solution, or the the solution is not accepted by the government body. The complaint to the Board should be presented within 30(thirty) working days from the date the investor is notified of the recommended solution or learns that the government body rejected the recommended solution. The Board shall then give its decision within 90(Ninety) working days. Any Federal government body has a duty to comply with and execute in accordance with the decision of the Board.
Dispute Settlement: without prejudice to the right of access to justice through a competent body with judicial power, any dispute between an investor and the Government involving investments effected pursuant to this Proclamation will be resolved through consultation or negotiation. The Federal government may agree to resolve investment disputes involving foreign investments through arbitration. Where a foreign investor chooses to submit an investment dispute to a competent body with judicial powers or arbitration, the choice shall be deemed final to the exclusion of the other.
Investment Administration Organs: The investment administration organs include the Ethiopian Investment Board, the Ethiopian Investment Commission, the Federal Government and Regional sState Administrations Investment Councils and the Investment Administration organs established pursuant to Regional laws.
Members of the Ethiopian Investment Board are 13(thirteen) including the Prime Minister as chairperson, a government official designated by the Prime Minister as Vice Chair person, EIC Commissioner and Secretary, Eight core or investment related government officials, two private sector representatives.
Council: a council for the cooperation and coordinated administration of investment between the Federal government and Regional state administrations is established by this Proclamation. Members of the Council include the Prime Minister or in his absence the Deputy Prime Minister as chairpersons, Presidents of all regions and Mayors of the Addis Ababa and Dire Dawa City Administrations, EIC Commissioner and heads of investment organs of all Regions and Addis Ababa and Dire Dawa City Administrations and other members designated by the Prime Minister as necessary.
Coordination with Regional States: the Commission shall work in close cooperation with Regional Stat Investment Administration organs and other stakeholders with a view to creating a uniform, coordinated and efficient national investment administration system. Standing regional state investment Desks shall be established.
Provision of Land: Regions shall handle land requests for investments in the manufacturing, agriculture and other sectors in an efficient manner and shall establish a transparent and predictable system for the handling of such requests. Regions shall identify and classify land to be used for investment projects, organize such land centrally under one Regional State Administration body and transfer the information to the appropriate investment organs. The EIC shall coordinate the Regional State Administration and appropriate investment organs to facilitate and follow through the efficient handling of such requests. Regions shall respond to land allocation request of an investor for manufacturing within 60(Sixty) days and 90(Ninety) days where the investment is in other sectors.

Transitory Provisions: rights and entitlements bestowed pursuant to Investment Proclamation no 769/2012 as amended and Regulations and Directives issued there under shall remain applicable in respect of investments approved prior to the coming into force of this Proclamation.

Duty to Observe: all investors have a duty to observe laws of the country and shall give due regard to social and environmental values.

18 New Labor Proclamation 1156/2019 Additions

1. Definitions

“Sexual harassment” means to persuade or convince another through utterances, signs or any other manner, to submit for sexual favor without his/her consent.
“Sexual violence” means sexual harassment accompanied by force or an attempt thereof.

2. Scope of Application
3(1). Without prejudice to Sub-Article (2) of this Article, this Proclamation shall be applicable to employment relations based on a contract of employment that exist between a worker and an employer including recruitment process.
3. Probation
11(3). When the parties agree to have a probation period, the agreement shall be made in writing; in such a case, the probation period shall not exceed 60 working days beginning from the first date of employment.
4. Prohibited Acts
14(2)g). Conduct meeting during working hours in disregard to the time assigned by the collective agreement or without obtaining the permission of the employer; h) Commit sexual harassment or sexual violence at workplace;
i) Physically abuse anyone in a work place.
5. Tardiness
27. 1/ Unless otherwise determined by a collective agreement, a contract of employment shall be terminated without prior notice only on the following grounds :
a) Unless the reason for being late is justified by the collective agreement, work rule or contract of employment, being late for duty eight times in six months period while being warned in writing of such a problem;
6. Absence
27/1/b) Absence from duty for a total five days in six months period while being warned in writing of such a problem; and where the absence cannot be classified in any of the leaves provided under the Proclamation;
7. Performance test
28(2) Any loss of capacity of work referred to in SubArticle (1) (a) of this Article shall, unless otherwise provided by a collective agreement, be verified by a periodical job performance evaluation.
8. Termination without prior notice by Employee
32(1) (b) Where the workers has been a victim of sexual harassment or sexual violence by the employer or a managerial employee;
9. Severance payment
39(1)d. Where the worker resigned due to sexual harassment or sexual violence by the employer or managerial employee; or where such act was committed by a coworker and the incident was reported to the employer but the latter failed to take appropriate measure in due time;
10. Compensation
41(2) However, where the termination is based on Article 32 (1) (b) the worker shall, in addition to severance pay, be entitled to compensation of his daily wage multiplied by ninety. This provision shall also apply to a worker covered by the relevant pension law.
11. Employee to pay compensation to Employer
45. 1/ A worker who terminates his contract of employment in disregard of the provisions of Article 31 or 35(2) of this Proclamation shall be liable to pay compensation to the employer.
2/ However, the compensation payable by the worker in accordance with Sub-Article (1) of this Article shall not exceed 30 days’ wages of the worker and be payable from the remaining payment due to the worker.
12. Deduction from Salary more than 1/3
59. 1/ The employer shall not deduct from, attach or set off the wages of the worker except where it is provided otherwise by law or collective agreement or work rules or in accordance with a court order or a written agreement of the worker concerned.
2/ Unless the worker expresses his consent in writing, the amount that may be deducted at any one time, from the worker’s wage shall in no case exceed one-third of his monthly wage.
13. Overtime Payment
68/ 1/ In addition to his normal wage, a worker who works over-time shall be entitled at least on the following rate of payments:

a) In the case of work done between 6:00 a.m. in the morning and l0:00 p.m. in the evening, at the rate of 1.5 multiplied by the ordinary hourly rate;

b) In the case of night time work between 10 p.m. in the evening and 6 a.m. in the morning, at the rate of 1.75 (one and three fourth) multiplied by the ordinary hourly rate;
14. Weekly Rest
69/4/ Notwithstanding the provisions of Sub Article (1) of this Article, where the nature of his task did not enable the worker to make use of his weekly rest day, the employer shall grant 4 working days of rest in a month.
15. Annual Leave
77(1) A worker pursuant to this Article shall be entitled to uninterrupted annual leave with pay. Such leave shall in no case be less than:
a) Sixteen (16) working days for the first year of service;
b) Sixteen (16) working days plus one working day for every additional two years’ service.
16. Paternity Leave
81/2/ A male employee shall be entitled to three consecutive days paternity leave with full pay
17. Leave for events
81/3/ A worker shall be entitled to leave without pay for up to five consecutive days in the case of exceptional and serious events. However, such leave may be granted only twice in a budget year.
18. Maternity Leave
88/3/ A pregnant worker shall be granted a period of 30 consecutive days of leave with pay of pre-natal leave and a period of 90 consecutive days of leave post- natal.

The Apostille Convention: Should Ethiopia Join?

By Hami Bogale and Dagnachew Tesfaye

The Convention of 5 October 1961 Abolishing the Requirement of Legalization for Foreign Public Documents also known as the Apostille Convention. The Apostille convention brought about a basic simplification of the series of formalities which complicated the utilization of public documents outside of the countries from which they emanated. Where it applies, the treaty reduces the authentication process to a single formality: the issuance of an authentication certificate by an authority designated by the country where the public document was issued. This certificate is called an Apostille.

The public documents covered under the convention include birth, marriage and death certificates; documents emanating from an authority or an official connected with a court, tribunal or commission; extracts from commercial registers and other registers; patents; notarial acts and notarial attestations (acknowledgments) of signatures; school, university and other academic diplomas issued by public institutions. However, the Apostille Convention does not apply to documents executed by diplomatic or consular agents. The Convention also excludes from its scope certain administrative documents related to commercial or customs operations.

The traditional method for authenticating public documents to be used abroad is called legalization and consists of a chain of individual authentications of the document. This process involves officials of the country where the document was issued as well as the foreign Embassy or Consulate of the country where the document is to be used. Because of the number of authorities involved, the legalization process is frequently slow, cumbersome and costly.


The Apostille Convention reduces the need for double-certification by originating state and that of the receiving state. The convention is applied millions of times each year throughout the world. It greatly facilitates the circulation of public documents issued by a country party to the Convention and that are to be used in another country also party to the Convention.


As of Ferbruary 2021, 120 countries are contracting states to the Apostille convention.

Since the convention greatly simplifies the authentication of public documents to be used abroad, Ethiopians will benefit by joining the convention.

Business Organizations

By Dagnachew Tesfaye
The new Commercial Code Proclamation No 1243/2013 repealed Book I, II and V of the 1960 Commercial Code of the Empire of Ethiopia Proclamation No 166/1960. The effective date of the new Commercial Code (new CC) is from the date of publication in the Federal Negarit Gazette. The repeal of Book I, II and V shall commence from the effective date. A brief discussion shall be done on Book II specifically on general provisions to business organizations.


Definition: A business organization (BO) has been defined in the old Commercial Code(old CC) as an association arising out of a partnership agreement. But now in the new CC a business organization is defined differently. A business organization is an association created by memorandum of association by persons coming together contributing for the purpose of carrying economic activities and of participating in the profits. The term partnership agreement existing in the old CC has been left out and probably substituted by memorandum of association. However, there are exceptions to the above definition. The exceptions are joint venture (JV) and a one-person private limited company. JV is established not by memorandum of association but by a contractual agreement. Such contractual agreement should not be revealed to third parties. The other exception is a one-person private limited company. Association requires two or more persons. However as an exception, a company can be established by a single person. The existence of the exceptions are mentioned in the new CC.


Memorandum of Association: Memorandum of Association (MoA) serves as the formation document of BOs except JV. Template MoA can be prepared by government entities including Ministry of Trade and Industry. However content of the MoA should not limit the right to agree by the partners. Any law or procedure that limit the partners to stick with the template or limit the right to agree on different matters not contrary to law, are null and void, it states. This last part is an addition in the new CC that practically solves problems faced by new entrants in forming company or partnerships.


Different Business Organizations: It used to be 6 types of BOs in the old CC. They were ordinary partnership, joint venture, general partnership, limited partnership, share company and private limited company. Now in the new CC, they became 7(seven) in number. These are general partnership, two types of liability limited partnerships, limited liability partnership, joint venture, share company, private limited company and one-person private limited company. Here in the new CC ordinary partnership is left out. On the other hand limited partnership is broadened to two types of partnerships, namely limited partnership with limited liability and two types of liability limited partnership. A new form of company is introduced namely one-person PLC.


Dissolution for Good Cause by Court: Dissolution of a BO by court happens when there is good cause. Good cause used to include in the old CC infirmity, permanent illness or any other reason incapable of carrying out his duties or serious disagreements existing between partners. Now in the new CC, good cause is only when serious disagreement exists between partners. The rest of the reasons namely infirmity, permanent illness, incapacity to carry out duties were disregarded. Still when there is serious disagreement between the partners, the court should not go automatically to dissolution. If the disagreeing partners can take their share and leave the organization and the rest of the partners can continue the organization, then the organization should continue to exist. Such clarification in the law will enable judges to interpret the law in a more clear and easier way.


Publication of Cancellation of Registration: The old CC state that where a BO is dissolved and wound-up, the existence of the BO shall stop after cancellation has been published in the official commercial gazette. This article has been amended by Commercial Registration and Licencing Proclamation No 980/2016. On the later proclamation on Article 11(7) it is stated that cancellation of registration of BO shall come into force one month after publication of notice of cancellation on a newspaper having wider circulation at the expense of the applicant; in the case of sole proprietor, however, the cancellation shall become effective as of the date of its entry into the register and without the need to publicize. The new CC however state clearly that the legal personality of the business organization shall cease to exist the next day the cancellation of the BO is entered in the commercial register. Then the cancellation of the organization as BO will be publicized by a gazette with wide spread distribution in the locality the main office of the cancelled BO is situated. On whose, the applicant or the government, expense is the publicity by a gazette is done is not clear. Publicity by a gazette, however, is not a requirement for cancellation of registration of all types of BOs. Rather publicity in a gazette happens to simply notify the fact that such a BO has stopped existing.


To sum up, these are some of the additions and deductions that happened on the general section of business organizations in the new Commercial Code.

New Federal Advocates Licencing and Administration Proclamation Enacted

The House of Peoples’ Representative on June 10/2021 after deliberation enacted as law the Federal Advocates Licencing and Administration Proclamation No 1249/2013. The new law has been in discussion for several years. The law got its final endorsement on June 10. The new law will put advocates in a better position in terms of administering their profession. The introduction of law firms will also create partnerships that better serve clients and contribute greatly to the economy.

Document Authentication and Registration

By Mahlet Mesganaw

Authentication and Registration of Documents Proclamation No 922/2015 provide the details in which documents are authenticated and registered. Authentication involves signature and affixing of seal while registration involves giving identification number and deposit of the document.


Organs Vested with Authentication and Registration of Documents: A)The Federal Document Authentication and Registration Agency (FDARA) established under Regulation No 379/2016 takes the primary role of document authentication and registration task under the Federal Government.
B) Ethiopian Embassies and Consular Offices authenticate documents to be sent to Ethiopia.
C) The Ministry of Foreign Affairs (MoFA) authenticate documents stamped by Ethiopian Embassies and Consular offices. MoFA also authenticate documents authenticated by Embassies and Consular Offices of foreign countries in Ethiopia. Moreover documents that are sent abroad and require authentication under the law of the receiving country will be authenticated by MoFA.
D) Commanders of Divisions of the Defense Force shall authenticate documents submitted by members of the defense force who are in active duty.
E) Commanders of Divisions of the Federal Police Commission shall authenticate documents submitted by members of the federal police force who are on active duty.
F) The Ethiopian Investment Commission(Commission) under the Investment Regulation No 474/2020 is given by law under Article 18 a one-stop-service to register memorandum of association and articles of association and their amendments for investments registered under the Commission.
G) The Industrial Park Regulation No 417/2017 provides under Article 15 a one-stop-shop service including authentication of documents including memorandum of association, articles of association and amendments thereof.


Mandatory Authentication and Registration: Under Proclamation No 922/2015 documents that SHALL be authenticated and registered are a) power of attorney or revocation of power of attorney; b) memorandum of association and articles of association and their amendments of business organizations and other associations ; c) documents that shall be required to be authenticated and registered by law. These may include contracts of transfer of immovable properties, contracts to establish collateral or guarantee rights on immovable properties and public wills.


Party Requested Authentication and Registration: The notary shall authenticate and register where parties to a document request for authentication and registration.

Documents presented for Authentications and Registration: Authentication involves new documents submitted for authentication; documents that are already signed and need authentication and registration; copies of documents to be ascertained vis-a-vis the originals; ascertaining the legality of documents; ascertaining the capacity and authority of signatures of a document; ascertaining the conditions of ownership and the owners of certain properties.


Prohibitions against the Notary: Apart from ascertaining its legitimacy, a notary shall not have power to change or cause to be changed the contents of a document submitted for authentication.


Oath and Hearing of Witnesses: Any person may declare the truth of the contents of a document under oath before a notary. In such a case the notary shall write down on the document that he caused the said person to sworn before he made the declaration. Furthermore, a notary shall take the testimony of a witness where he is ordered by a court.


Requirement of Witnesses on a Document: Contracts of transfer of ownership of immovable properties by selling or donation or contracts to establish collateral or guarantee rights on immovable properties and public will shall have two witnesses. Other than the above 3(three) types of documents, other documents may be authenticated and registered without being signed by witnesses.


Confidentiality: A notary shall not give to THIRD PARTIES information which comes into his possession in the course of performing his duties, unless ordered by a court or by a body empowered by law.


Legal Effect of Authentication and Registration: A document authenticated and registered in accordance with the Proclamation shall be Conclusive Evidence of its contents. The document can be challenged only for GOOD CAUSE by the PERMISSION of a court.


Acceptance of an authenticated and registered documents by Government Organs: Any document authenticated and registered by Federal or Regional institution shall be accepted by any federal or regional governments.


Suspension of Authenticated and Registered Document: The Agency may if it is provided with adequate evidence may pass temporary order of suspension on improperly authenticated and registered document. Such suspension shall be given within 5(five) working days from the date of submission of the petition or from the date examination commenced if the suspension is initiated by the institution. During suspension, the document shall be considered as not authenticated and registered.


Duty to go to Court under Suspension: When a document is suspended, the concerned person SHOULD institute a case in court within one month from the date of order of suspension. The court may approve, amend or repeal the order of suspension.


Revoking Order of Suspension: Order of suspension shall be discarded if the court invalidate the order of suspension or if the concerned person DO NOT institute proceedings in a court WITHIN ONE MONTH of the date of suspension.


To sum up, authentication and registration of documents is conducted by government entities. FDARA branches are swarmed by customers. Dissatisfaction is apparent. Besides those that require ascertaining ownership or injunction orders like contracts of transfer involving immovable excluding lease, contracts involving transfer of special-movables, and power of attorney and cancellation of the same, the rest can be done privately. There is a need to outsource or create public-private- partnership or assign part of document authentication and registration by law to private entities. Qualified persons to do the job are licensed attorneys. This will elevate the function of FDARA and contribute to ease of doing business in Ethiopia.


Major Changes on the Federal Courts Proclamation

By Dagnachew Tesfaye
The Federal Courts Proclamation No 1234/2021 (hereafter the Proclamation) is out repealing former Federal Court Proclamations and its amendments namely Proclamations 25/96, 138/98, 254/2001, 321/2003 and 454/2005, effective from January 21,2021. Here are some of the major changes.

  • Federal Courts are endowed with the common jurisdiction of interpreting and observing the FDRE Constitution.
  • Basic or fundamental error of law has not been defined. But now with this Proclamation it is defined. It is defined as judgment, ruling, decision, order or decree a) in violation of the constitution; b) by misinterpreting a legal provision or by applying an irrelevant law to the case; c)by not framing the appropriate issue or by framing an issue irrelevant to the litigation;d) by denying to award judgment to a justiciable matter; e) by giving an order in execution proceedings unwarranted by the main decision; f)in the absence of jurisdiction over the subject matter; g) an administrative act or decision rendered in contradiction with the law; and h) in contravention to binding decision of the Federal Supreme Court Cassation Division.
  • On Criminal Jurisdiction of the Federal Courts, crimes connected with conflicts between various nations, nationalities, ethnic, religious or political groups are included. Also rather than making it an exhaustive list of criminal matters, the Proclamation adds up cases specified by other laws also to make jurisdiction of the Federal Courts on criminal matters.
  • On Civil Jurisdiction of the Federal Courts the following are two matters are added. One, issues in relation to bankruptcy fall under civil jurisdiction of Federal Courts. Two, civil cases arising out of Addis Ababa (AA) and Dire Dawa (DD) are the Federal Court jurisdiction other than those given by the City Charters to City Courts namely change of name, guardianship, marital status certificates, possession or ownership of claims of City administered houses, Edir(associations) cases, and cases of money, contracts, loans involving up to ETB 500,000. And three cases specified by other laws shall also fall under the civil jurisdiction of the Federal Courts.
  • First Instance jurisdiction of the Federal Supreme Court (FSC) shrinks to change of venue issues. This seems to open the door for appeal right unlike the previous Proclamation no 25/96 where offences by federal government officials, ambassadors or consuls or representatives of international organizations were subject to first instance jurisdiction of the FSC. However, the Proclamation maintains cases specified by other laws may be included as first instance jurisdiction.
  • FSC Cassation Division (FSCCD) is clearly empowered to see cases decided by Regional Supreme Court Cassation Divisions i.e cassation over cassation. However such cassation over cassation is limited to basic or fundamental error of law indicated on Article 2(4)(a) violations of the Constitution and (h) in contravention to binding decision of the FSCCD. Moreover basic or fundamental error of law on Article 2(4)(b) i.e. misinterpreting a legal provision or by applying an irrelevant law to the case, can make a Regional cassation decision be seen by FSCCD where such a case have public interest and national importance.
  • FSCCD is empowered to see final decisions rendered by organs vested with judicial power. Also without prejudice to provisions of appropriate law, FSCCD can receive and see final decision rendered by Alternative Dispute Resolution mechanisms regarding cases that may be filed in Federal Courts.
  • Binding precedence of the decisions of the Cassation Division shall start from the date the decision is rendered and not when published.
  • Federal High Court (FHC) first instance jurisdiction on civil matters is increased from the previous ETB 500,000 to now an amount exceeding over ETB 10 million.
  • FHC civil jurisdiction has new addition. Any person, it states, who has vested interest or sufficient reason can institute a case before the FHC to protect the rights of his own or others, using the Civil Code Procedure on Article 176-179. Thus FHC may render decision, judgment or order to protect justifiable human rights specified under Chapter 3 of the FDRE Constitution.
  • On the previous Proclamation, appellate jurisdiction of the FHC was from Federal First Instance Court (FFIC) only. But now cases specified by other laws giving FHC the appellate power are also included here.
  • FFIC appellate jurisdiction was absent previously. Now appellate jurisdiction of the FFIC is added. FFIC shall have an appellate jurisdiction on matters bestowed on it by other laws.
  • The President of the FSC in the previous Proclamation used to have the power to assign judges of the Federal Courts, representative judges of assigned divisions, presiding judges, employ personnel with CONSULTATION with the FHC and FFIC Presidents. Now such consultation is deleted and a full power is assigned to the President of the FSC.
  • The President of the FSC has additional powers in this Proclamation namely ensuring preparation, issuance and implementation of regulations and directives and providing support to Federal Sharia Courts.
  • The Proclamation introduced power and duties of Representative Judges of an Assigned Division. The practice of having a representative for each division was there. But now the representative judge is legally recognized and given specific power and duties.
  • More so the duties of Presiding Judges of the Federal Courts are stated now. Presiding judges were there in executing their duties known in practice but now their duties are clearly provided by law.
  • Divisions of the FSC previously were Civil, Criminal and Labour. And now in the Proclamation, a new division format is introduced namely First Instance, Appellate and Cassation.
  • A Cassation Division (CD) comprising of 7 judges can be created by petition filed by litigating parties or by the court’s own initiation. There should be clear and sufficient reason where changing the previous legal interpretation is so necessary. The unique point here is interpretation of law rendered by CD presided by not less than 7 judges may review the same issue by not less than 7 judges.
  • The CD by 5 judges follow the procedure of written reply and counter reply and the case is decided, unless the CD thinks it is necessary to hear the parties. Such procedure is different for FHC or FFIC where there will be mandatory hearing procedure and no counter reply.
  • FHC and FFIC shall be presided by one judge except for two reasons. One a panel of 3 judges will sit where criminal charge punishable with more than 15 years rigorous imprisonment is the case and second the FSC may order by Directive for certain cases that the cases be seen by a panel of 3 judges.
  • A sign language expert for concerned disabled persons is now included in addition to language interpreter, in which the court has to organize.
  • Time frame is included for a decision requesting a judge to be removed. The decision to remove a judge has to be decided within 15 days from the date of application reached the new division.
  • Penalty for declined request for removal of a judge is increased. The penalty for application without good cause is increased from ETB 500 to a fine between ETB 1000-3000. Where the application to remove a judge is made with the intention to defame or damage the judge’s honor or delaying the proceeding, the fine can reach from ETB 3000-7000.
  • Budgetary Administration Autonomy is clearly stated under Article 36 of the Proclamation.
  • As well as Article 39(1) of the Proclamation provide that Federal Courts shall have independence to recruit, hire, and administer their own non-judicial personnel.
  • Calendar of courts became clear. Federal Courts shall be closed from Nehasse 1 to Meskerem 30. This means the commonly known Yekatit month 15 days closure or opening of the court after closure on Meskerem 18 were disregarded.
  • Members of the PLENUM is expanded to include two judges- one woman and one man, from the FHC and FFIC.
  • The Proclamation included court annexed MEDIATION. Where parties fail to resolve their dispute by mediation, the court proceeding shall continue. Where the parties reach an agreement under the mediation, the mediator shall prepare a settlement agreement, make the parties sign and present it to the judge for endorsement, if it is not legally or morally contrary to law. The endorsed settlement agreement shall be executed like any decision of a court. If the case ends with the mediation procedure, then the court fee shall be returned having deducted costs for the mediation.
  • Parties to a dispute shall have the obligation to conduct their litigation by using information technology the court has introduced. Such clear legal provisions will be an answer for court officials faced with challenges by parties or their lawyers who says there is no law for me to provide for example CD’s containing my written claim or response.
  • An important judicial principle is included in the Proclamation. Decisions of the Federal Courts SHOULD be executed throughout Ethiopia, it says. Any government body, institution or non-governmental organization or person in any region shall have the obligation to execute or cause to execute such order or decision. Failing to obey a court order or decision, hinders the execution thereof or to cooperate or give assistance when so requested can make that individual subject to simple imprisonment not exceeding 2 years or with fine not exceeding ETB 5000.
  • The FSC is vested with the power to establish External Advisory Council.
  • The House of Peoples’ Representative may issue REGULATION for implementation of this Proclamation.
  • The new jurisdiction of the FHC and FFIC shall come to force 6 month after the effective date of the Proclamation i.e. 21 January 2021. So the new jurisdiction for the FHC and FFIC shall commence on 22 July 2021.

Work Permit Administration for Expats Hired by Investment Enterprises

By Mahlet Mesganaw

The Ethiopian Investment Commission(EIC) has come up with a directive namely Regulating the Issuance of Work Permit to Expats Employed in Investments and the Implementation of Knowledge and Skill Transfer from Expats to Ethiopian No 772/2013( hereafter the Directive). The Directive will come into force when registered in the website of the Federal Attorney General. The uploaded date in the Federal Attorney General is April 14/2021.


The Directive applies to expats hired in investments whose administration falls within the mandate of EIC. However, the Ministry of Labor and Social Affairs (MoLSA) will continue to issue work permits for expats employed by investments enterprises licences by the pertinent government organs in pursuance of powers delegated from the EIC and for expats employed by enterprises outside the scope of the powers of the EIC.


The issuance and number of work permits to be issued has been arranged based on the type of work namely top management positions and non-managerial positions. When it is top management positions, issuance of work permits will be automatic. Whereas when it is non-managerial positions, work permit issuance differ based on the investment levels, namely project construction phase, machinery installation phase, commissioning phase, implementation or operation phase and repair, maintenance, training and audit works.


Under the Directive, the requirements to obtain work permit has been exhaustively listed. In addition to that the conditions for renewal of work permit, revocation or replacement of work permit has been stated in detail as well.
The requirements to obtain new work permit include:
1/ duly completed application form; 2/ description of personal profile of the foreign employee; 3/ academic credentials, professional license or certificate of competence and certificate of service of the foreigner authenticated by a competent government body (original and copy); 4/ passport of the foreigner valid for not less than three months;5/ four passport size photographs of the foreigner; 6/ as appropriate, valid work visa (WV), or business visa (BV), or work permit; 7/ if the expat employee engages in health, education or similar sectors, certificate of competence approved by the relevant government office; educational documents, professional license and certificate of service authenticated by an Ethiopian embassy abroad or the Ministry of Foreign Affairs; and support letter; 8/ employment contract between the expat and the enterprise; 9/ as appropriate, investment permit or business license; 10/ receipt showing payment of service charge determined by law; 11/ proof evidencing employment of Ethiopian replacement and assignment – to be operationalized after hiring the expat;
12/ training and knowledge transfer program organized by the enterprise – to be offered to Ethiopian replacement employees;


Except for management and impermanent positions of machinery installation, maintenance, renovation, training, supervision and audit and accountancy, an enterprise shall for all other positions, exercise its best endeavor to explore the availability or otherwise of Ethiopians possessing similar professional competence or experience required by the position or sector prior to hiring any expat. An enterprise hiring expats is obliged to set up and provide on the job training and replace expats with Ethiopians within a defined period of time.


MoLSA will handover all active work permit files that fall under this Directive as well as supporting software to EIC within 6 months.


In conclusion the Directive has put EIC in charge of work permits for investments registered under it. The requirements and number of expats to be employed has been set based on the number of Ethiopians employed. And an obligation to hire Ethiopians first and replace expats with Ethiopians within a defined period of time as been endorsed in the Directive. This Directive adds up to the one-window service in ease of investing in Ethiopia.

Women Workers: Prohibited Jobs

By Mahlet Mesganaw

The Ministry of Labour and Social Affairs (the Ministry) has a registered directive i.e. Jobs that are Heavy or Hazardous to Health or Disturbs the Reproductive Health of Women Workers Directive No 42/2013(here after the Directive). On this directive there are lists of works that are prohibited for women or pregnant women or up to 6 month breast feeding women not to engage in.


The prohibited works include the following:
-mining, underground well or cave excavation;
-mixing, filling or palliating pesticide or herbicides;
-crushing or production of asbestos and asbestos compositions;
-spraying in agricultural plantations pesticides or herbicides or
any works that directly make women or pregnant or beast feeding women to engage with hazardous chemicals or chemical compositions that affect their health or reproductive health.


The Directive also attempts to limit weight mass in lifting, pulling, pushing, carrying for Women Workers.
-For activity using only hands, not more than 15 k.g if the work is continuous or 25 k.g if the work is not continuous.
-For activity using hands only but involves uphill climb or downhill, not more than 10 k.g. weight if the work is continuous or not more than 15 k.g if the work is not continuous.
– If the work involves a one-wheel cart, not more than 50 k.g.


Maximum Exposure Limit should be adhered to for women workers engaging in air borne chemical or radiation susceptible working environment such as iron melting works, electro-mechanical works, battery factories or radiation emitting works.


Annual health check up should be done for women workers engaged in
-works that are done Standing for long period;
-direct contact to bodily fluids or blood in medical institutions
-quarry works;
-asphalt tar boiling or spraying works in road construction;
-cleaning of waste containers, pipes or waste canals ;
-too cold or too hot place of work due to the work behavior and
-works that involve vibration.


The employer is responsible to implement the directive. The employer is obliged to shift women or pregnant workers in the fields of prohibited works to other safe positions without reducing their post or salary. More so the employer should report to the Ministry once every quarter of a year.

Arbitration and Conciliation Working Procedure: Highlights

By Dagnachew Tesfaye

Ethiopia has adopted a comprehensive Arbitration and Conciliation Working Procedure under Proclamation No 1237/2021(hereafter the Proclamation) effective from publication in the Federal Negarit Gazette, done on 2nd of April 2021. This Proclamation repealed the arbitration and conciliation provisions of the Civil Code and Civil Procedure Code. The proclamation shall apply to commercial related national arbitration, international arbitration whose seat is in Ethiopia and national conciliation proceedings.


However divorce, adoption, guardianship, tutorship, succession, criminal cases, tax cases, judgment on bankruptcy, decision on dissolution of business organizations, all land cases including lease, administrative contracts, trade competition and consumer protection, administrative disputes falling under the powers given to relevant administrative organs by law shall not be submitted to arbitration.


The arbitration agreement shall be in writing, signed by the parties having two witnesses. An arbitration agreement concluded by electronic communication shall be deemed to have been in written form.


With respect to matters falling under the arbitration agreement, the contracting parties may request the court interim measures to be taken before the arbitration proceeding is initiated or during the proceedings. This shall not be considered as violation of the the arbitration agreement by the contracting parties and as intervention by the court.

The Proclamation will be applicable as law governing arbitration in which Ethiopia is designated as a seat of the arbitration and where the contracting parties have not chosen the applicable law. Where the parties have chosen the arbitration law, such law chosen by the parties shall govern the arbitration.

The parties to the contract will choose the number of arbitrators by agreement. Where the contracting parties fail to agree on the number of arbitrators, it shall be three arbitrators.

Where one of the contracting parties fail to appoint the co-arbitrator within 30 days from the date of receipt of the notice by the other party, or where the two arbitrators fail to agree on the appointment of the third arbitrator within 30 days from the date of their appointment or where the contracting parties fail to agree, in case of a sole arbitrator, the First Instance Court shall appoint such arbitrator upon the request of one of the parties.


Where the contracting party who has notifies the other party to participate in the appointment of arbitrator or properly notified to designate a co-arbitrator from his side and if he fails to reply within 30 days or deny the existence of an arbitration agreement, the requesting party shall have the right to cancel the agreement in his own time and submit his suit to the court.

Arbitration Centers may be established by the government or private persons. The details shall be determined by the Regulation. This shall make Ethiopian cities as hubs for arbitration and it is the hope of the writer that the regulation will not be neglected for a long time from being enacted.

One aspect that makes arbitration proceeding lack teeth has been its inability to issue interim measures to protect the interests of the claimant. But in this proclamation, unless the contracting parties agree otherwise, the tribunal may issue an order interim measure upon request made by one the contracting parties. Also where an order for interim measure cannot be enforced, one of the contracting parties may apply to a court for the enforcement of such order.

The proceedings of arbitration such as determination of rules of procedure, place of arbitral tribunal, language, presentation of statement of claim and statement of defense oral and written arguments are stated in detail. In addition to this, the Proclamation provides what happens in case of non-appearance of a party in dispute and intervention of a third party.

The arbitral award shall be in writing and signed by the arbitrator or arbitrators. Where the award is rendered by majority, the signature of the majority shall suffice and the arbitrator who has not signed on the arbitral shall state his reasoning. Correction of clerical errors, numerical errors, unintended and inadvertent omission of words may be requested within 30 days from receipt of the award.

Regarding appeal or application to Cassation, unless the contracting parties agree otherwise in their arbitration agreement, no appeal shall lie to the court from an arbitral award. Also unless there is agreement to the contrary, an application for cassation can be submitted where there is a fundamental or basic error of law.

Execution of an arbitral award shall be done by court. An arbitral award rendered in Ethiopia or in a foreign county shall be deemed to be binding and shall be executed pursuant to the Civil Procedure Code by applying to a court that is empowered to execute the award had the case been heard by a court. The party shall submit the arbitration agreement, the original award or an authenticated copy of the award. The arbitral award brought into Ethiopia for recognition or execution shall be authenticated by the relevant organ, and translated into the working language of the court.

And finally the proclamation state dispute resolution through Conciliation agreement. Contracting parties may express their agreement, in writing or in any other means, to resolve future or existing disputes through conciliation. Conciliation initiated by one party does not get a response within 30 days from the date of receipt of notification from the other party or upon expiry of the date of response, the party who initiate the conciliation may treat this as a rejection of the invitation to conciliate and shall notify the other party is revocation of the invitation.

Where the conciliator believes that there exists a proposal for conciliation that may be acceptable to the contracting parties, he may formulate the terms of the settlement agreement. The parties may sign a written settlement agreement. The conciliator shall authenticate the settlement agreement and furnish a copy thereof to each contracting party. Such settlement agreement shall be deemed to be final and non appealable. The execution shall be made by the court that has material jurisdiction and which is located at the place where the settlement agreement is reached.

In conclusion the Arbitration and Conciliation Working Procedure Proclamation sets the ground work for establishment of alternative dispute resolution in Ethiopia. The Proclamation helps to complement the right to justice, efficient resolution of investment and commercial related disputes. Those areas awaiting the enactment of Regulation by the Council of Ministers should be looked fast and see the realization of the ADR to its fullest extent for the business community and justice sector in Ethiopia.

Reduction of Work Force


By Dagnachew Tesfaye
This brief article will look into the reduction of workforce as envisaged by the Labour Proclamation 1156/2019( hereafter the Labour Proclamation) and Reduction of Work Force Directive No.43/2013(hereafter the Directive). The Directive is a registered directive at the Federal Attorney General’s portal. An attempt to elaborate what reduction of work force means and the procedure of implementing the reduction will be looked in detail. A brief conclusion shall follow.

“Reduction of Workforce” has been defined in the Labour Proclamation as termination of workforce of an undertaking affecting a number of workers representing at least ten percent of the number of workers employed or, in the case where the number of workers employed in an undertaking is between twenty and fifty, termination of at least five employees over a continuous period of not less than ten days.


The expression “number of workers” will have the meaning of the average number of the workers employed by an employer concerned within the twelve months preceding the date when the employer took measures of reduction of workers.

Good causes that justify reduction are stated under Article 28(3) as follows:
a) Any event which entails direct and permanent cessation of the worker’s
activities in part or in whole resulting in the necessity of a terminating a contract of employment; b) Without prejudice to the provisions of Article 18 (5) and (6) i.e. ( full or partial suspension, due to force majeure, of the activities of the employer for a period of not less than 10 consecutive days; or financial problems, not attributable to the fault of the employer, that requires the suspension of the activities of the employer for not less than 10 consecutive days) demand fall for the products or services of the employer resulting in the reduction of the volume of the work or profit of the undertaking and thereby requiring termination of a contract of employment; and c) A decision to alter work methods or introduce new technology with a view to raise productivity resulting in termination of a contract of employment.


The general procedure set forth in the Labour Proclamation is that whenever a reduction of workforce takes place, the employer shall conduct consultation with a Trade Union or workers’ representatives.

However, under the Directive, whenever there is no trade union or existing workers’ representative, the workers shall select their representatives using a selection workers’ committee. Those elected worker’s representatives should obtain majority vote of the workers.

Then the employer shall notify the trade union or workers’ representative in WRITING 30 days prior to implementation of the reduction. The content of the letter shall be reasons for the reduction of work force, how many workers will be affected, which positions are affected, how long the reduction lasts and the criteria for the implementing the reduction.

The employer and workers representative or trade unions shall be holding discussion on the reduction or seeking other options available given the status of the employer that can avoid reduction of workers. Such discussion has a time limit. And it should last within 30 days.

The discussion should enable to release those involved in the reduction with pension, if the option is available. If the employer has new positions opened, then so long as those reduced are compatible, the reduced workers will get priority.

In case of comparable skill and rate of productivity, the workers to be affected first by the reduction shall be in the following order: a) Those having the shortest length of service in the Undertaking; b) Those having fewer dependents; c)The reduction shall affected first workers except those that are listed under (d) up to (e) of this Sub-Article; d) Those employees with disability; e) Those who sustained employment injury in the Undertaking; f) Workers’ representatives; and g) Expectant mothers and mothers within four months post-natal.

Before, implementing the reduction, the employer shall NOTIFY in writing Ministry of Labour and Social Affairs office the reasons for the reduction of work force, how many workers will be affected, how many workers are working in the enterprise, which positions are affected, how long the reduction lasts and the criteria for the implementing the reduction.

There are exceptions. The procedure laid down in the Labour Proclamation shall not apply to the reduction of workers due to normal decrease in the volume of a construction work as a result of its successive completion unless the reduction affects workers employed for parts of the work before the work for which they are employed is completed. Here “construction work” includes the construction, renovation, upgrading, maintenance and repair of a buildings, roads, rail-way lines, dams and bridges, installation of machinery and similar works.

To sum up, reduction of workforce should follow the Labour Proclamation 1156/2019 and its implementation directive Directive No 43/2013. The employer should give in writing an invitation for the workers’ representatives for discussion and the Ministry details about the reduction of workforce. The workers should have their representatives assigned to discuss the reduction of work force with the employer. The employer should initiate the procedure 30 days prior to implementing the reduction and the result of the discussion should last within the 30 days.