Legislative and Judicial System

The 1960 Trade Code provides the legal framework for undertaking activities in Ethiopia. It contains detailed provisions for traders and entrepreneurs, companies, carriers and bankruptcies, etc. The Code is being revised to adapt new business concepts.

The 2002 Investment Code has also been amended to make it compatible with good governance.

The practice of law is reserved for Ethiopians. However, foreign nationals have the right to appear before the Court as a witness. In such cases, the foreigner may use the support of a translator appointed by the Court.

Ethiopia is a signatory to the International Convention on Investment Dispute Settlement (CIRLI), the World Bank agreement on arbitration of disputes between states and nationals of other states. The recognition and enforcement of foreign judgments as well as arbitral awards are conditioned by reciprocity and based on legal assistance agreements.

The 1995 Constitution provides for the protection of persons and property. Articles 14-18 of the Constitution list several guarantees of individual rights, including rights to freedom and equality before the law. Article 40 ensures the right of every citizen with respect to the possession of private property, including the right of acquisition, the right to use and dispose of such property at the owner’s convenience. The Investment Proclamation also gives the foreign investor the right to dispose of a residential home and other immovable property necessary for his investment.

The Government may make use of expropriation in the public interest, strictly in accordance with the law and after adequate compensation. Article 21 of the Declaration on Investment (2002) is a guarantee for investors against expropriation or nationalization measures, and Article 21.2 specifies expectations of payment of compensation “corresponding” to market value. of an investment intended to be nationalized in the general interest.

Institutional Structure
The 2002 Declaration on Investment, as amended in 2003 and again in 2008, and the Investment Incentives Regulations, constitute the main legal structure for foreign and local investment in Ethiopia.

The selection and registration
The minimum capital requirement for a single project is 100,000 US dollars. As a result, if the foreign investor invests in partnership with a local investor the minimum capital claim from him is US $ 60,000 per project. 
A foreign investor who wants to invest in Ethiopia must first obtain a permit. 
Along with the application for an investment permit, the following documents must be submitted to the AEI Licensing and Registration Department:

·         A lawyer’s power of attorney in the case of a request made through an agent

·         For an individual investor, photocopies of the relevant pages of the passport as well as 2 passport-type photos

·         For companies established in Ethiopia, the statutes of association

·         For recent companies, in addition to the 3 documents above, provide photocopies of the passport pages of each shareholder

·         As part of an investment by a subsidiary of a foreign company in Ethiopia, provide copies of the articles of association of the parent company

·         For joint investments by foreign and local investors, in addition to the 3 documents above, provide photocopies of identity cards or legal documents certifying the status of local investor.

After the issuance of investment permits and business licenses, the Ethiopian Investment Agency has the obligation to entrust the relevant case to the competent governmental bodies.

After the acquisition of the land (60 days) and the building permit (in 1 or 2 days), the investor is advised to do it as soon as possible for utility connections. According to the Ethiopian Telecommunications Society, it takes about a week to connect landline lines, and three days to get mobile phone services. The Ethiopian Electric Power Company needs 2 to 4 weeks to supply electricity. On the other hand, the Addis Ababa Water and Sewer Authorities need 4 to 5 days to provide access to the water.

Article 35.4 gives the AEI the responsibility to facilitate the allocation of land to approved investments. In addition, the AEI also facilitates access to utilities, such as water, electricity and telecommunications, for investors who own land.

Liability issues

The AEI is authorized by law to approve all FDI, regardless of the size or type of investment. 
All companies in Ethiopia are governed by the Commercial Code (1960). According to this Code, several forms of business may be adopted by Ethiopian companies. The most common is the LLC and the SA. It takes at least two people to create an LLC, and at least five for a SA. 
An individual investor can also be sole proprietor in most sectors, participating fully in the capital. Sectors open to investment in partnership with the Government include the manufacture of weapons, ammunition and telecommunication services.
Otherwise, the law encourages joint ventures with Ethiopians and Ethiopian companies. Companies wholly or partially owned by foreigners may sell their shares to Ethiopian or local investors in accordance with the law. However, there is no stock market to facilitate quick access to shares.

Building Permits
Municipalities allocate land to industries and services according to strategic provisions. After the acquisition of land, the investor applies to the authority concerned to obtain a building permit. This authority can specify the type and height of buildings for a particular site. Once the investor submits his construction project to the authority for final approval, permits should normally be ready after a few days. The Infrastructure and Construction Authority of the Municipality of Addis Ababa, for example, ensures that it can issue building permits in one day upon receipt of the project.

Acquisition and access
Despite the provisions of Articles 390-393 of the Civil Code, which essentially prohibit foreign ownership of immovable property except by “imperial order”, Article 38 of the Declaration on Investment (2002) gives a foreign investor the right to own a home and other real estate property necessary for its investment.

Access to capital
Legally established foreign companies in Ethiopia have access to local bank loans. Exporters also have access to external loans and supplier and associate credits, as directed by the National Bank of Ethiopia (BNE). Foreign investors must register their investment capital, external loans, supplier credits or associated loans with the BNE.

Lands
The 1993 declaration on urban lands gives investors the right to use the land during the lease period up to 99 years. The land can not be mortgaged or sold, but the value of the lease as well as the fixed assets can be transferred to a third party.
State and municipal governments are allowed to allocate rural or urban land without tax or lease, according to the provisions of the law. Investment projects in social services, such as hospitals and educational institutions, land are acquired without taxes, while export investment arrangements can obtain land with a lease at a reduced price. All other projects can obtain land through public auctions or by negotiation with competent authorities. Regional governments are expected to allocate land within 60 days of receipt of applications.

Outputs
The Government has not yet decided on a specific exit policy for FDI. However, the Ethiopian Trade Code (1960) provides for one for the dissolution and closure of legally established enterprises. One of the legitimate reasons for the dissolution of joint stock companies, for example, may come from the decision of an Extraordinary General Meeting of Shareholders. Having chosen the liquidation, the General Meeting must appoint the liquidators when appointment provisions are not made in the memorandum or the articles of association of the company. The liquidators must follow the rules and procedures of the Commercial Code when liquidating the company per share. LLCs and joint ventures may be voluntarily liquidated in accordance with the provisions of the memorandum, of the articles of association of the company and the Code of Commerce. Liquidation procedures for joint ventures must also take into account joint venture agreements.

No capital restrictions are imposed on foreign investors who restructure their profits, dividends or export at least 75% of their products. A foreign investor is not allowed to invest in sectors exclusively reserved for the Government, Ethiopian nationals and local investors. According to the updated Investment Code, a foreign investor intending to buy a business or the shares of an existing business must obtain a permit from the Ministry of Trade and Industry. There are no geographical or other restrictions.

Technology transfers are not limited by their nature or the cost of technologies. According to the updated Investment Code, technology transfer agreements will now only be registered by the AEI, and not just approved as it was in the past.

Regulatory Structure

Legislative and Judicial System

The 1960 Trade Code provides the legal framework for undertaking activities in Ethiopia. It contains detailed provisions for traders and entrepreneurs, companies, carriers and bankruptcies, etc. The Code is being revised to adapt new business concepts.

The 2002 Investment Code has also been amended to make it compatible with good governance.

The practice of law is reserved for Ethiopians. However, foreign nationals have the right to appear before the Court as a witness. In such cases, the foreigner may use the support of a translator appointed by the Court.

Ethiopia is a signatory to the International Convention on Investment Dispute Settlement (CIRLI), the World Bank agreement on arbitration of disputes between states and nationals of other states. The recognition and enforcement of foreign judgments as well as arbitral awards are conditioned by reciprocity and based on legal assistance agreements.

The 1995 Constitution provides for the protection of persons and property. Articles 14-18 of the Constitution list several guarantees of individual rights, including rights to freedom and equality before the law. Article 40 ensures the right of every citizen with respect to the possession of private property, including the right of acquisition, the right to use and dispose of such property at the owner’s convenience. The Investment Proclamation also gives the foreign investor the right to dispose of a residential home and other immovable property necessary for his investment.

The Government may make use of expropriation in the public interest, strictly in accordance with the law and after adequate compensation. Article 21 of the Declaration on Investment (2002) is a guarantee for investors against expropriation or nationalization measures, and Article 21.2 specifies expectations of payment of compensation “corresponding” to market value. of an investment intended to be nationalized in the general interest.

Institutional Structure
The 2002 Declaration on Investment, as amended in 2003 and again in 2008, and the Investment Incentives Regulations, constitute the main legal structure for foreign and local investment in Ethiopia.

The selection and registration
The minimum capital requirement for a single project is 100,000 US dollars. As a result, if the foreign investor invests in partnership with a local investor the minimum capital claim from him is US $ 60,000 per project. 
A foreign investor who wants to invest in Ethiopia must first obtain a permit. 
Along with the application for an investment permit, the following documents must be submitted to the AEI Licensing and Registration Department:

·         A lawyer’s power of attorney in the case of a request made through an agent

·         For an individual investor, photocopies of the relevant pages of the passport as well as 2 passport-type photos

·         For companies established in Ethiopia, the statutes of association

·         For recent companies, in addition to the 3 documents above, provide photocopies of the passport pages of each shareholder

·         As part of an investment by a subsidiary of a foreign company in Ethiopia, provide copies of the articles of association of the parent company

·         For joint investments by foreign and local investors, in addition to the 3 documents above, provide photocopies of identity cards or legal documents certifying the status of local investor.

After the issuance of investment permits and business licenses, the Ethiopian Investment Agency has the obligation to entrust the relevant case to the competent governmental bodies.

After the acquisition of the land (60 days) and the building permit (in 1 or 2 days), the investor is advised to do it as soon as possible for utility connections. According to the Ethiopian Telecommunications Society, it takes about a week to connect landline lines, and three days to get mobile phone services. The Ethiopian Electric Power Company needs 2 to 4 weeks to supply electricity. On the other hand, the Addis Ababa Water and Sewer Authorities need 4 to 5 days to provide access to the water.

Article 35.4 gives the AEI the responsibility to facilitate the allocation of land to approved investments. In addition, the AEI also facilitates access to utilities, such as water, electricity and telecommunications, for investors who own land.

Liability issues

The AEI is authorized by law to approve all FDI, regardless of the size or type of investment. 
All companies in Ethiopia are governed by the Commercial Code (1960). According to this Code, several forms of business may be adopted by Ethiopian companies. The most common is the LLC and the SA. It takes at least two people to create an LLC, and at least five for a SA. 
An individual investor can also be sole proprietor in most sectors, participating fully in the capital. Sectors open to investment in partnership with the Government include the manufacture of weapons, ammunition and telecommunication services.
Otherwise, the law encourages joint ventures with Ethiopians and Ethiopian companies. Companies wholly or partially owned by foreigners may sell their shares to Ethiopian or local investors in accordance with the law. However, there is no stock market to facilitate quick access to shares.

Building Permits
Municipalities allocate land to industries and services according to strategic provisions. After the acquisition of land, the investor applies to the authority concerned to obtain a building permit. This authority can specify the type and height of buildings for a particular site. Once the investor submits his construction project to the authority for final approval, permits should normally be ready after a few days. The Infrastructure and Construction Authority of the Municipality of Addis Ababa, for example, ensures that it can issue building permits in one day upon receipt of the project.

Acquisition and access
Despite the provisions of Articles 390-393 of the Civil Code, which essentially prohibit foreign ownership of immovable property except by “imperial order”, Article 38 of the Declaration on Investment (2002) gives a foreign investor the right to own a home and other real estate property necessary for its investment.

Access to capital
Legally established foreign companies in Ethiopia have access to local bank loans. Exporters also have access to external loans and supplier and associate credits, as directed by the National Bank of Ethiopia (BNE). Foreign investors must register their investment capital, external loans, supplier credits or associated loans with the BNE.

Lands
The 1993 declaration on urban lands gives investors the right to use the land during the lease period up to 99 years. The land can not be mortgaged or sold, but the value of the lease as well as the fixed assets can be transferred to a third party.
State and municipal governments are allowed to allocate rural or urban land without tax or lease, according to the provisions of the law. Investment projects in social services, such as hospitals and educational institutions, land are acquired without taxes, while export investment arrangements can obtain land with a lease at a reduced price. All other projects can obtain land through public auctions or by negotiation with competent authorities. Regional governments are expected to allocate land within 60 days of receipt of applications.

Outputs
The Government has not yet decided on a specific exit policy for FDI. However, the Ethiopian Trade Code (1960) provides for one for the dissolution and closure of legally established enterprises. One of the legitimate reasons for the dissolution of joint stock companies, for example, may come from the decision of an Extraordinary General Meeting of Shareholders. Having chosen the liquidation, the General Meeting must appoint the liquidators when appointment provisions are not made in the memorandum or the articles of association of the company. The liquidators must follow the rules and procedures of the Commercial Code when liquidating the company per share. LLCs and joint ventures may be voluntarily liquidated in accordance with the provisions of the memorandum, of the articles of association of the company and the Code of Commerce. Liquidation procedures for joint ventures must also take into account joint venture agreements.

No capital restrictions are imposed on foreign investors who restructure their profits, dividends or export at least 75% of their products. A foreign investor is not allowed to invest in sectors exclusively reserved for the Government, Ethiopian nationals and local investors. According to the updated Investment Code, a foreign investor intending to buy a business or the shares of an existing business must obtain a permit from the Ministry of Trade and Industry. There are no geographical or other restrictions.

Technology transfers are not limited by their nature or the cost of technologies. According to the updated Investment Code, technology transfer agreements will now only be registered by the AEI, and not just approved as it was in the past.