THE WORLD BANK GLOBAL JUDGES FORUM

THE WORLD BANK GLOBAL JUDGES FORUM COMMERCIAL ENFORCEMENT AND INLOVENCY SYSTEMS 19-23 MAY 2003. PEPPERDINE UNIVERSITY SCHOOL OF LAW MALIBU, CALIFORNIA ETHIOPIA By Menberetsehai Tadesse, Vice President of the Federal Supreme Court of Ethiopia TABLE OF CONTENTS PAGE 1.0 INTRODUCTION AND OVERVIEW 2 2.0 LEGAL FRAMEWORK FOR CREDITOR RIGHTS 4 3.0 LIQUIDATION 6 4.0 REHABILITATION 10 5.0 INSTITUTIONAL FRAMEWORK FOR INSOLVENCY 11 7.0 CROSS-BOARDER INSOLVENCY 13 8.0 PROPOSED OR PENDING LEGISLATION 14

1.0 Introduction and overview Ethiopia is one of the few countries of Eastern Africa whose modern legislation and Codes are somewhat related to the continental legal tradition. Many of the Codes which have been adopted in the wakes of the 1960s have been drafted by experts with greater influence from the European continental system. The Civil Code of 1960 was drafted by the renowned jurist Rene David. It is not therefore surprising to see many legal concepts of French origin. Neither is it surprising to see some rules in the Civil Code copied verbatim from the Code Civil. The legal system is not, however, fully continental. Some other codes seem to reflect the basic features of the common law and continental system at the same time. A case in point is the Civil Procedure Code of 1965 which draws heavily from the Indian civil Procedure Code. Ethiopia follows a federal form of government. It has therefore Federal as well as Regional courts. The competence of the Federal as well as Regional Governments is laid down in the Constitution itself which was adopted in 1995. The new constitution recognizes the independence of courts, and courts operate independently. Judges in Ethiopia are appointed by the Federal Parliament for the federal Courts and by Regional Parliaments for Regional Courts. Judges can be removed, and only when the parliament approves such a measure, under limited situations. There is a compulsory retirement age at 60. a. secured claims and enforcement The two most commonly practiced types of security under the Ethiopian legal system are pledge and mortgage. Both security devices are governed by rules in the Civil Code of 1960. Most loans to business are secured by immovable property, namely houses. Land is not used as a security for loans because the new constitution prohibits private ownership of land. Under Art 40 of the Constitution of the Federal Democratic Republic of Ethiopia land is declared to belong to the state and Ethiopian people. As a result one can only have the right of use on it and none other. (Rural land was in fact nationalized by the previous government, but was not part of the constitutional order.) Movable goods, claims and other intangibles can also be seized in the form of security for loans. If a claim is secured by pledge, the property must necessarily be delivered to the creditor. The pledgee has all the rights of a creditor on the debtor s property. (2939, Civil Code). The civil Code of 1960 prohibits an agreement to authorize the creditor to sell the pledge in the event of non-payment without complying with the formalities required by law. Such an agreement can only be made after the debt is due. 2851. The creditor of pledge can have the property sold by auction only after fulfilling certain formalities. Once the property is sold, the pledgee has priority rights over all other creditors. Mortgage is the other form of collateral usually used to secure claims. Unlike pledge, mortgage can result from the law or a judgment. The contract creating mortgage must always be in writing and would be of no effect except from the day when it is entered in 2

the registers of immovable property at the place where the immovable is situate. The mortgagee has priority to all other creditors to the extent of the registered claim. 3074. Foreclosure law has however been adopted recently and has modified some of the aforementioned matters as regards banking transactions. Proclamation No. 97/1998. According to Article 3 of this proclamation any agreement whereby the debtor allows the creditor bank to sell the mortgaged or pledged property by auction and transfer the ownership to the buyer is deemed valid notwithstanding Articles 2851 and 3060 of the Civil Code. Furthermore this proclamation allows creditor banks to sell a mortgaged or pledged property by giving a notice of 30 days to the debtor. In such cases the sale is deemed to have been executed on behalf of the debtor. b. Unsecured claims and enforcement An unsecured creditor in Ethiopia can only have his claims enforced through the judicial process. Unless there are explicit terms in the contract that allow the parties to settle disputes through arbitration, one would be forced to institute claims in the courts. Although there are some initiatives to enhance the timely disposal of cases, it may sometimes take a long time before a judgment is rendered. The normal cost for enforcing such claims would include judgment fee, lawyer s fee, and other incidental expenses. The most significant, however, would be the time spent in enforcing the claims. The federal courts have did not have specialized divisions to handle such matters and this has resulted in increment of the procedural time for the disposal of claims. The establishment of specialized divisions within the same court has already been started in the First Instance Court and has shown impressive results within a short period of time. This is the pattern that is in principle accepted by the Court Administration and preparations are made to have specialized benches at all levels. c. Liquidation The liquidation of an insolvent business in Ethiopia is governed by the Commercial Code which was enacted in 1960. Although Ethiopia has opted for a federal form of government recently, enactment of a Commercial code is made a federal power and liquidation therefore is uniform through out the country. Liquidation is basically done through a judicial process which can be initiated by the debtor, by one or more creditors, secured or unsecured, by the public prosecutor or by the court itself. (Art. 976 Comm. Code). In such cases the court can appoint one judge for the purpose of investigating into the affairs and activities of the debtor. (Art. 976 Comm. Code) At the first hearing or on receiving the report of the appointed judge, the court declares the debtor bankrupt. (Art. 977Comm. Code). The bankruptcy proceeding is basically overseen by the court, a commissioner and trustee. The judgment of bankruptcy would appoint a commissioner in bankruptcy and one or more trustees in bankruptcy. (Article 981). Publication of an extract of such judgment is also required. (Article983). The court which has declared a debtor bankrupt has the power to oversee all the bankruptcy proceedings and to make orders on matters which are outside the powers of the commissioner. It also has the 3

power to hear appeals from orders of the commissioner. 989. The commissioner on the other hand has the power to supervise and deal with all matters concerning the bankruptcy estate. The administration of the estate, however, is vested on the trustee, although he is under the supervision of the commissioner. The trustees, the number of which can never exceed three in number, are appointed from a list of qualified persons of good repute resident in Ethiopia. 994. The trustee, like the commissioner is appointed by the court and can only be removed by the same.990. The Code also envisages some role for a creditors committee which is formed by three or five creditors chosen by the commissioner from among all the creditors. The members of the committee may only be removed by the court on the proposal of the commissioner. d. Reorganization Rehabilitation is likewise governed by the Commercial Code of 1960 and is a federal jurisdiction. Rehabilitation is commenced by the debtor himself through a composition submitted to the commissioner. 1081. On receipt of the composition, the commissioner takes the advice of the trustees and the creditor s committee, who notifies the creditors if he thinks that the composition has a merit. The vote of the creditors is needed for the effectiveness of such a composition and it must be approved by two-thirds of the creditors representing two-thirds of the debts. 1084. Such a rehabilitation needs the confirmation of the court which can only be rendered after thorough consideration of the report of the trustees and that of the commissioner.1086. Once such rehabilitation is confirmed by the court in its judgment, it suspends the effects of bankruptcy and is binding on all creditors other than those holding security in rem which they have not relinquished, and unsecured creditors whose claims have arisen during the bankruptcy proceedings. After confirmation, the carrying out of the rehabilitation, which must follow the detailed instructions in the contained in the judgment, is the responsibility of the commissioner, the trustees and the creditor s committee.1088 2.0 Legal framework for creditor rights 2.1 creation and enforcement of security in real property As mentioned earlier, security in real property in Ethiopia relates only to houses, and does not extend to land as land cannot be privately owned. The creation of security in real property had two different forms in the Civil Code of 1960: Mortgage and Antichresis. Antichresis as a form of security device was, however, repealed by the same proclamation which nationalized rulral land. The only form of security on real property currently, therefore, is mortgage. Under the Civil Code mortgage can be created by three distinct modalities. Mortgage can result from the law, from a judgment, and from a contract. The legal mortgage of an immovable secures the claims of a seller and that of a copractitioner. The payment of the price or the performance of any other obligation in a sale of immovable property is secured on the immovable. Likewise a co-partitioner has 4

a legal mortgage on the immovable allotted to his co-partitioners in accordance with the act of partition.3041. Judicial Mortgage comes to the picture when a court of law or an arbitration tribunal secures the execution of its judgments, orders, or awards by granting one party a mortgage on one or more immovables the property of the other party. 3044. The most common form of form of mortgage, however, is the one that results from a contract. The effectiveness of a contract creating mortgage presupposes the fulfillment of a number of conditions. The following are the most important ones. a. the agreement must specify the amount of the claim secured by mortgage. b. it must clearly specify the immovable property mortgaged. c. the person who mortgages the property must be entitled to dispose of the immovable for consideration. d. the mortgage must be entered in the registers of immovable property. Provided that the basic requirements are satisfied, the contract of mortgage gives the creditor a relatively wider protection. a. he may demand to be paid out of the proceeds of the sale of the immovable property when it is attached by the creditors of the mortgagor. b. he may attach the property in the hands of the purchaser where the immovable has been sold by the mortgagor and the rights of the purchaser have been registered after the mortgagee. c. the mortgaged property may be transferred to him after the date is due if there is an agreement to this effect. d. he secures the payment of his claim in priority to the other creditors for the registered amount. The property which forms the mortgage may belong to a third party provided he has the right to dispose it of. The obligation of the mortgagor, in such cases is, however, limited to that property and unless there is an explicit provision to that effect, it would not extend to his other property. 3105. The person who guarantees claims in such a manner is assimilated to the person who acquires an immovable mortgaged. Such rules on securities in real property have been changed if the debt secured is a loan from the bank. Ethiopia has adopted a new foreclosure law which gives banking institutions wider rights than other institutions. Thus unlike other creditors, creditor banks can be authorized by the debtor to sell the property if he does not make the payments in time. Even if there is no such agreement between the parties banks are now given the power to enforce their claims without the intervention of the judicial authorities. Thus the banks can sell the mortgaged or pledged property if the debtor fails to discharge his obligations within 30 days after notice. And the banks sell the property in such cases they are deemed to have sold it under the authorization of the debtor. On the other hand the bank is duty bound to follow the rules of the Civil Procedure Code (rules on sale by public auction) in this process. An office of registrar is envisaged under this proclamation with the powers and duties to take the necessary measures for carrying 5

out the sale by auction. Registrar is defined by this proclamation to mean a Regional or City organ responsible for registering an immovable property or in the case of pledge an organ with the power to witness the signing of a contract of pledge and deposit same. 2.2 securities in personal property Security in personal property is likewise governed by the Civil Code of 1960. The requirements for the validity of such forms of security, is not however, as stringent as that of mortgage. a. written form is not always a requirement for validity of the contract of pledge. b. the pledgor need have the rights to dispose of the property. c. registration of the contract of pledge is not a requirement. A contract of pledge by definition is an agreement whereby the pledgee agrees to deliver a thing to his creditor as security for the performance of an obligation. As such the creditor is deemed to be in possession of the chattel where the document of title without which the pledge cannot be disposed of has been delivered to him. The maximum amount needs to be specified in the contract of pledge. The contract of pledge gives the pledgee the following rights. The pledgee gets the rights of a creditor on the debtor s property. He may make use of the pledge with the permission of the pledgor. He can collect fruits from the pledge and they become his property. He can bring possessory actions in respect of the pledge. He can have the property sold by public auction if the debtor fails to discharge is obligation He has the right to be paid before all other creditors out of the proceeds of the sale of the pledge. 2.3 Unsecured claims If a claim is unsecured, its enforcement will heavily depend on the amount of property of the debtor on which the creditor can lay hands on. The creditor will have in such cases to attach any other property of the debtor that can cover his claims, and even then will have to compete with other creditors, if there are some. If a judgment is rendered in favor of the debtor, the property of the judgment debtor can be sold to satisfy the debt. And this is usually done by selling the property by auction through the execution department in the courts. There are some minor differences in selling movable and immovable property in such cases. 3.0 Liquidation 3.1 principal laws governing liquidation 6

Liquidation is principally governed by the Commercial Code of Ethiopia. The Code was enacted in 1960 and has not been changed since. One finds some additional provisions in the Civil Code and Civil Procedure Codes as well. The Commercial Code which is composed of five titles devotes one separate title for Bankruptcy and schemes of arrangement. Thus Articles 968-1165 deal with such matters. General rules of Contract are incorporated in the Civil Code which was enacted in 1960 and the Commercial Code draws heavily from such basic principles. As regards liquidation, however, the commercial Code is relatively complete. The Ethiopian state is a Federal Republic and as such state powers are divided between Federal and Regional State laws. The Federal state has enumerated powers (Article 52). Whereas the Regional States have residual powers. The enactment of commercial code is however clearly given to the Federal Parliament under Article of the constitution. Anything that falls within the ambit of the commercial Code is, therefore, an exclusive jurisdiction of the Federal Government and as a result Regional States are not allowed to pass legislation on the same subject matter. courts which administer liquidation Liquidation being federal by subject matter, the administration of liquidation is entrusted to the Federal Courts. The federal constitution basically envisages parallel court system in the federal and the regional states. Thus the Federal judiciary has the Federal First Instance Court, the Federal High Court and The Federal Supreme Court. The Regional States likewise do have first instance courts, high courts and supreme courts with different nomenclatures. The existence of parallel Federal Courts is, however, accepted only in principle. Federal Courts are established in the Capital Addis Ababa and in Dire Dawa, and no such courts until recently existed in the other Regions. (The Federal Parliament has issued a new proclamation establishing federal courts in five regions.)the same constitution has delegated the adjudication of federal matters in the regional states to the regional courts. Thus, federal matters in the regions are in fact litigated in the regional courts. Matters falling under the jurisdiction of the Federal High Court are delegated to the Regional Supreme Court, and matters that fall under the jurisdiction of the Federal First Instance Court are delegated to the Regional High Court. This arrangement has significant implications to business matters. Liquidation of Business organizations is, for example, clearly the jurisdiction of the Federal High Court. Given the constitutional delegation, however, this would only mean that liquidation would be considered by the Regional Supreme Court, if the business is situate in the Regions. commencement of Liquidation Proceedings on liquidation can be initiated by either of the following. The creditor, the public prosecutor, the court itself, the heir (to prevent the assets of the succession from being mixed with his own property).980 comm.code. After the initiation of the proceedings the court may it thinks it to be expedient can appoint a judge for the purpose of investigating into the affairs and activities of the debtor. The judge who is so 7

appointed can get the assistance of a trustee if so requires. The appointed judge has the duty to report his findings to the court.976 comm.code. The judge must fix the date for suspension and declare the debtor bankrupt on the first hearing, or when appropriate, on the date when the report by the appointed judge is submitted. 977 comm.code. In the judgment of bankruptcy the judge is duty bound to appoint the commissioners and one or more trustees in bankruptcy. 981 com. Code. Extracts from the judgment are sent to the debtor, the trustee, the public prosecutor and the petitioning creditor no later than the day following judgment. The extract contains the names of the parties, the operative part and the date of the judgment. In addition, the registrar of the court posts an extract of the judgment at the main entrance of the court on the day following the judgment and it shall remain so posted for a period of three months. Similar copies are sent to the official in charge of the commercial register with a view to varying the entry in the register. Finally an extract is published in the newspaper empowered to publish legal notices circulating at the place where suspension of payments took place and at all places where the debtor carries business. 983 comm.code. 3.4 Parties to Liquidation The parties to liquidation are mainly the creditors and the debtor. In situations where the petition for insolvency is lodged by the public prosecutor the public prosecutor would be a party to the proceedings. It should, however, be remembered that the commissioner and the trustee would also be involved in the whole process. The position of such Parties would depend on who initially applies for the liquidation. 3.5 Liquidation Estate Once liquidation is initiated a balance sheet of the property of the debtor is prepared by the trustees and the original copy of the balance sheet is deposited with the registrar of the court. Such a balance sheet must be based on the books, documents, papers and other information as are available to the trustees. 1014 comm.code. The trustees can employ suitable persons, with the consent of the commissioner, to prepare the inventory and valuation of the debtor s property. The debtor should however be summoned by registered mail requiring him to make an acknowledgment. The public prosecutor has the power right to be present at the time of preparation of the inventory and to inspect at any time any documents books and papers in bankruptcy proceedings. When the inventory is completed, all goods, money securities, books, papers and documents, furniture, and chattels of the debtor shall be handed to the trustees and a note of such handling over shall be make at the foot of the inventory. Articles 1017, 1018, comm. Code. 3.6 Administrative Powers The liquidation process is supervised by the court, the commissioner, the trustees and the creditor s committee. The powers and responsibilities given to these entities vary, and so does their level of accountability. The court which gave the bankruptcy supervises all the bankruptcy proceedings and can give orders on matters which are outside the powers of the commissioner. The commissioner on the other hand, ha the power to supervise and 8

deal with all matters concerning the bankrupt estate. Article 991. Comm. code. He also has the duty to take all the necessary measures to preserve the assets of the debtor. Orders of the commissioner must always be deposited and all interested parties must be notified of the matter by registered mail. Trustees, which are court appointed, are responsible for the administration of the bankrupt estate under the supervision of the commissioner. The trustees represent the universality of creditors in relation to third parties. The trustees may with the permission of the commissioner sell all depreciable or perishable items if their preservation is costly. Although the trustees can sale other movables with the permission of the commissioner, they always need the permission of the court to sell the business. The creditor s committee is composed of three to five creditors chosen by the commissioner from among all the creditors. This committee has mainly an advisory role and gives its advices when such is required by law or when such is desirable. Article1003 comm. Code. 3.7 Creditors and Claims After the adjudication, the creditors have to produce to the trustees proof of their debts showing the sums claimed. When the creditors submit their claims the trustees would issue receipts for the proofs produced. The trustees are duty bound to return the proofs when the bankruptcy proceedings are over. Article 1041. When some creditors whose names appear on the balance sheet fail to produce proofs within fifteen days, the trustees must ask them to produce their proofs through notice in the newspaper empowered to receive legal notices. 1042 Once such documents are received, debts are verified by the trustees in the presence of the creditor s committee or its representative and the debtor. If the debtor does not show up on his own will he must be summoned by a registered mail. If the debts are approved by the trustees, the inventory of debts is deposited with the registry showing the proofs admitted and the proofs rejected. The registrar would then inform the creditors by a registered mail of the deposit and of the debts that has been rejected.1045. When debts are contested they are referred by the registrar to the first hearing to be judged upon the report of the commissioner. This is done after the parties are notified by a registered mail. (1048) Creditors who have security in rem and whose security is contested may join in the proceedings as an unsecured creditor. 1051 creditors failing to lodge their claims in time will have not claim in the distributions if they show up after the distribution but can deduct from the undistributed assets the dividends relating to their claims in the firs distributions. All proceedings for proving debts should be concluded not later than five months from the date of the judgment in bankruptcy unless such period is extended by the commissioner for exceptional reasons.1054 The commercial code has details as regards rights of creditors secured by a guarantee on movables other than business on mortgages and creditors secured by immovables and right of creditors secured by a mortgage on the business. It has a separate section for each of these. Articles 1058-1072 9

4.0 Rehabilitation 4.1 Overview of schemes of rehabilitation Rehabilitation is started when the bankrupt proposes a composition with the creditors and such is submitted to the commissioner. Such a proposition must necessarily specify the percentage offered to unsecured creditors and the period of time required for payment. It shall show the guarantees to cover the payment of debts, legal cost and the remuneration of the trustees. The commissioner must in such cases seek the advice of the committee of creditors and if the commissioner believes that the proposal has merits, he would cause the creditors to be notified through a registered letter. Such a notification must state a period not less that twenty days and not more than thirty days within which the dissenting creditors may file with the registry their refusal to accept the proposed composition. The creditors would then take a vote and the composition would be of no effect unless it is approved by two thirds of the creditors representing two-thirds of the debts. 1084. Composition must be confirmed by the court. 4.2 courts which administer reorganization Reorganization, or scheme of arrangement, as it is called in the Ethiopian Legal system, is a court supervised process. Such matters fall within the jurisdiction of the federal high court. If such issues arise in the regional states, the matter would be handled by the regional Supreme Court because of the constitutional delegation mentioned above. 4.3 commencement of reorganization Reorganization is commenced when a trader who has or is about to suspend payments and has not been declare bankrupt applies to a court of law for the opening of a scheme of arrangement. The application for reorganization can only be accepted by the court if it includes the balance sheet of the firm, the profit and loss account, a list of commercial credits and debts, with the names and addresses of the creditors and debtors. The debtor must file these documents together with a report giving the reasons for his suspension or impending suspension of payments, and the reasons for his proposing a scheme of arrangement. The debtor shall also show that a he has been registered in the commercial registry b. that he has been keeping proper accounts c. that he has not been declared bankrupt, nor made scheme or reorganization d. that he has not been convicted of offences under 680-688 of the Penal Code. 4.4 participants and their roles In this process of reorganization, the debtor, courts, the commissioner and the creditors are involved. 10

Courts are involved in processing the application and in giving the final confirmation for the scheme of reorganization. The commissioner is there to supervise the whole process of reorganization. He particularly has the duty to prepare the inventory of the debtor s estate. He has to check the list of debtors and creditors of and prepare a detailed report on the affairs and conduct of the debtor, on the proposed scheme and the guarantees offered to creditors. The creditors should consider the scheme in a meeting chaired by a delegate judge. The scheme of arrangement must be approved by a majority of creditors representing not less than two-thirds of all non-preferred or unsecured debts. must approve the scheme1140 comm.code. 4.5 reorganization Estate The estate always remains under the administration of the debtor himself through out the course of proceedings under the scheme of arrangement. He also manages his business. The debtor is however, supervised by the commissioner and the delegate judge. Etither of them can at any time inspect the books and accounts. 4.6 Administrative powers Administrative powers are given to the delegate judge as well as to the commissioner who are duty bound to report to the court. As mentioned earlier, the commissioner and the delegate judge can at any time inspect the account of the debtor who is under the scheme of arrangement. 4.7 Creditors and claims The creditors have the right to veto down the application of the debtor for a reorganization. There are however, important effects that emanate from the application for such scheme. After the application has been made and until the final confirmation of the scheme, no creditor holding a claim arising prior to judgment may disdain, acquire a preferred right over the debtor s property or register a mortgage. Like wise prescriptions, pereptions, and forfeitures are suspended. On the other hand gifts and other gratuitous acts or acts by way of guarantee done by the debtor during the proceedings shall not be set up against the creditors. 5.0 Institutional framework for insolvency 5.1 role of Governing Institutions/Judicial Authorities As has been indicated in the previous paragraphs the courts play significant role in the process of insolvency. All other institutions involved in connection with insolvency work under the general supervision of the of the judicial organs. Although commissioners, trustees and in some delegate judges play an important in the routine 11

activities, they are to begin with appointed by courts and can also in many cases removed by courts. The applications are submitted to courts, they are processed in the courts, the final declaration of bankruptcy is declared by the courts. Application to set the judgments aside are also submitted to the courts and many other orders in connection to the proceeding can only be made by the courts. 5.2 Specialization among courts/judges and tribunals Important as the position of courts is in the insolvency proceedings, there are no specialized courts or tribunals to handle such cases. Cases pertaining to insolvency are handled by courts which have general competence and the judges sitting in such benches more often than not have only a general training in law. It is not that the administration in the judiciary does not appreciate the importance of specialized benches, but the number of judges has been quite few compared to the backlog in the courts and assigning specialized benches has simply been practically impossible. 5.3 Organization of the court The federal courts, as well as the regional courts, have a three tier system, namely: the first instance court, the high court and the supreme court. Case the value of which is less that 500, 000 Birr begin at the lowest level and can go on appeal up to the highest level. Matters that are worth more than 500, 000 thousand begin at the high court and can go on appeal to the federal supreme court. The division of cassation at the supreme court has the power to review cases if it believes that there is fundamental error of law. Federal matters are delegated to the Regional courts provided the local jurisdiction is theirs. Thus although matters falling under the commercial code are basically under the competence of the Federal Government adjudication of disputes that arise in the regions is handled by the Regional courts. (Article 78 and 80 of the constitution) 5.4 Court Operations Court operations are not based on modern systems of case management. Since recently, however, there are efforts to modernized court operations. The Court Administration Reform Project has succeeded in modernizing court operations. Because of this project, the Federal Courts are now in a position the set standards for court performance and attempts are being made to put some techniques of case flow management in place at all levels of the court system. This has shown impressive results. It has made the Federal Courts more accountable, more efficient and more accessible. Judicial Decision Making The judicial decision making process is more of an inquisitorial type in principle. The courts have wide powers in soliciting evidence and in guiding the whole process. The adversarial pattern is, however, what is seen in practice. The pace of the whole process is usually determined by the litigants more than by the judges sitting on the bench. Until recently the principles of case flow management were unknown in the Ethiopian legal 12

tradition. Thus courts were not bound as regards the number of cases they would decide in any given period of time. Neither were they accountable for the number of adjournments they give in the process. This was manifested in unlimited number of adjournments on any one case. Delay was thus the basic feature of the Ethiopian legal system. This is now being changed. Time standards are now being introduced at all levels and judges are now being made accountable for their decisions, both in terms of quality and quantity. 5.6 Appellate Process Appeal is allowed in almost all cases in the Ethiopian legal system. Thus every decision rendered by a court of law is subject to review by a higher court. There are court fees in the appellate courts but a party would pay half as mush as he would in the firs court. The appellate courts do have relatively wide powers to review errors of law and errors of fact committed in the lower courts. A division of cassation is also available to litigants who can show that a fundamental error of law has been made in the final decision of the lower courts. This recourse is available to all litigants, whether their cases have been handled by the federal or regional courts. The appellate courts sit as a panel of three where as the division of cassation sits as a panel of five. All courts sitting as a first instance in civil cases have only one judge, and appellate courts always have three. Any one who wants to have the case heard needs to lodge the memorandum of appeal to the appellate court in 60 days, and if it is to the division of cassation in 90 days. Appeal on arbitral awards follows more or less the same pattern. 5.7 Institutional Integrity Although things are changing for the better, the perception of the general public was that courts lack the appropriate judicial integrity. Many litigants still believe that their case would not move unless they make some pay offs. I have to add a personal note that this is mainly a hung over of the past. The judicial administration commission makes all the necessary precautions to appoint people with high integrity. One cannot say that this has succeeded fully, but the institutional integrity and the performance of the Ethiopian courts and particularly that of the Federal courts is improving significantly. The independence of the judiciary is guaranteed by the constitution and they operate independently and occasions of intervention are faced with strong resistance from the judiciary. 7.0 Cross-Boarder Insolvency This matter is handled by the Civil Procedure code of 1965. Under Article 458 of this Code application for the execution of foreign judgments can be permitted by an Ethiopian court if a. the execution of Ethiopian judgments is allowed in that country b. the judgment was given by a dully established and constituted court 13

c. the judgment debtor was given the opportunity to appear and present his defense d. the judgment is final and enforceable e. execution is not contrary to public order and morals. Enforcement of foreign awards needs the elements mentioned above. The following requirements must be satisfied, in addition. Article 461 a. the award must have been made in following a regular arbitration agreement or other legal act in the country where it was made b. the parties have had equal rights in appointing the arbitrators and they have been summoned to attend the proceedings. c. the award does not relate to matters which under the Ethiopian laws could not be submitted to arbitration or is not contrary to public order or morals. d. the award is of such a nature as to be enforceable on the conditions laid down in Ethiopian laws. Conflict of Laws Issues In spite of its importance the not such law exists in the Ethiopian legal system. At least we do not have it as a comprehensive and organized branch of law. The need for conflict of laws has been exasperated by the introduction of the federal system in the country. As a result of the federal arrangement we are having different laws on similar matters. Commercial Code is fortunately within the jurisdiction of the federal government and the need of conflict of laws does not very likely arise as regards transactions taking place in different parts of the country. The point, however, remains that the enactment of a piece of legislation governing conflict of laws is a highly felt need. The Justice Reform Program which is underway has taken this as one possible area for intervention. In line with that the Justice and Law Research Institute is considering the preparation of a draft legislation in connection to conflict of laws. The adoption of such a law would fill in the gap in this area. One may wonder how the judiciary addresses matters in connection with such issues. Well courts usually give their decisions based on some basic principles that have been applied in other countries. In the absence of a formal legislation one cannot expect more. 8.0 Proposed or pending legislation The Ethiopian government is now in the process of overhauling the justice system within a general package of Comprehensive Justice Reform Program. This program includes amongst many other things the revision of the basic laws which have been in force for about half a decade now. The basic premise for revising the basic codes is to make them compatible with the new Constitution which has come up with some new principles and new arrangements. Apart from that, the program aspires to make the legal system conducive for private investment and for free exercise of the basic rights that have gained acceptance in many international instruments. 14

Along these lines the Commercial Code which governs many of the areas covered hereinbefore is under revision. It is hoped that the new draft will rectify problems that have been felt in the Code that is in force and will also accommodate the current needs of the Ethiopian context in light of developments and future prospects in the country and internationally. The new draft is prepared under the auspices of the Ministry of Justice. Many experts in the field have been involved in the process, and it is our hope that their imprints would be reflected in the final version. The process of revision is not however limited to the commercial Code. Many other Codes including the Civil Code, the Civil Procedure Code and many other pieces of legislation are likewise going through the same process. Revision of the Penal Code and the Criminal Procedure Code has in fact been finalized and is being considered by the Federal Parliament for a final decision. 15