The Forgotten Commercial Code Revision

Nov 9 , 2019
By Dawit Tadesse

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The current Ethiopian government has been working hard for the last year to reform the economic road map of Ethiopia. The Homegrown Economic Reform Agenda has been introduced. To implement this policy on the ground, the government has been revisiting Ethiopian investment proclamations.

I believe revising these laws is commendable, but this revision will not radically change the business environment of the country. The major revision in these laws is just to open some sectors for foreign investors and reducing the confining nature of the laws on the books.

However, the major problem of doing business in Ethiopia emanates from the Commercial Code and related laws. The Ethiopian business laws such as the investment proclamations are good enough to attract domestic and foreign investment into Ethiopia, but the problems start to happen after these investments begin to operate in the country. This is because most of the business laws and regulations including tax laws are not clear or updated. As such, they are subject to different interpretations.

Therefore, the Ethiopian government must do major surgery on business laws, especially on the Commercial Code, to radically change the business environment of Ethiopia.

The existing Commercial Code of Ethiopia was ratified in 1960. Despite its strong qualities, it fails to fully address the dynamism of commercial transactions of the real and virtual world. The amendment of the Commercial Code was among the suggested recommendations of the World Trade Organization.  It has been a while since the then Ministry of Justice (currently renamed the Office of the Attorney General) has been working on the revision of the Code even if no one seems to know when this revision will be finished and ready for implementation.

The 1960 Commercial Code of Ethiopia is comprised of five books with each having several titles, chapters, sections and hundreds of individual articles covering a range of matters in the field of commerce. It was drafted long before many of the financial innovations and technologies of today.

The world has changed. There are new things like virtual companies, digital currencies, electronic contracts, digital signatures, data protection and e-commerce that were not part of the 1960s business world.

Of course, it is understandable that the revision exercise of such an important branch of private law with close to 1,200 articles is a relatively tedious and cumbersome undertaking. It requires looking into the subject matter intended to be regulated by every single article and drawing comparisons with a host of related legal, organisational and economic concepts.  A summarized position paper on the revised draft version is quite difficult to come by.

However, the law has to be drafted to enable businesses to create jobs, prosperity and make innovations easy to compete in the global village.  As an investment advisor and academic in Ethiopia, I am working with many international investors and the local business community. I have many opportunities to listen to the demands of these investors. One of their major demands is the revision of the Commercial Code and its rapid implementation on the ground.

The delay of the Commercial Code revision makes many international investors slow down their investment decisions to invest in Ethiopia. It is very difficult for rational investors to commit their resources in a country where its commercial transactions are governed by outdated laws and regulations drafted close to 60 years ago.

The current government desperately needs to grow the economy. But it will not achieve this goal without creating a conducive environment for doing business through drafting and implementing a revised version that addresses the dynamism of commercial transactions in the business world today.

The government must accelerate the revision and in the meantime update the progress of the revision to the business community and other stakeholders regularly. That will help the business community in investment planning.

There should be better transparency and collaboration with the business community. If the government is constrained by lack of resources or expertise, it should work closely with the business community and other stakeholders to fill that gap. There are many stakeholders who have a big interest in this code revision who will only be too happy to help.

If the law is badly drafted with little emphasis given to innovation and modern businesses, it will be a major impediment for the country. Achieving this aim will not be an easy task, and it needs a lot of able lawmakers with a broader view of the world and in-depth intellectual capital.

The current government’s effort to reform the economy must go hand in hand with the quick revision of the Commercial Code and its rapid implementation on the ground. In this dynamic business environment, to provide what businesses need on time is a wise choice.

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PUBLISHED ON Nov 09,2019 [ VOL 20 , NO 1019]

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