Chapter VII: Investment opportunities and Forms in Ethiopia

Investment Opportunities in Ethiopia

Ethiopia endeavours to become a middle income country &
Leading manufacturing hub in Africa by2025
The target is broader than a quantitative target that comprises
aggressive poverty reduction and advances in health ,education &
the environment
The three key pillars to achieving the target are economic, social,
and environmental developments
(a) An economic development focuses on light manufacturing
mostly textile leather garment & agro-processing.

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 Investment plays an increasingly vital as a source of development
finance and economic competitiveness;
 Its in recognition has been put in place investment policy and
legislation that primarily aim to attract and retain quality
investment along with tips
 Largest and less volatile source of external finance,
 Surpassing official development assistance (ODA)
 Access to foreign markets
 Transfer of technology and innovation for better productivity &
competitiveness

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 More and better jobs to citizens

 Technical know-how, managerial and organizational skills

 Domestic firms upgrading through linkages & spill over

(b) The social development endeavours a quality education &

attainment of health care to all citizens of the country

(c) An environmental development endeavours to sustainable use

of natural resources & improving resilience to adverse impacts of

climate change
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 Major Investment Opportunities in Ethiopia
Economic Policy
The fundamental development objectives are to build a free-
market economic system that can enable:
 the economy develop rapidly,
 the country to extricate itself from dependence on food aid;
 Poor people to be the main beneficiaries from economic growth
Strengthening private sector growth & development particularly in
industry as means of achieving off-farm employment & output
growth ( envisaging investment in necessary infrastructure);

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 Rapid export growth through production of high value agricultural
products & increased support to export oriented manufacturing
sectors particularly intensified processing of high quality
skins/leather and textile garment;
ADLI is taken to be the primary economic policy of the country-
justified by:
 Comparative advantage in terms of massive cultivable land and
productive manpower-a means gearing to capital accumulation
 Recognized the key role that the non-peasant private sector
agricultural production, agricultural marketing and processing
agricultural products
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 The document expressed the government's commitment to:
 enhance and buttress the contribution of private sector (domestic
and foreign) in agricultural development endeavours.
 allocate land for commercial farming,
 make sure that there are adequate infrastructure facilities,
 rationalize and make efficient land lease procedures for
entrepreneurs who wish to set up large -scale commercial farms
Industrialization is an other arm of the strategy interwoven with
the development of the private sector

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 Industrial development was still in its infancy and has a narrow
base and existing industries have been devastated by civil war of
2022
 Its linkage with the agricultural sector was weak
 the share of industry in the GDP was envisaged to increase
significantly measures promised to be undertaken to encourage
private investment:
 to make the existing policies work better, by removing regulatory
impediments and improving implementation capacities on the side
of government

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 To establishment of platforms of dialogue to make the business
environment and the incentive structure attractive for
manufacturing in particular
Agriculture (here)
Ethiopia grows all types of cereals, fibber crops, oil seeds,
coffee, tea, flowers, fruits, and vegetables
For it is endowed a with wide ranging agro-ecological zones &
diversified resources.
Ethiopia offers opportunities to invest on food crops, beverage
crops and cotton

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Arable land is about 51 million hectares (45% of the total area of
the country),
Cultivated area is only about 20% of the available land
Irrigable area- about 10 million hectares of which only some 3% is
irrigated
Availability of big rivers and river basins (10 major rivers) for
Commercial crops such as coffee, tea, sugar cane, cotton, tobacco,
palm ,rubber, rice, spices food crops such as cereals, pulses
and oil seeds
10 lakes & underground water resource
Annual rain fall 1,200-2,000 mm
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18 major agro-ecological zones & 49 agro-ecological sub zones
All activities in the agriculture sector is open for foreign investors
may be to insure food security, provision of inputs for the industry,
technology transfer etc. ..
Forestry
Ethiopia has designated 58 areas as National Forest Priority Areas
(NFPA)
Ethiopia has designated 58areas as National Forest Priority Areas
(NFPA)
Investors can invest on producing structural timber, pulp wood,
matchwood or even fuel wood

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Fishery
Fresh water fish farming and processing using artificial ponds.
It is highly estimated that water bodies of the country have a
production capacity of 30,300-40,000 tones.
There is only about 10% being exploited!
Agricultural services
Agricultural services comprise pest and disease control, technical
consultancy, agricultural machinery, cold storage, transport &
marketing services
Manufacturing

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The Government of Ethiopia considers pharmaceutical
manufacturing a priority for its economic strategy
Increased attention to the country’s disease burden, rising
healthcare coverage & progressive population and economic
growth make Ethiopia an attractive market for pharmaceuticals
The Ethiopian pharmaceutical market is expected to grow at 15%
per year to reach nearly $1billion by 2020
Wide ranging incentives for pharmaceutical manufacturers
located in IPs generous income tax exemption

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 Infrastructure
The Ethiopian Government recognizes that the delivery of
infrastructural services are vital. such as:
 Transport (railway & airlines),
 Telecommunications & postal services,
 Energy & water have a long way to go before they meet the demand
of investors.
Favourable Situations to Invest in Ethiopia
Political Stability?
 A range of political and economic policy reforms w/c appear to
signal a significant departure from the previous practice of State-led
economic grow 13
 …and provide for a greater space for private sector involvement
and enhance the role of the private sector in the economy
 More and better jobs
 Expanding productive sectors of the economy
 Privatization program involving partial equity sales in the four
strategic sectors (airlines, telecom, power, and logistics); plan to
fully privatize several other state enterprises (sugar plants,
railways, industrial parks, etc.);
 Leveraging private investment for development financing:
 PPPs Improving Ease of doing business for local and SME
businesses, increased linkages
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 Regional integration & multilateral trade agreements ratification of
the African Continental Free Trade Area (AfCFTA) and accession
to the World Trade Organization (WTO), implies major
liberalization in trade in goods and services and introduce
disciplines on investment, intellectual property & competition
policy.
 Raw materials …regarding inputs
 Market accessibility…..both domestically &internationally
 Legal protections….both investor and investment property rights

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Investment Opportunities at the Regional Level
As per to art.29 of 1180/2020 thethe Ethiopian Investment
Commission, and Regional Investment Organs, the new investment
proclamation established Standing Council on Inter-Government
Relations.
In the past one of the main challenges was the lack of coordination
between the federal investment commission and regional
administrative organs mainly in terms of allocating land and
providing support.
The newly established Standing Council is expected to fill that gap.

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The specific regions, zones and districts are identified for further
incentive package
The Region has extensive natural resources w/c offer the most
significant opportunity for investment
Practical problems
The 1st problem the organization of the investment organs
envisaging insufficient structuring, lack of work force, shortage of
budget, vehicles & materials
The 2nd problem is lack of knowledge & experience to regulate
and to permit incentives
The 3rd problem concerns failure to formulate & implement
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strategies for regulations and to give incentives for investment.
The 4th problem relates to data. There is lack of experience to
systematically gather data and make it available for the required
purpose and goal.
5th problem relates to coordination among investment organs
The 6th problem is failure of investment organs to check the
correctness of particular information given by investors in the due
process of licensing.
The 7th drawback is that there is no information network to link all
the investment organs with one another
Investment Forms in Ethiopia
As per to art.8 of 1180/2020 investment proclamation and of
174of 1243/2021commercial code of Ethiopia can be: 18
 Investments might be performed in one of the following
Enterprises:
a) Sole proprietorship
b) Enterprise established in Ethiopia or abroad;
c) Public Enterprise established in pursuance to pertinent law;
d) Cooperative society formed in accordance with the relevant law
Any investment made in the forms prescribed under sub-article (1)
of this article shall be registered in accordance with the commercial
code of Ethiopia proclamation no. 1243/2021 or other applicable
law.
Any enterprise registered in Ethiopia having been established
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abroad shall be governed by the Commercial Code of Ethiopia and
Chapter VIII: Investment Incentives and guaranties
Incentives in General
In globalized economy, few countries can remain competitive
without FDI
With the potential benefits envisaging technology transfer,
employment gains, skills upgrading, and growth, it is not
surprising that many governments offer investment incentives
Investment incentive connotes to policy applied by government to
promote the establishment of new business or prioritized sectors
or to encourage existing business to expand or not to relocate
elsewhere
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 Conditions and level of incentive may be based on economic
sector, place of investment, and product destination
There are 3 main categories of investment incentive which can
be implemented on local ,regional, national and supranational
levels.
a) Financial incentives such as various grants and loans
b) Fiscal incentives such as tax holidays & reduced tax rates
c) Subsidized infrastructures etc.
Investment incentives are legislative measures aimed at
stimulating investment.
Tax holidays should not be used as a means to offset a high local tax rate, as
the type of investment attracted by these schemes is likely to be footloose and
unwilling to remain when the holiday has ended. 21
Economic Rationales for Incentives:
Incentives are meant to achieve the very objectives of the
country’s investment policies and laws sectors entitled for
incentives, the level of incentive, conditions of incentives
Incentives must be linked to the objective of the country’s
investment law raising the standard of living through sustainable
socio-economic development
On the other hand, incentives have the potential to introduce
economic distortions.
Economic distortion may result where incentives are more than
marginal and are analogous to subsidies on trade

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Governments see such incentives as a necessary measure to
compete with other host countries and to signal government
commitment to an open investment environment
There are a number of economic rationales for granting
incentives:
Incentives promote positive economic benefits i.e. job creation,
technology transfer, regulation of foreign exchange etc.
Incentives correct the failure of markets to reshuffle the gains that
accrue over time from declining unit costs
incentives compensate investors for lost return due to other
government interventions
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Incentives are a policy tool in the global competition to attract
FDI and benefit more from it.
Incentives can be successful solely where they can attract
investment irrespective of their rationale.
Presently governments are being offering variety of incentives
envisaging creating markets for investors.
In general, incentives play a role in attracting investment even
though they do not rank high among the main FDI determinants

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 Incentives under Ethiopian Laws
As per to art.17 of 1180/2020 investment areas eligible for
investment incentives as well as the type and amount of
investment incentives shall be determined by a regulation
no.474/2020
Government of Ethiopia support for priority areas
A) Exemption from the Payment of Customs Duty
 Provision of land at competitive lease prices
 Export incentives
 No restriction on the modality of participation
 No discrimination between domestic and foreign investors
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 Exemption from the payment of customs duty
 Duty free importation of capital goods and construction materials
 Duty free importation of spare parts whose value is not greater
than 15% of the total value of capital goods to be imported
B) Income tax exemption
 2 up to 7 years for manufacturing or agro-processing and
agricultural investments
C) Carry forward of losses for half of the tax holiday period
D) Export Incentive Schemes
 Export Credit Guarantee scheme

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 Bonded manufacturing warehouse scheme
 Bonded export factory scheme
 Industrial zones
 Constitution and investment law protect private property
 Repatriation of capital and profit
 Multilateral investment guarantee agency (MIGA)
 Bilateral investment promotion & protection treaties (BIPPT) with
more than 32 countries
Rethinking Investment Incentives in Ethiopia
It is essential to offer appropriate investment incentives particularly
to investors who invest in social activities.
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Investment incentives have costs and what is essential is to ensure
that their cost should not exceed the value of the benefits to the
public.
The participation of investors in there areas is critical to improve
the standard of education and health
Guarantees to Investors
Investments under international investment law and the domestic
law of host states.
Two questions arise in connection.
First, is the promotion and protection of investments comprised in
investment agreements compatible with states’ domestic law?
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 Second, public policies of host states may appear to be in
contradiction with an increased international security of
investments
When such a conflict is challenged by foreign investors, what are
the consequences for both parties?
In general, investments are transactions that are private in nature,
whose aim is to generate a positive rate of return.
Investments can have pervasive consequences on countries’
welfare envisaging :
 the consequences on sustainable development;
 the use and protection of natural resources;
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 Employment etc.
 It is the role of the governments to balance these sometimes
conflicting public and private interests.
 Host state should set clear, consistent, and transparent rules on
liberalisation and investor protection, with dispute settlement,
thereby underpinning the continued removal of barriers to market
access and encouraging economic growth.
 The main requirement is dealing with both public policy
requirements & to new obligations from international investment
law, the host state would have to adapt its decision making
procedures to increase transparency

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A host state public policy required to be spotless with respect to
international investment law,
it could be useful for the state to establish a unique organ to take
responsibility for an initial consultation with investors before the
final decision like EIC and EIB
This would avoid a policy newly instituted by the authorities of a
host state infringing legitimate expectations of a foreign investor.
These expectations have recently become the central notion of the
security of international investments
These elements promote competitiveness and the sustainable
development of economies which benefit from it.
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If they are made in a constructive way, adaptations to the evolution
of international investment law might simultaneously serve the
foreign investor and the general interest.
International security of investments is inseparably linked to an
inevitable transformation of the state where domestic tools
become insufficient in many respects.
It might be found other realistic ways of ensuring a better
balancing of the rights and interests of foreign investors and
respect for legitimate public concerns
One way of doing so is for states to clarify uncertain legal terms
where interpretation provided by tribunals might be inconsistent
such as ‘foreign investor fair and equitable treatment etc. 32
 Another tempting way would be to comprise the right to security of
international investments as a general provision in preambles of
BITs or IIAs w/c gives arise guarantee to investors.
Repatriation of Capital and Profits
As per to article 20 of 1180/2020 any foreign investor shall have the
right, in respect of his investment, to remit the following payments
and earnings out of Ethiopia in convertible foreign currency at the
prevailing exchange rate on the date of transfer
a) Profits and dividends accruing from his investment;
b) Principal and interest payments on external loans;
c) Payment related to technology transfer agreement registered as per
to art.15 of 1180/2020 33
d) Payments related to collaboration agreement registered as per to
art.15 of 1180/2020
e) Proceeds from the transfer of shares or conferral of partial or total
ownership of an enterprise to another investor
f) Proceeds from the sale, capital reduction or liquidation of an
enterprise
g) Compensation paid to an investor pursuant to Sub-article (2) of
art. 19 of 1180/2020
 As per to 20(2) A domestic investor investing jointly with a
foreign investor is not allowed to remit funds earned from the
investment out of Ethiopia.
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 Why not ?
As per to art.22 Employment of Expats are concerned, any investor
is permitted to hire duly qualified foreigners in the position of
higher management without any restriction.
The term ‘higher management’ position has created ambiguity in
the past.
However, the new investment law defined it to comprise the chief
executive officer (CEO), chief operating officer (COO), and chief
financial officer (CFO).
Investors are also allowed to hire expatriates in the position of
supervision, trainers and other technical professions only if they
can ascertain that Ethiopians possessing similar qualifications or
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experience required by the sector are not available.
As per to art 22(4) of 1180/2020, the investor is responsible for
replacing, within a limited period of time, such expatriate
employees by Ethiopian by arranging and providing the necessary
training.
Guarantee Against Expropriation
As per to art.19 of 1180/2020,government may expropriate any
investment undertaken for public interest, in conformity with
requirements of the law, and on a non-discriminatory basis.
In case of expropriation of an investment effected pursuant
adequate compensation corresponding to the prevailing market
value shall be paid in advance
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Expropriation refers to the taking of the assets of foreign
companies or investors by a host state against the wishes or without
the consent of the company or investor concerned.
It may envisage deprivation of the right to property owned by
foreign companies
There are lawful expropriations and unlawful expropriations as well
as direct expropriations and indirect expropriations.
Lawful expropriations are those carried out against compensation
and in accordance with international foreign investment law and the
provisions of a BIT.

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Unlawful expropriations envisage those carried out without
compensation or those in violation of international foreign
investment law or the provisions of a BIT
Direct expropriations are those that involve an outright or express
taking of the assets of foreign companies or investors by a
government decision or decree still with globalisation, economic
interdependence and the increasing existence of a comprehensive
body of law on foreign investment, outright or direct
expropriations are becoming rare in today’s world.
Indirect or consequential expropriations are those governmental
actions that undermine the interests of the foreign companies and
investors. 38
International law has long protected foreign property from
expropriation confiscation by the host country government by
giving the owner of the property a right to compensation for the
value of the lost property.
As per to article 8 of FDRE constitution, private property
(investment property) may be expropriated for public purpose by
government upon the effect of commensurate compensation
The owner of property must be paid appropriate compensation, in
accordance with the rules in force in the State taking such
measures in the exercise of its sovereignty and in accordance with
international law.
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Expats employed for investments carried out pursuant to art.22
whose permanent residence is outside of Ethiopia may remit, in
accordance with applicable law, salaries accruing from their
employment in convertible foreign currency at the prevailing
exchange rate on the date of transfer.
Federal and Regional Laws
The legislation on foreign investment usually contains guarantees
against expropriation of foreign investment without payment of
compensation
As per to 9(4) FDRE constitution, all international agreements
ratified by Ethiopia are an integral part of the law of the land
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As per to 13(2) of the same constitution, the fundamental rights
and freedoms specified in this chapter shall be interpreted in a
manner conforming to the principles of the universal declaration
of human rights, international covenants on human rights and
international instruments adopted by Ethiopia
The right to private property is also protected under art.40(4)
As per to 51(4) Federal government shall formulate and execute
the country’s financial, monetary and foreign investment policies
and strategies
Expropriation may be legitimatized as per to art.40(8) of FDRE
constitution.
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 for the public interests;
 under domestic legal procedure;
 without discrimination;
 against compensation commensurate
 Expropriation is prohibited unless these requirements are met
 Expropriation is forbidden lest these requirements are met
 Almost all Regional constitutions have incorporated these
provision in their laws

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Chapter IX: Concerns Related to the Law of Investment
A) Environmental concerns
Investment treaties should contain exemptions for interference by
host states to protect the environment.
Currently very few investment treaties have responded to this
concern
As stated, even if the treaty does not contain such a change, it would
be that in the context of changing attitudes, a governmental
interference on environmental grounds will be treated as a
regulatory interference i.e. justifiable.
US and Canadian treaties do contain provisions addressing
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environmental concerns.
This provision may also be found in NAFTA. Article 1114(1) of
NAFTA reads:
Nothing in this Chapter shall be construed to prevent a Party from
adopting, maintaining Or enforcing any measure otherwise
consistent with this Chapter, that it considers appropriate to ensure
that the investment activity in its territory is undertaken in a manner
sensitive to environmental concerns
The provisions of the model investment treaties of the US and
Canada contain far stronger statements of the exception to liability
for interference with the foreign investment on environmental
grounds.
44
 Article 10 of the Canadian model treaty, which contains the general
exceptions, states:
Subject to the requirement that such measures are not applied in a
manner that would constitute arbitrary or unjustifiable
discrimination between investments or between investors, or a
disguised restriction on international trade or investment, nothing in
this Agreement shall be construed to prevent a Party from adopting
or enforcing measures necessary:
a) To protect human, animal or plant life or health;
b) To ensure compliance with laws and regulations that are not
inconsistent with the provisions of this agreement; or
c) For the conservation of living or non-living exhaustible natural
resources 45
 For the Government, it is a primary consideration to ensure that
investment agreements are drafted in such a way that they do not
limit the freedom of action of the environmental protection
authorities in providing national instruments for protection of the
external environment
B) Human Rights
Human rights will assume greater significance in the future and
will have to be accommodated within investment treaties
The tendency of elites in many states geared to neo-liberalism has
been to attract foreign investment even at the cost of human rights

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If the violations of human rights involve rights that are protected by
Jus cogens principles such as the prohibition of genocide, torture or
racial discrimination, interference with them cannot be prohibited by
a bilateral treaty.
The Vienna Convention on the Law of Treaties requires that Jus
cogens principles should be given precedence over such treaties
Where lesser types of human rights are involved, these have to be
taken into account in making a balanced decision, the protection of
investments under the investment treaty not being the only criterion.
Where treaty norms conflict, the tribunal has a definite duty in
terms of international law to decide which norm is to be given
priority.
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The issue also arises whether arbitrators who are appointed to
decide investment disputes have sufficient expertise to decide such
questions of international law.
It is one of the reasons why the issue is avoided.
The legitimacy of an award of a tribunal w/c shows a lack of
concern for the competing norms based in human rights is to be
doubted.
States may well refuse to give effect to such awards, and the
legitimacy of the awards may be tested through some other means.
The Ethiopian people in general have the right to economic
development.
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 As per to art.89 of FDRE constitution, the investment should
promote a sustainable economic development of all the people of
Ethiopia
Government shall endeavour to protect and promote the health,
welfare and living standards of the working population of the
country
C) Displacement of People
The displacement of people from their localities may adversely
affect their life
Displacement should not be made so as to protect the life of the
people.
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It is essential to use a certain locality for more benefit than that of
individual
it may be crucial to expropriate the locality.
It is essential to make a balance between the rights of individuals
and
It is essential to make a balance between the rights of individuals
and the people.
If a rural landholder is expropriated, his/her land, s/he is entitled to
displacement compensation
As per to art.2(3) of expropriation of Land holdings for Public
Purposes, Payments of Compensation and Resettlement
Proclamation No. 1161/2019: 50
Displacement Compensation implies to payment to be made to a
land holder for the loss of his use right on the land as a result of
expropriation
As per to art.4(1) of the law, expropriation of land for public
purposes shall be made only on the basis of approved land use
plan; urban structural plan; or development master plan
As per to art.11 where land is expropriated for public purposes
compensation for the property and displacement shall be paid to
the landholders.
Art.12(2) the amount of compensation for the property on the land
shall cover the cost of replacing the property anew.
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Art.12(4) ensures that compensation for permanent improvement
to land shall be equal to the current value of capital and labour
expended on the land
As per to art.13(4)(e) displaced people shall be compensated for
the breakup of their social ties and moral damage they suffer as
result of the expropriation

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Chapter X: Investment Dispute Settlement
Settlement of International Investment Disputes
Settlement is a desirable solution for business disputes of an
international character
An essential question is how disputes concerning investment
agreements are to be resolved
As the parties are sovereign states, a state can bring an action
against the other state, in cases where the other state is not
providing sufficient protection to the foreign investment of its
national or violated the BIT in any other way

53
The investor-state dispute provision at first contained little more
than the assent to arbitration before the International Centre for
Settlement of Investment Dispute (ICSID),
whereas more recent forms of that provision frequently consist of
consent to arbitration before multiple fora, and they deal with a
range of other procedural concerns.
Some recent BITs have specified substantive protective clauses in
greater detail than existed in the earlier BITs, often with a view to
clarifying their reach or substance.

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A) ICSID Convention 1965
ICSID is intergovernmental institution established by treaty
Its aim is to contribute to the promotion of economic development
ICSID is not an international court or tribunal but simply provides
an institutional framework that facilitates conciliation & arbitration
The actual settlement of disputes takes place through arbitral
tribunals that are constituted on an ad hoc basis for each dispute
Unique feature: FI (private actor) has access to international for a
vs. trade dispute under the WTO

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Established by Convention 158 signatories
Avails impartial forum...
No in-house dispute settlement –facilitation of institutional
framework for each case for each case
As per to article 25 of ICSID the jurisdiction of the centre shall
extend to any legal dispute arising directly out of an investment,
between a contracting state
Or any constituent subdivision or agency of a contracting state
designated to the centre by that state & a national of another
contracting state, which the parties to the dispute consent in writing
to submit to the centre.
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When the parties have given their consent, no party may withdraw
its consent unilaterally
Jurisdiction for cases between signatory states
Voluntary submission...
Award cannot be set aside by domestic court decision
If the dispute cannot be settled through consultation & negotiation
within the cooling-off period, the disputing party or either party
may submit a claim either:
a) to the competent court of the State in whose territory the
investment has been made;
b) to national arbitration;
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c) to international arbitration:
Under the international centre for the settlement of investment
disputes (ICSID) convention, provided that both parties are parties
to the ICSID convention;
Under the ICSID additional facility rules, provided that either the
non-disputing party or the respondent, but not both, is a party to
the ICSID convention;
Under the UNCITRAL Arbitration Rules; or
Under any other arbitration institution or under any other
arbitration rules, if the disputing parties agree.
To avoid the multiplicity of forum in w/c an investor could settle a
dispute, it is useful to introduce a provision on the definite choice
of the investor: 58
the investor chooses to go either to local court or to arbitration.
Once this choice has been made, there is no possibility to use the
other mechanism to settle the dispute ("fork in the road"
provision).
E.g.. If an investor elects to submit a claim to a court or
administrative tribunal of the party in whose territory the
investment has been made, that election shall be definitive and
the investor may not thereafter submit the claim to arbitration.
The consent of each party to arbitration should be given.
Limitations: it could be relevant to mention that a claim
should not be submitted to arbitration after a certain
59
period of time.
Example: No claim may be submitted to arbitration if more than
three years have elapsed from the date on which the disputing
party first acquired, or should have first acquired, knowledge of the
breach and knowledge that the natural or juridical person has
incurred loss or damage.
Investment Dispute Settlement under Ethiopian Law
As per to article 28 of 1180/2020 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.

60
Where a Foreign investor chooses to submit an investment dispute to a
competent body with Judicial Power or arbitration, the choice shall be
deemed final to the exclusion of the other
As a rule, a dispute with any Ethiopian Government organ might not be
referred to arbitration or any form of out of court dispute settlement
mechanism.
Yet, the new investment proclamation provides for a state-investor dispute
to be resolved amicably as much as possible through
discussion/negotiation.
If no resolution is reached within 6 months, matters can be submitted to the
court having jurisdiction.
It also provides for the possibility that foreign investors and the government
may submit to resolve disputes through arbitration.
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All BITs contain a dispute settlement clause
Another important protection mechanism to foreign investors
It can be between contracting parties to a particular BIT or
between state and the foreign investor
In case of investor state dispute, all the BITs Ethiopia signed
require amicable resolution as far as possible with in a specified
period (3-6 months)
In the absence of amicable solution, the investor reserves much
leverage to chose to refer the case before local administrative and
judicial tribunal
Or to just take the case before international arbitration
62
Almost all the BITs exclude the exhaustion of local remedy rule
Investors even have the choice to interrupt judicial proceedings
and take cases before international arbitrations (See the Ethio-UK,
Ethio-Germany and Ethio-Finland BITs, Ethio-Belgium
Luxemburg BITs )
Utilizing Diplomatic Channels
It is a requirement that a dispute be brought b/n the ambassador of
one of the contracting parties and the relevant ministry of the other
party.
The matter could be settled by the experts of both countries where
the need arises, i.e. Where the matter envisages technical issues
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 Any dispute that might arise between the contracting parties i.e.
state-state dispute with regard to the interpretation and application
of the agreement must be settled by consultation through diplomatic
channel.
Diplomacy has a great role in solving investment dispute
ARBITRATION
Arbitration is an extrajudicial procedure w/c arises b/n two or more
parties in dispute.
The arbitration occurs when the parties submit their dispute and
procedure to a neutral 3rd party
Arbitration is the settlement of disputes by the decision of one or
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more persons called arbitrators.
It is a method of settling disputes in a quasi-judicial manner.
It is a speedy and inexpensive method of settling the dispute b/n
the parties
Private proceedings
May be adjudicated by experts in the field
Ease of international enforcement
Private proceedings, usually behind closed doors
Useful if dispute involves some secrets /know how
Parties can appoint a sole arbitrator, or a panel of arbitrators
Choice of governing law and applicable rules of arbitration
Choice of arbitration institution
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 Parties know who will resolve their dispute
Arbitrator can be an expert in the field
Helpful if area is technical in nature or requires special
knowledge
In certain situations, arbitration award may be enforced in
country where loser’s assets are situated
Useful if dispute involves cross-border elements(investors)
Requirements for arbitration
Arbitration clause/agreement in writing signed by parties or
contained in exchange of letters;

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 Parties undertake to submit disputes arising from the
agreement to arbitration
Choice of arbitrator(s)
Essentials of Arbitration

Establishment of their own rules.

Requires the will of the parties concerned.

feasibility of defining the dispute.

Possibility of ending the dispute, without coercion.

During the time of the arbitration, it might be relevant to apply
measures of protection.

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Example: A Tribunal may order an interim measure of protection
to preserve the rights of a disputing party,
Or to facilitate the conduct of arbitral proceedings envisaging an
order to preserve evidence in the possession or control of a
disputing party
For a state-of-the-art agreement, it is important to include a
provision on the governing law for arbitration.
Indeed, a Tribunal shall decide the issues in dispute in accordance
with the Agreement, the national laws of the host State of the
investment and applicable rules of international law.
Role of the Sub-Committee on investment to interpret a provision
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of the treaty. Interpretation binding on the arbitral tribunal
 Provisions on the final award are quite standard:
Where a tribunal makes a final award against a party, the tribunal
may award, separately or in combination, only:
a) monetary damages and any applicable interest;
b) restitution of property, in which case the award shall provide
that the party may pay monetary damages and any applicable
interest in lieu of restitution;
c) where a claim is submitted to arbitration by a juridical person,
an award of monetary damages and any applicable interest shall
provide that the sum be paid to the enterprise.

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A tribunal may also award costs and attorneys’ fees in accordance
with this Agreement and the applicable arbitration rules.
A tribunal may not award punitive damages
It is relevant to have an article on the enforcement of the award
An award made by a tribunal shall be final, and binding on the
disputing parties in respect of the particular case.
Subject to the applicable revision, annulment or set aside
procedures, a disputing party shall abide by and comply with an
award without delay.
Each Party shall provide for the enforcement of an award in its
territory.
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 If a disputing Party fails to abide by or comply with a final award,
the Party whose investor was a party to the arbitration may have
recourse to the dispute settlement procedure between Member
States. In this event, the requesting Party may seek:
a) a determination that the failure to abide by or comply with the
final award is inconsistent with the obligations of this Agreement;
and
b) a recommendation that the Party abide by or comply with the
final award.
©End of Session ® ►Thanks for Attention◄

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