Compare and Contrast The Ethiopian Previous Investment Law and Current Law
Compare and Contrast The Ethiopian Previous Investment Law and Current Law
Compare and Contrast The Ethiopian Previous Investment Law and Current Law
current Ethiopian
investment proclamation
and previous investment
proclamation
Introduction
On January 30, 2020, the House of People’s Representative approved Investment Proclamation
that replaces the Investment Proclamation No. 769/2012. The New Proclamation supplemented
by a new investment regulation to be enacted by the Council of Ministers investment regulation
474/2020.
The rationale for the reform includes the need to strengthen the private sector’s role in the
economy, modernize the investment administration system by consolidating relevant laws and
increase inward investment by addressing investment-related challenges, and establish effective
and transparent grievance handling procedures for investors. This paper briefly discusses the
difference between the two proclamations.
1
Investment proclamation, Proclamation No. 769/2012 art 5 with proclamation preamble
2
Investment proclamation, Proclamation No. 1180/2020 art 5 with proclamation preamble
2. Shift in Approach to Sector Regulation
A negative list approach provides an exhaustive list of investment areas that are restricted to
foreign investments and makes all other sectors open for investment by foreigners. Pervious
proclamation, Proclamation no. 769/2012 which introduced a hybrid system of negative and
positive listing.3 In this proclamation, the areas that are restricted to foreign investment and the
areas that are permitted for foreign investors are all expressly listed in the law. Sectors that are
not on the list have been prohibited for foreign investors. But, current proclamation,
Proclamation no. 1180/2020 reverses positive-listing approach to a negative listing approach
whereby areas that will be restricted from foreign participation will be exhaustively provided in
investment Regulation no. 474/2020 with the implication that all other areas will be permitted
areas of investment for foreign investors.4
3. Areas of Investment
Proclamation no. 1180/2020 provides four categories of investment areas; areas exclusively
reserved for joint investment with government, areas exclusively reserved for domestic investors
and area exclusively reserved for joint investment with domestic investors and5 those fully open
for foreign investors. In previous law there are area reserved of government only6 but current
proclamation eliminates a category of sectors that will exclusively be held by the government
and introduces a new category of sectors in which joint investment with domestic investors will
be mandatory.7 Details of the sectors eligible for the above list provided in regulation no.
474/2020. those are; a) Freight forwarding and shipping agency services; b) Domestic air
transport service c) Cross-country public transport service using buses with a seating capacity of
more than 45 passengers;. d) Urban mass transport service with large carrying capacity; e)
Advertisement and promotion services; f) Audiovisual services; motion picture and video
recording, production and distribution; and g) Accounting and Auditing services. Also, a foreign
3
Investment proclamation, Proclamation No. 769/2012 art 6-9
4
Investment proclamation, Proclamation No. 1180/2020 art 6/2/
5
https://businessinfoeth.com/5-features-of-the-new-investment-proclamation-and-regulation-laws-of-ethiopia/
6
Investment proclamation, Proclamation No. 769/2012 art 6/1/
7
Investment proclamation, Proclamation No. 1180/2020 art 6/2/
investor jointly investing with a domestic investor in areas listed above shall not hold more than
49% of the share capital of the enterprise.8
4. Expanded definition
The definition of domestic investors under proclamation no. 769/2012 are Ethiopian nationals,
foreign nationals treated as domestic investor under separate laws and government, public
enterprises and cooperatives. Under Proclamation no. 1180/2020, these categories are fully
maintained but expanded to also include foreign nationals or foreign enterprises accorded a
domestic investor status previously. This expansion offers legal recognition to foreigners and
their descendants that have lived and invested in Ethiopia for generations.
8
Investment regulation, Regulation No. 474/2020 art 5
9
Investment proclamation, Proclamation No. 769/2012 art 2 /1,2/
director and (b) foreign investors buying the entirety of an existing enterprise owned by foreign
investors or the shares thereof.10
In current proclamation grant Additional Mandate to EIC some are, Regulating Brownfield
Investments As such, in previous la EIC had no jurisdiction in administrating investments that
are made by way of a brownfield investment. Current Proclamation expands EIC’s mandate
allowing all foreign investors, both entering Ethiopia through Greenfield and brownfield
investments to obtain EIC’s services.
Current Proclamation grants EIC12 the mandate to work with MOLSA in regulating matters
related to (a) the necessity of expat employees; (b) the implementation of trainings for Ethiopians
replacing expats; (c) mechanisms to avail suitable local workforce to investors and (d)
procedures for the issuance, refusal and cancellation of work permits with Collaboration in the
Ministry of Labor and Social Affairs.
Also, EIC is granted new powers to facilitate visas for investors coming into Ethiopia and for
investors and families already in Ethiopia.13 Furthermore, the current law grants up-to five years
of multiple entry business visas to owners, shareholders, general managers, board members and
top management of investors upon valid confirmation by the EIC. EIC is required to work in
10
Investment Proclamation, proclamation No. 1180/2020 art9/4/
11
Investment Proclamation, proclamation No. 1180/2020 art 44
12
Investment Proclamation, proclamation No. 1180/2020 art 38
13
Investment Proclamation, proclamation No. 1180/2020 art 23
collaboration with Immigration, Nationality and Vital Events Agency for the proper
implementation of this mandate.
Currently, the Ethiopian Civil Aviation Authority and Ethiopian Energy Authority are granted
delegated powers to issue suspend and revoke investment permits in the area of aviation and
energy. This list is expanded to include the Ethiopian Communication Authority which is granted
similar mandate to issue, suspend and revoke investment permits for investors in
telecommunication sector.14
7. Investment permit
In previous law and current investment law The following investors shall be required to obtain
investment permits those are foreign investors, domestic and foreign investors, investing in
partnership, foreign nationals, not Ethiopian by origin, treated as a domestic investors and
domestic investors investing in areas eligible for incentives and who are seeking to be
beneficiaries of such incentives.15but current law add another investor to obtain investment
permit that are An investor seeking to expand or upgrade an existing investment, provided that
the investment is eligible for incentives and the investor seeks to be beneficiary of such
incentives.16
14
Investment Proclamation, proclamation No. 1180/2020 art 4/2/
15
Investment proclamation, Proclamation No. 769/2012 art 12 and Investment Proclamation, proclamation No.
1180/2020 art 10
16
Investment Proclamation, proclamation No. 1180/2020 art 10/1/e
9. Provision of Investment Land
Proclamation 1180/2020 introduces a new mandate to regions to establish transparent and
predictable system for land allocation. Thus, regional states are required to identify and classify
land to be used for investment projects. Regions may establish special procedures that will allow
them to respond to land requests by investors within a maximum of 60 days (for manufacturing
sector) and maximum of 90 days for other sectors.17
17
Investment Proclamation, proclamation No. 1180/2020 art 51
18
Investment Proclamation, proclamation No. 1180/2020 art 54
19
Investment proclamation, Proclamation No. 769/2012 art 24
maintained or in investment purpose and does not include land. However, only large investors
will be permitted to own one dwelling house.20
Proclamation 769/2012 provides that an investment permit may be suspended if the investor
violates the provisions of the proclamation, regulation or directives issued without providing
details of the specific grounds for suspension.21 Under current Proclamation, specific grounds are
exhaustively listed on the basis of which an investment organ may suspend investment permits.22
15.Grievance Handling
This is intended mainly to provide the framework for a potential investor to contest any decision
of an investment organ that fully or partially rejects its application to make an investment. 24 If
properly utilized, this can help the Government forestall the escalation of complaints into costly
investor–State disputes, thereby preventing waste of public resources. From investors’
perspective, the grievance handling mechanism can be essential to obtain resolutions for their
complaints in the early stages without incurring huge expenses
20
Investment Proclamation, proclamation No. 1180/2020 art18
21
Investment proclamation, Proclamation No. 769/2012 art 19
22
Investment Proclamation, proclamation No. 1180/2020 art13
23
Investment Proclamation, proclamation No. 1180/2020 art 22
24
Investment Proclamation, proclamation No. 1180/2020 art 25
Under Proclamation no. 769/2021, investors are permitted to lodge any complaint related to their
investment with the EIC with the right of appeal to the Board. Whereas, an elaborate grievance
handling rules are provided under Proclamation no.1180/2020 offering alternative and
predictable timelines for resolution of investment disputes. These include; Complaints to the EIC
and Complaints against Decisions of federal agencies.
16.Investment Disputes
Without prejudice to right of access to justice through competent courts, Proclamation no.
1180/2020 provides that any dispute between an investor and the state will be resolved through
consultation and negotiation.25 It further provides clear recognition to federal government
agencies to submit to arbitration if desired.26 The previous law did not have a provision for
investor-State dispute settlement (ISDS). This procedure applies once all the above procedures
for handling investors’ grievances have been followed and the matter has escalated into a
dispute. If a dispute between an investor and the Government cannot be resolved through
negotiation or consultation, in principle, it must be submitted to the competent Ethiopian court.27
Arbitration can be used as an alternative to resolving a dispute between a foreign investor and the
Government if there is a specific agreement to this effect.
25
Investment Proclamation, proclamation No. 1180/2020 art 28
26
Investment Proclamation, proclamation No. 1180/2020 art 28/2/
27
Investment Proclamation, proclamation No. 1180/2020 art 28
28
Investment Proclamation, proclamation No. 1180/2020 art 54
Conclusion
Current Investment Proclamation sets out rules to further encourage and promote foreign
investment by setting Negative listing approach to areas accessible for foreign investors. Details
added regarding; national content requirements for staff investment administration, allocation of
investment land and grievance handling procedures and new dispute resolution mechanisms.
Reference
Laws
Investment proclamation, Proclamation No. 769/2012
Investment proclamation, Proclamation No. 1180/2020
Investment regulation, Regulation No. 474/2020
Internet
https://businessinfoeth.com/5-features-of-the-new-investment-proclamation-and-
regulation-laws-of-ethiopia/