02 March 2012 Written by  Mitiku Mada and Alemayehu Tilahun

Sources and Historical Development of Ethiopian Bankruptcy Law


Elders witness that in Ethiopia the ancient society experienced similar practices like that of Romans. In the earlier times failure to perform promises (i.e. failure to pay back loans) which were given in monetary form or in exchange of goods for goods or bartering entails punishment. The punishment imposed on defaulting persons was either imprisonment in the home of the creditor or enslavement. This trend gradually abolished during the reign of His Imperial Majesty Haile Sellasie. Before Hailesellasie's regime, Menilik II officially prohibited slavery but it hiddenly existed until mid of the 19th C.

Like all other legislations, commercial legislations probably began to play important role in Ethiopia under Menilik II and developed particularly during the reign as Regent and Emperor of His Imperial Majesty Haile Sellasie I. Scholars witnessed that there was no complete record and documentation as what was promulgated and what the contents of the legislation convey. Together with other proclamations there appears to have been bankruptcy law, which was promulgated in 1933 inspired by the French law. It was said that the said law was published in French and Amharic languages which holds about 96 Articles. The French text beers the date of "12 July 1933" but the printed Amharic text leaves the space for the date blank. M. Marein noted that there was no unanimity of opinion as to whether the so called Bankruptcy law was draft only or whether it was ever promulgated. One of the drafters of the Commercial Code, J. Escara in his avante project 'de code de commerce' stated that it was only draft law. This is clear indicator of the fact that there was a law dealing with bankruptcy before the coming into existence of the Commercial Code, which is currently in force.

The second half of the 19th C. in Africa as a whole and in Ethiopia particularly had unforgettable history with marked change in the laws. It was during this time that the existing laws including the Commercial Code came to existence. With regard to its source the 1960 Commercial Code is somewhat eclectic. The then drafters noted that:

all traders buy in order to resell, all enter into contract whether of sale, agency, or carriage, and all use forms of banking credits. Bill of exchange, share companies, private limited companies, bankruptcy and other collective procedures of liquidating the goods of a trader are all institutions known almost every where. Thus, to use comparative law as an element of legislative policy is less dangerous in commercial matters than in the domain of pure civil law

However, there are indefinable differences in the continental law approach and common law approach in areas like persons subject to bankruptcy, number and nature of procedure, effect of bankruptcy on debtor, judges’ role in the proceeding, freedom left to creditors, intervention of administrative authority and defining circumstance under which a person could be declared bankrupt.

J. Escara also noted in his avante project and in the discussions before the sub-commission, that some of the differences are negligible. To exemplify, whether the circumstance under which a person can be declared bankrupt are defined in generic terms or enumerative list which does not create difference. This is because the general definition itself incorporates the limitative enumerative list. He conducted delicate selection of principles from different sources. Hence, in practice the Latin and Germanic institutions are the sources of the continental principles of the Ethiopian Commercial Code. But the existence of Anglo-American commercial practice and on the other hand, the excellent solutions furnished on more than one point by the written commercial law of England and the United States has also contributed to the Ethiopian law. Hence, the source and development of Ethiopian bankruptcy law has similar history with many other countries and it cannot be traced to a single country as a source or limited legal family as the only source.

Last modified on Wednesday, 02 May 2012 13:05