Testing the Fitness of the Transplanted Ethiopian Personal Property Security Rights’ Bill to the Local Context: A Critical Perspective
31 Pages Posted: 14 Feb 2018
Date Written: February 1, 2018
A new secured transactions law for Ethiopia has been drafted under the aegis of the International Finance Corporation (IFC), evidently based on Article 9 of the Uniform Commercial Code (UCC) of US and legal systems influenced by it. This article examines whether the bill circulated by the National Bank of Ethiopia on November 17, 2017, designed based on foreign law is suitable to the Ethiopian local context. The article argues that while the anatomy of the bill and its general approach are consistent to the theme of enhancing access to credit, it suffers from defects engrained in its failure to adequately take into account the Ethiopian local context.
First, the bill mandates electronic collateral registration system in a country with no adequate electricity and internet services, infrastructures that are necessary for the successful operation of electronic registration system. Second, by adopting the Personal Property Security Right (PPSR) approach, the bill unnecessarily excludes security rights in immovable property from its umbrella and defeats the purpose of comprehensive secured transactions law reform, which is to implement a legal regime that covers all types of assets, parties, and transactions (securing payment or performance of obligation). Third, the bill has alarming terminological problems resulting from drafter(s) misapprehension of or insensitivity to the existing legal regime. Fourth, the unclarity of the bill’s provisions on floating security interest could potentially lead to costly court litigation. Fifth, in departure from UCC Article 9 or recently reformed secured transactions laws, the bill entitles the creditor to take possession of the collateral upon the debtor’s default, without putting in place the necessary tools to protect consumer debtors from potential abusive conducts of creditors. By empowering the Collateral Registry Office to order the police to assist the creditor in repossessing the collateral, it denies the debtor of due process of law, with no legal avenue for ex post facto judicial control. This article argues therefore that the bill is ill-suited to the Ethiopian local context and would maintain the inefficiency of the existing system and injects unfairness to the system.
Keywords: Ethiopia, Security Interests, Functional Approach, Personal Property Security Right, Movable Assets, Self-Help Repossession, Local Context
Suggested Citation: Suggested Citation