Examining the Fitness of the New Ethiopian Personal Property Security Rights’ Bill to the Local Context: A Critical Perspective
24 Pages Posted: 14 Feb 2018 Last revised: 24 May 2018
Date Written: May 21, 2018
In what could be regarded as a defining moment in secured transactions law reform in Ethiopia, a new legal regime governing security interests 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 or legal systems (instruments) influenced by it. Pending the bill’s approval by the Ethiopian parliament, this article examines whether the bill is suitable to the Ethiopian local context. It argues that while the anatomy of the bill and its general approach are consistent to the theme of enhancing access to credit which dictates secured transactions law reform across the globe, it suffers from shortcomings engrained in its failure to adequately take into account the Ethiopian local context.
First, the bill mandates electronic collateral registration system in a country without the necessary perquisites/ 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, i.e., implementing a legal regime that covers all types of assets, parties, and transactions. 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 potentially subjects the debtor to extra-judicial deprivation of property right, with no judicial control mechanism.
Concluding that the bill is ill-suited to the Ethiopian local context, the paper suggests that the approval of the bill by the parliament be delayed for further public scrutiny and debate among the relevant stakeholders. The article proffers policy recommendations for the revision of the bill.
Keywords: Ethiopia, Security Interests, Functional Approach, Personal Property Security Right, Movable Assets, Self-Help Repossession, Local Context
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