Recent developments impacting legal services in Ethiopia from a historical perspective

Tameru Wondm Agegnehu

Tameru Wondm Agegnehu Law Office (in cooperation with BonelliErede), Addis Ababa 

tameru.wondmagegnehu@belex.com
 

Weynalem Weldesenbet

Tameru Wondm Agegnehu Law Office (in cooperation with BonelliErede), Addis Ababa

weynalem.weldesenbet@belex.com
 

Background

As one of the oldest nations in Africa, Ethiopia has rich history in matters relating to its indigenous legal system, including legal practice. Legal edict dating back to the mid-17th century required the sovereign to dispense justice among his people fairly and equitably. Justice was dispensed by local elders and designated judges on the basis of custom, as well as writs and religious edicts. Early European attempts to introduce their system in the country met with both failure and success dating back to the 19th century. The first attempt was made by Great Britain early in 1840, which was rejected outright by Emperor Tewodros, while the second attempt by the French, following the victory of Ethiopia at the Battle of Adwa in 1896, succeeded to establish the regime of extraterritoriality in 1908 for foreign nationals living in Ethiopia.

The most favoured nation treatment clause, common in all diplomatic agreements, has served to open the privilege to all nationals with diplomatic relations in Ethiopia. Both treaties aimed at establishing consular jurisdiction for the application of foreign laws in all matters involving foreign nationals. Foreign lawyers were allowed to appear for their nationals before an Ethiopian court, where a foreign judge was also allowed to sit. The situation continued up until 1942, when Ethiopia reformed its judiciary and duly provided recognition with some guidance to its newly practicing lawyers. From then on, a national independent legal system began to thrive with formally licensed practicing lawyers, including lawyers who came from other countries and resided in Ethiopia.

The section on business organisations in the Commercial Code of 1960 did not include Limited Liability Partnership (LLP), or provide any other model for professional organisations. For that reason, incorporation of legal practice and legal service as a business are twin gifts for lawyers that arrived after 71 years of waiting with patience.

A few practicing lawyers joined and took advantage of the law for organising civil associations and formed the Ethiopian Bar Associations late in 1960, where membership was consensual. That association has made gallant efforts to create relationships with similar associations in many African countries and beyond, including the IBA. To that end, delegates of the Ethiopian Bar Association have attended African Regional Forum meetings and general IBA meetings in Amsterdam, Durban and Nairobi. The Ethiopian Lawyers Association (as it is currently called) has also hosted the foundation meeting of the Pan African Lawyers Union (PALU), for which its sitting President was designated as a permanent secretary of PALU and Addis Ababa was designated as a venue for the head office of PALU. The plan to hold the last annual meeting of African Regional Forum in Addis Ababa was thwarted by the worldwide Covid-19 pandemic beginning in 2020.

The status quo

The license issued by the Ministry of Justice, and which is currently issued by the Office of the Attorney General, recognised the recipient of the license as a sole practitioner and gave no recognition to the right of lawyers to organise themselves into law firms, nor for a non-Ethiopian lawyer to participate in any way in legal practice in Ethiopia. Thus, legal practice in Ethiopia remained more or less a fixed system with no mechanism for transmission of heritage or experience to the next generation as practice ended with the passing away of each practicing lawyer. This became obvious and alarming, especially after the opening of the law school that started graduating trained lawyers and publishing the Journal of Ethiopian laws beginning in the early 1960s.

The reform

Finally, and rightly, the government felt the need to revise the resilient commercial code of 1960 that defied earlier attempts by previous governments. After two years of diligent efforts, the revision came out in April 2021, with a section that included LLP for professional associations. The LLP is a limited liability company, with at least two professional partners, with capital contributed either in cash, in kind or including intellectual property or professional service. The law leaves both the capital and the number of the partners of the company open ended. Equally relevant is a new proclamation called the Federal Advocacy Service Licensing and Administration Proclamation, which is designed to regulate details of licensing, legal practice by foreign lawyers or law firms. The two laws are aimed at laying out details about the formation of LLPs and the rights and liabilities of partners, as well as the process of licensing and the criteria to be eligible to obtain licenses.

Admission to an LLP partnership is open only to lawyers with a valid license and who are duly registered with the Office of the Attorney General. Foreign lawyers of Ethiopian origin could also join the firm. The law provides that the partner in the LLP is not responsible or liable for another partner’s misconduct or negligence unless he/she is personally implicated in the conduct giving rise to the liability. The law firm, thus established as an LLP, acquires independent legal personality to handle or bear duties and responsibilities not attributable to each partner, along with the partner responsible for the liability.

So too, the exposure of horizontal liability of fellow partners inter se is narrowed down to a situation where the partner in question is directly involved in one way or another. This, in effect, absolves other partners from the vicarious liability for the conduct of other fellow partners. Law firms, including members, are required to obtain indemnity insurance for the damages clients may suffer as a result of nonperformance or misperformance of the practitioners. Generally, the pass through system of taxation is applied to such relationships, to allocate the tax liability between partners and the partnership.

LLP versus licensing

The new laws introduce two new concepts to the legal taxonomy of Ethiopian jurisprudence, namely, the concept of a law firm as a business organisation with limited liability , and lawyers as partners answerable only to their individual faults. The licensing proclamation is adopted by the House of Representatives but is not yet published in the Negarit Gazette, the Official Gazette in which all Federal Laws are published. The new features of the upcoming proclamation include the following:-

Scope of application

Federal advocates and law firms licensed/formed under these proclamations enjoy the attributes of limited liability companies, and individual liabilities are limited to mistakes/wrongs for which the partner is personally responsible.

The new licensing proclamation opens a window of opportunity for foreign lawyers to practice before Ethiopian courts, along with their local partners where the case is likely to involve the application of foreign laws.  

Establishment of law firms

• The LLP shall be formed by a memorandum of association containing the name of the firm and that of the partners, the contributions in cash or in kind, the head office, duration, the objective of the firm and the name of the General Manager;
• The minimum number of members is two;
• The area of engagement shall be legal services and other services related to advocacy (details will be determined by a directive);
• The organisational structure envisaged by the proclamation is an LLP as envisaged under the newly amended commercial code; and
• The minimum cash contribution of a partner is fixed at ETB 50,000.

Management

• Management of the firm shall be agreed upon by the partners;
• The manger is selected from among the partners;
• Scope of power of the manger includes the administration of the firm and representing the law firm to defend its interests before courts or other forums or to appoint an agent for that purpose; and
• The firm will be jointly and severally liable for the damage caused to third parties, unless the third parties knew the manger didn’t have the power to carry out actions which led to injury of the third party.

Organisational structure and responsibility of a law firm

• The organisational structure of a law firm shall be a Limited Partnership;
• The attributes of the law firm shall include the following.

(a) to make contracts;

(b) to own property; and

(c) to sue and be sued in its own name and to have rights and obligations which other juridical persons have;

• The liability of partners in a law firm to third parties shall be limited to the share each partner has in the firm;
• The law firm shall continue to exist despite changes on the membership of the firm; and
• The provision of advocacy service by a law firm doesn’t make the service business or investment as defined under the Ethiopian Commercial Code and the investment law.

The obligation to secure professional indemnity insurance

• Every advocate or law firm shall secure an indemnity insurance policy, for any damage caused by any of them within one year of acquiring the advocacy service license.

Distribution of profit and loss

• Unless otherwise provided in the partnership agreement of the law firm, the partners of the law firm shall distribute, among themselves, profit and loss or proceeds of liquidated assets of the firm at the time of dissolution in accordance with the share contributions in the firm.

Creditors

• Creditors who demand payment from the law firm can exercise their right against any asset of the firm; and
• Creditors who demand payment from the law firm have no right to proceed against the personal properties of the partners of the firm.

Taxation

• Taxation shall be in accordance with relevant law governing partnership associations.

Conclusion

Generally, the new law on LLPs and the proclamation for the licensing of practicing lawyers introduces three major parameters to legal practice in Ethiopia. In the first place, the adoption of the LLP model helps to transform legal practice from a sole practice to corporate legal practice system, which guarantees continuity of the firm from generation to generation. Secondly the opening for foreign lawyers to appear before Ethiopian courts, however narrow, will help to promote the exposure of our courts and legal systems to the international community. This trend is likely to encourage specialisation based on the scheme of ‘knowing more and more about less and less’. Thirdly the impact of all these developments is likely to improve the attractiveness of Ethiopian law firms for foreign lawyers to work with. Ethiopian lawyers will also be encouraged by the new trend to create working relationships with foreign lawyers and international institutions, such as the IBA, to improve their visibility.