Procedures for Expropriation of FDI under the Ethiopian and International Law: Comparative Analysis

Abstract 

Well managed and protected FDI without doubt is an engine to economic development of a given country. The main reason that justifies the of foreign investor‟s property and investment among other things trace protection backs to the right of the investors to own property and to encourage them to invest. However, this right is not without exceptions as the host states have inherent sovereign right to expropriate any property or investment which resides within its jurisdiction. As a result, exportation of FDI has been for long time a source of investment disputes between investor or host states, or between home and host states. To reconcile both interest and to avoid expropriation from being source of investment disputes, procedural requirements for lawful expropriation has developed under the international law regime; which is public purpose, nondiscrimination, compensation and due process. On the other hand, under the Ethiopian law we can also find procedures for undertaking lawful expropriation. 

The paper critically examines internationally and nationally recognized procedures of expropriation. And then makes comparative analysis to identify the compatibility and adequacy of the latter regime as compared to the former (i.e., the international law regime).  In doing so, the paper has tried to consult relevant customary laws, arbitral awards, investment agreements (BITs and MIA), and domestic laws such as the investment proclamation, expropriation proclamation and Ethiopian BITs. Then, the paper argues that the Ethiopian procedures of expropriation are compatible with the international law procedures of expropriation. The paper further argues, the fact that prior notification, preparation of detailed data and advance compensation are additional prerequisites for lawful expropriation in the Ethiopian law, places it in a better position as compared to the international law since in the latter there is no duty to notify; and compensation is in the strictest sense a condition rather than a precondition for lawful expropriation of FDI. Hence, undertaking expropriation of FDI as per the internationally and nationally recognized procedures will be helpful to avoid, or at least to reduce expropriation from becoming source of investment disputes. 

Keywords: 

Expropriation, Foreign Direct Investment, International Law, Ethiopian Law, Property Right 

Acronyms: 

BITs- Bilateral Investment Agreements 

FDI- Foreign Direct Investments 

IIAs- International Investment Agreements 

MIT- Multilateral Investment Agreement 

ICSID- International Center for Settlement of Investment Disputes 

UDHR- Universal Declaration of Human Rights