Is the COVID-19 pandemic an event which is a force majeure?

Ethiopian law defines force majeure as an unforeseen circumstance that absolutely prevents a debtor from discharging his obligations. Force majeure is presumed not to exist when the occurrence of the event could have been foreseen or where it renders the obligations of the debtor to be more onerous.  Ethiopian law consider the following events as force majeure when the applicable contract is silent: 

1. the unforeseeable act of a third party for whom the debtor is not responsible; or
2. an official prohibition preventing the performance of the contract; or
3. a natural catastrophe such as an earthquake, lightning or floods; or
4. international or civil war; or
5. the death or a serious accident or unexpected serious illness of the debtor.

The events listed at a-c and e can, depending on the circumstances, be interpreted to capture COVID-19 whereas (a) and (b) may apply in the context of the state of emergency.  It may also be argued that the events described at (c) are not presumed to be exhaustive but illustrative and, as such the reference, to natural catastrophe may be stretched by interpretation to capture the pandemic. It must be noted that the question of whether COVID-19 is an event which qualifies as force majeure or not will depend on:

1. the question of whether or not it causes the debtor to completely be unable to perform its obligations.
2. The cause and effect relationship between the pandemic and non-performance must be established for successfully claiming the defence of force majeure under Ethiopian law.
3. a pandemic, disaster, catastrophe or emergency situation akin to COVID-19 is covered by the definition of force majeure in the relevant contract. Therefore, one has to closely consider what definition was provided in a contract on a case by case basis.
4. Whether it is captured under a catch-all provision in the contract.

A specific reference to a “pandemic” in the definition of force majeure in the contract will make it easier to bring a force majeure claim. Voluntary actions by a party, say to protect the health and safety of employees in the absence of government requirement, may be more problematic to claim force majeure. Additionally, it is important to note that the relevant force majeure event does not need to be COVID-19 itself. It is the consequences of COVID-19 (such as government measures) and its impact upon the ability of the affected party to fulfil its contractual obligations that will be relevant.

What if my contract does not have a force majeure clause?

As indicated in the response to the foregoing question, the events listed therein constitute force majeure events even if the contract does not have a force majeure clause. It is when a debtor can show to the satisfaction of the court that either of the events stated above completely prevented him/her from discharging his/her obligations that one can invoke force majeure even if the contract is silent.

Can a contract be set aside if a party cannot deliver goods or services on time because of the pandemic?

Yes, if the pandemic is characterized as a force majeure event, the contract can be set aside. The party who claims to be affected by the pandemic, i.e. the non-performing party, is required to provide a timely notice to the other party. The requirement of notice is critical to avoid liability for damage by the affected party that could have been avoided.

Can a party suspend its non-monetary obligations under a contract in light of COVID-19?

Under Ethiopian law, contracting parties are allowed to suspend obligations in cases of anticipatory breach. Anticipatory breach occurs when there are simultaneous obligations between contracting parties. One of the parties to the contract clearly shows that he will not perform his obligations or becomes insolvent as established by a court. In such a case, the other party may suspend his obligation until the party who clearly showed his/her intention not to perform his/her obligation provides security and guarantee that he/she will follow through on the original contractual obligation. Without anticipatory breach, parties may not suspend obligations under a contract. 

On the other hand, in a contract of supply, the supplier may suspend performance after having given reasonable notice to his contracting party. A contract of supply is defined as a contract in which a party undertakes for a price to make a periodical or continuous delivery of things. Parties are at liberty to insert a clause for a suspension of obligations in their contracts. Therefore, for a party to suspend its obligation under a contract because of COVID-19, a provision that would allow suspension of a contract under such circumstances must be included in the contract.  If there are other specific clauses in a contract that are wide enough to cover COVID-19 and which allow the party to suspend its obligations, a party may suspend performance of its obligations.

In what circumstances can a party rely on force majeure in order to suspend its obligations under a contract? What conditions need to be fulfilled?

A force majeure clause will typically excuse a party from performance of a contract following the occurrence of certain events that are beyond that party’s control. Force majeure is used to avoid liabilities by a debtor in a contract if a debtor defaults and is sued for breach of contract.  Since suspension is not legally regulated, the parties are at liberty to include grounds for suspension in their contract. Therefore, so long as the parties included force majeure to result in suspension of obligations, then any party can rely on it to suspend its obligations. For a party to rely on a force majeure event, the party must ensure that the circumstances fulfil the following definitional element of events characterized as force majeure events:

1. Unforseeability-the party has to establish the circumstances do not arise from events that the party could have planned for and manage
2. Absolute impossibility-the circumstances prevent the party from not performing at all, not making it more burdensome for it.

Conditions to be fulfilled for a successful force majeure claim

Once a party is persuaded that COVID-19 related circumstances caused the party not to perform the contract, the party must also consider the following criteria before suspending their obligations:

1. Whether the affected party has taken all reasonable steps to avoid or mitigate the event or its consequences: a party is obligated to take steps to find an alternative means before claiming force majeure. However, given the continued global impact of COVID-19, it is likely that many parties will not be in a position to find alternatives to fulfil their obligations.
2. Whether there are any specific obligations under the force majeure like a notice requirement: it is important to check if the party is obligated to serve the other party with a notice and what the notice requirements are before suspending their performance. The party should comply with any set timelines and other requirements of issuing the notices as some contracts have specific time-bar clauses.

If a counterparty to a contract refuses to meet its obligations under the contract because of COVID-19, what recourse does the other party have?

In such a case, the party in question can sue the non-performing party for breach of contract and claim damages or specific performance (depending on the nature of the contract) or exercise any other remedies available under the contract. Please note that courts are currently not entertaining cases that are not urgent in their nature.

With respect to registration of documents under relevant laws:

(i) What happens to the requirement to register documents under the relevant laws (where DARA is closed)
(ii) Are penalties applicable for late payment of stamp duty during the period of COVID-19 and can one get a waiver of penalties ?

(i) What happens to the requirement to register documents under the relevant laws (where DARA is closed)

Documents such as power of attorneys, documents originating from abroad, memorandum of association, articles of association, shareholders’ resolutions as well as agreements requiring authentication are signed and registered at DARA. DARA is currently only partially functional.  Among other things, this has an impact of delaying the completion of transactions such as sale and purchase of shares, capital increase and change of address or any other amendment to the memorandum and articles of association of a company.

(ii) Are penalties applicable for late payment of stamp duty during the period of COVID-19 and can one get a waiver of penalties ?

 Stamp duties with regards to documents that are required to be registered by DARA are paid before authentication and registration of the documents.  In a scenario where contracting parties have signed an agreement that is not required to be registered at DARA (eg. Employment contract, security deeds, contract of lease) and have not paid stamp duty, the late payment of a stamp duty has a penalty of doubling the amount of stamp duty. It also states that the penalty amount should not be less than 10 Birr in all circumstances. Therefore, so long as the government registries remain open, the penalty will be in place. If the registries are closed, then there will not be any late payment of stamp duty penalties since the documents will not be submitted.

If one has entered into a commercial contract (e.g. a Share Purchase Agreement) that is pending completion, would the outbreak of COVID-19 be deemed to constitute a material adverse change (MAC) entitling a party to terminate the agreement/ delay completion? What other recourse would you have?

In order to rely on a MAC, this must be specifically included in the underlying contract. COVID-19 has been declared a pandemic by the World Health Organization and an epidemic by the Ethiopian government. Many businesses have been adversely affected by the pandemic due to reasons such as lock downs and business supply disruptions and are experiencing or are anticipating financial downturns. Despite the foregoing, the effects of the pandemic on the earning potential of businesses and industries in the long term is unknown. It is unknown how long the pandemic will last and its long-term effect on the global economy. The ability of a party to successfully claim that COVID-19 constitutes a MAC will need to be assessed on a case-by-case basis taking into account the individual circumstances of the particular matter and the effect that COVID-19 will have had on their business, assets or operations. In the event that a party was aware of the COVID-19 outbreak when entering into the relevant contract, it would be even more difficult for such a party to rely on the MAC clause.

What are the effects of COVID-19 on delays to obtain regulatory approvals that are condition precedent (CP) to completion?

Although a state of emergency has been declared, most regulatory bodies are partially open providing limited and essential services. Ethiopian Investment Commission and the TCCPA have remained operational.  A party could rely on force majeure to suspend its obligations under a contract or to terminate the contract or to extend the timeline for completion (if this right exists under the contract).The parties to the contract could also mutually agree in writing to delay completion of the transaction and extend the timelines for the fulfilment of an condition precedents, awaiting further developments on the measures that government will take to further contain COVID-19.

For purposes of interpreting a force majeure clause that includes an “epidemic” as an event, can it be argued that there is currently an “epidemic” in Ethiopia?

Yes. COVID-19 is currently classified as a pandemic by the WHO. The Ethiopian government has also declared an SOE classifying COVID-19  as an epidemic in accordance with the Ethiopian Constitution.

Can an employer be legally compelled to notify the local health ministry, either proactively or in response to a request from the ministry or other government agency in case an employee is infected with the COVID-19 virus?

Yes. The Ethiopian government declared a state of emergency on April 07,2020, which was followed by the enactment of a State of Emergency Proclamation No. 03/2020 (“SOE Proclamation”) by the federal parliament on April 10, 2020. Further, the Council of Ministers approved the State of Emergency Regulation No. 03/2020 (“SOE Regulation”) detailing the measures to be taken by the Federal government to contain COVID-19. Under article 4 (5) of the SOE Regulation, any person that has contracted COVID-19 or any person that knows another person who has contracted COVID-19 must notify the Ministry of Health or the police. Further, under the Ethiopian labour law, an employer is legally required to take all necessary occupational safety and health measures and to abide by the standards and directives to be given by appropriate authorities. With respect to COVID-19, the Ethiopian Ministry of Health (“Ministry”) and the Ethiopian Public Health Institute (“EPHI”) have been issuing guidelines to the public, including the obligation to notify the Ministry on any cases or symptoms of COVID-19.

Is an employer legally obligated to notify employees if any of their employees is infected with the COVID-19 virus?

The Ethiopian Ministry of Labour and Social Affairs (“MOLSA”) issued a COVID-19 workplace protocol on March 18, 2020 (“MOLSA Protocol”). While an employer is not legally obligated to notify employees, it is required to take measures to ensure safety of workers such as providing sick leave immediately to the infected worker and requiring other employees to self-quarantine and get tested as a workplace safety measure. Further, the MOLSA Protocol provides that if an employee is found to be COVID-19 positive, the Employer is obligated to give safety instructions to employees without causing panic.

Is there an obligation to close a place of work if an employee is infected? At what stage can the employer reopen the place of work?

No. Under the SOE Regulation, there is no obligation for an employer to close a place of work if an employee is infected with COVID19. However, the MOLSA Protocol provides that if an employee shows any symptom or has been  diagnosed with COVID-19, the Employer must identify  workers  who   have   been   in  contact with the infected worker and clean the workplace with the support from Ethiopian Public Health Institute.

Are there any issues with forcing employees to work from home?

No. Under the SOE Regulation article 4 (11), Employers are required to facilitate working from home for employees.

How can employers cut wages for employees? For example, can employees be asked to stay away from work in exchange for reduced pay without triggering redundancies?

The reduction of wages would require the consent of the employees as wage is agreed between the employer and the employee. Without this agreement, the employer cannot consider wage reduction. The MOLSA Protocol proposes for employers to consider, in view of sustaining their businesses, interim measures such as suspending fringe benefits and allowances that do not form part of the salary of employees, freezing salary increments, and reviewing salary scales. There are no guidelines on reduction of wages and the MOLSA Protocol does not propose for that to be followed by Employers.

Can an employer force employees to take outstanding leave days?

Yes. Pursuant to the MOLSA Protocol on COVID-19, an Employer is encouraged to grant outstanding leave days to employees. Further, if employees do not have outstanding leave days, the Protocol proposes for Employers to arrange leave days from the upcoming budget year to be used. This is to minimize any potential wage reduction, suspension or termination of contracts.

Can employers force employees to go on forced paid leave or unpaid leave during this time?

An employer may grant paid leave to an employee without deducting such leave from the employee’s annual leave as a measure to prevent the spread of COVID-19. However, an unpaid leave maybe permissible if:

1. the employer and employee expressly agree; or
2. the employer suspends its operations resulting in the suspension of the employee.

The Ethiopian labour law permits suspension of employees in cases of force majeure and the occurrence of financial problems not attributable to the employer.  Suspension of employees requires the prior approval of MOLSA.

Is notice required to suspend or put an employee on unpaid leave?

Notice is not required; however, the employer should inform MOLSA in writing within three working days of the occurrence of the ground for suspension. If the Ministry fails to respond within those three days, the employer is deemed to have been permitted to suspend.

Is there a maximum number of days allowed for suspension of employmentIs there a maximum number of days allowed for suspension of employment?

The Labour law provides that the suspension period shall not exceed 90 days

Do annual leave days continue to accrue during suspension of employment?

Yes. Annual leave accrues based on the duration of the employee’s service. As suspension does not presume termination of employment, annual leave will continue to accrue unless the parties agree otherwise.

Can employment be terminated at the end of the suspension period should the business continue to be on the downturn and is unable to sustain the headcount due to COVID-19?

No. Under the SOE Regulation, an Employer is prohibited from terminating contracts of employment for the duration of the SOE subject to the conditions to be laid out by MOLSA.  To date, MOLSA has only issued the MOLSA Protocol and not specific directives on termination of contracts. The SOE’s restriction on termination should be understood in the context of COVID-19 and does not apply to regular employment relationship. As such, if the grounds under the labour law resulting in contract termination occur, outside of the COVID-19, the Employer will be entitled to terminate. This interpretation is yet to be tested at the courts which may apply a more protective interpretation.

Can the quarantine period be deducted from an employee’s annual leave or sick leave? What if the period exceeds the employee’s sick leave entitlement?

The quarantine period could be deducted from an employee’s sick leave. Where the period exceeds the employee’s sick leave entitlement, such period may be deducted from the employee’s annual leave upon the employee’s consent If, however the quarantine period exceeds both sick and annual leave entitlements, the employer is entitled to suspend or terminate employment by providing the appropriate notice.

Can the quarantine period be deducted from an employee’s annual leave or sick leave? What if the period exceeds the employee’s sick leave entitlement?

The quarantine period could be deducted from an employee’s sick leave. Where the period exceeds the employee’s sick leave entitlement, such period may be deducted from the employee’s annual leave upon the employee’s consent If, however the quarantine period exceeds both sick and annual leave entitlements, the employer is entitled to suspend or terminate employment by providing the appropriate notice.

Can terms of employment be renegotiated during this period of the pandemic?

Yes. Terms of employment in an employment contract may be renegotiated and amended at any time with the agreement of both parties. However, the minimum entitlements provided to an employee under the labour proclamation cannot be derogated. 

Can employees be asked to reduce the number of hours they work so that they are paid based on the number of hours worked (salary is reduced accordingly)?

Yes, however, this will require the prior agreement of the employee. The employer should consult with the employees prior to making any amendments to employment contract including wages and working hours.

What duty of care does an employer owe to their employees during this time? Accordingly, what liabilities arise on an employer if an employee is infected at the place of work?

The Ethiopian labour Proclamation imposes a legal obligation on employers to take various measures to ensure that the workplace is safe for all employees. Employers must therefore put in place measures to protect their employees from the spread of COVID-19 at the workplace in line with national and international guidelines. Further, the MOLSA Protocol provides, among others, that Employers should provide:

• protective gears, water and sanitary materials.
• Eliminate congestion, maintain physical distancing, avoid face to face meetings, and provide information on prevention methods to employees.
• Follow up, control and reporting systems for COVID-19 cases in the workplace.

Pursuant to article 185 (2) of the Labour Proclamation, an employer that fails to take all necessary occupational safety measures and fails to abide by national standards and directives will be liable to a fine of ETB 10,000-20,000 or first time offense. If the act is committed for more than three times, it may result in the closure of the Employer’s undertaking.

Do employers still need to pay full salaries to employees if the nature of their job is that they are unable to work remotely but need to stay home to be safe from the virus?

This will need to be consulted and agreed between the employer and employee. If the employee has outstanding leave days, the employee may use those days for staying home. As noted in the MOLSA Protocol, the Employer may also agree to allow upcoming leave days to be granted.

Can employees who cannot work remotely be forced to take annual leave during this period?

Yes, employees who cannot work remotely can be forced to take annual leave as advised by the MOLSA Protocol.

What is the legal position on sick leave?

Under Ethiopian labour law, a distinction is made between managerial and non-managerial employees for the purpose of sick leave.

1. For non-managerial employees, an employee is entitled to a total of 6 months sick leave from which the first one month is 100% paid, the second two months is 50% pay and the last three months without pay.
2. For a managerial employee who has at least served for 3 months, the employee  is entitled to 15 days of sick leave with half pay, while an employee that has served for 1 year or more is entitled to one-month of sick leave with half pay.

What is an employee entitled to when they are working remotely? What are the benefits an employee is entitled to when working remotely?

There are no legal prescriptions that provide any entitlement for employees working remotely. Given this gap, employees are entitled to their normal employment benefits as stipulated under their employment contracts (such as salaries and leave entitlements etc.) when they are working remotely. They would not, however, be entitled to benefits that require their physical presence at the workplace (such as transport to the office benefits, free lunch etc.).

Can any employer reduce its workforce because of COVID19?   What would be the entitlement of employees whose contracts have been terminated as a result of reduction of workforce?

Under the SOE Regulation, an Employer is prohibited from terminating contracts of employment for the duration of the SOE subject to the conditions to be laid out by MOLSA. MOLSA has not yet issued such directive. As noted above, the MOLSA Protocol advises employers to take measures short of terminating contracts.

Under the Labour Proclamation, an employer would have good cause to terminate a contract of employment if the following occurs:

1. Any event which entails direct and permanent cessation of the employee’s activities in whole or in part:
2. Demand fall for the products or services of the employer resulting in the reduction of the volume of the work or profit of the undertaking.

To the extent COVID-19 results in either one of the conditions above, the Employer will be entitled to reduce the work force by terminating the contract of employment. However, in terms of determining the workforce to be reduced and retained, the labour law provides guidance taking into account factors such as skills, productivity, gender, people with disability, longevity of services and expectant mothers. Employees who have completed their probation and whose contracts have been terminated as a result of reduction of work will be entitled to severance payment and payment of 60 days’ wage.   Under previous directives issued by MoLSA regarding reduction of employees under normal circumstance, the employer has also an obligation to take a series of notification and consultation measures with relevant labour office at the place where the employer is located.

Should an employer have a written COVID-19 policy?

Yes. The MOLSA protocol advises employers to have a written COVID-19 policy as a measure to help protect workers from infection and protect employers from liability.

Would directors and officers be held liable for not doing enough if someone caught the virus and spread to other staff members?

Yes. Under the Labour Proclamation, the employer and managerial employees would be liable if they compel the employee to execute any task that is hazardous to life.

Can an employer make an employee perform other jobs when their core functions are down (for examples, if sales are down)?

The Ethiopian labour law does not provide a mandatory provision in relation to requiring employees to perform other jobs when their core function is down, except for managerial employees. For managerial employees, the Civil Code provides that an Employer may, at any time, where the interest of the undertaking requires, assign a different work to the employee provided there is no reduction in wages.

What should an employer do if an employee doesn't want to come at work because he/she is afraid of being infected at the workplace?

The answer to this question will depend on the context. If the government declares a complete lockdown, the employee has good reason to stay behind. If that is not the case and the employee is what can be considered as a key employee and the employer puts in place all work place health and safety measures, it is reasonable for the employer to demand the employee to report to work formally. Depending on the response from the employee, the employer could consider a range of measures such as replacing the employee with a temporary employee willing to substitute, and to take administrative action on the employee on the grounds of unauthorized absence.}

What is the extent of the Prime Minister’s powers to declare a State of Emergency in Ethiopia and what this means?

Under the Ethiopian Constitution, the PM is not empowered to declare a state of emergency (SOE).  It is only the Council of Ministers of the federal government that may declare an SOE which is required to be approved by the parliament within 48 hours. Further, regional states may also declare their own state of emergency if there is an occurrence of a natural disaster or an epidemic. So far, the Council of Ministers has declared a nationwide SOE on April 10, 2020 and Tigray regional state has also declared a state level SOE. Other regions such as Amahra and Southern Nations, Nationalities and Peoples (SNNP) have taken measures such as restricting transportation and lockdowns in some towns short of an SOE.

If an SOE is declared, it would mean that the government would have the power to suspend constitutional rights (political and democratic rights) to the extent necessary to avert the conditions that required the declaration of the emergency.

Is business interruption covered in insurance policies in Ethiopia?

Yes, in Ethiopia business interruption cover is a form of insurance coverage typically procured by businesses as part of property insurance coverage. Business interruption cover is designed to assist policyholders to mitigate the loss of revenue or income due to their operations being affected by the designated cause, e.g. the occurrence of property damage or other casualty. Business interruption policy is recognized as a pecuniary insurance separate from but very closely connected with material damage insurance. It compensates lost income/profit which would have been achieved by the business if the interruption to the business had never occured. However, it is not as of yet issued as a standalone product rather in association with other types of material damage cover of commercial property risks.

Would the cover extend to interruption caused by the COVID-19 pandemic?

COVID-19 related claims: business interruption policy may not be issued as a standalone product. Hence, unless property insurance policy insured perils cause a damage or loss, business interruption policy may not cover interim expenses. Moreover, it has absolute exclusions that exist in most policies (such as epidemics, war or earthquake). 

In relation to COVID-19 business interruption, questions may arise as to whether the underlying property insurance policy requirements have been met. For example, in circumstances where business premises or manufacturing facilities have been closed as part of a mandatory governmental order or voluntarily closed by the business owner as part of COVID-19 containment measures or out of fear of contamination, but the physical facilities are otherwise still habitable and uncontaminated, it is possible that a generic business interruption cover will not respond since there has been no property damage/no direct physical loss.

Business owners considering COVID-19 related insurance claims will also need to bear in mind the specific exclusions in their insurance policies which may preclude coverage. Generic commercial property insurance and business interruption policies will typically exclude damage arising from epidemics or pandemics. If the agreed cause of loss under the underlying property insurance policy is limited to specific peril such as fire or excludes epidemics such as COVID-19, the business interruption insurance policy associated with such underlying policy may not extend to cover interruption caused by the COVID-19 pandemic.

What should businesses do/consider in relation to their insurance policies in light of the COVID-19 pandemic?

Businesses should do the following:

1. Carefully review along with their advisers the terms of their existing coverage to establish whether business interruption relating to COVID-19 or epidemics generally would be covered or excluded and whether, even if there may be no exclusion from cover, proof of physical loss may affect the ability to recover from insurance.
2. Going forward, businesses should avoid generic policies and carefully think through the practical risks and losses they are likely to face in an environment where such epidemics and disease outbreaks are no longer ‘black swan’ events and structure their insurance coverage so as to effectively respond to these risks.
3. Insurers, insured persons and brokers should work together to evaluate whether the present industry standard forms of commercial property and business interruption cover are ‘fit for purpose’ and to consider developing products that address the practical risks that businesses are facing at present and are likely to face in the future. For instance, consideration could be given to cover endorsements that extend cover to a contingent business interruption, that is, cover is extended to a business where its key suppliers (rather than the business itself) suffer physical losses to their property that impairs the supplier’s ability to deliver contracted goods or materials.
4. Consideration could also be given to extension of cover to situations where although there has been no physical damage, governmental action such as a lockdown orders or SOEs as part of epidemic containment measures, affects access to or use of the insured’s business premises.

In the case of Insurance Premium Financing Arrangements, if the client does not meet his monthly payments, would the insurers be called upon to cancel the policies and refund the premium due?

Yes, the Insurance Premium Financing Agreements will typically include:

1. a right for the bank to procure the cancellation of the policy if the insured/borrower defaults in repayment of the premium financing facility; and
2. an acknowledgement by the insurance company that if the bank procures the termination of the policy as above, then the insurer would refund to the bank a pro rata portion of the unutilized premium.

What happens to mergers being evaluated by the Competition Authority of Ethiopia (the Trade Competition and Consumer Protection Authority, “TCCPA”) in the event of a lock down/ closure of the TCCPA?

To date, the TCCPA has not issued any statement providing guidance on how merger assessments will be conducted in the event of a lockdown or an SOE. In line with the government decision to keep only key personnel in government offices starting from 25 March 2020, TCCPA remains functional.  However, parties participating in a merger should envisage the possibility of merger evaluations by the TCCPA being delayed as a result of the decision. As merger will not have any legal effect until it is notified to and approved by the TCCPA, any on-going applications or evaluation activities are likely to be suspended in the event of TCCPA’s closure.

How will merger applications be submitted to the TCCPA in the event of a lock down/ closure of the TCCPA?

This is unknown at this point. The TCCPA is yet to issue a statement providing guidance on how merger assessments will be submitted in the event of a lockdown. If TCCPA arranges an online review platform in the meantime, it is also possible that applications may continue to be submitted.

What kind of conduct in business is prohibited and is likely to attract investigations or imposition of sanctions by the Ministry of Trade or the TCCPA during this period of COVID-19?

Since the outbreak of COVID19, demand for some essential medical and other consumable products have skyrocketed. The government has been suspending businesses that have increased prices as a result of increase in demand.  The SOE Regulation provides that special benches and court procedures will be set up in order to handle cases related with price increments and product hoarding as per the applicable competition and criminal laws.

Will coordinated or even unilateral efforts by entities to mitigate and suppress the COVID-19 pandemic prompt competition law scrutiny?

e.g information sharing of competition sensitive information such as future prices, volume of stock available, co-operation in delivery of supplies to remote areas if shops are closed down etc.

Yes. The Competition Proclamation generally prohibits agreements, concerted practices or decisions by undertakings which have, as their object or effect, the prevention or lessening of competition in trade (Anti-Competitive Trade Practices). Certain particularly harmful agreements, such as agreements among competitors to fix prices, rig bids, or allocate markets, are unlawful per se. Others are evaluated based on their effects on competition. The SOE Regulation provides that the government may, as part of the COVID-19 response, order companies to alter or increase their normal production or sell products at a certain price.

Can undertakings unilaterally refuse to deal with a firm that fails to adopt adequate measures to protect workers and customers, or a firm that promotes misinformation that may exacerbate the public health risks?

If the undertaking is one that has a dominant market position, refusing to deal with a firm requires a justifiable economic reason.  Maintenance of safety and quality of services and goods qualifies as a justifiable economic reason. Therefore, if the undertaking can prove that the failure to adopt adequate measures to protect workers and customers, or the promotion of misinformation that may exacerbate the public health risk  affects the quality and safety of the services or goods, the undertaking can unilaterally refuse to deal with the firm.

Would hoarding of products with the subsequent intention of increasing prices and/or collusive increase of prices in light of increased demand (commonly known as price gouging) during the COVID-19 crisis be permissible?

No.  When entities act in concert or collude to increase prices, or hoard goods with the subsequent intention of increasing prices due to a sharp increase in demand, it will qualify as an anti-competitive trade practice in violation of the Competition Proclamation and the SOE Regulation.  It is worth noting, that a taskforce was formed by the Addis Ababa Trade Office to regulate illegal price increases on 13 March 2020. A notice to that effect including a warning to manufacturers and retailers against illegal price increases and hoarding was issued. In the notice, the government indicated that such conduct by manufacturers and retailers would be punishable by closure of the entities. On 14 March 2020, the taskforce started taking action on businesses that were illegally increasing prices. Moreover, on 24 March 2020, the TCCPA issued another cautionary notice on selling products that deceive customers by stating that the said products prevent or cure COVID-19.

Will the TCCPA hold meetings and carry out site visits during this period?

At this time, the TCCPA is yet to issue a statement providing guidance on how the current COVID-19 pandemic will impact the TCCPA’s capacity to hold meetings and carry out site visits during this period. However, parties should envisage the possibility of the ongoing COVID-19 pandemic disrupting the normal day to day functioning of the TCCPA.  Nevertheless, the  taskforce formed by the Addis Ababa Trade Office has during the COVID-19 period carried out investigations into alleged breaches of competition laws such as hoarding of products and illegal price increment and proceeded to impose penalties against parties found to be in breach.

How does COVID-19 impact investigations where the TCCPA requires responses to queries to be provided within a certain period?

The TCCPA is yet to issue guidance on how the current COVID-19 will impact investigations particularly where the TCCPA requires responses to queries to be provided within a specified timeline. However, parties should engage with the TCCPA on a case by case basis for directions on how to proceed and also to request for extensions of time to submit information or respond to enquiries by the TCCPA in the event that they are constrained from being able to respond in a timely manner as a consequence of COVID-19. Such requests can be made orally with the TCCPA but should ideally be followed up with written communication.

Can I obtain interim reliefs from the courts during this period in light of the closure of the courts and registries in the event I have an urgent matter?

Yes. The Federal Supreme Court has announced that federal courts will be in partial closure due to COVID- 19 starting March 20, 2020.  It has now extended the closure of the Federal courts for until the end of April 2020. However, it is possible to obtain interim relief in case of urgent matters that affects life, liberty and public safety. Moreover, the Supreme Court is rendering its judgement on matters that are mature and is issuing short note about the contents of its judgements.

Will I be able to file or serve documents/pleadings following the closure of courts, registries and offices?

Court buildings and registries will not be accessible to members of the public as they are currently closed. However, parties with urgent matters will be allowed to file their matters.

If not, will I be penalised for failing to do so?

There is no penalty in this case. However, where it is impossible or impractical to file and serve a document, either due to the fact that it is not urgent or if one is unable to effect service, the parties must wait until the courts reopen to render its normal service.

Can I execute a court order during this period of suspension of court activities?

All execution proceedings have been suspended until the end of April 2020. In addition, no action will be ordered with respect to existing interim orders.

How will new dates be obtained for the matters that were to be heard or mentioned during the suspension period?

Judges have been directed to issue new appointment dates for pending matters and the new dates for each matter will be posted in on a notice board in the court’s premises. The court also declared text messaging using a short code of 992 as a means of accessing new dates of appointment, though the text messaging alternative often times fails to work.

What will happen to interim orders that were set to lapse during the suspension period?

There is no clear provision to this effect. However, if such interim order is considered as a case that requires urgent action, the judge may entertain it.

What is the status of operations at the Federal First Instance Court, Federal Higher Court and Federal Supreme Court during this period?

The suspension of court proceeding applies to all hearings and submission in both civil and criminal cases at the Federal First Instance Court, Federal High Court and Federal Supreme Court including the Cassation Division.

Can a witness be excused from attending court if their date falls outside the period when court activities have been suspended but the witness is reluctant to travel owing to COVID-19?

If a witness has good cause not to attend witness hearing, it can be excused from attending court and it is up to the judge to determine the existence of good cause. Given the circumstance and recommendation by the government to stay at home to contain COVID-19, the reluctance by the witness not to travel owing to risk of exposure to COVID-19 may be considered as a good cause.

Will I be able to obtain an early date for my matter, in light of the backlog of cases that will arise owing to matters that were taken out during the suspension period being prioritised?

No, the judges are authorised to prioritise and give new appointment dates on their own discretion.

What are the obligations of lessors and lessees in relation to minimising the spread of the COVID-19 virus at the building or the leased premises?

By virtue of the principle of good faith and the obligations incorporated under Article   2916 and 2921 of the Civil Code, both the lessee and lessor are required to safeguard and maintain the leased premises and the building in good condition and care.  Ordinarily, the lessor shall warrant to the lessee the peaceful enjoyment of the building during the currency of the lease whereas, the lessee shall use the immovable leased with all necessary care and according to the purpose stated in the lease agreement.

Can the Government order the closure of the whole or a part of a building?

Yes. Pursuant to Food and Medicine Proclamation No. 1112/2019, Food, Medicine and Healthcare Administration and Control Proclamation No. 661/2009 and Food, Medicine and Healthcare Administration and Control Regulation No. 299/2013, the Ethiopian Public Health Institute is empowered to take measures that would control communicable diseases including ordering the closure of schools and other public spaces, and taking other necessary measures.

Furthermore, under the SOE Regulation, government may order any property owner to surrender its property (buildings, house, hotel, apartments, vehicles) for the purpose of containing the spread of the virus. The only exception is if the property owner uses the property for his/her daily life.

Can a lessor unilaterally decide to close the whole or a part of a building to help stop the spread of the COVID-19 virus?

Except as stated under the contract of lease, the lessor is not entitled to unilaterally decide to close the building. This will be a breach against the legal protection provided to the lessee under the law for peaceful enjoyment of the leased premises. However, as per the SOE Regulation, the government may order any buildings or properties to be closed for the purpose of containing COVID-19.

Can a lessee unilaterally decide to shut its premises to help stop the spread of the COVID-19 virus?

Typically, the main obligations of the lessee under a lease agreement are payment of the rent and use of the leased premises with all the necessary care as well as the use of the premises for its intended purpose. The lessee may shut the leased premises due to the spread of COVID-19 so long as it is complying with all its obligations under the contract or the SOE Regulation.

What is the effect on co- tenancy clauses where the Government directs the closure of the whole or part of a building or where the other tenants in the building unilaterally decide to close their leased premises and cease trade?

Co-tenancy clauses are provisions in a lease that require the landlord to maintain a minimum building occupancy. The effect on the co-tenancy clause would depend on:

1. What is construed as occupancy;
2. Whether the minimum occupancy is affected by a partial closure; and
3. Whether force majeure or could be applied to the scenario at hand.

The minimum occupancy required on the leased premises is subject to the agreement of the parties on the lease contract. If the closure of the whole or part of the building affects the co-tenancy obligation under the contract, the effects of these will be regulated under the contract and force majeure clauses under the law as discussed in previous sections.

Can a lessee suspend the payment of rent claiming that the Covid-19 gives rise to a force majeure event?

Yes, on condition that the lessee can prove whether COVID-19 amounts to a force majeure event. In order to claim force majeure, force majeure must be specifically provided for in the lease agreement. In principle, contractual parties are free to determine the terms and conditions of contract including events that would constitute as force majeure.  If the lease agreement is silent, the provision of Civil Code defining force majeure will apply as follows:

1. an occurrence of an event which the debtor could not normally foresee.
2. The event should render the performance of the contract absolutely impossible.
3. its occurrence must be beyond the control of the party concerned. The event must be external and should not be within the control of the debtor.

Thus, for a force majeure to occur, the performance of a contract by the debtor should be absolutely impossible. To the extent that the spread of COVID-19 renders the payment obligation of the lessee impossible, in which case, the lessee has the burden to prove, the lessee may suspend payment.

What happens if there is failure to provide building services, including maintenance, cleaning, sanitation, and security due to COVID-19?

This will depend on what is contractually agreed between the parties. Responsibility for the provision of services for a multi-tenant building, including maintenance, cleaning, sanitation and security for the common areas are normally set out in the lease agreement. It is common market practice in Ethiopia for lessor to exclude liability for failure to provide services where the cessation of the services is due to factors out of the control of the lessor or due to no fault on the part of the lessor. This is recognised on the basis that the lessor is not personally providing the services and that the lessor has no direct control over the third-party service providers.

If an individual lessee or an employee of the tenant contracts COVID-19, can a landlord prohibit the tenant or its employee from accessing the building/premises?

Yes, however, the landlord must notify the Ministry of Health or the police immediately as per the SOE Regulation. Further, the tenant/employee has the obligation to cooperate with medical treatment including being quarantined.  The government has issued guidelines on how a person who contracts COVID-19 is to be treated until recovery including the requirement to isolate oneself from one’s surroundings. Therefore, a person who contracted COVID-19 is not allowed to access the leased premises in accordance with the emergency health protocol announced by the government.

What alternative remedies can I consider if my contract/lease does not entitle me to suspend my obligations on account of force majeure?

A lessee is liable for any damage caused to the other party for failing to perform the obligations under the contract which is the payment obligations. If the contract does not consider suspension of payment obligation on account of COVID-19 as force majeure event, the lessee will have two options to suspend the obligations:

1. A government Order: if the government rules for closure of buildings, the lessee will be entitled to terminate the agreement as the core obligation of the contract of lease is use of the leased premises.
2. Amendment to the Contract: the parties may reach to an agreement to amend its terms so as to enable the lessee cease to perform its payment duty without any further legal liability until the matter is resolved.

What should real estate developers with development loans do in view of the looming slowdown in house purchase uptake?

Under Ethiopian law, once a contract is concluded, it will bind the contracting parties as if it was a law. Moreover, a contract shall remain in force notwithstanding that the conditions of its performance have changed, and the obligations assumed by a party have become more onerous than he/she foresaw. Thus, the best course of action is to discuss and re-negotiate the terms of the contract.

How are payments under the sale agreement affected if the completion date falls during a period when Document Authentication and Registration Agency (DARA) is closed?

This will vary from one agreement to another depending on the specific terms of the agreement. For a cash transaction, a purchaser’s obligation to pay the balance of the purchase price is normally pegged to the completion date in exchange for the release of the completion documents. In some circumstances, parties agree that the entire purchase price or a portion of it can be released to the seller on the completion date upon release of the completion documents to the buyer. In a financed transaction, the buyer normally pays the deposit into an escrow account and on the completion date procures a financial undertaking from its financier to make payment of the balance of the purchase price to the seller. The seller would not be entitled to the entire purchase price until the transfer and the charge have been registered before the Document Authentication and Registration Authority( DARA)  In such transaction, the closure of the DARA has the effect of delaying the stamping and registration of the transfer and consequently the receipt by the seller of the purchase price and the granting of possession of the property to the buyer. Moreover, in such an instance, both the seller and the buyer should agree on how best to manage each party’s expectations and timelines for completing the transaction as the closure and the reopening of the DARA is not within the control of either party. The provisions of the agreement for sale on time prescribed for registering the transfer should also be reviewed so as to provide for additional time if required.

How does the current slowdown of government offices such as DARA and various governmental offices affect completion in various sale and purchase transactions?

In Ethiopia, there is currently no full lockdown. Government offices are partially operating with a downsized number of civil servants providing services. As there is likely to be delays in processing transactions, the following issues should be considered for completing a property sale transaction:

1. in a financed transaction involving banks, the completion period should give sufficient time for the bank to complete its due diligence (if this has not already been done):
2. the completion period should also give sufficient time for the seller to procure the various completion documents, once the DARA and relevant authorities, are fully operational:
3. whether any of the completion documents (including clearance certificates) that may have already been procured would expire prior to government offices being fully operational: and
4. time prescribed for notarizing the transfer

If the agreement for sale has already been executed and the completion date will occur prior to the reopening of DARA and the relevant county government offices, then parties will need to discuss providing an extension of time to a more realistic date so as to allow each party to comply with its completion obligations.

How does closure of DARA affect the handover of possession of the property on a sale transaction?

It is prevailing practice for possession of the property to be granted by the seller to the buyer on completion of the registration of the transfer, if required, and release of the purchase price to the seller. As indicated above, the closure of DARA has the impact of delaying the stamping and registration formalities on the transfer and consequently the release of purchase price to the seller and grant of possession of the property to the buyer.  Should the buyer wish to take possession of the property prior to the registration of the transfer, then, this may be made conditional on the release of the purchase price and the buyer would take the risk on the registration of the transfer.

Alternatively, the buyer may occupy the property prior to the registration of the transfer as a lessee and pay rent to the seller. In this situation, while the seller  enjoys an additional revenue stream (for what is hoped to be a short period), the seller takes on the risk of vacating the buyer if the transaction is not completed due to no fault on the part of the seller.

What steps if any is the DARA taking to help with the registration of documents that may have statutory or contractual timelines?

DARA has set up an emergency task force to deal with urgent registration of documents where it can be demonstrated that there is a risk of exceeding statutory or contractual timelines for registering the document.

Has there been any tax relief measures announced by the government as a result of COVID19?

No. The federal government has not yet announced tax relief measures for businesses on the basis of COVID19 although relevant government officials indicated in various forum that this is being discussed as a timely agenda. The Addis Ababa City Administration has however announced that it is planning to provide a tax exemption to all business for the last quarter of the year. According to the proposal, Category C taxpayers as well as all rental income taxpayers at all category will be exempted from income tax for the period starting April until end of June 2020. In terms of employment income, employees will pay 50% of their normal tax liability for three months as of April. In addition, the tax bureau has proposed to waive tax liability arising from penalty and interest.

On the other hand, the Ministry of Finance has provided tax and duty-free privileges to medical supplies such as test kits/apparatus, protective garments, thermometers, disinfectants, medical consumables, to support the COVID-19 response.  Furthermore, in order to aid companies with cashflow, the government announced that it will expedite VAT returns.

My tax return is due soon. What should I do?

The tax declaration and payments are expected to be executed within the time framework provided under the respective tax laws unless the government waives the obligation to file tax returns on the legally prescribed timeline. The Ministry of Revenue has not yet taken the initiative of extending tax filing periods following COVID-19 and the declaration of the State of Emergency. On the contrary, the Ministry has required tax payers to file their reports using e-filing and for those who do not use e-filing to report as usual on time stressing that the government is in need of finance to cope with the financial challenges of the COVID-19.

Due to absence of key staff in our accounting department, we have just realised that we missed the deadline for filing an objection to a tax assessment– what should we do?

It is possible to apply in writing to the Ministry of Revenue for an extension of time to lodge an objection provided that:

1. You were prevented from lodging the notice of objection within the period specified in the law due to absence from Ethiopia, sickness, or other reasonable cause. (in this case, the COVID-19 pandemic); and
2. You did not unreasonably delay in lodging the notice of objection.

It is important to note that the tax review department is currently accepting and filing grievances arising from tax assessment as well as application to request time extension to lodge an objection.

I have an on-going case at the Tax Appeals Commission which is due for hearing or mention. What will happen?

The Tax Appeal Commission has suspended conducting hearings during this period and adjourning pending cases appointed for hearing for the month of March to June 2020.

How will I file an appeal during this period?

It is possible to file notice of appeal any time within 30 days after notice of the decision. The Tax Appeal Commission has not suspended its function amid the pandemic.

What happens when a notice is issued during this period?

The normal appeal process applies. Upon receiving of notice on tax assessment, it is possible to file an objection with the review department within the prescribed time, normally 21 days from the date of receiving the notice. During the period in question, the review department is open and receiving applications. However, like the Tax Appeal Commission, hearing and questioning persons relevant to the case are not undertaken due to COVID-19.

How will judgements be delivered by the Tax Appeals Tribunal during this period?

Following a notice from the Tax Appeal Commission, with effect from 25 March 2020, no judgments will be rendered until the 13^th of June 2020. The Commission is only accepting fresh applications to ensure applicants are meeting the deadline prescribed by the relevant tax law.