Rethinking Ethiopian Secured Transactions Law through comparative perspective: lessons from the Uniform Commercial Code of the US
| Author | Asress Adimi Gikay |
| Position | Asress Adimi Gikay, LLB, LLM, SJD, PhD Researcher, Scuola Universitaria Superiore Sant'Anna Pisa (SSSA), Piazza Martiri della Libertà, 33 56127 Pisa (Italia) C.F. 93008800505, Email: asress.adimi@gmail.com. |
| Pages | 153-195 |
153
Rethinking Ethiopian Secured Transactions
Law through Comparative Perspective:
Lessons from the Uniform Commercial Code of the US
Asress Adimi Gikay
Abstract
Various countries have reformed their secured transaction laws recognizing the
significance of modern secured transactions law in enhancing access to credit
and economic development. Ethiopia has not undertaken comprehensive
secured transactions law reform, despite the demonstrable mismatch between
the legal regime governing security interests and the country’s current political,
economic and commercial realities. In-depth analysis of the Ethiopian secured
transactions law is made in this article in the light of UCC1 Art 9, English, and
French secured transactions laws and the EBRD (European Bank for
Reconstruction and Development) Model law and the experience of civil
law jurisdiction of Louisiana. I argue that secured transaction law reform in
Ethiopia can be implemented based on UCC Art. 9 with some adjustment in
light of Louisiana’s experience. The article uses the unitary concept of security
interest and floating lien to exemplify the supremacy of the approaches and
policies of UCC Art. 9 and its suitability as a model for potential secured
transactions law reform in Ethiopia.
Key terms
Credit market, UCC, unitary concept/theory, functional approach, floating lien,
floating charge, security in terest, self-help repossession, efficiency
DOI http://dx.doi.org/10.4314/mlr.v11i1.6
This article is licensed under a Creative Commons Attribution-NonCommercial-
NoDerivs (CC BY-NC-ND)
Asress Adimi Gikay, LLB, LLM, SJD, PhD Researcher, Scuola Universitaria Superiore
Sant’Anna Pisa (SSSA), Piazza Martiri della Libertà, 33 56127 Pisa (Italia) C.F.
93008800505, Email: asress.adimi@gmail.com.
I thank Dr. Williams Iheme and Prof. Tibor Tajti (Central European University) for
their comments and insights. My sincere appreciation also goes to the in ternal and external
reviewers for their constructive comments.
1 The Uniform Commercial Code (UCC) was published in 1952, as a uniform code to
harmonize the commercial law of the states in the US through adoption.
154 MIZAN LAW REVIEW, Vol. 11, No.1 September 2017
Introduction
International organizations and states recognize modern secured transactions
law as vital for economic development. The United Nations Commission on
International Trade Law (UNCITRAL),2 EBRD3 and the Institute for
Unification of Private International Law (UNIDROIT) are among the key
advocates of modern secured transactions law at international level.4 Central
and Eastern European (CEE) countries, after the fall of communism have
reformed their secured transactions laws as vital part of the transition to market
economy and to sustain strong economy.5 Various African countries such as
Malawi,6 Liberia,7 Sierra Leone,8 and Nigeria9 have recently implemented
comprehensive reforms, albeit not necessarily flawless.10
Frequently used acronyms:
BMP Proclamation on Business Mortgages
CEE Central and Eastern Europe
DCFR Draft Common Frame of Reference
EBRD European Bank for Reconstruction and Developmen
t
PMPBP Proclamation on Property Mortgaged or Pledged with Banks
PMSI Purchase Money Security Interest
ROT Sale with Retention of Title
SMEs Small and medium-sized enterprises
UNCITRAL United Nations Commission on International Trade Law
UNIDROIT Institute for Unification of Private International Law
2 UNCITRAL (2010), the UNCITRAL Legislative Guide on Secured Transactions Law,
New York, UN. Hereinafter “UNCITRAL Legislative Guide.”
3 EBRD (1984) Model Law on Secured Transactions, London, EBRD. Hereinafter “EBRD
Model Law.”
4 The UNIDROIT administers multiple legal instruments governing security rights including
the 2001 Convention on International interest in Mobile Equipment, commonly referred to
as “the Cape Town Convention” the three additional protocols, i.e., the Railway Rolling
Stock Protocol, the Aircraft Protocol, Space Assets Protocol and MAC protocol (work in
progress). All UNIDROIT works are available at http://www.unidroit.org/work-in-
progress-studies/studies/security -interests (Accessed 31 Jan. 17).
5 Croatia, Hungary, Poland, and Romania have recently reformed their secured transactions
law in CEE. See Norbert Csizmazia (2008), Reform of the Hungarian law of security rights
in movable property, Juridica International, XIV, 181-198, p. 182. see also, Patricia
Živković(2013), Floating Security Interest- Comparative Analysis of US, English and
Croatian Approaches, The Milestones of Law in the Area of Central Europe Conference
Paper, Bratislava, Comenius University, pp. 1050-1058 & Catalin-Gabriel Stanescu(2015),
Self-Help, Private Debt Collection and the Concomitant Risks: A Comparative Law
Analysis, Switzerland, Springer Publising .
6 Malawi enacted Personal Property Security Interests Act of April 2013. Available at
https://stlrp.files.wordpress.com/2014/02/personal-property-security-act.pdf(Accessed 26
July 2017).
Rethinking Ethiopian Secured Tran sactions Law through Comparative Perspective … 155
The major part of Ethiopia’s secured transactions law has been in place since
1960, and it has not undergone wholesome secured transactions law reform
although the country, like CEE countries, had a command economy for
seventeen years.11 In view of its current developmental goals and economic
realities,12 this article raises the issue of reform of Ethiopia’s secured
transactions law taking the cue from the US Uniform Commercial Code Article
9 (hereinafter UCC Art. 9).13
1. UCC Art. 9, Civil Law Tradition and the Central Assumptions
A question arises whether legal transplantation or crafting a legal institution
(concept) in a recipient system based on an institution (concept) with its origin
in a foreign legal system is possible. If so, can civil law and common law
traditions intermingle to any degree? What is the place of UCC Art. 9 in
continental legal systems? Because the main thesis of this article is that secured
transactions law reform in a civil law country –Ethiopia– can be implemented
taking the cue from UCC Art. 9, designed in a common law country, it is crucial
to first examine the above questions.
1.1 Is UCC Article 9 compatible with continental legal tradition?
In the past decades, significant developments have taken place in continental
Europe with regard to the transplantation of Article 9 of UCC to continental
legal systems or regarding the reconciliation of its approaches and policies with
secured transactions laws of civil law countries. Developments at domestic level
7 The Liberian Commercial Code (2010), Chapter 5.
8 Supplement to the Sierra Leone Gazette Vol. CXLV, No. 39, The Borrowers and Lenders
Act (2014).
9 See https://securedtransactionslawreformproject.org/reform-in-other-
jurisdictions/africa/nigeria/(Accessed 26 July 2017).
10 For dissatisfaction with the Nigerian Reform, See Iheme, W.C. and Mba, S.U. (2017)
‘Towards Reforming Nigeria’s Secured Transactions Law: The Central Bank of Nigeria's
Attempt through the Back Door’, Journal of African Law, pp. 1–23.
11 Matthew J. Mccracken (2004), ‘Abusing Self-Determination, and Democracy: How the
TPLF Is Looting Ethiopia’, 36 Case W. Res. J. Int'l L. 183.
12 Ethiopia has recorded impressive economic development over the past two decided.
According to IMF report, Ethiopian economy outperformed the economy of more than ten
Africa countries between 2007-2011 and evidences suggest that it is the 73rd economy in
the world among 228 countries and it is the second fastest growing economy in Africa
next to Ghana. See the economist, available at http://www.economist.com/node/21554547
(Accessed 26 July 2017).
13 In the US, the UCC Art. 9 governs secured transactions. It was first published in 1952 and
adopted by all states in US in a form of a statute along with its revised versions.
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