LEGAL UPDATE. On Changes Introduced to Anti-corruption Laws of Ethiopia. Our Services. Legal Advisory Representation Business Negotiation Facilitation

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1 PAGE 1 LEGAL UPDATE VOLUME 1, ISSUE V JUNE, 2015 Our Services Legal Advisory Representation Business Negotiation Facilitation INTRODUCTION Welcome to the fifth issue of MTA s Legal Update. This issue of our Monthly Legal Update highlights the following two topics: Changes Introduced to Anti-corruption Laws of Ethiopia, and Bill Proposed to Amend the Private Organization Employees Pension Scheme. On Changes Introduced to Anti-corruption Laws of Ethiopia Legal Research Inside this issue: Changes Introduced to Anti-corruption Laws of Ethiopia Bill Proposed to Amend the Private Organization Employees Pension Scheme Monthly Legal Recently, the federal parliament promulgated three new legislations that amended the power and mandate of the Federal Ethics and Anti-Corruption Commission (hereinafter referred to as the Commission ) to investigate and prosecute corruption crimes, broadening the coverage of corruption law to include acts that were not previously criminalized as well as introducing new rules of procedures for prosecution and investigation of corruption crimes. The legislations are named as Federal Ethics and Anti-Corruption Commission Establishment (Amendment) Proclamation No. 883/2015 (hereinafter referred to as the New Establishment Proclamation ), the Revised Anti-Corruption Special Procedure and Rules of Evidence (Amendment) Proclamation No. 882/2015 (hereinafter referred to as the New Procedure Proclamation ) and the Corruption Crimes Proclamation No 881/2015 (hereinafter referred to as the Corruption Proclamation ). The legislative changes were necessitated and initiated following the decision of the Federal and Regional Ethics and Anti-Corruption Commissions Joint Forum to study challenges in the implementation of the anticorruption laws. The series of studies undertaken indicated that there were legal loopholes and provisions lacking clarity which were believed to have affected the fight against corruption and impropriety. In this note, we will briefly introduce our readers to the key changes that have been made to the law defining acts that constitute as corruption crimes, its scope of application and amendments to procedural laws. Furthermore, amendments to the mandate of the Anti-Corruption Commission and its power to investigate and prosecute corruption crimes will be identified. Of significant importance to the new legislations is the power conferred on the Commission to investigate and prosecute corruption crimes committed by Public Organizations broadly defined in the Corruption Proclamation as including

2 PAGE 2 privately owned businesses which administer public funds for public purposes. Examples of such organization include, banks, insurance companies, real estate and others. This is a major departure from the previous mandate of the Commission which was restricted to the investigation and prosecution of employees working in government institutions. Details are discussed below. 1.1 Changes Introduced to the Anti-Corruption Laws Ethiopia is a signatory to the United Nations Convention against Corruption adopted on 31 October, 2003 and African Union Convention on Preventing and Combating Corruption adopted on 11 July Accordingly one of the purposes of the amendment is to align Ethiopia s anti-corruption laws and strategies with these international conventions. The significant changes that were made under the three legislations relate to the inclusion of private sector organizations within the scope of areas to be investigated and prosecuted with a crime of corruption. The crimes as defined under the new Proclamations include acts of bribery, embezzlement Volume 1, Issue V and other similar acts committed in public organizations. Under the definition of corruption crimes, acts involving huge amount of money committed in highly strategic public offices, public enterprises, public organizations and public organization operating in more than one regional states have been included. A public organization has been defined under Article 2(4) of the Corruption Proclamation as any organ in the private sector which in whatever way administers money, property or any other resource collected from members or from the public or any money collected for the benefit of the public excluding religious organizations, political parties, international organizations and Edir or other similar traditional or religious associations. Likewise, employees of a public organization are broadly defined as employees who are employed, appointed or elected by members to work either temporarily or permanently in a public organization and include leaders of the organization, any member of the board of directors or any person or committee involved in the formation of a share company or a charity. Not all businesses in the private sector have been covered under the Corruption Proclamation but those that are connected to the administration of money or property of the public. Among these, share companies, unions, continued on page 4 Bill Proposed to Amend the Private Organization Employees Pension Scheme 1. Foreword The private organization employees pension scheme was introduced in Ethiopia in June 2011under Proclamation No. 715/2001 ( the Proclamation ). Through this legislation, the country s pension scheme has been extended to cover employees of private organizations. Now a bill is proposed (the Proposed Bill ) for the amendment of this Proclamation and is at present submitted to the Ethiopian parliament for deliberations. The Proposed Bill sets forth some justifications behind the amendment of the Proclamation. It mentions the problems that have been faced in the practical application of the Proclamation and also points out the need for the inclusion of managerial employees in the scheme and also for uniform social security coverage for all employees of private organizations. In this update, we review some of the key changes that are in the process of being introduced under the Proposed Bill. The note is prepared on the basis of a draft of the legislation submitted to the Ethiopian parliament. As the draft has not yet been finalized and formally passed by the parliament as an approved bill, none of the changes can be taken as definitive. * * See page 7

3 PAGE 3 Volume 1, Issue V Proclamation, private organization employees were provided an option either to stay with the provident fund scheme or agree to be covered by the Proclamation and join the Pension Scheme. Only the provident contribution of those employees who consented to join the Pension Scheme was transferred to the Private Organizations Employees Pension Fund established by the Proclamation. 2. Major Points of Recommendations by the Proposed Bill 2.1 Eligibility for Pension Scheme vs Employee on Probation The Proclamation provides that only employees permanently employed in any private organization are to be covered by the private organization employees pension scheme (the Pension Scheme ) with the definition of permanent employee in the Labour Proclamation No. 377/1996 taken as a reference. In the Proposed Bill, the definition provided in the Proclamation for Private Organization Employee and Permanent Employee is recommended to be deleted and replaced by a new definition. The newly introduced definition provides that private organization employee means a salaried person employed in any private organization for not less than one month. Irrespective of the type of work for which the employee is contracted i.e., whether the contract of employment is concluded for a definite period or for definite piecework, or for a specific project or not, the Proposed Bill extends the Pension Scheme to cover a wider section of employees in the private sector. However, the Labour Proclamation puts a maximum of 45 days for a probation period in a contract of employment in order to give the employer the chance to assess whether the employee is fit for the work or not. It seems an issue here to fixing the legibility of employees for pension for an employment of mere 30 days wherein the probation period is not yet successfully completed. 2.2 No More Provident Fund Scheme The other major shift from the Proclamation under the Proposed Bill is the determination of the scope of application of the Proclamation (Article 3 (2) (a)). Under the The Proposed Bill recommends the deleting of the provision which provided those employees who were using the provident fund scheme the option of whether to stay with the provident scheme or not, and rather bringing into the Pension Scheme all employees of private organizations. Under the Proposed Bill, employees under the provident fund scheme before the coming into force of the Proclamation and who consented to stay with the provident fund scheme will be covered by the Pension Scheme and their accumulated contribution will be transferred to the Private Organizations Employees Pension Fund. The provision which excludes from the scope of application of the Proclamation of domestic workers and employees of governmental international organizations and foreign diplomatic missions will remain applicable. Likewise, employees of religious organizations and political organizations and persons engaged in the informal sector will still be covered by the Proclamation only upon consent. 2.3 Penalty for Default by the Employer The Proclamation puts an obligation on private organizations to deduct contributions of employees from their salaries and deposit the amount to the pension fund within 30 days from the last day of the month in which payment of salary has been effected. Where the organization fails to deposit the amount for a period of more than three months, the Private Organization Employees Social Security Agency ( the Agency ) was empowered to cause the deduction of the arrear contributions from the bank account of the organization. continued on page 5 Under the Proposed Bill, employees under the provident fund scheme before the coming into force of the Proclamation and who consented to stay with the provident fund scheme will be covered by the Pension Scheme.

4 PAGE 4 On Changes Introduced continued from page 2 cooperatives, labour unions, professional associations and financial institutions such as banks, insurance, saving and money transfer institutions can be mentioned. A commentary prepared in the drafting of the laws suggested the possibility that this list could be broadened in the future to include organizations and employees of the private sector that commit or participate in an act of corruption on the basis of the necessary studies to be undertaken by the Commission. With the expansion of the scope of the application of corruption crimes to include the private sector, the Proclamation has correspondingly included liability of juridical persons and it is worth noting that penalties imposed on private sector entities have been more severe than those provided under the Criminal Code. The Commission s empowerment to investigate employees of public organizations for alleged crimes of corruption is entrenched with the duty imposed on these organizations to report to the Commission or other authorized investigating organs serious ethical violations and corruption offences forthwith irrespective of the administrative disciplinary measures that they take. Since its establishment in 2001, the mandate of the Commission has only been limited to the investigation and prosecution of public offices and enterprises and the officials and employees thereto. Its power only extended to the investigation and prosecution of non public offices and non government employees only if they have participated in the commission of corruption crimes by government employees. Under the New Establishment Proclamation, however, the Commission has been vested with new powers such as: the power to withdraw, in accordance with law, corruption investigation and charges as well as corruption cases pending in the court of law, and 1.2 New Introduced Procedures Right to bail Volume 1, Issue V For a person charged with a corruption offense, his/her right to bail is of a great importance. This right, however, has been further restricted under the New Procedure Proclamation which introduces the denial of bail rights for certain crimes. In principle, an individual suspected or charged for an alleged corruption offence is entitled to his/her bail rights. However, if the individual is charged or suspected with a corruption offence punishable with more than 10 years, then bail will not be granted. Furthermore, the New Procedure Proclamation provide that where there are concurrent crimes punishable with more than 4 years but less than 10 years and the aggregate punishment of the two crimes is more than ten years, the suspect shall not be released on bail. Therefore, even where a person is charged with an offence punishable with less than ten years and there is a possibility where he/she would be punished with more than ten years, for being charged with two or more concurrent offences, he/she would be denied of his/her right to bail. Under the 2005 Revised Anti-Corruption Special Procedure and Rules of Evidence Proclamation No. 434/2005(hereinafter referred as the Existing Procedure Proclamation ) the right to bail of an arrested person was denied only for offences punishable with more than 10 years without taking in to account concurrent offenses committed by the suspect. In practice, however, before the enactment of the New Procedure Proclamation, appellate courts have been denying bail right of persons who have been charged with concurrent offences punishable with more than ten years. to terminate corruption investigation or charges by confiscating the proceeds obtained from the crime in a procedure to be determined by a Regulation in the future.

5 Volume I Issue V The Existing Procedure Proclamation has a procedure for a preparatory hearing for the court to weigh the evidences submitted by the prosecutor. The objective of this procedure was to guarantee a speedy trial for the suspect. In practice, though, the objective has not been realized due to the excessive delay caused by the courts examination. The New Procedure Proclamation has eliminated this procedure in its entirety in order to avoid this problem of delay. With respect to its effectiveness, the New Procedure Proclamation is applicable to cases arising after its enactment and cases pending on the effective date of the Proclamation are to be finalized according to the Existing Procedure Proclamation. Other procedural issues The New Procedure Proclamation has empowered the courts to issue an attachment order against any property acquired as a result of the commission of the crime and the fruit thereof. In the Existing Proclamation, the court can only issue such order in relation to the property directly acquired and not the fruit thereof. Though the law was clear at the time, the practice was not consistent. There were some cases where the court ordered for the confiscation of the fruits of the crime and in others only of the property directly acquired from the crime. Furthermore, it has also empowered the head of the relevant organ to give an attachment order effective only for 48 hours pending the issuance of a court order when the head believes that the property may be squandered. The appropriate organ has been defined under Article 2(3) of the New Procedure Proclamation to mean any organ which is empowered to investigate and/or prosecute corruption offence. This can be the Commission, Regional Ethics and anti-corruption commissions and Federal and regional crime investigation bodies. Therefore, the property of a person suspected for the crime of corruption can be seized by the appropriate organ. In relation to condition of attaching other properties, the New Procedure Proclamation has included some family members of the suspects whose properties can be attached. It provides that any money or property deposited in a bank or any other property of the suspect, his spouse or children under the age of 18 proportionate to the amount of enrichment by the suspect or damages suffered by others may be attached by the court. Such an attachment order is continued on page 6 PAGE 5 Bill Proposed to Amend continued from page 3 Under the Proposed Bill, a fine will be imposed on organizations failing to deposit the amount within the prescribed time. The newly introduced Article 13 provides that any private organization which fails to deposit the pension contributions within one month shall be liable to pay to the Agency the unpaid pension contribution adding on it bank deposit interest rate. 2.4 Denial of Reimbursement Rights The other major point of issue under the Proposed Bill which diverges from the Proclamation is the removal of the provision on reimbursement of pension contribution. The Proclamation provides that an employee of a private organization who quits due to resignation after completing 10 years, or for any other cause other than those specified by the Proclamation, prior to 20 years of service shall be paid an amount equal to the total pension contributions made by the employee excluding contributions of the employer. As per this Proposed Bill neither the employee nor the employer will be entitled for reimbursement of pension contribution where the contract of employment is terminated for whatever reasons. 2.5 Mode of Calculating Pension Benefits vis-à-vis Salary Increment The Proposed Bill also forwards the point of amendment on the methods of calculation of amounts of retirement pension. Article 19 (1) of the Proclamation provides that the amount of retirement pension due to any employee is 30% of his average salary of the last continued on page 6

6 PAGE 6 On Changes Introduced continued from page 5 given notwithstanding that there are no evidence that the property is acquired as a result of the corruption offence and upon the application of the investigator or prosecutor supported by an affidavit indicting that the suspect is enriched or others suffered damage as a result of the commission of corruption offence. The right of the suspect to use the property so attached is not affected by the order except that the suspect shall not have the power to use cash or property deposited in a bank. Exceptionally, however, when compelling circumstances emerge, the court may allow the suspect to use the appropriate amount of such cash or other property. If the court grants a suspect the right to use a property, it may also give a decision it deems necessary to minimize the damage that may result when the suspect uses the property up on the application to be made by the investigator or the prosecutor. The New Procedure Proclamation stipulates that property obtained from corruption or the fruit thereof or any property proportionate to the benefits obtained therefrom shall be confiscated. It also provides that the property of the accused proportionate to the benefit procured by another person or damage caused by corruption offence on private, public and state interest or advantage of pubic organization shall be confiscated even in the absence of a direct benefit by the accused. However the Existing Procedure Proclamation provided for confiscation of property in the Volume I Issue V amount of benefit derived by the accused person and upon his pronouncement of guilt. Where the value of property of the accused is less than the benefit obtained or the damage caused or where no property is registered by the name of the suspect, then his common property shall be confiscated. Common property includes any property jointly owned by the accused and another person or property so considered by law. Property in the name of the spouse or child under the age of 18 is also presumed to be the common property however this presumption can be rebutted with the production of evidence showing that it is a personal property. Where a criminal proceeding is terminated or no conviction is obtained for any reason, the appropriate organ may institute a civil action for the confiscation of the property obtained through corruption offence or the fruit thereof or property proportionate to the damage caused. In the Existing Proclamation, the owner of the property was entitled with the power to institute civil action but the New Procedure Proclamation provides that the action has to be instituted by the appropriate organ. The appropriate organ may give permission or delegate this power to government offices, public enterprises or public organizations or any individual if the proceed of the crime is their property. Generally the New Procedure Proclamation is more comprehensive and it has been drafted to address issues which were not clearly dealt under the Existing Procedure Proclamation, thus minimizing the diversity of decisions given by courts. Bill Proposed to Amend continued from page 5 three years preceding retirement. The Proposed Bill argues that since private organizations do not use a regulated and uniform salary fixing and increment applications, some employees could be hired at private organizations with high salaries or get high salary increments and when this employment or salary increment comes preceding retirement, it could unfairly inflate the amount of retirement pension. The Proposed Bill puts forward an amendment to the provision by adding new sub-articles. The newly recommended sub-article 2 provides that an employee who retires from a private organization which had no organizational structure or studied salary scale, if paid more than 25% annual average salary increment on the salary paid a month before 3 years of pension entitlement, only the 25% annual average salary increment

7 MESFIN TAFESSE & ASSOCIATES LAW OFFICE Debrezeit Road, Beklobet, Garad Mall, 2 nd Floor, No Tel. (251) (251) (Direct) (251) (Mobile) P.O.Box: 8867, Addis Abeba, Ethiopia Volume I Issue V shall be considered for the calculation of the 3 years average monthly salary. 2.6 Attachment of Pension Benefits: Broadening Exceptional Instances Article 50 of the Proclamation provides that unless by court order in respect of public fines, taxes or charges or for fulfillment of the obligation to supply maintenance in accordance with relevant law, benefits under the Proclamation shall not be attached. The Proposed Bill recommends a new subarticle providing that a contribution for social health insurance scheme pursuant to Social Health Insurance Proclamation shall be monthly deducted from pension benefit and transferred to the Ethiopian Health Insurance Agency thereby broadening the exceptional instances where a pension benefit is to be attached. PAGE 7 PROTECTING YOUR INTERESTS 2.7 Limiting the Amount of Pension Benefit in Post-Retirement Employment Article 51 of the Proclamation provides about methods of calculations of service years regarding people on retirement benefit without attaining the retirement age and who have obtained employment opportunity after retirement. The Proposed Bill argues that some people could be hired with high salaries after securing pension benefits and such an income may disproportionally inflate the pension benefit. To address this concern, it proposes for a limitation of the additional benefit not to exceed 50% of the retirees previous retirement pension benefit and the incremental amount of the pension benefit to be paid to the retiree only upon reaching the retirement age of 60. Visit us on Like us on Facebook Follow us on * Just before going into publication, it has been reported through mass media that the Proposed Bill has been accepted with some modifications and promulgated by the Ethiopian Parliament. In accordance with these reports, sub-article 7 of Article 57 under the Proposed Bill which provides for the transfer of the accumulated contribution of the provident fund to the Private Organizations Employees Pension Fund has been cancelled from the Proposed Bill. And also the minimum period of employment of an employee in a private organization in order to be legible for a pension scheme has been extended to 45 days as opposed to the 30 days period as recommended by the Proposed Bill. Note: Information provided in this legal update is intended to be used as a guide and can by no means be taken as legal advice. A formal legal advice is recommended before acting on the basis of any part of the information provided in the legal update.