Lecture Notes On: Construction Law

Arba Minch University

Institute of Technology

Department of Civil Engineering

Program: Construction Technology & Management

Construction Contract & Law Course

Lecture Notes on

Construction Law

Organized & delivered by:

Zewdu Tefera Worke

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 Lecture Notes On: Construction Law

Lecture Notes on Construction Law

Table of Contents

 Background
 Laws of Ethiopia
 Background
 Industry Regulation
 Program Regulation
 Project Regulation
 Persons Regulation
 Contract Regulation
 Disputes Regulation
 Laws of Other Countries
 International Law

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 Lecture Notes On: Construction Law

Construction Contract & Law Course

Lecture Notes on
Construction Law
Organized & delivered by:
Zewdu Tefera Worke
…………………………………………………………………………
1. Construction Law
1.1 Background
 Concept
 In literature, construction law has been defined as follows:
 Construction law is a body of law that deals with matters related to building
construction & related fields.
 It covers a wide range of legal issues including:
 contract law;
 bonds & bonding;
 guarantees & securities;
 liens & other security interests;
 tendering;
 construction claims; and
 related consultancy contracts; (Emphasis added)
 The items included in the definition of construction law are relevant for
construction but are not sufficient;
 There is no as such a single or unified law or code which regulates the whole aspects
of construction process & its management;
 The nature of “construction law” is thus eclectic; viz., it brings all relevant regime of
laws (public & private law regimes) together to regulate the construction process &
its management as illustrated herein below;
 Therefore, we do have construction related laws and not construction law as such;
 Scope
 The scope of construction related laws may come from & broadly encompass the
following three area of laws; viz.,

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 Lecture Notes On: Construction Law

 the relevant laws of Ethiopia;

 the relevant laws of other countries; and
 the relevant aspects of public and/or private international law:
 The relevance & application of such laws may be different depending upon the
specific issue to be regulated or the particular phase in which the construction
project reached;
 The legal regulation of construction management may thus focus on the following
fundamental aspects of same:
 construction industry;
 construction program;
 construction project;
 regulation of persons engaged in construction;
 regulation of contract; and
 regulation of disputes;
 During construction phase, based on a construction contract, construction related
laws are specifically related to the broad concept of applicable law to contract which
may, in essence, include such three areas of laws;
1.2 Laws of Ethiopia
1.2.1 Background
 The relevant laws of Ethiopia related to construction management in general and
construction project in particular may include:
 constitutional law;
 statutory laws ; and
 non-statutory laws;
 These construction related laws may include, as the case may be:
 federal laws;
 specific regional laws; and
 specific local laws;
 In terms of time dimension, such relevant & applicable laws may encompass the following
time horizon;
 the laws of the Empire of Ethiopia (1934-1966 E.C);
 the laws of the Derg Regime (1967-1983 E.C); and
 the laws of the current government (1983-to date E.C);

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 Most of the discussions during the training are basically related to federal laws in terms of
its constitutional law, statutory laws (like proclamations or their equivalent) and some
aspects of non-statutory laws (like regulations or their equivalent);
 Based on such construction related laws, there are also other supportive technical and/or
administrative documents which help achieve the objective of the construction project & its
process;
 These supportive documents may include, but not limited to, the following which are issued
by competent government authority(ies):
 This gives us the whole legal framework as related to construction related laws.
 Directives; like the federal procurement directive issued by the Ministry of Finance
& Economic Development based on the federal procurement law(i.e., Proc. No.
649/2009);
 guidelines; like the development project preparation guideline issued by the
Ministry of Finance & Economic Development;
 technical codes; like for buildings issued by the Ministry of Urban Development,
Housing & Construction;
 safety regulations; like for buildings issued by the Ministry of Urban Development,
Housing & Construction; and relevant municipalities;
1.2.2 Constitutional Law
 Background
 supreme: The constitution of every country is the supreme law of the land or
country;
 policy source: The constitution is the source of all policy including development
policies;
 source of laws: The constitution is the source of all laws of the country;
 vertical power: The constitution distributes powers vertically between the federal
government and the regional states; see Article 50
 horizontal power: The constitution distributes powers horizontally among the three
organs of state: viz., the legislative, the executive; and the judiciary; see Article 50
 This is true for the FDRE Constitution;
 Scope
 As related to construction, the FDRE Constitution provides the following key &
fundamental constitutional base; Some of the issues are of the following: viz.,

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 development: the constitution provides social & economic development objectives;

see Article 77(6) cum Article 89 & 90; the means to achieve these constitutional
objectives, among other things is the construction project;
 sustainable development: the constitution recognizes that social & economic
development to be based on the principle of sustainable development; se Article 92
cum Article 43; this is crucially relevant for construction projects (be it public or
private development projects) as they are required to undergo the environmental
impact assessment to ensure sustainable development;
 environmental safety: to ensure the clean & healthy environmental objective is
embedded in the constitution; this is crucially important for development projects to
be realized through defined construction project with a view to regulate
environmental pollution; see Article 92;
 property rights: it provides the public ownership of land which is one of the critical
input to the development projects through construction project; see Article 40;
 property rights: this is crucial for investment & business creation for private citizens
& corporate entities; see Article 40 cum Article 43; the businesses so created become
themselves employers or contractors or consultants and so forth;
 consultation; the constitution provides peoples right for consultation as related to
development policies & development projects; see Article 92(3); this is crucially
important for development projects to be realized through construction project
specially during planning, study & design phase of the construction project;
 compensation: this is crucially important for development projects not to displace
people from their areas but if displacement is unavoidable the right to provide
adequate prior compensation; see Article 44(2); this is part of the socio-economic
impact study of every construction project during planning & study plus design
phase;
 international agreements: the constitution provides the status of international
agreements to which Ethiopia is a party (bilateral or multilateral) within the
Ethiopian legal system; see Article 9(4); such international agreements may have
their legitimate implications in terms of determining:
 the scope & method of construction project procurement (for physical
and/consultancy);
 the construction project delivery system (design-bid-build or otherwise);
 the origin of supply;

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 disbursement of funds;
 tax matters;
 public finance administration matters; and
 method of construction dispute resolution; and so forth..
 transparency & accountability: the constitution provides these fundamental
principles; see Article 12; this is crucially relevant with respect to construction
project procurement process;
1.2.3 Statutory Laws
 Background
 Statutory laws are basically proclamations or comparable legal instruments (like
decrees);
 Statutory laws are basically deliberated & issued by parliaments(or house of peoples
representatives);
 Statutory laws are required to be in line with the constitution (due to their vertical
relationship with the constitution);
 Regulation of construction management may encompass the following six thematic
areas, viz.,
 industry regulation;
 program regulation;
 project regulation;
 regulation of persons;
 regulation of contract; and
 regulation of disputes;
 In terms of their fundamental features, they may have the following dimensions:
legal; public service; legal & contractual; and scope dimensions;
 legal dimension: all issues do have their own specific or shared legal base;
 public services dimension: some are provided or undertaken as government or
public services based on that specific or shared applicable law;
 legal & contractual dimension: some are provided based on such specific or shared
applicable laws and based on specific contractual arrangement as corporate
services;
 scope dimension: such specific or shared applicable laws, government services and/
or corporate services:

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 industry: some focus on the construction industry;

 program: some focus on specific construction program;
 project: some focus on specific construction project;
 stakeholders: some focus on critical stakeholders; in two ways:
 in terms of role players in the construction project process (in terms
of employer/client; consultant (design/supervision); contractor; sub-
contractor;);
 in terms of to be affected by or interested in such construction
project (in rural and/or urban projects);
 contract: some focus both on contractual & legal regulation (of works;
services; goods in terms of formation; effect; and proof of contracts);
 disputes: some focus on disputes management (settlement & judgmental but
ADR based) and enforcement issues voluntarily or otherwise;
 International: some have purely domestic dimension and still some may
have international dimension (like source of finance; import of goods;
international arbitration ;);
 Let us examine each, in turn;
 Construction Industry Regulation
 The construction industry is a regulated industry;
 By construction industry regulation it means the regulation of the industry as a
whole, at cross development sector level, to provide leadership to the industry in an
holistic & integrated manner both at the federal & regional level;
 Scope:
 The construction projects which are an integral part of the Ethiopia
construction industry are: building; water & energy; transport &
communication;
 With respect to issues to be considered at the construction industry level
providing regulatory framework is one.
 Regulatory framework includes laws which is the subject of this part of the
training;

 Ownership:
 The following institutions are relevant in providing construction industry
level leadership & regulation;

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 The would-be established Ethiopian Construction Industry Development

Council (overall & integrated leadership to the industry);
 Ministry of Urban Development, Housing & Construction (registration &
professional certification, development of standards for construction works
…);
 Ministry of Finance & Economic Development (development of standard
conditions of contract for works & consultancy services; standard bidding
documents; regulating procurement process for works;..); through PPPAA;
 The Ethiopian Construction Project Management Institute (building
construction project management capacity & certification of construction
professionals ;…);
 the comparable regional institutions related to construction;
 Legal Framework: existing & future laws
 The industry awaits the development, adoption & enforcement of those cross
sectoral & industry-wide applicable laws which regulate the construction
industry as a whole;
 The following are those laws which identify those institutions for the overall
leadership of the construction industry;
 Reg. No. /, which will establish & empower “the Ethiopian Construction
Industry Development Council”;
 Proc. No. 691/2010 cum Proc. No. 803/2013: the statutory instrument which
empowers & re-designates, respectively, the Ministry of Urban
Development, Housing & Construction;
 Proc. No. 649/2009: the statutory instrument which re-establishes &
empowers the Public Procurement & Property Administration Agency; the
Agency being accountable to the Ministry of Finance & Economic
Development;
 Reg. No. 289/2013: the non-statutory legal instrument which establishes &
empowers the Ethiopian Construction Project Management Institute; the
Institute being accountable to the Ministry of Urban Development, Housing
& Construction;
 Draft Proc. No. /2013: Construction Industry Registration draft Law;
 the applicable regional laws: statutory or otherwise, if any;

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 Construction Sector Development Program Regulation

 Background
 Social & economic development is a declared constitutional objective of the country;
 Respective public institutions are created to realize these social & economic
development objectives;
 Such institutions develop their respective social & economic sector & sub-sector
development programs;
 Such public social & economic development programs are based on their respective
development policy and the GTP;
 Such public social & economic sector & sub-sector development programs, with
respect to their physical facility/infrastructure development requirement, are the
basis for such respective construction projects;
 The private sector, as far as the investment policy & law of the country permits,
may also participate in such social & economic development process;
 Such private investment, domestic and/or foreign, may take, based on the
applicable investment law & other relevant laws, different form;
 Such private sector development investments or programs, with respect to their
physical facility development requirement, are the basis for such respective &
specific construction projects;
 The following discussion shall however focus on public social & economic
development process & its management;
 Social Sector Development Program Regulation
 Scope
 Social sector development program regulation may encompass the following areas:
 agricultural development program;
 housing development program;
 water supply infrastructure development program;
 health sector development program;
 sanitation facilities development program;
 education sector development program;
 sports infrastructure development program;
 Such broad sectoral development programs cut across diverse institutions;

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 Some of them may have their own sub-sector development program under them;
 Ownership
 The following institutions are legally mandated for social sector development
program;
 These are of the following:
 Ministry of Agriculture;
 Ministry of Urban Development, Housing & Construction;
 Ministry of Water, Irrigation & Energy;
 Ministry of Health;
 Ministry of Education;
 Sports Commission;
 Under each of such federal institutions, there are also specific other institutions
which participate in the realization of such social development objective;
 Respective & specific institutions:
 of the regional states; and
 of the two city administrations;
shall take also their respective social sector development program;
 Legal Framework
 The applicable legal framework for social sector development program regulation
shall be of the following:
 Proc. No. 1/1995: the FDRE Constitution: Article 90 cum 43 cum 92: Social
Development Objectives with environmental safety & sustainable
development objectives, respectively;
 Proc. No. 691/2010 cum 803/2013:
 Ministry of Agriculture; Article 19;
 Ministry of Urban Development, Housing & Construction; Article
25;
 Ministry of Water, Irrigation & Energy; Article 26;
 Ministry of Education; Article 28;
 Ministry of Health; Article 29;
 Proc. No. 769/2013: the Investment Proclamation;
 Proc. No. 624/2009: the Ethiopian Building Proclamation;

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 Proc. No. 197/2000: the Ethiopian Water Resources Management

Proclamation;
 Proc. No. 200/2000: the Public Health Proclamation;
 Charter Proc. No. 361/2003; the Addis Ababa City Government Charter
Proclamation;
 Charter Proc. No. 416/2004: the Dire Dawa City Government Charter
Proclamation;
 Reg. No. 243/2011: the Ethiopian Building Regulation;
 Reg. No. 115/2005: the Ethiopian Water Resources Management Regulation;
 The legal framework encompasses;
 constitutional law;
 the applicable statutory laws;
 the applicable non-statutory laws;
 The legal framework thus provides:
 fundamental & constitutional base;
 institutional creation and/or ownership & mandate; and
 detail subject matter (i.e. the development itself) regulation;
 Economic Sector Development Program Management
 Scope
 Economic sector development program regulation may encompass the following
areas:
 transport development program;
 energy development program;
 industry development program;
 real estate development program;
 irrigation development program;
 communication infrastructure development program;
 Such sectoral development programs cut across diverse institutions;
 Some of them may have their own sub-sector development programs; like
 under transport sector development program;
 road sector development program;
 rail way sector development program;
 air port infrastructure development program;

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 energy sector development program;

 hydropower development program;
 geothermal power development program;
 wind power development program;
 solar energy development program;
 Ownership
 The following institutions are legally mandated for social sector development
program management;
 These are of the following:
 Ministry of Agriculture;
 Ministry of Urban Development, Housing & Construction;
 Ministry of Transport;
 Ministry of Water, Irrigation & Energy;
 Ministry of Industry;
 Ministry of Mines;
 Ministry of Information Technology & Communication;
 Under each of such federal institutions, there are also specific other institutions
which participate in the realization of such social development objective;
 Respective & specific institutions:
 of the regional states; and
 of the two city administrations;
shall take also their respective share for such economic sector development
program;
 Legal Framework
 The applicable legal framework for economic sector development program
management shall be of the following:
 Proc. No. 1/1995: the FDRE Constitution: Article 89 cum 43 cum 92:
Economic (Development) Objectives with environmental safety &
sustainable development objectives, respectively;
 Proc. No. 691/2010 cum 803/2013: which mandates the respective ministries
mentioned;
 Ministry of Agriculture; Article 19;
 Ministry of Industry; Article 20;

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 Ministry of Transport; Article 23;

 Ministry of Communication & Information Technology; Article 24;
 Ministry of Urban Development, Housing & Construction; Article
25;
 Ministry of Water, Irrigation & Energy; Article 26;
 Ministry of Mines; Article 27;
 Proc. No. 769/2013: the Investment Proclamation;
 Proc. No. 624/2009: the Ethiopian Building Proclamation;
 Proc. No. 197/2000: the Ethiopian Water Resources Management
Proclamation;
 Charter Proc. No. 361/2003; the Addis Ababa City Government Charter
Proclamation; and their respective economic development institutions;
 Charter Proc. No. 416/2004: the Dire Dawa City Government Charter
Proclamation; and their respective economic development institutions;
 Reg. No. 243/2011: the Ethiopian Building Regulation;
 Reg. No. 115/2005: the Ethiopian Water Resources Management Regulation;
 The legal framework encompasses;
 the constitutional law;
 the applicable statutory laws; and
 the applicable non-statutory laws;
 The legal framework thus provides:
 fundamental & constitutional base;
 institutional creation and/or ownership (of the respective development
objective) & mandate in respect thereof; and
 detail subject matter (i.e. the development itself) regulation;
 Construction Project Regulation
 Background
 Construction project management is characterized by the following fundamental
features:
 it is project based & project type specific;
 it is institution (as owner or client) specific;
 it is contracting parties specific;
 it is project delivery system specific;

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 it is payment system specific;

 it is project procurement method specific;
 it is project location/site specific;
 it is project time requirement specific;
 it is project cost requirement specific
 it is project quality requirement specific
 it is project input intensive & input specific;
 it is construction contract type specific;
 it is stakeholder intensive & stakeholder specific;
 in terms of regulation, it is applicable (governing) law specific;
 its regulation also construction project phase specific;
 To make it systematic, the application of such construction project related statutory
laws are to be analyzed based on defined construction phase;
 planning & study phase;
 design phase;
 procurement phase;
 construction phase; and
 post-construction phase;
 In all such construction phases, those statutory and/or non-statutory laws may,
generally, regulate the following aspects of the construction project process, as the
case may be;
 regulatory requirements;
 input regulation;
 information regulation;
 requirements regulation;
 safety regulation;
 services regulation; and
 process regulation;
 Now, let us examine each, in turn.
 regulatory requirements;
 planning & zoning regulation; as related to urban master plan; structure
plan; local development plan, if any;
 environmental regulation; in terms of undertaking environmental impact
assessment; social impact assessment; risk assessment; …

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 resource utilization regulation: like permit for use of water resources;

 quality & standards regulation: as related to construction equipment/plant
& construction materials;
 building permit regulation; by respective municipalities;
 building construction process inspection/regulation; by respective
municipalities;
 building occupancy permit regulation; by respective municipalities;
 foreign exchange permit regulation; by the National Bank of Ethiopia;
 equipment finance lease regulation; by the National Bank of Ethiopia & by
Ministry of Trade;
 expatriate staff & labour permit regulation; by the Ministry of Labour &
Social Affairs;
 immigration related regulation; as related to expatriate staff & labour for
residence permit purpose; by the National Intelligence & Security Service;

 input regulation;
 design input; as related to employment of design consultants;
 land input; acquisition of rural or urban land;
 financial input; capital budget for the construction project from domestic
and/or foreign source;
 labor input;
 considered at design phase (in terms of specification);
 considered at procurement (tendering) phase (in terms of estimating
bid price); and
 considered at construction phase (in terms of achieving specified
quality requirements as related to workmanship);
 construction materials input;
 considered at design phase in terms of specification;
 considered at procurement (tendering) phase in terms of estimating
bid price; and
 considered at construction phase in terms of achieving specified
quality requirements;
 construction equipment input;
 considered at design phase (in terms of specification);

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 considered at procurement (tendering) phase in terms of estimating

bid price; and
 considered at construction phase in terms of achieving specified
quality requirements;

 information regulation;
 social & economic development information; from Central Statistics
Agency; under Ministry of Finance & Economic Development;
 demographic information; from Central Statistics Agency;
 hydrological information; from Ministry of Water, Irrigation & Energy;
 geological information; from Ethiopian Geological Survey; under the
Ministry of Mines;
 metrological information; from National Meteorology Agency under the
Ministry of Water, Irrigation & Energy;
 mapping information; from Ethiopian Mapping Agency under Ministry of
Finance & Economic Development;

 requirement regulation;
 public consultation; as related to project design & implementation; it is
constitutional requirement;
 payment of compensation; as related to acquisition of rural and/or urban
land; including affecting other economic interests; like farmers interests;
pastoralists interest; building; fences; public utilities;
 consideration of tax; VAT; income tax; customs duty; turn over tax;
 consideration of public holidays & rest days; for construction program
purpose;
 safety regulation;
 natural environment safety; at planning; design; and implementation phase;
 heritage environment safety; at planning; design; and implementation
phase;
 human environment safety; at planning; design; and implementation phase;
 built-environment, as related to neighboring structures; at planning; design;
and implementation phase;
 public utilities environment safety; at planning; design; and implementation
phase;

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 seismic & other design safety codes; codes & guidelines; specially at design
phase;
 service regulation;
 consultancy service; for project supervision & contract administration;
 equipment lease service input; operative or hire purchase lease service;
 technical investigation services;
 testing services; as related to soil; material; chemical;…
 transportation services; by sea; by land (truck & rail); by air;
 insurance services; as to bid security; performance security; retention
money security; property insurance; liability insurance; life insurance;
including professional indemnity insurance;
 banking services; bid security in form of certified payment order (CPO);
advance payment guarantee; letter of credit services (for importation of
construction equipment and/or construction materials);
 customs security services; as related to customs bond; as related to tax
exempted foreign contractor;
 customs clearance services;
 warehousing services;
 dry port services;
 pre-shipment inspection services;
 forensic engineering services; as related to structural failure assessment of
causes of same;
 claims expert services; specially for complex construction claims; and
international contractor’s and/or consultant’s claims request;
 dispute settlement services; as related to alternative dispute resolution
(ADR) system; as related to construction mediation; construction
conciliation;
 dispute resolution services; as related to alternative dispute resolution
(ADR) system; as related to adjudication (Dispute Board); and as related
to arbitration;
 process regulation; i.e., procurement laws;
 for procurement of works; in case of public procurement;

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 for procurement of services; like consultancy services in case of public

procurement;
 for procurement of goods; like procurement of construction materials
and/or construction equipment in case of public procurement;
 Let us examine each of the construction phase from construction related laws
perspective;
 Design Phase
 Background
 Design phase assumes that the planning & study phase of a construction project has
been done and the construction project under consideration has been found feasible
or necessary;
 The relevant laws are of the following;
 Input Regulation
 The inputs to the construction at this stage may include: design; finance; land and
information;
 Design input;
 procurement law: Proc. No. 649/2009 (the Public Procurement & Property
Administration Law) cum The Federal Government Procurement Directive
cum the Standard Bidding Document for Consultancy Services;
 the law of contract; see Article 1675-2026; of the Civil Code
 the law of professional services; see Article 2632-2638 cum Article 2610-
2631; of the Civil Code;
 the law for professional liability: see Article 2626 cum 2031; of the Civil
Code;
 international agreement: If the source of finance being international, the
procurement process may be regulated based on that specific international
financial agreement;
 financial input;
 the budget law: of each fiscal year; for capital budget
 see like Proc. No. 806/2013 (the 2006 (E.C)) Fiscal Year Federal Government
Budget Law);
 the financial administration law;

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 see Proc. No. 648/2009 (the Federal Government Financial Administration

Law) cum 691/2010 (the Ministry of Finance & Economic Development);
 the water resources fund law: (for water resources development projects);
 see Proc. No. 268/2002 (Ethiopian Water Resources Development Fund);
 the bilateral or multilateral financial international agreement;
 see the specific ratification proclamation; as related to loan or aid to form
the capital budget of the project;

 land input;
 rural land acquisition (through expropriation proceeding) & management
laws;
 see Proc. No. 1/1995 cum 31/1975 cum 456/2005; plus the specific region
applicable laws;
 urban land acquisition (through expropriation proceeding) & management
laws:
 see Proc. No. 1/1995 cum 47/1975 cum 721/2011; in all urban setting federal
& regional;

 information input
 social & economic development information;
 see Proc. No. 442/2005 from Central Statistics Agency;
 demographic information;
 see Proc. No. 442/2005 Central Statistics Agency;
 hydrological information;
 see Proc. No. 691/2010 cum 197/2000 cum 803/2013; from Ministry of Water,
Irrigation & Energy;
 geological information;
 see Proc. No. 194/2000: from Geological Survey of Ethiopia;
 Mapping information; from Ethiopian Mapping Agency;
 Meteorological information: see Proc. No ? of the establishment of the
National Meteorology Agency;
 Regulatory Requirement
 planning & zoning regulation:

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 master plan or structure plan laws of a given urban setting; like Proc. No.
361/2003 (the Charter Proclamation of the City of Addis Ababa) cum
structure plan of the city of Addis Ababa;
 Proc. No. 624/2009 for building projects in all urban setting federal &
regional;
 Reg. No. 243/2011: the Ethiopian building regulation;
 environmental regulation:
 the constitutional law: Proc. No. 1/1995
 Environmental organs law:
 see Proc. No. 295/2002 (Environmental Organs Law which re-establishes
empowers the Environmental Protection Authority of Ethiopia EPA) cum
Proc. No. 803/2013 (which establishes the Ministry of Environment &
Forest);
 environmental impact assessment laws:
 see Proc. No. 299/2002 cum all other sectoral environmental laws; see also
other applicable guidelines;
 environmental pollution control laws:
 see Proc. No. 300/2002 cum all other sectoral environmental laws;

 resource utilization regulation

 like water:
 securing permit (from the Ministry of Water, Irrigation and Energy) to
develop water resources as related to water resources development projects
like irrigation; power; water supply;
 see Proc. No. 1/1995 cum 691/2010 cum 197/2000 (water resources
management law) cum Regulations No. 115/2005 (for water resources
management regulation);
 quality & standard regulation;
 as related to construction materials & equipments;
 see Proc. No. 413/2004; the law which establishes the quality & standards of
Ethiopia;
 Requirements Regulation
 public consultation:

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 see Proc. No. 1/1995 cum 299/2002 (Environmental Impact Assessment Law)
cum 455/2005 (Expropriation of Landholding for Public Purposes &
Compensation Law); as related to development & environmental
consultation;
 compensation:
 see Proc. No. 1/1995 cum 455/2005 cum Regulations No. 135/2007; see also
state assistance based on socio-economic study; and consider also
international financial institutions requirement for Resettlement Action
Plan (RAP);
 tax matters: the tax laws of the country;
 see Proc. No. : 285/2002 (VAT) & applicable regulations;
 see Proc. No. : 286/2002 (Income Tax) & applicable regulations;
 see Proc. No. : 308/2002 (TOT) & applicable regulations;
 see Proc. No. : 622/2009 (Customs Duty) & applicable regulations, if any;
 Safety Regulation
 built-environment:
 see Proc. No. 624/2009 cum Regulations No. 243/2011 (the building proclamation &
regulation) and other relevant laws;
 public utilities:
 see Proc. No. 624/2009 cum 464/2004 (power & telecommunication networks) cum
10/1995 (water & waste water networks);
 seismic & other design safety considerations; codes & directives;
 Procurement Phase
 Background
 This phase is mainly characterized by procurement, negotiation & contract;
 The procurement process may have three aspects: consultancy services & the
procurement process itself & the tax requirement;
 Input Regulation
 consultancy input
 the employer (client) now requires consultancy services to prepare tender
documents and to manage the subsequent procurement process including

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advising the client on the evaluation & selection of contractors; related laws
are of the following;
 procurement law: Proc. No. 649/2009 (the Public Procurement & Property
Administration Law) cum The Federal Government Procurement Directive
cum the Standard Bidding Document for Consultancy Services;
 the law of contract; see Article 1675-2026; of the Civil Code
 the law of professional services; see Article 2632-2638 cum Article 2610-
2631; of the Civil Code
 the law for professional liability: see Article 2626 cum 2031; of the Civil
Code;
 international agreement; If the source of finance being international, the
procurement process may be regulated based on that specific international
financial agreement;

 financial input
 the budget approved for design may not swerve for procurement &
subsequent implementation in this case the following construction related
law may apply;
 the budget law of each fiscal year; for capital budget like Proc. No. 806/2013
(the 2006 (E.C)) Fiscal Year Federal Government Budget Law);
 the financial administration law; Proc. No. 648/2009(the Federal
Government Financial Administration Law) cum 691/2010(the Ministry of
Finance & Economic Development);
 the water resources fund (for water resources development projects); Proc.
No. 268/2002 (Ethiopian Water Resources Development Fund);
 the bilateral or multilateral financial international agreement; like the
specific ratification proclamation; as related loan or aid to form the capital
budget of the project;
 Procurement Regulation
 procurement law:
 see Proc. No. 649/2009 (the Public Procurement & Property Administration Law)
cum The Federal Government Procurement Directive cum the Standard Bidding
Document for Works;

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 this law regulates the procurement process: from invitation for bids up to contract
award;
 If the source of finance being international, the procurement process may be
regulated based on that specific international financial agreement;
 Requirement Regulation
 The participation of bidders in the procurement process may require to fulfill
certain requirements; considering
 tax obligations;
 securing bid security;
 securing performance security (for winner bidders);
 tax laws;
 see Proc. No. : 285/2002 cum 609/2008 (VAT); 286/2002 cum Reg. No.
164/2009 (Income Tax); 308/2002 cum 611/2008 (TOT); 622/2009 (Customs
Duty);
 security related laws:
 bid security from insurance companies or banks; performance security from
insurance companies;
 Construction Phase
 Background
 The construction phase is the most central point with respect to legal regulation of a
construction project;
 The regulation encompasses the following diverse areas:
 contract regulation: as to its effects;
 input regulation as to the construction project like: consultancy; land;
finance; labor; construction material; construction equipment;
 regulatory requirements: as related to planning & zoning; quality &
standard; construction process(as related to building); and permits as to
foreign currency; equipment finance lease; immigration; and so forth;
 safety regulation: as related to: the natural & cultural (heritage)
environment; the human environment; the built environment; and the
public utilities environment;
 requirement regulation: as to tax matters; rest days & public holidays;
 security regulation: as related to insurance; banking and customs security;

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 disputes regulation: as related to negotiation; conciliation; arbitration; and

litigation;
 Let us examine each, in turn;
 Contract Regulation
 the Law of Contract:
 see the Civil Code: Article 1731-2026; regulates basically effects of the signed
construction contract and its interpretation; performance; variation; and non-
performance including proof of same;
 the Law of Public Construction Contract;
 see the Civil Code: Article 3131 ff (Administrative Contract) cum 3244 ff (the law of
contract for public works);
 the Law of Private Construction Contract;
 see the Civil Code: Article 1675 ff cum 2610 ff cum 3019 ff;
 Input Regulation
 Consultancy input
 the employer (client) now requires consultancy services for continuous
design services; for project supervision; contract administration; related
laws are of the following;
 procurement law: Proc. No. 649/2009 (the Public Procurement & Property
Administration Law) cum The Federal Government Procurement Directive
cum the Standard Bidding Document for Consultancy Services;
 the law of contract; see Article 1675-2026 of the Civil Code
 the law of professional services; see Article 2632-2638 cum Article 2610-
2631; of the Civil Code
 the law for professional liability: see Article 2636 cum 2031; of the Civil
Code;
 international agreement; if the source of finance being international, the
procurement process may be regulated based on that specific international
financial agreement;

 Land input

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 this related to the contractual obligation of the employer under the

construction contract to provide site & access thereto (i.e., from time to
time); construction related laws are of the following;
 rural land acquisition (through expropriation proceeding) & management
laws; Proc. No. 1/1995 cum 31/1975 cum 456/2005; plus the specific region
applicable laws;
 urban land acquisition (through expropriation proceeding) & management
laws: Proc. No. 1/1995 cum 47/1975 cum 721/2011; in all urban setting:
federal & regional;

 financial input:
 the budget law: for capital budget like Proc. No. 806/2013 (the 2006 (E.C))
the current Fiscal Year Federal Government Budget Law);
 the financial administration law; Proc. No. 648/2009 (the Federal
Government Financial Administration Law) cum 691/2010(the Ministry of
Finance & Economic Development);
 the water resources fund (for water resources development projects); Proc.
No. 268/2002 (Ethiopian Water Resources Development Fund)
 the international financial agreement; (either bilateral or multilateral) if the
source of finance being international, the project financing (disbursement)
process shall follow that specific international financial agreement, as
ratified by domestic statutory law; see also Proc. No. 691/2010 cum 648/2009
the role of the Ministry of Finance & Economic Development in such
financing process;

 labor input:
 labor is a critical input to the construction process, which determines the
direct cost of the construction project;
 its regulation may have domestic & international dimensions;
 The Labor Law; see Proc. No. 377/2003 (the labor law proclamation) cum
466/2005 (its amendment);
 International dimension: see the relevant ILO Conventions to which
Ethiopia is a party;
 construction materials input: see below
 construction equipment input: see below

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 Regulatory Requirements
 planning & zoning;
 master plan or structure plan cum local development plan laws of a given
urban setting;
 like Proc. No. 361/2003 (the Charter Proclamation of the City of Addis
Ababa) cum structure plan of the city of Addis Ababa;
 Proc. No. 624/2009 for building projects in all urban setting federal &
regional;
 construction regulation:
 the building law: see Proc. No. 624/2009 cum Reg. No. 243/2011:
 this time the regulatory intervention may include: issuing building
construction permit; construction process inspection; issuing occupancy
permit if the building is completed; plus any building height regulation;
 standard & quality:
 as related to construction materials & machineries;
 see Proc. No. 413/2004; the law which establishes the quality & standards of
Ethiopia;

 permits:
 the Central Bank Law; regulation & issuance of foreign currency permit by
the National Bank of Ethiopia;
 the Law of Financial Lease: the National Bank of Ethiopia & the Ministry of
Trade to regulate the operation & management of financial lease; see Proc.
No. and Proc. No. 807/2013 cum 691/2010 (as related to Ministry of Trade);
 the Labor Law; Proc. No. 377/2003 cum 691/2010; the Ministry of Labor &
Social Affairs to issue work permit for expatriate staff & labor;
 the Immigration Law; see Proc. No. 354/2003; to issue resident permit for
expatriate project staff & labor;
 Safety Regulation
 natural environment:
 non-sectoral environmental laws; to ensure sustainable
development & environmental safety;
 see Proc. No. 295/2002 cum 803/2013 cum 299/2002 cum 300/2002;

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 Sectoral environmental laws; see, for example:

 Forestry Conservation, development & Utilization Proclamation, Proc. No.
94/2002;
 Mining Operation Council of Ministers Regulations No. 182/1994;
 Research & Conservation of Cultural Heritage Proc. No. 209/2000;
 Fisheries Development & Utilization Proc. No. 315/2003;
 the Ethiopian Water Resources Management Proc. No. 197/2000;
 A Proclamation to Promote the Development of Mineral Resources, Proc.
No. 52/1993;
 Institute of Biodiversity Conservation & Reserve Establishment
Proclamation, Proc. No. 120/1998 cum 381/2004 cum Reg. No. 291/2013;
 Awash National Park Order No. 54/1969; Simien National Park Order No.
59/1969;
 Council of Ministers Regulations to Declare Ethiopian Standards-Drinking
Water Specification, Regulations No. 12/1990;
 Federal Rural Land Administration, Proc. No. 456/2005;
 Radiation Protection Authority Establishment Proc. No. 79/1993;
 Urban Zoning & Building Permit Proc. No. 316/1987;
 Federal Urban Planning Institute Establishment Proc. No. 450/2005;

 international environmental agreements;

 Article 9 (4) of Proc. No. 1/1995 cum ratified international environmental
agreements like:
 Convention on the Prohibition of the Development, Production, Stockpiling
and Use of Chemical Weapons and on Their Destruction Ratification Proc.
No. 30/1996;
 UNs Convention to Combat desertification in those Countries Experiencing
Serious Drought and/or Desertification, Particularly in Africa Ratification
Proc. No. 81/1997;
 Basel Convention on the Control of the Trans boundary Movement of
Hazardous Wastes and Their Disposal Ratification Proc. No. 192/2000;
 Rotterdam Convention Ratification Proc. No. 278/2002; (NB: the
proclamation is meant for the ratification of the Rotterdam

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Convention on Prior Informed Consent Procedure for certain hazardous

Chemicals & Pesticides in International trade;);
 The Stockholm Convention on Persistent Organic Pollutants Ratification
Proc. No. 279/2002;
 The International Treaty on Plant Genetic Resources for Food and
Agriculture Ratification Proc. No. 330/2003;
 Implementation of the Convention on the Prohibition of Chemical Weapons
Proc. No. 331/2003;
 Ratification of the Convention for the Pacific Settlement of International
Disputes (1899) Proc. No. 348/2003;
 Bamako Convention Ratification Proc. No. 355/2003; (NB: this Convention
is meant to Ban the Import in to Africa and the Control of Transboundary
Movements & Management of Hazardous Wastes Within Africa.)
 Basel Convention Amendment Ratification Proc. No. 356/2003;
 Basel Protocol Ratification Proc. No. 357/2003; Catagena Protocol on
Biodiversity Ratification Proc. No. 362/2003;
 The Convention for the Protection of Cultural Property in the Event of
Armed Conflict and its First Protocol Accession Proc. No. 373/2003;
 Kyoto Protocol Ratification Proc. No. 439/2005;
 Other relevant laws:
 the investment laws; as related to environmental clearance for investment;
see Proc. No. 769/2012;
 the business registration & licensing laws; as related to administrative
liability (like suspension or revocation of business license); see Proc. No.
686/2010;
 the Civil Code; as related to civil liability;
 the Penal Code; as related to penal liability;
 the human environment;
 the Labor Law: Proc. No. 377/2003 cum applicable international
construction related safety regulations; as related to construction project
labor;
 the Public Health Law: see Proc. No. 200/2000, health proclamation;

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 the Law of Extra- Contractual Liability; see the Civil Code Article 2027ff
cum Proc. No. 624/2009 cum Reg. No. 243/2011; as related to the safety of
the general public;
 the built-environment;
 see the Law of Extra-contractual liability; the Civil Code Article 2027 ff cum
 see Proc. No. 624/2009 cum Reg. No. 243/2011;
 the utilities environment;
 Scope:
 water lines; sewerage lines; telecommunications network; power
network;
 the Law of Extra-contractual liability; the Civil Code: Article 2027 ff;
 the Building Law; Proc. No. 624/2009 cum Reg. No. 243/2011 cum Article
2027 ff the Civil Code;
 the Power & Telecommunications Network Protection Law; Proc. No.
464/2005 cum 2027 ff the Civil Code;
 the Water & Waste Water Network Law; see Proc. No. 10/1995 issued by
the Addis Ababa City Government cum Article 2027 ff the Civil Code;
 Requirement Regulation
 tax laws:
 see Proc. No.: 285/2002 cum Proc. No.609/2008 (VAT);
 see Proc. No.: 286/2002 cum Reg. No. 164/2009 (Income Tax);
 see Proc. No.: 308/2002 cum Proc. No.611/2008 (TOT);
 see Proc. No.: 622/2009 (Customs Duty); the contractor, unless exempted is
required to comply with its fiscal obligations as related to the construction
project;
 holidays & rest days laws:
 see Proc. No. 16/1975 cum 29/1996;
 which is relevant for the preparation of construction program by the
contractor;
 Security (Business) Regulation
 insurance security

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 performance security: see the Law of Contract Article 1675-2026 cum 1920-
1951 (the Law of Suretyship or guarantee);
 insurance for works; see the Law of Contract Article 1675-2026 cum Article
754-712 (the Law of Insurance) the Commercial Code;
 insurance for equipment; see the Law of Contract Article 1675-2026 cum
Article 754-712 (the Law of Insurance) the Commercial Code;
 workmen compensation; see the Law of Contract Article 1675-2026 Article
754-712 (the Law of Insurance) cum the Commercial Code; cum the Labor
Law; Proc. No. 377/2003;
 property insurance; see the Law of Contract Article 1675-2026 cum Article
754-712 (the Law of Insurance) the Commercial Code;

 bank security
 advance re-payment guarantee; see the Civil Code1675-2026 cum 1920-1951
(the Law of Surety ship or guarantee); cum Article 896 ff (the Law of
Banking ) the Commercial Code;
 retention money guarantee; see the Civil Code1675-2026 cum Article 896 ff
(the Law of Banking) the Commercial Code;

 customs security
 customs duty law: as related to the tax obligation of the foreign contractor to
deposit security in cash to insure the fiscal privilege provided to it in relation
to construction equipment & spare parts thereof ;
 see Proc. No. 622/2009 (Customs Duty Proclamation);
 see also Clause 14.1(e) MDB-FIDIC;
 Post-Construction Phase
 Background
 This phase is basically characterized by legal regulation of some processes.
 However, the law of contract may also come in to application;
 The legal regulation may encompass both domestic & international law, as the case
may be;
 Domestic Laws
 dispute resolution laws; arbitration related laws; and/or court laws;

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 such laws are related to the laws as related to domestic arbitration or

litigation related to the construction disputes arising under the construction
contract which has been initiated due to termination or after completion of
the construction project;
 this is valid for domestic arbitration or litigation;
 construction warranty law;
 see the Civil Code; as related to public or private construction law Article
3282 or 3039, respectively;
 the contractor may become liable for latent construction defects for 10 years
after final acceptance of the works or possession of same;
 if there were decennial liability insurance it may be called by the employer;
there is no such kind of insurance in Ethiopia yet;
 the Law of Contract: 1675 -2026;
 the Law of Professional Services: 2632-2638 cum 2610-2631;
 the Procurement Law Proc. No. 649/2009 cum the Federal Procurement Directive
and/or Manual;
 if the structure under consideration encounters serious structural failure
within such 10 years, the employer may need the services of a forensic
engineer to establish the root cause (s) of the structural failure;
 this needs a contractual agreement between such forensic engineering
expert(s) & the client or the owner of the facility;
 the Law of Contract: Article 1675 -2026; the Civil Code;
 the Law of Professional Services: 2632-2638 cum 2610-2631; the Civil Code;
 the Procurement Law Proc. No. 649/2009 cum the Federal Procurement Directive;
 if the contractor denies such claim of the employer as the failure related to
construction, the employer may be compelled to hire claims expert &
specialized lawyer to bring an action against the contractor;
 the Law of Contract: 1675 -2026;
 the Law of Professional Services: 2632-2638 cum 2610-2631;
 the Procurement Law Proc. No. 649/2009 cum the Federal Procurement Directive;
 if the case brought against the contractor at the court of law, the employer
may need to hire an expert witness to testify about the failure of the structure
under consideration;

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 this is the case where the forensic engineering experts themselves not act as
expert witness for the employer before the court of law or due to the need
for additional expert witnesses;
 Regulation of Persons
 Background
 This part of the training discusses two fundamental issues: viz., existence & capacity
of key role players in the construction project process;
 These key role players in the construction project process, from design-bid-build
project delivery system perspective, are employer; contractor; and consultant;
 How do they exist legally and how they acquire the requisite legal capacity to enter
in to the respective contract?
 The scope of the discussion is of twofold: existence regulation & capacity regulation;
 Existence Regulation
 Contracts are entered in to by persons;
 Persons are of two types: natural persons (i.e., human beings) & legal persons (i.e.,
institutions);
 Natural persons acquire their existence by birth;
 The relevant persons to a construction contract are: employer & contractor;
 Employers could be public or private;
 Contractors could also be private or public;
 Employers & contractors are thus legal persons;
 The legal way to acquire their respective legal personality and therewith their legal
existence may depend on whether they are public institutions or private (corporate)
entities;
 Public Employers
 Public employers could be of three types:
 ministries (their regional equivalent: bureau);
 other administrative public institutions (their regional equivalent); and
 public enterprises or public share companies (their regional equivalent, if
any);
 Ministries acquire legal personality & therewith their legal existence based on the
Civil Code; see Article 394 ff;

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 Other administrative authorities or establishments (like Authorities; Agencies;

Commissions; Institutes; and their regional equivalents, if any) acquire their legal
personality and therewith their legal existence by specific legislation (proclamation
issued by federal parliament) or by specific regulation issued (by federal Council of
Ministers) to that effect;
 Public enterprises or public share companies acquire their legal personality &
therewith their legal existence based on Proc. No. 25/1992 (the federal framework
for the management of public enterprises) and based on specific regulation issued
(by Council of Ministers) to that effect;
 Public enterprises may act as employers or contractors or consultants depending
upon their respective objective for their establishment;
 Corporate Contractors/Consultants
 A corporate entity like contractor or consultant may acquire its legal personality
through registration based on Proc. No. 686/2010 (or its regional equivalent, if any);
 The act of registration of such corporate entity shall be done by a separate
competent public authority.
 This act of registration provides, legally, to such corporate entity a legal personality
and therewith a legal existence;
 Legal personality is therefore the basis for or equivalent to legal existence;
 The legal capacity of public institutions thus emanates from their formative legal
instrument;
 The legal capacity of private entities emanates not only from the registration &
licensing itself but also from their formative & operative document, which is
contractual in nature, and which provides the required legal capacity &
empowerment (for example to the general manager of such company) to act in the
name & on behalf of the company;
 Thus legal capacity emanates from two sources: from law & from contract;
 Agents acquire their derivative legal capacity from contract; this lead us to the
concept of the law of agency; see Article 2179-2265 of the Civil Code;
 Capacity Regulation
 The legal capacity of public employers or corporate entities (like contractors or
consultants) is determined differently;
 Public employers acquire their legal capacity from the law;

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 whereas corporate entities acquire their legal capacity both from the law &
contract;
 Public Employers
 Public employers acquire their legal capacity to enter in to contracts including
construction contract based on such formative legal instrument: proclamation or
regulation;
 The head of such public institution based on such formative legal instrument deals
with third parties like contractors or consultants or suppliers to form & perform
such respective contracts;
 Such head represents & binds the public institution under consideration not
him/herself;
 Such legal capacity, as reflected in such formative & empowerment legal
instrument, may or may not include the power to settle construction related disputes
through arbitration, for example, or other forms of alternative dispute resolution
methods; see for example, Clause 26.4 PPA 2011;
 Corporate Contractors/ Consultants
 Corporate contractors or consultants (formed like PLCs or Share Companies)
acquire their legal capacity based on the following applicable laws & formative &
operative documents;
 see the Commercial Code of Ethiopia;
 see Proc. No. 686/2010 (Business Registration & Licensing Law); due to
specifically the license; and
 see also the formative & operative (contractual) instruments (i.e.,
Memorandum of Association & Articles of Association) of the construction
company or consulting firm under consideration;
 The following legal instruments shall also apply for the head of such corporate
entity to enter in to contract including construction or design or consultancy or
supply of goods contract;
 see The Law of Agency: the Civil Code; Article 2179-2265;
 to represent the entity:
 in the tendering process;
 in contract negotiation;
 in contract signing;

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 in contract performance;
 in receiving instruction;
 in payment receipt;
 in construction dispute resolution;
 as related to enforcement of an arbitral award or a court judgment;
 The Law of Stamp Duty; Proc. No. 110/1998 cum 612/2008; to legalize the
power of attorney;
 The Law of Document Authentication: Proc. No. 334/2003 cum 467/2005
(Authentication & Registration of Documents Law); to authenticate, for
example, the power of attorney;
 Such head of the said corporate entity represents & binds, legally, the said
corporate entity under consideration not him/herself;
 Let us consider, the formation of such respective contracts after we have established
the relevant persons; their existence; and capacity;
 Contract Regulation:
 Background
 Legal regulation of contract may come in to picture with respect to the following
three basic categories of contracts viz.,
 contract of services; like design services;
 contract for the supply of goods; and
 works contract;
 Without prejudice to the special provisions of the law governing such special types
of contract(see Article 1676 of the Civil Code), the general law of contract (see
Article 1675-2026) basically regulates the formation, effect & proof of such service,
goods & works contract between the relevant contracting parties, viz.,
 service contract: between service provider & service receiver;
 supply contract: between goods supplier & goods purchaser; and
 works contract: between employer & contractor; between main contractor
& sub-contractor;

 Service Contract
 service contract may traverse & include, as the case may be, many types of
laws: like the Civil Code; Commercial Code; Maritime Code; labour law;
and so forth; and

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 service contract may encompass services of different nature: commercial

services; technical or engineering services; scientific services; and ordinary
or civil services; the nominated sub-contractor may find itself here if such
sub-contractor provides special services like design services;

 Supply Contract
 supply of goods contract may focus on construction materials &
construction equipments; the nominated sub-contractor may find itself here
if such sub-contractor supplies goods of special nature;

 Works Contract
 works contract mainly focus on the regulation of the formation & effect of
main works contract between the employer & the main contractor; the sub-
contracts formed between the prime contractor & the sub-contractor
(domestic or nominated);
 The nominated sub-contract is thus a unique arrangement which may find itself in
the three categories of contract;
 Let us examine, each in turn;
 Works Contract
 This part of the law regulates the formation construction contract between the
employer & the contractor; between the main contractor & the sub-contractor;
 The applicable laws are of the following;
 The law of contract: see the Civil Code: Article 1675-1730; which regulates the
exchange of consent; determination of object; and consideration of form;
 The law of public construction contract: the Civil Code: Article 3131 ff cum Article
3244-3296;
 The law of private construction contract: see the Civil Code Article 2610-2631 cum
Article 3019 cum 3040;
 Contract approval: see procurement or other administrative laws or procurement
directives: as related to contract approval; or
 International agreement: the specific international financial agreement to secure go
ahead (for contract approval);
 Services Contract
 Services are critical input to the construction process;

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 Construction project thus requires services of different nature;

 The following services are acquired through contractual arrangement with the
respective service providers;
 The services are arranged, depending on the specific project phase, either by the
employer or the contractor or in the name of both as the case may be;
 The following are some of the services:
 project planning & study services;
 project design or engineering services;
 project supervision & contract administration services;
 testing services; (soil; chemical; material ;…)
 investigation services; (soil investigation; geophysical investigation;
geotechnical investigation; …)

 construction equipment lease services;

 insurance services;
 banking services;

 pre-shipment inspection services;

 transportation services;
 maritime & transit Services;
 custom clearance services;
 dry port services;
 labour services;
 claim expert services;
 dispute resolution services;
 forensic engineering services;
 Supply of Goods Contract
 Construction project requires goods of different nature as input;
 The following are some:
 construction materials; and
 construction equipment;

 Construction Materials
 The construction material, as a critical input, to the construction project
may involve the following construction related laws;
 Construction material either be naturally grown or available or
manufactured;

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 In case of manufactured construction materials, it may have domestic &

international dimensions; in case of its international dimension the relevant
import regulation regime shall also apply; The following are some of the
relevant applicable laws:
 the Law of Contract: see Article 1675-2026 of the Civil Code;
 the Law of Sales; see the Civil Code: Article 2266 ff i.e., the Law of Sale;
 the Law of Banking: the Commercial Code of Ethiopia; See Article 896 ff
for letter of credit (L/C) purpose;
 the Law of Insurance: the Civil Code Article 1675-2026; cum the
Commercial Code of Ethiopia; see for inland insurance Article 654 ff; the
Maritime Code of Ethiopia for marine insurance; Article 288 ff; cum Proc.
No. 746/2012, the law which regulates the insurance business;
 The Law for Multi-Modal Transportation: this includes transportation of
such construction materials by sea & by land; the Maritime Code of
Ethiopia (for marine transport by sea): see also Proc. No. 547/2007 (a
proclamation which amends the carriage of goods by land) cum 548/2007
(i.e., the law for multimodal transportation of goods); cum Proc. No.
588/2008 (the law which defines the liability of the dry port to the
consignee);
 the Law of Pre-shipment Inspection: see Proc. No. 173/1999 cum Reg. No.
56/1999 (the regulation which determines the pre-inspection fee); if
applicable;
 INCOTERMS: the international commercial terms (INCOTERMS) as
developed by the International Chamber of Commerce (ICC) shall also
apply to the contract of sale or supply of goods with a view to allocate
respective rights, obligations and liabilities as related to the goods delivery
point (risk); cost of insurance & freight and other respective obligations;

 Construction Equipment
 The construction equipment is one of the critical input to the construction
process, which determines the direct cost of the construction project;
 Construction machinery or plant or equipment could be secured either:
 by lease: like through operative lease; hire purchase lease or
financial lease (in this case the service contract shall apply); or

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 by purchase; in such case the relevant laws for construction

materials as related to import (of construction equipment) shall
apply;
 the Law of Contract; see Article 1675-2026 of the Civil Code;
 the Commercial Law; the Commercial Code of Ethiopia cum Article 18 of
Proc. No. 103/1998;
 the Law of Capital Goods Leasing: see Proc. No. 103/1998 cum Proc. No.
807/2013 (the law which amends the Capital Goods Leasing Proclamation
103/1998 & which introduces the separate business management of financial
lease; it is both regulated by the National Bank of Ethiopia & by the
Ministry of Trade);
 the Law of Construction Machineries Registration & Control: Proc. No.
177/1999 cum the relevant directives issued by the Ministry of Urban
Development, Housing & Construction;
 international law: Financial Lease is also internationally regulated; see
Unidroit Convention on International Financial Leasing (May 20, 1988);
 Construction Disputes Regulation
 Background
 The applicable law also regulates the methods for construction disputes resolution;
 Mediation & adjudication have no legal framework in Ethiopia yet;
 Scope
 Settlement
 compromise/negotiation:
 regulated under the Civil Code;
 see the Civil Code Article 3307-3317;

 conciliation:
 regulated under the Civil Code;
 see the Civil Code Article 3318-3324 cum 3307-3317;
 Judgmental
 Arbitration:

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 regulated under the Civil Code & the Civil Procedure Code of Ethiopia; see
the Civil Code Article 3325-3346 cum the Civil Procedure Code: Article 315-
319 cum 350-357 cum 461 cum 458(a);
 PPA 2011 provides no arbitration (and adjudication) except for those public
institutions which have clear legal power or mandate to enter in to an
arbitration agreement;
 Litigation:
 by litigation, as a form of dispute resolution, it means the direct submission
of a relevant construction dispute to court and the court to hear & decide on
the dispute including enforcement & appeal against the lower decision of the
lower court;
 those laws which establish & provide jurisdiction for the courts are
applicable here;
 the federal constitution: which divides judicial power between the federal
government & the regional state;
 the federal courts law: see Proc. No. 1/1995 cum Proc. No. 25/1996 cum
138/1999 cum 254/2001 cum 321/2003 cum 322/2003 cum 454/2005;
 the federal courts: the Federal Supreme Court; the Federal High Court; the
Federal First Instance Court;
 the regional courts: the Regional Supreme Court; the Regional High Court;
the Regional First Instance Court;
 international financial agreement: this may bring in to operation adjudication (in all
its possible variants) & arbitration as dispute resolution methods;

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1.3 Laws of Other Countries

 Background
 The construction contract expressly recognizes the possible application of the laws
of other countries (jurisdictions); see Clause 1.4 (Law & Language) MDB-FIDIC if
stated in the contract data;
 see also Clause 8 (Governing Law) PPA 2011 cum the SCC;
 These countries could be the country of origin or transit countries, if any;
 The scope of the laws of other countries may encompass the following areas;
 Scope
 The application of the laws of other countries to the construction project may come
in to picture due to the following reasons; viz., due to:
 choice of the forum for dispute resolution specially as related to arbitration;
 choice of the forum for the enforcement of foreign arbitral award;
 bilateral agreement between Ethiopia and that specific country;
 multilateral agreement between Ethiopia and that specific multilateral
international financial institution; like the World Bank…
 banking transaction to effect payment to the supplier in that country as
related to letter of credit;
 contract of sale of goods between Ethiopian national institution (employer or
contractor) and the seller in that particular country;
 as related to ensuring environmental safety; as related to the country of
origin or transit with respect to importation & transportation of explosives
or dangerous chemicals;
 dispute resolution laws:
 based on the doctrine of lex fori arbitri, (the place of arbitration) the law of
arbitration and the procedural law of that forum country shall apply;
 this is the case in relation to international arbitration; for example, if the
arbitration were held in Paris, the law of arbitration & the procedural law
of France shall apply to govern such arbitration process;

 banking law;
 the banking transaction law of that country govern the transaction based on
international standard;

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 this is clear in case of contract of supply based on letter of credit

arrangement for payment;
 environmental regulation laws:
 this is the case as related to the movement of some dangerous or hazardous
items like explosives or special chemicals;
1.4 International Law
 Background
 Neither the MDB-FIDIC nor the PPA 2011 specifically envisage the possible
application of international law;
 The possible application of international law may be implied in case of MDB-
FIIDIC as the agreement to finance a given construction project in Ethiopia
requires a prior international loan and/or aid agreement between Ethiopia and that
specific multilateral international financial institution;
 see Clause 2.4 Employer’s Financial Arrangement;
 see Clause 8.1 (c) Commencement of Works: Financial Arrangement;
 see Clause 16.1 Contractor’s Entitlement to Suspend Work; Financial
Arrangement;
 see Clause 16.2 Termination by Contractor: Financial Arrangement;
 see Clause 15.6 Corrupt or Fraudulent Practices; serves as a ground to
terminate the contract by the employer also to suspend disbursement by the
specific MDB;
 The possible application of international law specially that of public international
law may thus come in to picture as related to construction project due to the
following connection between the construction project & an international legal
instrument;
 Such international laws may or may not be ratified by Ethiopia;
 If it is ratified it constitutes an integral part of the Ethiopian legal framework as per
Article 9 (4) of the FDRE Constitution;
 The power to negotiate & sign including to ratify international agreements is the
power of federal government under the FDRE Constitution;
 Scope
 international financial agreements; see Proc. No. 1/1995 cum 691/2010;

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 such agreements could be bilateral or multilateral;

 such agreements are negotiated & signed by the Ministry of Finance &
Economic Development & ratified by the House of Peoples Representative;
 such international agreement provide the required financial input to the
construction project in whole or in part;
 the following are illustrative international legal instruments;
 International Development Association for Financing the Water Supply
Development & Rehabilitation Project Ratification Proc. No. 46/1996;
 OPEC Fund for International Development Loan Agreement for Financing
the Addis Ababa Bole Air Port Development Project Ratification Proc. No.
59/1996;
 ADF Loan Agreement for Financing the Addis Ababa Bole Air Port
Development Project Ratification Proc. No. 62/1997;
 Arab Bank for Economic Development in Africa Loan Agreement for
Financing the Addis Ababa Bole Air Port Development Project Ratification
Proc. No. 78/1997;
 Nordbanken Loan, for Partly Financing the 7th Telecommunications
Development Program, Guaranteeing Agreement Ratification Proc. No.
71/1997;
 European Investment Bank Loan Agreement for On-Lending Through the
Development Bank of Ethiopia, to Small & Medium-Sized Private Sector
Enterprises, Ratification Proc. No. 85/1997;
 Nordic Development Fund Credit Agreement for Partly Financing the Road
Sector Development Program Ratification Proc. No. 143/1998;
 international environmental agreements; see Proc. No. 1/1995 cum Proc.
No. 691/2010 cum Proc. No. 803/2013;
 this has been discussed under environmental safety regulations above;
 the ratified international environmental agreements may have their own
legitimate implications on the construction project with a view to ensure
sustainable development & environmental safety;
 the best example will be the Climate Change & the Climate Resilient Green
Economy Strategy of Ethiopia (2011) based on such agreement;
 the power to negotiate international agreement now rests with the Ministry
of Environment & Forest;

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 The ratification of such international agreements rests with the House of

Peoples Representative;
 foreign arbitral award enforcement law:
 As related to recognition & enforcement of foreign arbitral award, the 1958
New York Convention (international law) is in point;
 Ethiopia is not a party to such Convention;
 However, a foreign arbitral award could be recognized & enforced in one of
the convention ratified country where the asset of the award-debtor
situated;
 The court of that country shall guide its procedure based on the Convention
& its judicial procedure law;

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Reference Materials for

Construction Law
………………………………………………………………………………
A. Constitutional Laws
1. The FDRE Constitution; Proc. No. 1/1995
2. The Nine Regional Constitutions;
3. The Charters of the two City Administrations;
3.1 Charter Proc. No. 361/2003: for the City of Addis Ababa
3.2 Charter Proc. No. 416/2004: for the City of Dire Dawa;
B. Policy Documents
4. Social Development Policies;
5. Economic Development Policies;
6. Environmental Policy;
C. Statutory Laws (Proclamations or their equivalent)
7. Codes
7.1 The Civil Code;
7.2 The Commercial Code;
7.3 The Maritime Code;
7.4 The Penal Code;
7.5 The Civil Procedure Code;
7.6 The Criminal Procedure Code;
8. Other Statutory Laws
8.1 All other Proclamations cited in the Lecture Notes;
D. Non-Statutory Laws (Regulations or their equivalent)
9. All relevant Regulations cited in the Lecture Notes;

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