Million Alemu Legal Services

Introduction

The Ethiopian Authority for Civil Society Organizations (ACSO) has enacted a directive which is dedicated to governing the registration process and administration framework of foreign organizations in Ethiopia (A Directive on the Registration and Administration of Foreign Organizations-Directive No. 986/2024, /hereinafter ‘ACSO’s New Directive’/). There has been huge legal gap in this regard and now after rigorous effort ACSO has come up with comprehensive and well-organized ACSO’s New Directive. This Directive is said to be rectify many loopholes and created a very smooth, attractive, encouraging, and collaborative approach for foreign organizations and individuals who are intending to work in Ethiopia on different areas.

ACSO’s New Directive claims that its core purpose is to streamline and simplify the registration process for foreign organizations in Ethiopia, ensuring that their legal rights and interests are safeguarded. It aims to provide a clear framework that outlines the legal obligations and responsibilities of foreign organizations operating in the country. By establishing transparent procedures and guidelines, ACSO’s New Directive aims to create an enabling environment that promotes the smooth registration and administration of foreign organizations, fostering their active participation in Ethiopia's socio-economic development.

Ultimately, ACSO’s New Directive seeks to enhance transparency, accountability, and cooperation between foreign organizations and the Ethiopian government, fostering a mutually beneficial relationship that supports the overall growth and progress of the nation.

The objective of ACSO’s New Directive, as indicated in its preamble, is to facilitate the engagement of foreign organizations in various project activities, either independently or in collaboration with local non-governmental organizations, by providing financial, in-kind, and knowledge support.  One of the strong justifications for ACSO’s New Directive is the need to create a conducive environment for foreign organizations to contribute to the development and growth of Ethiopia's civil society sector in alignment with national regulations and goals.

Salient Features of the Directive

Although there are some vague issues ACSO’s New Directive failed to foster clarity, one of its strong features is that it clearly defines for foreign organizations what rights they are entitled to, what obligations and responsibilities they bear and in what activities and with whom they can work. This enhances the predictability and certainty of Ethiopian laws and regulations towards foreign organizations registration and their sustainable operation in Ethiopia.

Another feature of ACSO’s New Directive is that it articulates the formal and legal requirements for the registration of foreign organizations in Ethiopia. It stipulates what documents are required, the need for support letter, the condition of authentication of all necessary documents and support letter and other requirements for registration. The grounds for rejection of registration are also clearly stated in ACSO’s New Directive. There is also registration fee of USD 500 (five hundred) to be paid only in Dollars.

Thirdly, ACSO’s New Directive has adapted a little stringent approach towards work plan requirement. Article 11 deals with the matters to be included in the work plan. It seems that this is for the purpose of regulating the operation of the foreign organization.

Moreover, ACSO’s New Directive provides for the freedom of the organizations to cooperate and collaborate with any legal entity and to engage in any income generating activities and sectors if it conforms to the ultimate purpose they were established for.

ACSO’s New Directive stipulates, in black and white, restrictions regarding the engagement and participation of foreign organizations in Ethiopia. It is clear about prohibiting foreign organizations not to exert influence on political parties and engaging in voter education or election observation. Moreover, the provision of ACSO’s New Directive allowing charities to engage in restricted activities upon government invitation provides clarity and flexibility.

Some Limitations of the Directive

Enacting ACSO’s New Directive is of paramount importance in different respects. It is a profound work for ACSO to promulgate it. However, it seems that ACSO’s New Directive has the following weakness as per our opinion. The weaknesses of ACSO’s New Directive are as follows:

Ø  Lack of clarity on name approval requirements: The provisions regarding name approval in ACSO’s New Directive raise questions regarding the necessity and nature of licenses for registered names. There is ambiguity surrounding whether a resolution from the parent company is sufficient for name approval. Clarity is needed in this regard to enhance procedural clarity and ease of compliance.

Ø  Complexity in registration fee payment: While ACSO’s New Directive introduces various payment modalities for registration fees, including utilizing the ACSO's bank account, there is still a requirement to document the exchange rate used for fee conversion. This suggests room for further simplification. ACSO should consider establishing a foreign currency account into which fees can be directly paid by foreign organizations, eliminating potential exchange documentation issues, and helping the Authority generating foreign currency for the country.

Ø  Challenges related to bank accounts for charities: Article 15 (2) of ACSO’s New Directive introduces the possibility of charities having both foreign currency and ETB accounts for each project. However, practical implementation may face challenges due to regulations of the National Bank of Ethiopia that limit the number of foreign currency accounts permitted per organization. Additionally, clarification is needed regarding the types of foreign currency accounts that charitable organizations are allowed to have, as there has been confusion in this area.

Ø  Ambiguity regarding asset transfer of liquidated companies: ACSO’s New Directive dictates protocols for transferring assets of liquidated foreign companies. However, there is a lack of clarity on whether the foreign organization can decide to transfer its assets to other foreign organizations engaged in a similar project. This discrepancy between this ACSO’s New Directive and prior regulations raises concerns about the implementation and practicality of this provision.

Ø  Lack of clarity regarding the issuer of the support letter: The directive does not clearly indicate who should issue the support letter required for the registration of a foreign organization in Ethiopia.

Ø  Lack of clarity on document authentication requirements: Article 10 of ACSO’s New Directive outlines requirements for document authentication during the registration process. However, the provision lacks clarity in specifying the proper authentication methods.

Overall, these weaknesses of ACSO’s New Directive create confusion, complexity, and potential interpretation issues in various areas, including name approval, registration fee payment, bank accounts for charities, and asset transfer of liquidated companies. Clarity, simplification, and alignment with prior regulations are needed to address these concerns effectively.

Conclusion

In conclusion, ACSO’s New Directive is a significant step towards creating a conducive environment for foreign organizations to contribute to the country's development. ACSO’s New Directive aims to streamline the registration process, define the rights and obligations of foreign organizations, and promote cooperation between them and the Ethiopian government.

While ACSO’s New Directive has several commendable features, such as clearly defining rights and responsibilities and specifying registration requirements, it also has several limitations. These include a lack of clarity on name approval requirements, complexity in registration fee payment, challenges related to bank accounts for charities, ambiguity regarding asset transfer of liquidated companies, lack of clarity on the issuer and submission of the support letter, and insufficient guidance on document authentication requirements.

Addressing these weaknesses is crucial to ensure procedural clarity, ease of compliance, and effective implementation of ACSO’s New Directive. Clear guidelines on name approval, simplification of fee payment processes, clarification on bank account regulations, and proper guidance on asset transfer and document authentication would enhance ACSO’s New Directive's effectiveness and promote a transparent and mutually beneficial relationship between foreign organizations and the Ethiopian government.

Disclaimer

The information provided in this article by Million Alemu Law Office is for general informational purposes only and should not be construed as legal advice. The legal brief is based on the understanding of the subject matter at the time of publication and may not reflect current legal developments. The content of this legal brief is not tailored to specific legal situations or circumstances and should not be relied upon as such. It is recommended to consult with a qualified attorney for advice related to your legal issues.

Million Alemu Law Office assumes no liability for any errors or omissions in this legal brief and disclaims any responsibility for actions taken or not taken based on the information provided. This legal brief does not create an attorney-client relationship, and any communication with the Million Alemu Law Office through this legal brief does not constitute legal representation. Laws and regulations may vary, and the information in this legal brief may not be up to date. It is advisable to consult with an attorney or relevant legal authorities for the most accurate and current information.

Should you require assistance or further clarification regarding the registration and administration of foreign organizations in Ethiopia, please do not hesitate to contact us. We prioritize our clients' needs and value every inquiry.

Compiled by Yideg Sale-Legal Associate at Million Alemu Law Office