Ethiopia’s Proposed Asset Seizure Bill

The Need for Balancing Economic Interests With Rule of Law

Ethiopia’s proposed Asset Recovery Bill has sparked controversy. The bill grants broad powers to the government to seize assets suspected of being acquired through illegal activities, even without proven crimes. Critics fear the bill could be used to target political opponents and lacks sufficient due process protections. The retroactive application of the law is another primary concern. Legal experts, opposition parties, and even some public officials have raised concerns about the bill’s constitutionality. The lack of judicial oversight and the potential for abuse are significant risks experts raise. The Ethiopian government should carefully consider these concerns and prioritize upholding the rule of law. While asset forfeiture can be a tool to combat economic crime, strong safeguards are needed to prevent potential abuse. EBR’s Eden Teshome has spoken to experts and explored the experience of other countries to compile this report.

The Ethiopian government has proposed a new “Asset Recovery Bill” that would grant the Ministry of Justice the power to confiscate private property and wealth even without proven “economic crime.” The bill reportedly allows for retroactively applying the law for up to 10 years, requiring property owners to formally provide receipts for money from abroad through banks if suspects claim to have accumulated the wealth from overseas. This legislation is framed as a tool to combat “economic crimes” that the government claims have damaged the economy. Still, critics fear it could be used to target political opponents or those perceived as supporting rebel groups. The broad powers granted to the government under this bill, including confiscating properties without proving their owners are guilty, have continued to spark significant concern and debate among Ethiopians.

The government claims this legislation is necessary to combat “economic crimes” that have long been damaging Ethiopia’s economy. However, the bill provides the government with sweeping authority to seize assets at its discretion, raising concerns that it could be used to silence dissident voices. The proposed law’s retroactive application and lack of a requirement to prove guilt are particularly concerning features.

Bisrat Teklu, a lawyer and legal advisor, outlined some of the critical issues with the bill from a constitutional and rule of law perspective:

“The constitution upholds the rule of law, yet this draft proclamation is somewhat extended. Instead of the Ministry of Revenue and police, concerned bodies should inspect individuals in governmental institutions who are not performing their duties in line with the constitution, thereby amassing illicit wealth and generating illegal income. However, even wealth acquired through rightful and legal means is now being questioned regarding its legality.”

Bisrat argues that despite the government’s assertion that the law will not incriminate illegal asset owners, it carries implications of incriminating. “When you see the inspection, it is led by an attorney and policies and the way inspectional information is gathered, through accessing personal phones of individuals, does not align with typical judicial procedures. In the end, this could result in confiscation, similar to criminal laws where, under certain conditions, individuals found guilty may have their wealth confiscated. In my opinion, despite the absence of imprisonment, it resembles a confiscatory law with a somewhat arbitrary nature.” Bisrat tells EBR.

The retroactive application of the law is also highly problematic, according to Bisrat. “Regarding the retroactive application, it contrasts sharply with the constitution. In Ethiopia, according to the FDRE Constitution, non-retroactivity of criminal law is permitted only for matters concerning criminal offences, particularly substantive criminal law. One aspect of the principle of the rule of law is non-raise to the activity of civil as well as criminal laws.”

Bisrat warns that the law’s retroactive nature, reaching back ten years, could have severe consequences. “Moving ten years backwards, considering the time value of money, would lead to significant consequences. I consider this approach inappropriate,” he argues.

The lack of due process protections in the bill is another primary concern. Bisrat explains, “Another aspect highlighted in the draft proclamation concerns the oversight of foreign exchange, tax collection and other related matters where individuals acquiring wealth illegally and affecting the economy. When drafting such laws, governments often base various international conventions aimed at preventing individuals from hiding after illegally acquiring wealth, ensuring the stability of the nation’s economy, and preventing them from leaving the country once found guilty and related to corruption such as transnational organized crime.”

However, Bisrat argues that the bill needs to provide adequate safeguards: “During the inspection period, there are inconsistent bodies. The attorney and police will manage your call and any electronic media to gather information and investigate. As an individual, it can be challenging to navigate and defend against this inspection.”

Bisrat also identified the lack of independent oversight and judicial review as a significant flaw. Another concern is that this proclamation may unjustly confiscate wealth through abuse of power. Especially in Ethiopia, political opponents and anyone against this law may face the confiscation of their wealth.”

Bisrat warns that the bill’s provisions could fuel “another social crisis, fueling revenge within society and potentially leading to rebellious acts against one another.”

An economist who requested anonymity shares concerns about the broader economic impacts of the proposed asset seizure law:

“This bill, if enacted as it is, could have a chilling effect on investment and economic activity in Ethiopia. Investors, both domestic and foreign, need to have confidence that their property rights will be protected. The retroactive nature of the law and the broad discretionary powers given to the Minister of Justice to confiscate assets without due process will likely deter new investment and lead existing investors to move their capital out of the country.”

The economist argues that the law could also have unintended consequences for ordinary Ethiopians. “Many Ethiopians, particularly those in the informal sector or with limited access to the formal banking system, rely on cash holdings and remittances from family members abroad as a source of savings and investment capital. The requirement to provide receipts for foreign-sourced funds will make it extremely difficult for these individuals to validate the origins of their assets, potentially exposing them to unjust asset seizures.”

The proposed asset seizure law has also drawn criticism from Ethiopia’s opposition parties. Abraham Haymanot, vice president of the Ethiopian People’s Revolutionary Party, argued that the bill violates the constitution’s protections on private property rights:

“The constitution upholds the rule of law, yet the proclamation is somewhat extended. Instead of the Ministry of Revenue and police, concerned bodies should inspect individuals in governmental institutions who are not performing their duties in line with the constitution, thereby amassing illicit wealth and generating illegal income. However, even wealth acquired through rightful and legal means is now being questioned regarding its legality.”

Abraham also expresses concerns about the lack of due process and potential for abuse: “This type of law is essential for identifying crimes such as illegal wealth acquisition, minimizing black market activities in foreign currency exchange, prosecuting those who use fraudulent tax practices, and defending against money laundering. However, he argues that the burden of proof and the standard of ‘beyond a reasonable doubt’ in such cases is the accused’s responsibility. Because even if someone is not a criminal, the draft bill poses a risk that would lead to confiscating their wealth.

The proposed bill has also drawn criticism from legal experts at the Ministry of Justice. A senior official, speaking on condition of anonymity, expressed concerns about the bill’s constitutionality and potential for abuse:

“The government asserts that this law is not criminal in nature. However, despite the absence of imprisonment in the proclamation, it carries implications of that could be a base for criminality. As the inspection is led by attorneys and polices, and the way inspectional information is gathered, through accessing personal phones of individuals, does not align with typical judicial procedures that are of civil nature. This could result in confiscation of the properties in question. This outcome is similar to criminal laws where, under certain conditions, individuals found guilty may have their wealth confiscated.”

The official went on to note that the retroactive nature of the law is highly problematic: “Another consideration when designing such laws is that they should be attached to specific crimes. This means that if a suspect cannot be found guilty through normal legal channels, there must be provisions to allow for confiscation and verification of legality. One can infer from this that the proclamation is quite broader. This is because one can be found guilty and have their possessions confiscated for seemingly minor reasons and gaps.”

Legal experts, opposition parties, and even government officials have raised concerns about Ethiopia’s proposed asset seizure bill, which highlights the significant risks posed by the bill. The lack of due process, potential abuse, and retroactive application raises severe doubts about the bill’s constitutionality and compatibility with the rule of law.

Several countries have bills to seize wealth gained illegally. These asset forfeiture laws have been abused in other African countries, often to target political opponents and critics of the government. In South Africa, for example, the government’s Asset Forfeiture Unit has been accused of overreach, with critics arguing that it has become a “political weapon” used to harass and intimidate opponents of the ruling party.

In 2018, the South African High Court ruled that parts of the country’s asset forfeiture law were unconstitutional, citing concerns about the lack of due process and potential for abuse. The court found that the law allowed the government to seize assets without a proper hearing, violating the presumption of innocence.

The ruling highlighted the importance of robust judicial oversight and due process protections in asset seizure laws. As Bisrat, the Ethiopian legal expert, warned, the lack of such safeguards in Ethiopia’s proposed bill could enable “the unjust confiscation of wealth through abuse of power.”

Given the significant risks and concerns of legal experts, opposition parties, and some public officials who couldn’t speak out loud and openly for fear of reprisal, the bill drafters should carefully reconsider some of the details in the proposed asset seizure law. Upholding the rule of law and protecting the constitutional rights of citizens should be the top priority, even as the government seeks to combat economic crimes.

As the bill is still a draft, more robust mechanisms that reduce abuse can be included to avoid extending the bill to silence opposition. Articles promoting due process of law and protecting citizens are also advisable; independent oversight and a narrow scope help address valid concerns.

While the controversy over the draft bill continues, many literatures argue that asset forfeiture is essential for combating economic crime and fostering a sound economy.

Asset forfeiture, the legal process by which authorities seize property suspected of being obtained through illegal activities, has emerged as a critical tool in the fight against economic crime in many countries. While the Ethiopian draft bill on asset forfeiture has sparked debate, some economists also highlight its potential benefits for fostering a sound and predictable economy. Research demonstrates that effective asset forfeiture programmes can deter criminal activity, reduce the size of the informal economy, and ultimately contribute to a more stable and prosperous nation.

One of the primary advantages of asset forfeiture is its deterrent effect on economic crime. Klick and Krueger’s study, published in the Journal of Law and Economics, found a strong correlation between asset forfeiture and decreased money laundering activities. Criminals are more likely to be deterred from engaging in illegal acts if they face losing their ill-gotten gains and the assets they have accumulated through their illicit activities. This practice disrupts the financial rewards of crime, making it a less attractive proposition for potential offenders.

Furthermore, asset forfeiture can be crucial in curbing the informal economy, a sector often characterized by tax evasion and a lack of transparency. Research by the International Monetary Fund (IMF) suggests a link between weak asset forfeiture laws and a larger informal economy. When criminals can retain the proceeds of their crimes, they can reinvest them back into the informal sector, distorting market competition and hindering economic growth. Effective asset forfeiture disrupts this cycle by severing the financial lifeline of the informal economy, encouraging businesses to operate within the formal system and contribute to tax revenue.

The economic benefits of asset forfeiture extend beyond deterring crime and shrinking the informal sector. Based on the experience of other countries, recovered assets boost resources for critical public services such as education, healthcare, and infrastructure development. A study by the National Institute of Justice (NIJ) in the United States found that asset forfeiture programmes generated significant revenue for law enforcement agencies, which helps to strengthen crime prevention interventions and social programmes. This practice creates a positive feedback loop, where recovered assets enhance law enforcement and social safety nets, ultimately leading to a more stable and predictable economic environment.

However, it is essential to acknowledge asset forfeiture concerns, mainly due process rights. With its ten-year investigation window, the Ethiopian draft bill raises questions about the potential for arbitrary asset seizure. A transparent and fair legal framework ensures that asset forfeiture is used effectively and does not disproportionately impact innocent individuals.

While the Ethiopian draft bill on asset forfeiture requires careful reconsideration to address due process concerns, it’s also noteworthy to understand its potential advantages. Asset forfeiture programmes can significantly foster a sound and predictable economic environment by deterring economic crime, shrinking the informal economy, and generating revenue for public services. By learning from best practices worldwide and establishing a transparent legal framework and solid legal institutions, Ethiopia can harness the power of asset forfeiture to strengthen its economy and pave the way for a thriving future. EBR

12th Year • July 2024 • No. 131