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ADDIS ABABA UNIVERSITY COLLEGE OF LAW AND GOVERNANCE STUDIES SCHOOL OF LAW GRADUATES PROGRAM

Master of Laws (LL. M) In Public International Law

ASSESSMENT OF THE NEW ETHIOPIAN INVESTMENT LAW IN LIGHT OF ETHIOPIA9S ACCESSION TO THE WTO: THE CASE OF THE AIR TRANSPORT SECTOR

A Thesis Submitted in Partial Fulfillment of the Requirements for the Award of Master of Laws (LL. M) in Public International Law at School of Law, College of Law and Governance Studies, Addis Ababa University

By: Gidey Asgedom

Advisor: Martha Belete (Assistant Professor)

Addis Ababa, Ethiopia

September 2021

ASSESSMENT OF THE NEW ETHIOPIAN INVESTMENT LAW IN LIGHT TO ETHIOPIA9S ACCESSION TO THE WTO: THE CASE OF THE AIR TRANSPORT SECTOR

By: Gidey Asgedom

Advisor: Martha Belete (Ass. Professor)

September 2021

Dedication

This paper is dedicated to the loving memory of all individuals who

passed away in the Tigray War while working on my LL. study!!

vii

Contents Page No.

Acknowledgements .................................................................................................................................... vi

Acronyms and Abbreviations ................................................................................................................... ix

Chapter One Abstract xi
Introduction
- 1. Background of the Research
- 1. Statement of the Problem and Research Questions
  - 1.2. Statement of the Problem
  - 1.2. Research Questions
- 1. Literature Review
- 1. Objectives of the Research
  - 1.4. General Objective
  - 1.4. Specific Objectives
- 1. Significance of the Research
- 1. Scope and Delimitation of the Research
- 1. Methodology of the Research
  - 1.7. Research Design
  - 1.7. Research Methods
  - 1.7. Techniques of Data Analysis and Interpretation
- 1. Chapters Sequence/Organization Layout
CHAPTER TWO
AND THE WTO ACCESSION PROCESS CONCEPTUAL AND REGULATORY FRAMEWORK OF THE AIR TRANSPORT SERVICES,
- Introduction
- 1. Air Transportation Services and Tough Competition in the Sector
  - 2.1. Air Transport Services
  - 2.1. The Tough Competition in the Air Transport Services
- 1. Regulatory Framework of the Air Transport Services
  - 2.2. Convention on International Civil Aviation (Chicago Convention)
  - 2.2. The Economic Regulation of International Air Transport viii
- 1. WTO and International Air Transportation Services
  - 2.3. GATS
  - 2.3. The Uruguay Round and Air Transport Services
  - 2.3. GATS Annex on Air Transport Services
  - 2.3. Reviews of the GATS Annex on Air Transport Services
- 1. WTO Accession Process
  - 2.4. General Background on Accession to the WTO
  - 2.4. WTO Accession procedures
CHAPTER THREE
SERVICE AND ETHIOPIA9S ACCESSION TO THE WTO THE NEW ETHIOPIAN INVESTMENT LAW ON INTERNATIONAL AIR TRANSPORT
- Introduction
- 1. Ethiopia9s Accession to the WTO
- 1. The Ethiopian Air Transport Sector
- the WTO 3. The New Ethiopian Investment Law on Air Transport with Respect to Ethiopia9s Accession to
  - 3.3. General overview of the Ethiopian Investment Law
  - Accession to the WTO 3.3. The New Ethiopian Investment Law on Air Transport in Respect to Ethiopia9s
CHAPTER FOUR
CONCLUSION AND RECOMMENDATIONS
- 1. Conclusion
- 1. Recommendations
Bibliography

SDT Special and Differential Treatment

UK United Kingdom

UN United Nation

USA United States of America

WTO World Trade Organization

Abstract

Air transport is regulated by the Chicago Convention, ICAO, and IATA, other regional and

international arrangements. It is also governed by countries’ Bilateral Air Services Agreements

(BASAs). The WTO, although it excludes the air transportation in general, it included some sub-

services (MRO, the selling and marketing of air transport services and CRS) in its AATS. To clarify

the exact scope of the AATS and to check-up the interest of members regarding the continuity of

current exclusion of <traffic rights and services directly related to the exercise of traffic rights=

the Council of Trade in Services reviewed the AATS twice: first review (2000 - 2003) and second

review (2005 - present) though it is not successful yet. Ethiopia formally submitted its formal

request for WTO accession in January 2003 through the accession process was stagnant for about

eight years until the current Prime Minister, Abiy Ahmed (PhD), came to power with some changes

to the previous investment policy and resumed the accession process in June 2019. The New

Investment Law has made many changes to the air transport sector: lifting the 50 passengers’

aircraft seating capacity in the previous investment law and made a new partial liberalization of

the international air transport service and domestic air transport service, but the travel agency,

travel ticket sales and MRO are reserved for domestic investors. To this end, the researcher has

assessed the new investment law considering Ethiopia's WTO accession using qualitative and

descriptive methodology. In contrast to the AATS, the New Investment Law is as restrictive as the

previous Ethiopian investment law though it has partly liberalized the major service of the air

transport. Thus, the researcher concluded that the air transportation under the New Investment

Law could be a challenging issue to Ethiopia's negotiation team to the WTO. Finally, the

researcher provided some recommendations to be taken by the Ethiopian negotiation team, by the

Ethiopian legislation and the WTO.

Key words: World Trade Organization (WTO), Accession, Ethiopia, Investment Law,

Liberalization, Air Transportation

LL Thesis _ Gidey Asgedom ( Sep. 2021)

2

owned by the state. 3 Ethiopia has been actively participating in the international trade and it has

applied for membership to the World Trade Organization (WTO).

WTO is an organization which is established and committed to work for international trade

liberalization. It is one of the most important and broad in scope to supervise the multilateral trade

agreements. Trade liberalization is a removal or reduction of restrictions/barriers on the free

exchange of goods between nation that thwart free flow of services and goods among and between

countries, and the end goal of trade liberalization is to create a plain playing field for all traders so

that the basis of competition will be comparative and competitive advantages. 4 The WTO has

excluded the major part of the air transport from the scope of the General Agreement on Trade in

Services (GATS) though it has provided some services of the sector to be included in the WTO

negotiation process.

Ethiopia has applied for WTO accession in January 2003 and in the first 10 years it has been

working on some activities including submission of memorandum, answering questions and the

initial goods offer which was submitted in February 2012. 5 However, the accession process was

stopped for years. 6 It has resumed in June 2019 after the Ethiopian Prime Minister Dr. Abiy Ahmed

met with the former WTO Director-General, Roberto Azevêdo, on the Annual Meeting of the

World Economic Forum in Davos on 23 January 2019 and continues the accession with revision

of some policies and laws. 7

In substitute to the Investment Proclamation dated on 17 September 2012 with its 2014

amendment, Ethiopia has adopted a New Investment Proclamation (<New Investment

3

8Ethiopia Economy 20209 (Countries of the World, 27January 2020 theodora/wfbcurrent/ethiopia/ethiopia_economy.html 4 accessed 10 February 2021 Ermias Abebe, 8THE ACCESSION OF ETHIOPIA TO THE WTO IN THE CONTEXT OF ITS POLICY ON <DEVELOPMENTAL STATE=9 (LL M Thesis, University of South Africa 2014)2 5 Hussein Ahmed, 8ETHIOPIA9S ACCESSION TO THE WORLD TRADE ORGANISATION: LESSONS FROM ACCEDED EAST DEVELOPING COUNTRIES94 Oromia Law Journal, No, (2015)227 Tilahun Esmael, 8ETHIOPIA9S WTO ACCESSION AND FINANCIAL SERVICES LIBERALIZATION: STRIKING THE BALANCE BETWEEN TRADE LIBERALIZATION AND DOMESTIC POLICY SPACE96 MIZAN LAW REVIEW No, (2012)208 6 8Ethiopia to Reinstate WTO Negotiations9 (Ethiopian Chamber of Commerce and Sectoral Association ethiopianchamber/wto.aspx 7 accessed 10 February 2021) World trade organization and regional trade relation negotiation committee directive No. 587/2013 (Federal Democratic Republic of Ethiopia Council of Ministers), Art; ENA, 8Ethiopia Resumes WTO Membership Negotiations9 (ena/en/?p=12146 accessed 10 February 2021) l

LL Thesis _ Gidey Asgedom ( Sep. 2021)

3

Proclamation= or "NIP") on 30 January 2020. 8 The NIP opens the investment framework many

sectors of the Ethiopian economy including the service sectors except same sectors and sub-

sectors. 9 It has expanded its investment objectives under the NIP and all areas of investment are

opened for Foreign Investors except those reserved in the proclamation. The reserved investment

areas are also provided in the Investment Regulation No. 474/2020 (<New Investment Regulation=

or <NIR=). The NIP has liberalized the air transport sector though some of its sub-services are

restricted. This is the major research problem that initiated this study and the very purpose of this

research is to thoroughly analyse the air transport sector under the NIP and WTO and its effect in

the resumed Ethiopia9s accession to the WTO.

1. Statement of the Problem and Research Questions

1.2. Statement of the Problem

The new Ethiopian investment law, NIP and NIR (the <New Investment Law=), has expanded its

investment objectives using a negative listing system. It has opened all areas for foreign investors

by listing only the reserved ones. The below are among the reserved areas of investment on air

transport sector:

1. International air transport service: reserved for joint investment of any investor with the

Government. 10

2. Domestic Air Transport Service: reserved for joint investment with domestic and foreign

investors. 11

3. Travel agency, travel ticket sales and Aircraft maintenance repair and overhaul (MRO):

reserved for domestic investors. 12

8

9 The Investment Proclamation 2020 (Federal Democratic Republic of Ethiopia), Article 5 6

Anthony Giustini and Nadezhda Varbanova (from Clifford Chance)1 and Tadesse Kiros and Habtamu Hailemeskel (from Tadesse Kiros Law Office, Ethiopia), 8ETHIOPIA'S NEW INVESTMENT LAW – WHAT DOES IT MEAN FOR FOREIGN INVESTORS?9(tadessekiros/wp-content/uploads/ethiopias-new-investment- law%E2%80%93what-does-it-mean-for-foreign-investors 10 accessed 10 February 2021) 11 Investment Regulations 474/2020(Federal Democratic Republic of Ethiopia Council of Ministers), Art. 3(3) 12 Ibid Art. 5(1) (b) Ibid Art. 4(11) and 4(19)

LL Thesis _ Gidey Asgedom ( Sep. 2021)

5

1. Literature Review

Air transport services have been an important means of transportation in transporting peoples and

goods from place to place within a boundary of a specific country and cross-border international

services between and among service and different countries in every corner of the world. This

service has contributed a lot in achieving economic growth and development of our globalizing

world. States need to have a law to regulate the increasing airline services and the tough

competition between and among the airline companies. Thus, the international air transport

services have been regulated by a complex structure of bilateral agreements negotiated between

states under the Chicago Convention. 14 In respect to international air transport services, a principle

of national sovereignty over airspace is provided in the Chicago Convention. This principle and

the bilateral negotiations by and between states have been discouraging the full liberalization of

international and even domestic air transport. However, due to the fast growth of the air transport

industry and the increase of competition in the airline industry, a liberalization of the sector is

becoming a continuous issue. 15 The liberalization of air transport is also an issue in the first and

second review of the AATS though the most air transport services are excluded from the scope of

application of the GATS. 16

The scope and the reason for the exclusion of the air transport sector in the AATS has discussed

in the International Air Transport Association (IATA) Discussion Paper. 17 The paper discussed

that, in addition the well understood and comprehensive the services under the multilateral

framework provided by International Civil Aviation Organization (ICAO) and IATA, over 3,

bilateral agreements have recognized in the Uruguay Round negotiation and consequently the

scope off the AATS becomes limited. The paper has also provided the option to clarify and

strengthen the Annex (Option 1) and to expand the Annex (Option 2), and the position of

14

K. BUTTON and T. SAMANTHA, 8International Air Transportation and Economic Development9, J. of Air Transport Management, (2000)20 15 Y. ZHAO, 8Liberalisation of Air Transport Services under the Framework of the WTO: Confronting the Challenge of the Twenty- 16 First Century93 Asian Y. Int9l L, (1998), 8 C. FINDLAY and D. ROUND, <The 8three pillars of Stagnation: challenges for air transport reform=, World Trade Review, (2006), 251 17 IATA Discussion Paper: LIBERALISATION OF AIR TRANSPORT AND THE GATS: Government Affairs External Relations Division, International Air Transport Association, Geneva, October 1999

LL Thesis _ Gidey Asgedom ( Sep. 2021)

6

developing countries are considered in the options. On the other hand, the paper has provided an

option to liberalize air transport outside the GATS framework.

Julie Van Coillie has analyzed the ambiguous relationship between air transport services and the

WTO and tried to discuss the place for air transport in the WTO. 18 WTO has provided a place for

2.3. Reviews of the GATS Annex on Air Transport Services

As a principle, the AATS has excluded the <traffic rights and services directly related to the

exercise of traffic rights=, but it covered only three services as an exception to the principle.

However, the AATS has not defined the phrase < services directly related to traffic rights = and it

results in an ambiguity to the exact scope of the services under the AATS. 19 Consequently, the

WTO Members has always interpreted the phrase differently, and some have taken commitments

outside the scope of these three covered services while the others limited only to three services. 20

As per the analysis of Julie Van Coillie, the GATS have adequate framework for liberalizing air

transport although it has been impossible due to the political disagreement between to WTO

Members. 21 After the all his analysis, he concluded that a full adoption of air transport services,

including the traffic rights, within the GATS framework will not occur soon. 22

Ruwantissa Abeyratne has briefly discussed the competition and investment laws in the

international air transport. 23 It has discussed on the United Nations Conference on Trade and

Development (UNCTAD) also called a Model Law on Competition adopted on 2004 also has the

purpose to control or eliminate restrictive agreements or arrangements among enterprises, or limit

access to markets or otherwise unduly restrain competition, adversely affecting domestic or

international trade or economic development. 24 Many countries have also developed their own

law to regulate the competition in air transport such as the Anti-Monopoly Law of China, The

18

JULIE VAN COILLIE, 8The ambiguous relationship between air transport services and the WTO9 (LL M Thesis, KU LEUVEN FACILITY OF LAW 2019)32 19 20 Ibid 34 21 Ibid 22 Ibid 54 23 Ibid 24 Ruwantissa Abeyratne, Competition and Investment in Air Transport: Legal and Economic Issues, (2016) Ibid 194

LL Thesis _ Gidey Asgedom ( Sep. 2021)

8

1. Objectives of the Research

1.4. General Objective

The general objective of this study is to examine the New Investment Law in light of Ethiopia9s

accession to the WTO with the scope of the air transport sector.

1.4. Specific Objectives

In addition to the above major objective of the study, there are also specific objectives addressed

in this research. These include:

1. To access the place and status of the Air Transport Services under the WTO laws.

2. To investigate the compatibility of the New Investment Law with the AATS.

3. To critically analyze the effect of the partial liberalization of the international and

domestic air transport services and the restriction of some sub-services to Ethiopia9s

accession to the WTO.

1. Objectives of the Research

This study has legal significance through recommending points which are relevant in the

compatibility and effect of the New Investment Law with the AATS and its effect in the

negotiation of the ongoing Ethiopian accession to WTO as well as related points as mentioned

in the objective of the study.

Thus, this research will have the following significances;

1. It may fill the gap of literature in the field of air transport in the WTO and Ethiopian

Laws.

2. It may recommend filling the gap in the law of air transport in the WTO and Ethiopian

Laws as well as the potential challenges that Ethiopia could face in the negotiation of

WTO accession.

3. It may help to conduct larger scale doctrinal or empirical study on the area of air

transport in the WTO and Ethiopian Laws.

LL Thesis _ Gidey Asgedom ( Sep. 2021)

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4. It can also serve as a reference material to aviation academicians, practitioners and the

Accession to the WTO 3.3. The New Ethiopian Investment Law on Air Transport in Respect to Ethiopia9s

Ethiopian Laws along with its effect.

1. Scope and Delimitation of the Research

This study will focus on the air transport sector under the WTO and the air transport sector in the

New Investment Law in exclusion of any other services under the GATS and New Investment

Law. The research is also limited to the Ethiopian accession to the WTO by excluding any other

acceding countries. Finally, this research is limited only to commercial international and domestic

air transport services and specifically the regular scheduled transportation of cargo, passengers and

Mail (excluding any Aerial Firefighting, Agricultural Aviation, Personal Travel, Law

Enforcement, Medical Transport, Overnight Delivery, Search and Rescue, Sightseeing, Surveying,

Mapping and Traffic Reporting, and other small private air service organs with charter-based

services).

1. Significance of the Research

1.7. Research Design

This research contains the features of doctrinal inquiry. To achieve the objectives of the research,

it will use qualitative data. To analyze the international laws and domestic laws, WTO laws and

New Investment Law regulating the sector of air transport, the researcher will make an

investigation into the laws and interpretations of the laws using the rules of interpretation and

scholarly books and journals.

1.7. Research Methods

To analyze the law governing the subject matter at hand, the researcher will explain laws and legal

analysis depending on the primary sources of laws which will help to access the first and second

research questions. On the other hand, the researcher will employ the secondary sources to find

the conceptual framework of the effect of the New Investment Law in the WTO accession and

negotiation to accession (third research questions), by reading books, journals, academic articles

and various internet sites will be consulted for relevant information.

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