Category: Case Comment

Index to Cassation Decisions Volume 13

Index to Cassation Decisions Volume 13

Most of you are asking and waiting for the release of Cassation decisions volume 13 and 14 and I don’t have any good news. I frequently check their website. Still volume 12 is the last volume available. But I think, the next two volumes will be made available to the public soon. The index to Volume 13 is officially released. You can download it here or from the official web page of the Federal Supreme Court.

I have added a bookmark and a link to the table of contents, so that you can easily browse the contents of the document.

DOWNLOAD  Index to Cassation Decisions Volume 13

Conflict of Laws in Labour and civil cases

Conflict of Laws in Labour and civil cases

In a conflict of law case, a court is expected to address three basic issues:

  1. Determining the presence  judicial jurisdiction
  2. Determining the applicable law to solve the dispute
  3. Determining whether a foreign judgment should be given recognition by domestic courts

Before these three issues are addressed, the court is primarily tasked with determining whether the case is really a conflict of law case or not?

So, how does a case become a conflict of law case? A short to the question is that it becomes a conflict of law case, it contains a foreign element. What then is a foreign element?

“When a case is said to contain a foreign element, the reference(s) may be of three natures __ personal, local, or material __ in that, respectively illustrated, if one of the parties of the case is a foreigner (including one from another federating unit) or the transaction of any nature took place, totally or partially, abroad (outside the forum state) or, finally, the object of the dispute (property, esp. immovable property) is situated in another state (including a member of federation); the case is said to contain a foreign element.” (Araya Kebede and Sultan Kasim, Conflict of laws teaching material, sponsored by Justice and Legal System Research Institute)

The draft conflict of rules also defines foreign element in the following way.

Art.4. Foreign Element

Foreign element refers to:

  1. A personal nature and may pertain to nationality, domicile or residence of the interested parties; or
  2. A local nature and may pertain to the place where facts occur or contracts are made from which the juridical situation arises; or
  3. A material nature and may pertain to the place where the property to which the juridical situation applies is situated.

According to article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996, when a case is related to private international law, the Federal High Court will have first instance jurisdiction to solve the dispute. This article is not a conflict of law rule regarding judicial jurisdiction in conflict of law cases. It simply gives exclusive material jurisdiction to the Federal High Court, to address the above three questions of conflict of law disputes. What follows is a brief summary of the way this article is understood by lower courts and the cassation bench.

1.   Conflict of laws in labour cases

1.1.        Determining the governing law by the agreement of the parties

 

Applicant: Foundation Africa

Respondent: Ato Alemu Tadesse

Cassation File Number: 50923

Date: 19-9-2003 (E.C.)

An employment contract between the employee and employer made in Ethiopia, for a work to be performed in Ethiopia, stipulating a foreign law to govern any dispute arising between them is invalid. The presence of such contract does not oust the ordinary material jurisdiction of first instance court in labour disputes.

In a similar case, [C.A.S. Consulting engineers salezgiter GMBH vs. Ato Kassahun Teweledeberhan Cassation File Number 54121 Date 1-3-2003 (E.C.)] where the parties indicated German Law to be the applicable law to solve their disputes, it was held that such contractual provision is not valid. The case by its nature is not a case “regarding private international law” as provided in article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996. As a result, it is the Federal First Instance Court not the Federal High Court who has jurisdiction over such matter.

1.2.        Employment contract made in a foreign country

Applicant: Ato Bezabeh Eshetu

Respondent: Salini construction

Cassation File Number: 60685

Date: 21-6-2003 (E.C.)

When the employment contract is made in a foreign country, it is a case regarding private international law. Hence, the Federal High Court will have first instance jurisdiction as per article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996. But, it should be noted that, this does not imply Ethiopian courts will assume judicial jurisdiction merely because the contract was made in a foreign country. The fact that a certain case is a ‘case regarding private international law’ only confers a power on the Federal High Court to determine whether Ethiopian courts have judicial jurisdiction and if yes to determine the applicable law.  In short, article 11 sub article 2 (a) of Federal Courts Proclamation No. 25/1996 simply gives material jurisdiction exclusively to the Federal High Court.

2. Conflict of laws in civil cases

2.1. Extra-contractual liability (foreign company not registered in Ethiopia)

Applicant: Ethiopian Electric Light Corporation

Respondent: Dragados Construction

Cassation File Number: 42928

Date: 12-5-2002 (E.C.)

This case relates an action by applicant for compensation for damage caused by respondent while doing business in Ethiopia. Respondent argued that it a foreign company registered according to the law of Greece and domiciled in Athens. It also stated that it is not registered in Ethiopia. Based on these facts, respondent challenged the jurisdiction of the Federal First Instance Court, because the conflict of law rules apply to determine courts having jurisdiction and the applicable law. The Federal Instance Court accepted this argument and ruled that it does not have jurisdiction over the case. On appeal, the ruling of the lower court was affirmed by Federal High Court on the ground that the mater falls within its first instance jurisdiction.

The cassation bench reversed both decisions of the lower courts. The bench in its reasoning stated that damage was caused in Ethiopia while respondent was doing business in Ethiopia. The case was brought to the court where the damage caused. Therefore, the Federal First Court should exercise jurisdiction according to article 27(1) of the Civil Procedure Law.

2.2. Contract made in Ethiopia with a foreigner

Applicant: Global Hotel Private Limited Co.

Respondent: Mr. Nicola As Papachar Zis

Cassation File Number: 28883

Date: 26-3-2000 (E.C.)

The fact that one of the parties in litigation is a foreigner does not automatically make the case ‘a case regarding private international law.’ The defendant should necessarily challenge the jurisdiction of the court on the ground that Ethiopian law is inconsistent with the law of his nationality or domicile. If the foreign party does not invoke lack of jurisdiction of Ethiopian courts, the case is not a private international law case.

Consequential loss in Insurance Cases: Review of Cassation Decisions (Part I)

Consequential loss in Insurance Cases: Review of Cassation Decisions

One of the basic principles of insurance applicable to property insurance is the principle of indemnity. This underlying principle provides that compensation payable to the insured upon occurrence of loss to his property could not exceed the actual value of the property at the time of loss. This principle is clearly stated in article 678 of the commercial code. However, the clarity of the provision didn’t save courts from giving contradictory decisions in determining the amount of compensation to be paid to the insured. When a dispute as to the amount of compensation arises, some courts took a position that the amount payable should be equal to the maximum amount specified in the insurance policy. In order to justify their position courts usually rely on article 665 of the commercial code which imposes an obligation on the insurer to pay “the agreed sum” within the time specified in the policy or when the risk insured against occurs or at the time specified in the policy. In principle a court does not make a mistake if interprets “the agreed sum” as “the amount stated in the insurance policy.” It becomes a mistake if a court applies it to property insurance or insurance of objects.

Article 665 of the code is found in the general provisions applicable to all forms of insurance contract. Hence, the relevance of the provision is limited to determining the time of making payment. As regards the amount of compensation it could only make sense if it is made applicable to life insurance policies. As the value of a human body or life could not be valued, the amount to be paid at the time of materialization of risk is left to the agreement of the parties. The principle of indemnity does not apply to such type of insurance. In property insurance cases article 678 of the code always prevails over the general insurance provisions.

Consequential loss and principle of indemnity

One of the challenges in applying the principle of indemnity in insurance cases is the issue of consequential loss. The commercial code does not make any reference to consequential loss and whether the insurer has an obligation to make payment for such type loss in the absence of a specific policy to this effect. Consequential loss in short refers to lost of profits  and  income resulting  from  harm  to  or  destruction  of  one’s  insured property. It is an indirect loss since it is not a result of a direct act but a loss incurred due to the consequences or results of the act. If a commercial vehicle insured against collision is totally destroyed the owner in addition to the direct loss of his property incurs an indirect loss of income as a consequence of the loss of his vehicle. This will be usually loss of income from the time of destruction of the vehicle until he is paid compensation by the insurer. Now the question is: is it possible to claim for such type of consequential loss under Ethiopian insurance law?

In this regard the position of the Federal Supreme Court Cassation Bench is that the insurer has an obligation to compensate the insured for consequential loss. The absence of any clear provision in the insurance policy providing coverage for consequential loss is not a valid ground to relieve the insurer from his liability. What if there is an exclusion clause in the policy? According to the cassation bench, the insurer’s obligation is still effective even though the policy clearly excludes compensation for consequential loss.

However, this firm position of the cassation bench could not be taken as a full answer to the question raised above. Depending on the nature of the claim by the insured ‘consequential loss’ may refer to loss caused as a result of an act (harm to  or  destruction  of  one’s  insured property) or it may also be similarly used to refer to loss caused as a result of an act of a party (i.e. an act of the insured.) An act of the insurer causes consequential loss on the insured when there is unjustified delay in making payment upon occurrence of loss.

According to article 665 of the commercial code compensation should be paid within the time specified in the policy or when the risk insured against occurs or at the time specified in the policy. If the policy does not provide such time, then payment should be effected immediately (Article 1756 of the Civil Code.) Unjustified delay constitutes non-performance of contract entitling the other party to claim damage caused to him by non-performance. (Article 1771 sub article 2 of the Civil Code)

It is only in this sense that the decisions of the cassation bench could be understood and analyzed. This is important because in most of the decisions no clear distinction is made between consequential los as a result of the act and as a result of the insurer. The absence of clear distinction is not totally the fault of the bench. The parties are also partially responsible for the confusion. When one looks in to the argument of the insured and the insurer, they tend to be at variance in understanding the underlying issue and even in the usage of terminology. Usually the insured claims “compensation for the loss of income” and the insurer challenges such claim on the ground of the absence and/or exclusion of consequential loss in the insurance policy. Yes it is true that a party is not entitled to compensation for loss of income as a result of loss of his insured property. However, what the insured is really demanding by “consequential loss” or “compensation for the loss of income” is payment of compensation for delay of non-performance of the insurance contract. This usually happens when the insurance company delays payment or refuses to compensate the insured upon occurrence of loss.

Consequential Loss in Liability Insurance Cases

Case One

Applicant  Ethiopian Insurance Company

Respondents 1.Ato Demesie Werekeneh

2. Genesis Farms Ethiopia Pvt.

Cassation File Number 27565

Date: Hidar 24-2000 E.C.

Court: Federal Supreme Court Cassation Bench

In this case, a vehicle belonging to 2nd respondent caused a total damage on 1st respondent’s vehicle. Applicant became a party to the case as it has insured 2nd respondent’s vehicle. The value of the 1st respondent’s vehicle was estimated to be 80,000 br. (Eighty thousand birr). In addition to this amount 1st respondent also claimed 18, 300 br. (Eighteen thousand three hundred birr) lost income for 211 days.

Applicant challenged the claim for lost income on the following two grounds:

  1. 1st respondent should not be compensated twice for a single loss, as compensation for the loss of income will have the effect of double compensation.
  2. 1st respondent could not claim compensation for the loss of income caused as a result of damage to his property, without having consequential loss insurance policy.

The cassation bench, responding to applicant’s 1st argument stated that once 2nd respondent is found liable for causing total damage to 1st respondent’s vehicle there is no reason it could not be liable for the loss of income to 1st  respondent as the result of the damage. As regards the second argument the bench said:

“Applicant has not argued (or submitted similar argument) that the insurance policy it issued to respondents excludes consequential loss”

In other words, it held a position that consequential loss is always payable unless the insurance company shows to the satisfaction of the court that it is excluded by the insurance policy.

The cassation bench may not be criticized for its analysis of consequential loss but, for its failure to relate it to the maximum liability of the insurance company. Applicant was made a party to the case because it insured the liability of 2nd respondent. Since this is a liability insurance case the applicable provisions are articles 685 to 688 and of the Commercial Code and the general provisions of insurance (articles 654 to 674 of the Code.) Irrespective of the type of insurance article 665 sub article 2 of the code states that the insurer’s liability shall not exceed the amount specified in the policy.

If the maximum liability of applicant in the insurance policy is 80,000 br. (Eighty thousand birr), then that is the only amount it is obliged to pay. Even assuming that the policy limit is above 80,000 br. (Eighty thousand birr) the insurance company is still not liable to consequential loss. In liability insurance case, the nature and extent of liability of the insurer is determined based on the terms and conditions of the policy. If the policy only provides coverage against the liability of insured as a result of direct damage to the property of third parties, then there is no contractual or legal ground to make the insurer liable for consequential loss. The bench found 2nd respondent liable for the loss of income caused to 1st respondent. However, how this liability is transferred to the applicant insurance company is not clear.

Can a civil case be a ground of res judicata in a labour case?

Case Brief

Applicant- Ermias Mulugeta
Respondent- Bekelecha Transport Share Company
Cassation File Number- 39471
Date of judgement- Hamle 29 2001

Read the decision of the court (Amaharic)

Issue: Wether failure to prove fault of employee by the employer in a labour case is a ground of resjudicata if a civil action is brought by the same employeer against the same employee alleging fault of the employee?

Ruling and reasonig of the court

The Cassation bench affirmed the decision of lower courts. The court relied on its own previous decision (Cassation File Number 36710) regarding the issue raised in this case. Accordingly it concluded that the issue to be framed in unlawful dismissal case is totally different from a civil action brought by the employer claiming restitution or payment for loss of or damage to property. The labour court may have decided that the employee has not committed fault, when the fault at issue is ‘being responsible for loss of property’ of the employer. Such decision is not a ground of res judicata if an action against the employee is brought by the employer claiming payment of the price of the property.