WHEREAS, the formality provided under the Civil Code for the conclusion of mortgage contracts is exerting negative impact on the efficiency of loan provision service which is the day-to day activity of banks and micro-financing institutions;
WHEREAS, the invalidation of existing contracts of mortgage concluded under the prevailing practices of banks and micro-financing institutions for not being notarized, as provided for by the Civil Code, may leave most of the existing loans unsecured with a serious threat to the existence of the banks and the micro-financing institutions and to the country’s overall economy;
NOW, THEREFORE, in accordance with Article 55 (1) of the Constitution of the Federal Democratic Republic of Ethiopia it is hereby proclaimed as follows:
1. Short Title
This Proclamation may be cited as the “Civil Code As Amended Proclamation No. 639/2009”.
The following new sub-article (3) is added under Article 1723 of the 1960 Ethiopian Civil Code.
“3/ Notwithstanding the provisions of sub-article
(1) of this Article, a contract of mortgage concluded to provide security to a loan extended by a bank or a micro-financing institution may not require to be registered by a court or a notary.”
3. Transitory Provisions
1/ The validity of any contract of mortgage concluded, prior to the effective date of this Proclamation, to provide security to a loan extended by a bank or a micro-financing institution, may not be challenged for not being registered by a court or notary in accordance with Article 1723 of the Civil Code.
2/ Any court decision, rendered prior to the effective date of this Proclamation, to invalidate a contract of mortgage concluded to provide security to a loan extended by a bank or a micro-financing institution, for not being registered by a court or notary in accordance with Article 1723 of the Civil Code shall have no effect. Any such case pending before any court as of the effective date of this Proclamation shall also be terminated.
4. Effective Date
This Proclamation shall enter into force up on the date of publication in the Federal Negarit Gazeta.
Done at Addis Ababa, this 30th day of June, 2009
PRESIDENT OF THE FEDERAL DEMOCRATIC REPUBLIC OF ETHIOPIA