‘Federal Supreme Court Criminal Appeal File no.60324’

The case is a criminal appeal case involving Ato Ayele Debella and the Ethiopian Revenue and Customs Authority. Ato Ayele Debella appealed his conviction for engaging in unlawful banking business without a license. The court (Federal High Court of Ethiopia) sentenced him to 22 years of imprisonment, a fine, and asset confiscation. The summarized document provides an overview of the appellant’s arguments and the court’s examination of the case.

The Supreme Court reversed the decision reasoning that the Art.3 (1) of Banking Business proclamation No.592/2008 does not require that individuals should have licenses to enter into contracts of money lending. The law nowhere prohibits the act of lending money on individual basis. It does not provide that lending money is the sole prerogative of banks, but just one of their activities. Thus the charge is pressed due to misinterpretation of the term ‘banking business’ and criminalizing an act which is not provided under the law, for there is no provision under the law that criminalizes the act of money lending on individual basis.

This discussion instead of delve in to the criminal aspect of the case it resort in to issues that would have been framed for to a civil court. The basic issue that is addressed here is that what Banking Business is? in reference to the proclamation no.592/2008 that the court left to frame as an issue. The appellant (Ato Ayele Debella) alleged to have been lending large amount of money repetitively, collecting cheque as collateral, made written loan contracts, and lent over 104 Million ETB to over 80 borrowers. As the court reasoned, the appellant was engaging on a banking business and needs a banking business license-the dissenting judge affirmed.

Was he engaged in banking business and needs a license? And what is banking business or commercial banking business, are the core issues reviewed here. The discussion also shows a line passing between other financial institution and commercial banking. In Article 2(2) of Banking Business Proclamation No.592/2008(herein after banking business proclamation) states what are banking business consists. However, there are essential activities that define a nature of banking business or commercial banking in exclusion of others like investment bank or others.

The listed activities to be banking business generally are discounting and negotiating of promissory notes, drafts, bills of exchange and other evidence of debt; receiving deposits of money and commercial paper; lending money, and buying and selling of gold and silver bullion and foreign exchange. One doesn’t need a banking business license for a discounting service, for transfer of funds to other local and foreign persons, and for buying and selling of gold and silver as it’s an incidental activity authorized for banking or not essential activity of banking business or can be without having different license for such activity.

Receiving fund from the public through means that the National bank declared and using the funds in whole or in part, for the account and at the risk of the person undertaking banking business for loans or investments in a manner acceptable by the National bank [the bank becomes the owner of the money and lend it at its own risk] are the activities that are essentially define banking business. The others in exclusion of the two are not essential to define basically a banking business or commercial banking. Any given person can do such activities by having just a trader license of such activities, but not essentially having a banking business license or commercial banking business license.

Therefore, at the very beginning as enshrined in Art.2(2) (a) and (b) Ato Ayele Debella has not raised money through means that the National Bank has declared to be an authorized manner of receiving funds or use the fund at his risk for loans or investments in a manner acceptable by the National Bank. The court in a different understanding of the definition of banking business or commercial banking declared Ato Ayele Debella was involved in banking business, which left the definition in a paradox.

As stated above a person doesn’t need a banking business license to do the activities that listed in c-e of Art.2 (2) of the banking business proclamation. A banking business (nature of banking business) involves essentially receiving funds from the public through means that the National bank has declared and using (usus right) the funds raised in whole or in part, for the account and at the risk of the person undertaking banking business. Not excluding other activities, those the two are the essential activities that can define a banking business or commercial banking.

Reference

“Appellant: Ato Ayele Debella; Respondent: Ethiopian Revenue and Customs Authority.” Journal of Ethiopian Law, vol. 25, no. 2, September 2012, p. 14-23.

About the Author:

Andamlak Admasu is law student at Addis Ababa University, serving as a member of Legal Updates Team within the student-led Justice Club.

He can be contacted via email andmlakadmasu19@gmail.com.

Final Note: This article is reviewed and contributed through the team of editors of Justice Club-Legal Updates Team, Addis Ababa University, to ensure it meets Insight Magazine standards.