Ethiopia Secures Hague Victory In Lease Arbitration Case | The Reporter Ethiopia

The Federal Democratic Republic of Ethiopia has secured a decisive victory in a 334 million euro investment arbitration brought by African Asset Finance Company Holdings B.V., a Netherlands-incorporated entity wholly owned by a Delaware-based parent company.

This week, a tribunal constituted under the UN Commission on International Trade Law (UNCITRAL) dismissed all claims tied to the case, which concerned regulatory measures adopted by the National Bank of Ethiopia (NBE) requiring that lease agreements be denominated in Birr rather than foreign currency.

The claimant had challenged the measure, arguing that it interfered with its business model, which relied on US dollar-linked financing.

In a comprehensive ruling, the three-member high level tribunal, chaired by Lucy Reed, with Matthew Gearing KC and Sean D. Murphy (PhD) and seated in the Netherlands, unanimously rejected all of the claimant’s allegations. The tribunal found that Ethiopia’s regulatory framework was a legitimate exercise of governmental authority aimed at ensuring pricing transparency and consumer protection, particularly for low-income agricultural communities who are primary users of lease-financed equipment.

The claimant argued that the Birr-denomination requirement undermined its ability to manage currency risk and amounted to indirect expropriation, as well as violations of the fair and equitable treatment standard and non-discrimination obligations.

Ethiopia, in turn, demonstrated that the regulation did not prevent cost recovery or profitability, as financial institutions remained free to structure pricing through interest rates and other mechanisms, while ensuring that end-users could clearly understand the actual cost of lease agreements.

The tribunal agreed with Ethiopia’s position, holding that the measure neither constituted expropriation nor breached the fair and equitable treatment standard. It further found no evidence of discrimination and affirmed that the regulation pursued a legitimate public policy objective consistent with Ethiopia’s regulatory framework.

In addition to dismissing all claims, the tribunal awarded Ethiopia two-thirds of the arbitration costs, underscoring the strength of the state’s defense. Ethiopia was represented in the proceedings by Zewdineh Beyene Haile (PhD), Prof. Won Lemma Kidane, and Jackson Shaw Kern of ALG LLP alongside the Ministry of Justice. The claimant was represented by Enhance Arbitration B.V.

The award is likely to be seen as an important affirmation of regulatory autonomy in the financial sector, particularly in emerging markets seeking to balance investor protections with consumer transparency and financial inclusion.

This victory came within a span of less than a month of another victory that Ethiopia obtained in The Hague in an arbitration case involving Akgun Insaat Makina Sanayii ve Dis Ticaret Ltd. Sti., a Turkish construction and machinery firm that had secured a large plot of land for industrial development near Addis Ababa’s freshwater sources.

Concerns about contamination eventually led Ethiopian authorities to block development on the plot, and the Turkish firm took the case to the Hague, demanding half a billion dollars for what it claimed was unfair expropriation.

A tribunal recently ruled that the Ethiopian government had acted within its rights.

Observers note that at a time of continued global efforts to reform the investor-state arbitration system, Ethiopia’s success in these cases  could be viewed as demonstrating the complexity of the legal regime and the need for a careful appraisal.