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Investor protection during disasters: What Ethiopia Can Learn from Kenya
When investors assess a destination, they do not only look at tax incentives or market size. Increasingly, they ask a deeper question: what happens to my investment when things go wrong? Natural disasters, public health emergencies, and other crises test the strength of a country’s legal system. How a state treats investors during such moments often determines whether confidence is sustained or permanently lost. A comparison between Ethiopia and Kenya reveals important differences in how investor protection operates when normal conditions no longer apply.
How Kenya Protects Investors During Disasters
In Kenya, investor protection continues to function even during emergencies. The country’s constitutional framework plays a central role in this stability. Property rights are strongly protected and any state action that affects an investment whether in ordinary times or during a disaster must meet clear legal standards. Even when the government introduces emergency measures in response to floods, droughts, pandemics, or security concerns, those measures remain subject to judicial review. This reassures investors that crisis response does not translate into unchecked state power.
Kenya’s investment laws further reinforce this protection. Investors are shielded from unlawful expropriation and are entitled to compensation if losses arise from war, civil disturbance, or comparable events. Importantly, these protections apply on a non-discriminatory basis, meaning foreign investors are treated no worse than local ones. During disasters, regulatory relief and recovery mechanisms are often introduced, rather than abrupt and indefinite restrictions. This reduces the risk that emergency regulations will amount to indirect expropriation disguised as public necessity.
Another critical element of Kenya’s investor confidence is access to neutral dispute resolution. Kenya’s openness to international arbitration, including through ICSID and bilateral investment treaties, provides investors with a credible fall back option when domestic remedies prove insufficient. This is particularly important during crises, when local courts and administrative systems may be under strain. The availability of international remedies sends a strong signal that investor rights do not disappear when circumstances become difficult.
Ethiopia’s Legal Framework: Protection Without Crisis Clarity
Ethiopia, by contrast, provides investors with solid protections under its Investment Proclamation, including guarantees against expropriation, assurances of compensation for public purpose takings, and the right to repatriate profits and capital. These provisions demonstrate a clear intention to protect investment. However, the legal framework remains largely silent on what happens during disasters or states of emergency. There is no clear guidance on how investor losses caused by natural disasters are treated, nor are there explicit standards governing compensation when emergency measures disrupt business operations.
Key Gaps in Ethiopian Investor Protection
This silence becomes particularly significant during periods of emergency. Broad executive powers may be exercised in the public interest, and businesses may face closures, restrictions, or regulatory suspensions. Yet Ethiopian investment law does not clearly explain how investor rights are balanced against emergency powers, or what remedies are available when crisis measures severely affect investments. For investors, this lack of predictability can be as damaging as the disaster itself.
The cautious approach to international arbitration further deepens this uncertainty. With limited treaty coverage and a strong reliance on domestic mechanisms, foreign investors in Ethiopia may feel that their options narrow precisely when protection matters most. In contrast to Kenya, where crisis response and investor protection operate side by side, Ethiopia’s framework leaves investors largely to infer their position during extraordinary circumstances.
The comparison highlights an important lesson. Effective investor protection is not only about what the law promises in stable times, but also about how it performs under pressure. Kenya’s experience shows that safeguarding investors during disasters strengthens long-term confidence rather than undermining public interest. For Ethiopia, introducing clearer rules on disaster-related investor protection, compensation standards during emergencies, and access to neutral dispute resolution would significantly enhance its attractiveness as a resilient investment destination.
In an era where uncertainty is the norm rather than the exception, investors are drawn to legal systems that anticipate crises instead of reacting to them. Aligning Ethiopia’s investment framework with this reality would not only protect investors but also support sustainable economic growth.
Seble Asefa is the Founder and Principal Managing Director of Legal Eagles Law Firm.
She has more than 15 years of experience in the legal profession. Previously, she served as a college lecturer and worked as a legal advisor for various international and national organizations. She has also served in the judiciary as an assistant judge.
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