Training Module on:

Construction Law

Module Code: TM/ECWC/PM-4072

Prepared by: CPDi

November 2023
Addis Ababa
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ACRONYMS

FIDIC Federation International Des Ingenieurs-Conseils

FPPA Federal Public Procurement Agency
ERA Ethiopian Roads Administration
EOT Extension of Time
GCC General Conditions of Contract
COPA Conditions of Particular Applications
FDRE Federal Democratic Republic of Ethiopia

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Table of Content
ACRONYMS ............................................................................................................................................... ii
Table of Content ......................................................................................................................................... iii
Symbols Used .............................................................................................................................................. v
Introduction .................................................................................................................................................. 1
SESSION ONE ............................................................................................................................................ 2
1. INTRODUCTION ................................................................................................................................ 2
1.1 Overview of Construction Law and its importance in the Construction Industry ............................. 2
1.2 Classification of Legal Systems ......................................................................................................... 3
1.3 Definition of Construction Law ......................................................................................................... 4
 SUMMARY ............................................................................................................................................ 5
SESSION TWO ........................................................................................................................................... 7
2. CONSTRUCTION CONTRACTS AND LEGAL DOCUMENTS ..................................................... 7
2.1 Formation of construction Contracts .................................................................................................. 7
SESSION THREE ..................................................................................................................................... 13
3. APPLICABLE PRINCIPLES OF LAW IN THE CONSTRUCTION CONTRACTS ...................... 13
3.1 Conditions of Contract and the applicable law ................................................................................ 13
3.2 The Law Applicable to Contract in Ethiopia ................................................................................... 14
3.3 Interpretation of Contracts ............................................................................................................... 17
 SUMMARY .......................................................................................................................................... 22
SESSION FOUR ........................................................................................................................................ 24
4. CONTRUCTION LIABILITIES AND INSURANCE ...................................................................... 24
4.1 Insurance, security, bond/guarantee ................................................................................................. 24
 SUMMARY .......................................................................................................................................... 28
SESSION FIVE ......................................................................................................................................... 30
5. ENVIRONMENTAL AND SAFETY REGULATIONS IN CONSTRUCTION .............................. 30
5.1 Policy, Legal and Administrative Framework ................................................................................. 30
5.1.1 Policy, Legal and Adminstrative Framework Environmental ....................................................... 30

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5.1.2 Policy, Legislation and Administrative Framework on Occupational Health and Safety (OHS) . 47
Reference: .................................................................................................................................................. 55

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Symbols Used
Icon/Symbol* What it Refers to? Description

Important notes Important notes for the participants to keep in mind

ⓘ
 Exercises/Activities group or individual exercises/activities which might
be done in the class or outdoor or at the work place

∆
Definitions Definition of key words in each topic will be
provided as part of the basic concepts


Examples Examples relevant to the topic are provided


Summary Important learning points from each topic


References Sources of information used in the training material
and further readings that can be helpful for the
learner during or after the training.

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Introduction
Construction contracts are entered and administered within the general context of the legal system
of the country where the construction project is executed. Construction contract administration,
therefore, requires proper understanding of the underlying legal principles and concepts of that
country.

Therefore, good understanding of Construction Law is mandatory to the professionals who have
been involving in construction industry for successful completion of projects for the intended
purposes.

Objectives
General objective
The overall objective of the Construction Law training is, to enhance the capacity of professionals
who have been involving in the construction industry such as Project Managers, Resident
Engineers, Construction Engineers, Claims Experts, Lawyers, Middle and Top Management
Leaders of the organizations and the like in the area so that they can understand the basic ideas
and work together as a team for proper day to day administration of projects in the organization.

Specific objectives
Upon completion the training based on this manual, the participants will be able to:
✓ Define construction low from different perspectives;
✓ Understand the basic principles of formation of contracts ;
✓ Understand the applicable principles of law in the construction contracts;
✓ Understand the basic principles of interpretation of contracts;
✓ Understand the principal Environmental and safety regulations of the country;

Outcome
At the completion of this training module, the trainees will be able to administer the signed works
contract effectively by applying the acquired knowledge in relation to construction law.

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SESSION ONE
1. INTRODUCTION
Contents:
1.1 Overview of Construction Law and its importance in the Construction Industry

1.2 Classification of Legal Systems

1.3 Definition of Construction Law

Session summary
Exercises

1.1 Overview of Construction Law and its importance in the Construction

Industry

Construction contracts are entered and administered within the general context of the legal
system of the country where the construction project is executed. Construction contract
administration, therefore, requires proper understanding of the underlying legal principles and
concepts of that country.

American Jurist, Benjamin Nation Cordazo defines Law as:-

“A principle or rule of conduct so established as to justify a production with reasonable certainty

that it will be enforced by the courts if its authority is challenged.”

According to this definition, law has a certainty which is reasonable. It is enforced by courts,
therefore, those who violate the law will be punished by the decision of the court.
Generally The Constitution is:-

➢ Basic Law of a Country

➢ The Supreme Law of the Land

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Rule of Law:-
Application of the law on the makers and the people equally

Separation of Power

➢ The Legislative (the law maker)

➢ The Executive (the law enforcer)
➢ The Judiciary (the law interpreter)
Level of Courts in Ethiopia are:
➢ Supreme Court
➢ High Court
➢ First Instance Courts

Generally there are different kinds of Laws. Some of the common kind of Laws are shown
hereunder for information.

➢ Constitutional Law
➢ Labor Law
➢ Family Law
➢ Law of Traders & Business Organizations
➢ Law of Agency
➢ Law of Contracts and the like

1.2 Classification of Legal Systems

It is common to find the categories of legal systems of the world as ‘Common Law, The Anglo-
American Legal System’ and ‘Civil Law’.

➢ Common law: Refers to a body of law derived from judicial decisions rather than from
statutes or constitution. The main creators of the common law are the judiciary. The
basic operation system is laid down by case law. While deciding cases, judges lay down

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the law. Countries like USA, UK, Australia and other commonwealth countries follow
the common law legal system.
➢ Civil law: Civil law systems are codified. The whole area of law so laid down in one
legislative document with the aim of providing a closed, coherent and consistent set of
propositions that, if used in good faith, can be applied to solve any dispute in that area.
Countries such as Ethiopia, most continental Europe and South American countries
follow this legal system.
This training manual focused mainly on Law of Contracts or Construction Project Law.

1.3 Definition of Construction Law

There is no particular area of law that applies solely to the construction industry, rather there
are certain legal corpus -statutory and non-statutory that controls and regulate the operation of
the construction industry. Simply Law of Contract is defined as:

“A Law that regulates the creation, transfer and disposition of property rights through making
promises.”

“The amalgam of all those parts of the law that apply to the construction industry and those who
work in it.” (Source: ICE Manual of Construction Law, xiii)

“Construction law may, based on relevant constitutional objectives, mean a legal and/or
contractual regulation of construction demand & construction delivery process, the role of
respective stakeholders therein & management in respect thereof.” (Source: Ato Zewdu)

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 SUMMARY

Construction contracts are entered and administered within the general context of the legal
system of the country where the construction project is executed. Construction contract
administration, therefore, requires proper understanding of the underlying legal principles and
concepts of that country.

Generally Law is a principle or rule of conduct so established as to justify a production with

reasonable certainty that it will be enforced by the courts if its authority is challenged.

Some of the common kind of Laws are;

➢ Constitutional Law
➢ Labor Law
➢ Family Law
➢ Law of Traders & Business Organizations
➢ Law of Agency
➢ Law of Contracts and the like

There is no particular area of law that applies solely to the construction industry, rather there
are certain legal corpus -statutory and non-statutory that controls and regulate the operation of
the construction industry. Simply Law of Contract is defined as:

“A Law that regulates the creation, transfer and disposition of property rights through making
promises.”

“The amalgam of all those parts of the law that apply to the construction industry and those who
work in it.”

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“Construction law may, based on relevant constitutional objectives, mean a legal and/or
contractual regulation of construction demand & construction delivery process, the role of
respective stakeholders therein & management in respect thereof.”

 Exercise 1.1:
Purpose: To familiarize participants with concepts of law in general and construction law
in particular.
Materials: Handout no.
Time: 1 hour
Discussion Questions:
✓ Define the word Law in general terms
✓ How do you understand the word Rule of Law?
✓ List different kinds of laws
✓ Discuss the different categories of the legal systems in the world
✓ Define construction law and discuss its application in contract documents

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SESSION TWO
2. CONSTRUCTION CONTRACTS AND LEGAL DOCUMENTS

Contents:
2.1 Formation of construction Contracts

Session summary
Exercises

2.1 FORMATION OF CONSTRUCTION CONTRACTS

Contract is defined as the agreement between two parties to undertake certain works for the
payment of a sum of money is known as a Contract. Such a contract legally binds the two parties
to undertake the works on the one hand and to pay for the works on the other hand.

Article 1675 of the Civil Code defines Contract as:-

“An agreement whereby two or more persons as between themselves create, vary or extinguish
obligations of proprietary (ownership) nature”

Other definitions of Contract is;

“A promise or a set of promises for the breach of which the law gives a remedy or the
performance of which the law recognizes as a duty.”

In order for a Contract to exist it must satisfy the following:

➢ There must be an offer and an unconditional acceptance of that offer

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➢ Some form of consideration or payment must be required

➢ Each party must have the capacity to enter into contract
➢ The contract must have legal objectives
➢ The promises made by the parties must be capable of being performed.

Terminologies
Offer: is a proposal made in a manner that it shall bind the offerer when all the terms and
conditions are accepted by the other side.
Acceptance: is an absolute assent/agreement to the terms & conditions of an offer.
An Agreement: is the presence of a lawful offer and acceptance of the offer.

Generally a typical construction contract works agreement consists the following sections;
➢ The Form of Agreement
➢ The Letter of Acceptance
➢ The Tender
➢ The Conditions of Contract
➢ The Specifications
➢ The Drawings
➢ The Bill of Quantities

The Form of Agreement

➢ The issue, by an Employer, of a Letter of Acceptance to Tenderer is usually sufficient,
in terms of law, to establish a binding contract between the Employer and the Tenderer
for the implementation of the works.
➢ Some countries require the signature of a formal contract agreement or Form of
Agreement, usually to formalize the agreement

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The Letter of Acceptance

➢ A Contract is created by the acceptance of an offer
➢ The Letter of Acceptance is the formal advice that the Employer has accepted a
Contractor's Tender.
➢ The date of this letter marks the start of the Contract

The Tender
➢ The Tender means the Contractor's priced offer to the Employer for the execution and
completion of the Works and the remedying of any defects therein in accordance with
the provisions of the Contract, as accepted by the Letter of Acceptance.

Addenda to the Tender

➢ It is often necessary to issue explanations, revisions, additions or deletions to tenderers
during the tender period. This is formalized by issuing an Addendum to the Tender.
➢ Each addendum should be accompanied by a receipt form which must be returned so
that the Employer have confirmation that each Tenderer has received all the necessary
information.
➢ The Addenda become part of the Tender documents and once accepted, part of the
Contract documents as do the minutes of any pre-award meetings.

The Conditions of Contract

➢ The Conditions of Contract defines the general legal relationship between the
contracting parties, including the rights and obligations of each party and the powers
and duties of the Engineer.
➢ Part I General Conditions of Contract (GCC)
➢ Part II Conditions of Particular Application (COPA).
➢ Part II compliments Part I and forms an integral part of the Contract Documents.

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➢ The content of Part II takes precedence over Part I in the event of a discrepancy between
the two parts.

The Specification
➢ The Specification is a set of definitions and descriptions which define and describe in
detail the character and quality of the materials to be utilized, the construction processes
to be followed and the characteristics of the finished project and its components
➢ Standard Technical Specification
➢ Conditions of Particular Application
➢ Special Specification compliments the Standard Specification and forms an integral part
of the Contract Documents.
➢ The content of the Special Specification takes precedence over the Standard
Specification in the event of a discrepancy between the two parts.

The Drawings
➢ Specification and Special Specification do not define what work is to be undertaken.
This description of the dimensions, materials, locations, strengths etc. is described in
diagrammatic form on the contract drawings. It is these drawings which describe the
exact scope of the works and which determine exactly what is to be measured in the
final Bill of Quantities.

The Bill of Quantities

➢ As part of the Contractor's tender documents, the BOQ as submitted by the Tenderers
includes the Tenderers offered unit rates and total contract amount.
➢ As part of the Contract documents, the BOQ includes the unit rates and total contract
amount as accepted by the Employer, following the tender evaluation process.
➢ In re-measureable contracts the quantities set out in the BOQ are the estimated quantities
for the Works

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➢ Everything of consequence in respect of costs, shown on the drawings or described in

the specifications, should be reflected in the Bills of Quantities.

Priority of sections of a contract documents

➢ The Contract Agreement
➢ The Letter of Acceptance
➢ The Bid, the Appendix to the Form of Bid, and the Bid Addenda including the Minutes
of Negotiation.
➢ The Conditions of Contract, Part II;
➢ The Conditions of Contract, Part I;
➢ The Special Specifications
➢ The Standard Specifications
➢ The Drawings;
➢ The Priced Bill of Quantities
➢ Other documents, as listed in the Appendix to Bid

 SUMMARY

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Contract is defined as the agreement between two parties to undertake certain works for the
payment of a sum of money is known as a Contract. Such a contract legally binds the two parties
to undertake the works on the one hand and to pay for the works on the other hand.

Article 1675 of the Civil Code defines Contract as:-

“An agreement whereby two or more persons as between themselves create, vary or extinguish
obligations of proprietary (ownership) nature”

In order for a Contract to exist it must satisfy the following:

➢ There must be an offer and an unconditional acceptance of that offer
➢ Some form of consideration or payment must be required
➢ Each party must have the capacity to enter into contract
➢ The contract must have legal objectives
➢ The promises made by the parties must be capable of being performed.

 Exercise 2.1:
Purpose: To familiarize participants with concepts of construction law.
Materials: Handout no.
Time: 1 hour
Discussion Questions:
✓ Define contract in accordance with the Civil Code of Ethiopia
✓ Discuss the criteria’s that have to be fulfilled in order to exist a valid contract.

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SESSION THREE
3. APPLICABLE PRINCIPLES OF LAW IN THE CONSTRUCTION
CONTRACTS
Contents:
3.1 Conditions of Contract and the applicable law
3.2 The Law Applicable to Contract in Ethiopia
3.3 Interpretation of Contracts

Session summary
Exercises

3.1 Conditions of Contract and the applicable law

Most of the Conditions of Contracts are initially developed within the context of the applicable
law. For instance, the FIDIC conditions of contract which is considered by many as the cousin
of the ICE form was initially developed within the context of common law in UK for domestic
use and then developed for international use without any appropriate modification.

It is common to find the concept of applicable law in standard forms of contract. For example,
in FIDIC standard forms of contract, one finds “The Contract shall be governed by the law of
the country (or other jurisdiction) stated in the Appendix to Tender.”

The legal basis of contracts in construction works are based on the law of obligations of the
country where the construction works are meant to be executed. Simply stated, the laws of the
country ultimately govern the contract entered between the parties. In the case of international
contracts, despite the fact that the Financer, Contractor and Consultant may be from different
countries, it is the domestic law or the law of the land that governs the construction contract.

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Sub-Clause 1.4 Law and Language clause of FIDIC conditions of contract states that “The
Contract shall be governed by the law of the country or other jurisdiction stated in the Contract
Data”

Similarly it is stated in the conditions of contract that the ruling language of the Contract shall
be that stated in the Contract Data. The language for communications shall be that stated in the
Contract Data. If no language is stated there, the language for communications shall be the
ruling language of the Contract.

3.2 The Law Applicable to Contract in Ethiopia

The Ethiopian law of contracts is largely contained in the Ethiopian Civil Code (ECC) with the
exception of certain specific types of contract that are regulated by the Commercial Code and
Maritime Codes.

Construction contracts are generally made, interpreted, executed and enforced in the same way
as any other commercial contracts. The law of construction contracts is part and parcel of the
general law of contract, i.e., all the elements of contract should be contained in any construction
contracts.

Construction contracts are considered to be special forms of contract and are dealt under Book
V of the Civil Code. Various provisions related to the construction contracts are made in the
Civil Code.

➢ Art.2610 -2631; (Work and Labour)

➢ Art. 3019-3040;and, (Immovables)
➢ Art.3244-3296. (Public Works)

Book IV of the ECC deals with contracts in general while Book V deals with special contracts.
(Article 1675-1677).

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Contracts governed by the rules of ECC are classified under ‘nominate’ contracts. Contracts
that are not governed by the general rules of ECC instead, governed by the general principles
of contract and the terms agreed by the parties are classified under ‘innominate’ contracts.
Construction contracts are classified under nominate contracts.

Article 1675 defines contract as “an agreement whereby two or more persons as between
themselves create, vary or extinguish obligations of a proprietary nature.”

Formation of Contracts (Articles 1678-1730)

Articles 1678 states the elements of contract that are mandatory for the existence and validity
of contracts. It is stated that:

No valid contract shall exist unless:

(a) the parties are capable of contracting and give their consent sustainable at law;
(b) the object of the contract is sufficiently defined and is possible and lawful;
(c) the contract is made in the form prescribed by law, if any.

➢ Articles 1679-1710 deals with the consent of the parties,

➢ Articles 1711-1718 deals with object of contract and
➢ Articles 1719-1730 deals with any prescribed form required to form a contract.

Essential conditions of a lawful contract are:-

➢ The Parties
➢ Intention to enter into legal relations
➢ Free Consent
➢ Offer made by one party to the other

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➢ Acceptance of the offer by the other party

➢ Capacity of the parties
➢ Lawful object
➢ Form of the Contract

The Terms of the Contract

The terms of the contract generally classified as Expressed Terms and Implied Terms. Terms
of the contract which are expressly agreed in written contracts at the time the contract is made
are referred as express terms of the contract.

Terms are also implied to contract by law. Implied terms of the contract are those terms which
are not specifically agreed by the contracting parties but which are implied into the contract by
the Civil Code or courts or by Parliament. Some of common implied terms in the construction
industry are Environmental Protection, Gender Violence, Labor Law, particularly OHS, etc.

Further to expressed terms of the contract, Article 1713 makes clear provisions for terms to be
implied into contracts from three principal sources, namely, customs, equity and good faith that
are related to the nature of the contract.

Art. 1713. - Contents of Contract.

The parties shall be bound by the terms of the contract and by such Incidental effect as are
attached to the obligations concerned by custom, equity and good faith, having regard to the
nature of the contract.

In addition to the above classification, it is common to classify expressed terms of the contract
as fundamental or incidental terms.

Fundamental terms are considered to be the “core” of the contract whereby the non-performance
of which destroys the essence/substance of the contract. Incidental terms are those terms of the

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contract which are collateral to the fundamental terms and the non-performance of which may
give rise to a claim for damages but not to a repudiation of the contract.

3.3 Interpretation of Contracts

Interpretation of contract is a process of giving meaning to the phraseology of the contract. It is

reducing the law into reality.

“Interpretation is the art or process of discovering and expounding the intended signification of
the language used, that is, the meaning which the authors of the contract/law designed to convey
to others.” [Garner; 2004: 837]

Interpretation of a law comprises of search for the soul of the law. The word interpretation can
have a narrow meaning, i.e finding the literal meaning of the words used and a wide meaning
i.e ascertaining the intention of the contract/law maker. [M.A Sujan; 2000:181]

Some of the rules of interpretation of the law in Ethiopia includes:-

Where the law is clear but unreasonable:- We interpret it according to good faith, morality
and reasonableness.

Where the law ambiguous:- We use contextual interpretation or use expose de motive

Where the law is silent:- We use non-exclusive method. We may also apply restrictive
interpretation where the law does not include some items in the list.

Where the law is contradictory:- The higher law prevails over the lower, the special law
prevails over the general (where laws are equal); or the recent law over the old one.
Generally, we do not have law provides for rules of interpretation of the law. However, we have
interpretation of contract in our ECC (Article 1732-1739)

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A. Contracts shall be interpreted in good faith (Civil Code, Arts. 1732)

Art. 1732 -Interpretation in accordance with good faith:

“Contracts shall be interpreted in accordance with good faith, having regard to the loyalty and
confidence which should exist between the parties according to business practice.”

Good Faith Interpretation Additional Principles:-

➢ Having regard to the loyalty and confidence which should exist b/n the parties according
to business practice.
➢ Ascertaining the meaning of the actual words of the contract by reference to the existing
local practice and settled usage.
➢ The economic advantage each of the parties seek from the contract must be studied.
➢ The very nature of their relationship must be carefully evaluated.

Art. 1733 –Limits of Interpretation:

“Where the provisions of a contact are clear, the court may not depart from them and determine
by way of interpretation the intention of the parties”

B. Common Intention of the parties (Civil Code, Arts. 1734)

Arts. 1734 - Common Intention of the parties

(1) Where the provisions of a contract are ambiguous, the common intention of the parties
shall be sought.
(2) The general conduct of the parties before and after the making of the contract shall be
taken into consideration to this effect.

Common Intention of the parties had when entering into such a contract must be sought

➢ What made them make such a contract?

➢ What did each of the parties intend to obtain from the contract?

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➢ The general conduct of the parties before and after the making of the contract shall be
taken into consideration
➢ The nature and environment of other similar contracts

C. General Terms (Civil Code, Arts. 1735)

Ejusdem Generis Principle:

It is a common phenomenon in human ordinary conversation or dialogue to understand general

terms in their context but not in their literal dictionary meanings. ECC makes a provision on
how to interpret general terms found in contract. CONTEXT IS THE KING!

Article 1735:- General terms.

A contract shall be deemed to relate to such matters only on which it appears that the parties
intended to contract, however general the terms used.

D. Contextual Interpretation (Civil Code, Art. 1736)

Art. 1736 – Interpretation in accordance with the context

(1) The provision of a contract shall be interpreted through one another and each provision
shall be given the meaning required by the whole contract.
(2) Ambiguous terms shall be given such meaning as is the more likely, having regard to
the subject matter of the contract.

➢ The provision of a contract shall be interpreted through one another and each provision
shall be given the meaning required by the whole contract.
➢ The real meaning to the word must be established taking into account the spirit of the
whole essence.
➢ Ambiguous terms shall be given such meaning as is more likely, having regard to the
subject matter of the contract.
E. Positive Interpretation (Civil Code, Art. 1737)

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Art. 1737 - Positive Interpretation

Provisions capable of two meanings shall be given a meaning to render them effective rather
than a meaning which would render them ineffective

When a word in a contract is exposed to two meanings the following rules must be adopted.

➢ The meaning of the word closer to the nature of the contract must be given acceptance.
➢ The meaning of the word that makes the contract valid is preferred to that which makes
it invalid.
➢ The meaning of the word in favour of the debtor is preferred to that in favour of the
creditor.
➢ In cases of doubt, a contract shall be interpreted against the party who stipulates an
obligation and in favour of the party who assumes it.
➢ In cases of gratuitous contracts, the meaning of the word giving advantage to the party
with an obligation is preferred to that claiming a right from it.

F. Interpretation in favor of debtor/Contra proferentem

Articles 1738 (1) and (2) of the ECC makes provision for the rule of interpreting ambiguous
terms of the contract in favor of the debtor of the drafter of the contract. This rule of construction
contract against the grantor is commonly known as the principle of contra proferentem. The
article reads as follow:

Article 1738 – Interpretation in favour of the Debtor.

(1) In cases of doubt, a contract shall be interpreted against the party who stipulates an
obligation and in favour of the party who assumes it.
(2) Stipulations inserted in general provisions, models or forms of contracts prepared by
one party shall be interpreted in favour of the other party.

It is often the case that in construction contracts or otherwise, the contract is drafted by one
party and the other party does not have the chance to negotiate on every term of the contract

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during the process of signing of the contract. Under such condition, any ambiguity is interpreted
in favor of the Debtor. The justification for the rule is as follow:

“… a person who puts forward the wording of a proposed agreement may be assumed to have
looked after his own interests so that if the words leave room for doubt about whether he is
intended to have a particular benefit there is reason to suppose that he is not.” (Chitty on
Contracts,12-084, page 859)

In the case of sub-contract agreements, interpretation of ambiguous words is interpreted in favor

of the sub-contractors because usually, it is the main contractor who drafts the contract.

G. Gratuitous Contracts

Article 1739 – Gratuitous contracts.

The obligations assumed by a party who derives no advantage from the contract shall be
construed more narrowly.

 SUMMARY

Most of the Conditions of Contracts are initially developed within the context of the applicable
law. For instance, the FIDIC conditions of contract which is considered by many as the cousin

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of the ICE form was initially developed within the context of common law in UK for domestic
use and then developed for international use without any appropriate modification.

It is common to find the concept of applicable law in standard forms of contract. For example,
in FIDIC standard forms of contract, one finds “The Contract shall be governed by the law of
the country (or other jurisdiction) stated in the Appendix to Tender.”

The Ethiopian law of contracts is largely contained in the Ethiopian Civil Code (ECC) with the
exception of certain specific types of contract that are regulated by the Commercial Code and
Maritime Codes.

Essential conditions of a lawful contract are:-

➢ The Parties
➢ Intention to enter into legal relations
➢ Free Consent
➢ Offer made by one party to the other
➢ Acceptance of the offer by the other party
➢ Capacity of the parties
➢ Lawful object
➢ Form of the Contract

Interpretation of contract ECC (Article 1732-1739)

➢ Interpretation in accordance with good faith

➢ Common Intention of the parties

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➢ General Terms
➢ Contextual Interpretation
➢ Positive Interpretation
➢ Interpretation in favor of debtor/Contra proferentem
➢ Gratuitous Contracts

 Exercise 3.1:
Purpose: To familiarize participants with construction law in the context of Ethiopian
Civil Code and principles of contract interpretations.
Materials: Handout no.
Time: 1 hour
Discussion Questions:
✓ Explain the relationship between the conditions of the contract and the applicable
law
✓ List the essential conditions of the lawful contract and discuss each of them in
detail.
✓ List the basic principles of interpretations of the contract and discuss each of them
with example in detail.

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SESSION FOUR
4. CONTRUCTION LIABILITIES AND INSURANCE
Contents:
4.1 Insurance, security, bond/guarantee

Session summary
Exercises

4.1 Insurance, security, bond/guarantee

Risk management is a vital part of the project management practice and efficient project
management implies good practice in risk management through systematic procedures. Risk
management involves identification of the risk sources, quantifying of their effect, developing
management responses to the risks and provision for residual risk in the project estimates. This
will help to avoid the downside risks and to exploit opportunities. Some of the benefits of risk
management are project issues are clarified, understood and considered from the start, decisions
are supported by thorough analysis, the definition and structure of the project are continually
monitored, clearer understanding of specific risks associated with the project, build-up of
historical data to assist future risk management procedures and the like. (An M., 2006)

Risk transfer involves transferring risks from one party to another without changing the total
amount of risk in the project. Risk transfer can occur between the client and contractor or
between the client and/or contractor and an insurer. The decision to transfer or allocate risk to
another party is implemented through an insurance policy or the conditions of contract. One of
the factors to be considered by the client during risk transfer is to know whether or not the party
to whom the risk is being transferred is able to do anything to manage or control the risk. The
second consideration is whether or not the risk premium that would have to be paid for the
transfer of a risk is greater than the cost of the consequences, should the risk be realised.

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Generally risk is transferred to the party that can best able to manage or control them or to the
party that can best able to accept the consequences, should they be realised. Clients who
routinely force maximum assumption of risk on the contractor are likely to incur higher project
costs. Contract preparation that allocates risk with a balanced input from all parties will be most
cost effective.

Insurances, bonds and guarantees are one of the risk transfer systems to Insurance Companies
and Financial Institutes from the Employer/Contractor which are included in most conditions
of contracts. FIDIC Conditions of Contract has the following clauses in relation to Insurance of
the works.

Insurance of Works and 21.1 The Contractor shall, without limiting his or the Employer’s
Contractor’s obligations and responsibilities under Clause 20, insure:
Equipment (a)the Works, together with materials and Plant for incorporation
therein, to the full replacement cost (the term "cost" in this context
shall include profit),
(b) an additional sum of 15 per cent of such replacement cost, or
as may be specified in Part II of these Conditions, to cover any
additional costs of and incidental to the rectification of loss or
damage including professional fees and the cost of demolishing
and removing any part of the Works and of removing debris of
whatsoever nature, and
(c) the Contractor’s Equipment and other things brought onto the
Site by the Contractor, for a, sum sufficient to provide for their
replacement at the Site.

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Scope of Cover 21.2 The insurance in paragraphs (a) and (b) of Sub-Clause 21.1 shall
be in the joint names of the Contractor and the Employer and shall
cover:
(a) the Employer and the Contractor against all loss or damage
from whatsoever cause arising, other than as provided in Sub-
Clause 21.4, from the start of work at the Site until the date of issue
of the relevant Taking-Over Certificate in respect of the Works or
any Section or part thereof as the case may be, and
(b) the Contractor for his liability:
(i) during the Defects Liability Period for loss or damage arising
from a cause occurring prior to the commencement of the Defects
Liability Period, and
(ii) for loss or damage occasioned by the Contractor in the course
of any operations carried out by him for the purpose of complying
with his obligations under Clauses 49 and 50.
Exclusions 21.4 There shall be no obligation for the insurances in Sub-Clause 21.1
to include loss or damage caused by:
(a) war, hostilities (whether war be declared or not), invasion, act
of foreign enemies,
(b) rebellion, revolution, insurrection, or military or usurped
power, or civil war,
(c) ionising radiations, or contamination by radio-activity from
any nuclear fuel, or from any nuclear waste from the combustion
of nuclear fuel, radio-active toxic explosive or other hazardous
properties of any explosive nuclear assembly or nuclear
component thereof, or
(d) pressure waves caused by aircraft or other aerial devices
travelling at sonic or supersonic speeds.

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➢ Contractors are required to insure against damage or injury to works, their

employees, other people as may be required by statutory or the contract
➢ The contract may state that works must be insured in the joint name of the
Employer and the Contractor
➢ Liabilities specified as Employer’s responsibilities do not require coverage
(Exclusions).

✓ Part of the works completed and occupied by him

✓ Actions of himself or his Engineer, other contractor
✓ War, hostilities, riot, etc.

Insurance Policies have to Include Minimum the following Points

Amount of cover: For permanent and temporary works, construction plant, material and other
properties mobilized to the site need to be covered for full values or with some plus as specified
in the contract. The amount shall be increased or decreased if the contract value increases or
decrease accordingly.
Exceptions: check the consequences to Contractors or Employers by accepting the exceptions
proposed by the insurers.
Period of Insurance: check start and expiry dates of the policy and compare with the
requirement by the contract. Extension required for prolonged contract period
Termination of Policy: check the policy conditions stated for termination
✓ When the repayment will be returned to the contractor
✓ If the policy is terminable at the will of the insurer
✓ If dependent on number of claims made
Bond and Guarantee: Bonds and Guaranties may be conditional or unconditional based on the
type of procurement ICB or NCB. For local Contractors with NCB most of the time is is
conditional. Most of the time for NCB contracts, conditional is suitable for performance while

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unconditional is for advance payment, retention and bid bonds. Conditional requires proof of
the default by the party while unconditional is paid upon demand without requiring the
claimant/Employer/ to justify his claim. However, after depositing the amount the guarantor
has the right to claim and collect the money if the condition is default of the Employer.

 SUMMARY
Risk transfer involves transferring risks from one party to another without changing the total
amount of risk in the project. Risk transfer can occur between the client and contractor or
between the client and/or contractor and an insurer. The decision to transfer or allocate risk to
another party is implemented through an insurance policy or the conditions of contract. One of
the factors to be considered by the client during risk transfer is to know whether or not the party
to whom the risk is being transferred is able to do anything to manage or control the risk. The
second consideration is whether or not the risk premium that would have to be paid for the
transfer of a risk is greater than the cost of the consequences, should the risk be realised.
Generally risk is transferred to the party that can best able to manage or control them or to the
party that can best able to accept the consequences, should they be realised. Clients who
routinely force maximum assumption of risk on the contractor are likely to incur higher project
costs. Contract preparation that allocates risk with a balanced input from all parties will be most
cost effective.

Insurances, bonds and guarantees are one of the risk transfer systems to Insurance Companies
and Financial Institutes from the Employer/Contractor which are included in most conditions
of contracts.
Insurance Policies have to Include Minimum the following Points
✓ Amount of cover
✓ Exceptions
✓ Period of Insurance
✓ Termination of Policy

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 Exercise 4.1:
Purpose: To familiarize participants with concepts of Insurance, security, bond/guarantee
and how to transfer risk from Employer/Contractor to Insurance Companies.

Materials: Handout no.

Time: 1 hour
Discussion Questions:
✓ Discuss the main objects of insurances in the construction industry.
✓ Explain the difference between conditional and unconditional bonds and
guarantees
✓ What do you understand by the term Exceptions/Exclusion Clauses
✓ What are the minimum points that an insurance policy should include? Discuss each
of them in detail.

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SESSION FIVE
5. ENVIRONMENTAL AND SAFETY REGULATIONS IN
CONSTRUCTION

Contents:
5.1 Policy, Legal and Administrative Framework
5.1.1 Policy, Legal and Adminstrative Framework Environmental
5.1.2 Policy, Legislation and Administrative Framework on Occupational Health and
Safety (OHS)

Session summary
Exercises

5.1 Policy, Legal and Administrative Framework

This chapter outlines the policy, legal and administrative framework governing environmental
issues in Ethiopia as well as highlights of other relevant policies, laws and guidelines as well as
international conventions ratified by Ethiopian Government and have some connection with
issue of environment.

5.1.1 Policy, Legal and Administrative Framework Environmental

Constitution of the FDRE

The Constitution of the Federal Democratic Republic of Ethiopia (FDRE), adopted in August
1995, is the source of all legal and policy frameworks of the country. It has several provisions,
which have direct policy, legal and institutional relevance for the appropriate implementation
of environmental protection and rehabilitation action plans to avoid, mitigate or compensate the
adverse effects of development actions like the projects at hand. The concepts of sustainable

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development and environment rights are entrenched in the rights of the people of Ethiopia
through Articles 43 and 44, which state among others the right to development and the right to
live in a clean and healthy environment.

Article 92 of the constitutions states that all Ethiopians shall live in clean and healthy
environment; no damage or destruction happened to those basic environmental rights. People
have the right to full consultation and the community has the right to express their views in the
planning and implementation of environment policies and deals with the projects that directly
affect them. The Government and citizens shall have the duty to protect the environment and
mitigate the affected parties. Furthermore, Article 44.2 of the constitution indicates that
interventions for public goods that cause the displacement of people or adversely affect the
livelihood of the local population shall have the right to commensurate monetary or other means
of compensation including relocation (resettlement) with adequate state assistance.

Establishment of Environmental Protection Organs

Establishment of Environmental Protection Organs is stipulated by the Proclamation No.

295/2002. The major objective of this Proclamation is to formally lay down the institutional
arrangements necessary to ensure environmentally sustainable management and development
both at Federal, Sectoral and Regional levels. The proclamation therefore re-establishes the
Environmental Protection Authority, Sectoral Environmental Units and Regional
Environmental Agencies with a series of respective mandates, powers and duties at Federal,
Sectoral and Regional levels in the same order.

EPA is recently upgraded and reorganized as Ministry of Environment, Forest and Climate
Change whereby the rights and obligations of the EPA, which was stated under proclamation
No. 295/2002, has been transferred to the newly proposed Ministry of Environment and Forest
and Climate Change--MoEFCC.

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Consequently, as the recent amendment to the definition of powers and duties of the executive
organs of the FDRE (proclamation no. 916/2015), the MoEFCC has given powers to fulfil its
role in ensuring the realization of the environmental objectives provided under the constitution.
The MoEFCC is involved in the development of environmental policy and legislation; setting
environmental quality standards for air, water and soils; monitoring pollution; establishing
systems and procedures for EIA; and in establishing a national environmental information
system. Enforcing the laws and policies, including EIA, environmental monitoring and auditing,
for all projects or activities that falls under the control of the Federal Government also falls
within the responsibilities of the MoEFCC and its delegated sector Ministries/Authorities. The
delegated sector Ministries/Authorities have been assigned the dual role of reviewing ESIA
reports as well as ensuring timely and effective implementation and supervision of sector
specific ESIAs.

The Regional States are also required to establish their own regional environmental agencies,
which are responsible for ESIAs for regionally managed infrastructures or development
activities. The MoEFCC is required to provide regional authorities with guidance, technical
support, and capacity building; support the development of various guidelines, including
procedures appropriate to sector projects; undertake awareness creation in other federal
agencies; and provide technical support to those agencies. Following the screening, review and
comment of environmental impact statements both the MoEFCC and REPAs approve project
ESIAs and issue an environmental clearance/permit where applicable. MoEFCC and REPAs
also undertake environmental audits where required to ensure that projects are complying with
their EMPs and their commitments to environmental mitigation and monitoring.

The power and duties of MoFECC as per Proc. 916/2015 related to ESIA are the following.
➢ coordinate activities to ensure that the environmental objectives provided under the
constitution and the basic principles set out in the Environmental Policy of the Country
are realized;

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➢ establish a system and follow up implementation for undertaking environmental impact

assessment or strategic environmental assessment on social and economic development
polices, strategies, laws, programmes and project set by the government or private;
➢ establish a system for evaluating and decision making, in accordance with the
Environmental Impact Assessment Proclamation, the impacts of implementation of
investment programs and projects on environment prior to approvals of their
implementation by the concerned sectoral licensing organ or the concerned regional
organ;
➢ formulate environmental safety policies and laws on the production, importation,
management and utilization of hazardous substances or wastes, as well as on the
development of genetically modified organisms and the importation, handling and
utilization of genetically modified organisms or alien species, and ensure their
implementation;
➢ propose incentives or disincentives to discourage practices that may hamper the
sustainable use of natural resources or the prevention of environmental degradation or
pollution;
➢ establish an environmental information system that promotes efficiency in
environmental data collection, management and use.

Proclamation on Environnemental Impact Assessment

This Proclamation (No 299/2002) aims primarily at making environmental impact assessment
(EIA) mandatory for categories of projects specified under a directive issued by the
Environmental Protection Authority whether such projects belong to public or private
organizations. The Authority issued several directives subjecting categories of projects to
environmental impact assessment. The Proclamation describes a policy, strategy, program, law
or an international agreement as “public instrument” and directs the Authority to issue
guidelines distinctively classifying certain categories of public instruments as likely to entail
significant environmental impact. The Proclamation requires, among others: -

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• Specified categories of projects to be subjected to EIA and receive an authorization

from the Authority or the relevant regional environmental agency prior to commencing
implementation of the project;
• Licensing agencies should ensure that the requisite authorization has been duly
received prior to issuing an investment permit, a trade or operating license or a work
permit to a business organization;
• The Authority or the relevant Regional Environmental Agencies may exempt from
environmental impact assessment projects with insignificant environmental impact;
and
• A licensing agency may suspend or cancel a license that has already been issued where
the Authority or the relevant regional environmental agency is believed that the
performance of the license holders is no satisfactory.

Procedures that need to be followed in the process of environmental impact assessment are
described in the Proclamation. Thus a project initiator (Proponent) should:

• Undertake a timely environmental impact assessment, identifying the likely adverse

impacts, incorporate the means of their prevention, and submit the environmental
impact study report accompanied by the necessary documents to the Authority or the
relevant regional environmental agency;
• Ensure that an environmental impact assessment is conducted and an environmental
impact study report prepared by an expert who meets the requirements set forth by the
directive issued by the Authority; and
• Submit an environmental impact study report to the Authority or the relevant Regional
environmental agency for review.

The Proclamation directs the Authority and the relevant Regional environmental agency how
to deal with an environmental impact study report they receive. Thus, after evaluating the report

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by taking into account any public comment and expert opinion, the Authority or the relevant
Regional Environmental Agency must do one of the following.

• Approve the project without condition and issue authorization if it is satisfied that the
project may not cause negative impact;
• Approve the project and issue authorization with condition that must be met in order to
reduce adverse impacts to insignificant impacts; or
• Refuse (Reject) implementation of the project if the negative impacts cannot be
satisfactorily avoided.

The proclamation defines project categories in to 3. These are projects that will require full EIA
or partial EIA or for which study of EIA is not called for. For this particular project, full EIA is
mandatory taking in to account the scale of the project and the provision provide in the EIA
proclamation.

Proclamation on Environmental Pollution Control

This proclamation (Proc. No. 300/2002) is mainly based on the right of each citizen to have a
clean and healthy environment, as well as on the obligation to protect the environment of the
country from being polluted. Its primary objective is to provide the basis from which the
relevant ambient environmental standards applicable to Ethiopia can be developed, used and to
make the violation of these standards a punishable act.

The Proclamation also states that the “polluter pays” principle will be applied to all persons
and institutions concerned. Under this proclamation, the EPA and now MoEFCC is given the
mandate for the creation of the function of Environmental Inspectors. These inspectors (to be
assigned by EPA/MoEFCC or regional environmental agencies) are given the authority to
ensure implementation and enforcement of environmental standards and related requirements.

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Proclamation on Conservation, Development and Utilization of Forests

This Proclamation (Proc. No. 94/1994) was issued in 1994 to provide for the Conservation,
Development and Utilisation of Forests. The objective of this Proclamation is to provide the
basis for sustainable utilisation of the country’s forest resources. The Proclamation categorise
the types of forest ownership such as State, Regional and Private Forests. It provides the power
for designation, demarcation, and registration of forests to the Ministry of Agriculture (it is now
transferred to Ministry of Environment, Forest and Climate Change– MoEFCC) and Regional
Governments.

Proclamation on Expropriation of Land Compensation (Proclamation No. 455/2005)

The Federal legislation on Expropriation of Land for Public Purposes and Compensation
(Proclamation No. 455/2005) in effect repealed the out-dated provisions of the Ethiopian Civil
Code of 1960 regulating land acquisition and compensation for the purpose of public projects.
This new legislation established detail procedures setting the time limits within which land
could be acquired after a request is received from a proponent, principles for assessment of
compensation for properties on the land as well as for displacement compensation. It also
empowered the Wereda Administration to establish valuation committees to value private of
communal properties. In the case of public-owned infrastructures to be removed from the right-
of-way, the owners of the structures would assess the value of the properties to be removed.
Additionally the legislation provided for appeals on valuation decisions but such action would
not delay transfer of possession of land to the proponent or contractor appointed by the
proponent.

As discussed earlier, the Constitution lays down the basis for the property to be compensated in
case of expropriation as a result of State programs or projects in both rural and urban areas. Art.
44.2 clearly states that “All persons who have been affected or whose livelihoods have been
adversely affected as a result of state programs have the right to a commensurate monetary or
alternative means of compensation, including relocation with adequate state assistance” Thus,

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persons who have lost their land as a result of acquisition of such land for the purpose of
constructing roads are entitled to be compensated to a similar land plus the related costs arising
from relocation; assets such as buildings, crops or fruit trees that are part of the land etc.

Hence, the project plans must include an “attractive” and sustainable resettlement strategy,
offering adequate compensation and incentives to the loss of livelihood of the project affected
people (PAPs) at least as per the provisions of the proclamations No. 455/2005.
Proclamation on Rural Land Administration and Land Use

The objective of this Proclamation (Proc. No. 456/2005) is to conserve and develop natural
resources in rural areas by promoting sustainable land use practices. In order to encourage
farmers and pastoralists as well as government institutions and private investors to implement
measures to guard against soil erosion. The Proclamation also introduces a Rural Land Holding
Certificate, which provides a level of security of tenure. The MoARD was charged with power
to execute the Proclamation by providing support and coordinating the activities of the regional
authorities. Regional governments have an obligation to establish a competent organization to
implement the rural land administration and land use law.

According the Proclamation where land, which has already been registered, is to be acquired
for public works, compensation commensurate with the improvements made to the land shall
be paid to the land use holder or substitute land shall be offered. The Proclamation imposes
restrictions on the use of various categories of land, for example wetland areas, steep slopes,
land dissected by gullies, etc.

Proclamation on Research and Conservation of Cultural Heritage

Proclamation No. 209/2000 provides legal framework for Research and Conservation of
Cultural Heritage. The Proclamation establishes the Authority for Research and Conservation
of Cultural Heritage (ARCCH) as a government institution with a juridical personality. In

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addition, it has provisions for management, exploration, discovery and study of Cultural
Heritage and miscellaneous provisions.

The Proclamation defines the objectives, powers and duties of the Authority (ARCCH). As
stated in the Proclamation, the Authority shall have the power to: -
• Carry out a scientific registration and supervision of Cultural Heritage;
• Protect Cultural Heritage against man-made and natural disasters;
• Enables the benefits of Cultural Heritage assist in the economic and social development of
the country; and
• Discover and study Cultural Heritage.

Article 41 of the Proclamation, which is on Fortuitous (unexpected) Discovery of Cultural

Heritage states that, any person who discovers any Cultural Heritage in the course of an
excavation connected to mining explorations, building works, road construction or other similar
activities or in the course of any other fortuitous event, shall forthwith report same to the
Authority, and shall protect and keep same intact, until the Authority takes delivery thereof.
Connected to this, it also states that, the Authority shall, upon receipt of a report submitted, take
all appropriate measures to examine, take delivery of, and register the Cultural Heritage so
discovered.

Under Miscellaneous Provisions, the Proclamation states that, any person who holds permit to
conduct construction works in a reserved area [an area declared to be containing an assemblage
of immovable Cultural Heritage or an archaeological site] and who discovers Cultural Heritage
in the course of construction activities shall stop construction and shall forthwith report same
in writing to the Authority.

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Proclamation on Ethiopian Water Resource Management

This Proclamation (Proc. No. 197/2000) was issued in March 2000 and provides legal
requirements for Ethiopian Water Resources Management, Protection and Utilization. The aim
of the proclamation is to ensure that water resources of the country are protected and utilized
for the highest social and economic benefits, to follow up and supervise that they are duly
conserved, ensure that harmful effects of water use prevented, and that the management of water
resources is carried out properly. As stated in the Proclamation, the Supervising Body (the
Ministry pertaining to water resources at central level, or any organ delegated by the Ministry)
shall be responsible for the planning, management, utilization and protection of water resources.

According to Sub-Article 1 of the Article 11, no person shall perform the following activities
without a permit from the supervising body without prejudice to the exceptions specified under
Article 12: -
• Construct water works;
• Supply water, whether for his own use or for others;
• Transfer water which he/she abstracted from a water resource or received from another
supplier; and
• Release or discharge waste into water resources unless otherwise provided in the water
resource management regulation.
As per this proclamation, whenever there is a need to prioritize the available water resources,
first priority is given for domestic water supply, livestock watering and ecosystem conservation
in that order of importance. Water resources rationing for development actions like irrigation,
industry, power generation and construction was put at the tail of the list.

Public Health Proclamation

The objectives of the Public Health Proclamation (Proc. No. 200/2000) relevant to
environmental health and applicable during the construction and operation phases of

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development projects include prohibiting discharge of untreated liquid waste generated from
septic tanks, seepage pits and industries into water bodies, or water convergences; prohibiting
the disposal of solid or liquid or any other waste in a manner which contaminates the
environment or affect the health of the society also pertinent to this project.

Solid Waste Management Proclamation

This Proclamation (Proc. No. 513/2007) was issued in March 2007 and its objective is to
enhance capacity at all levels to prevent possible adverse impacts while creating economically
and socially beneficial assets out of solid wastes. Under this proclamation, a person or
institutions that is generating wastes is held responsible for proper disposal of wastes he
produced through reuse or recycling or disposal at the officially approved sites as appropriate.
It is the main objective of the proclamation to highly encourage public and investors’
participation and involvement in the collection and segregation, storage and recycling of solid
wastes.

This proclamation clearly indicates the general obligation of urban administration in solid waste
management issues and how it can ensure public participation and involvement of lowest level
administration in managing solid wastes. The proclamation also indicates how the inter-regional
movement of solid wastes should be managed, the management of glass containers and tin cans,
management of plastic bags and used tyres, food related and household solid wastes, and
management of construction debris and demolition of solid waste and excavated soils.

Moreover, emphasis was also given to how the solid wastes are transported; their disposal sites
are constructed and auditing of the disposal sites in-operation is made. Civil liability and penalty
issues as well as responsibilities to issue regulations and directives that will facilitate the
implementation of this proclamation are detailed at great lengths. More relevant to the solid
waste management issue for the project at hand is management of construction debris or wastes,

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management of used tyres, plastics, tin cans and household wastes that will be generated from
the operation of camps.

Proclamation on the Development, Conservation and Utilization of Wildlife

This Proclamation (Proc. No. 541/2007) was issued in August 2007 and it has the following 3
major objectives. These are:

• To conserve, manage, develop and properly utilize the wildlife resources of Ethiopia;
• To create conditions necessary for discharging government obligations assumed under
treaties regarding the conservation, development, and utilization of wildlife;
• To promote wildlife-based tourism and to encourage private investment.

Wildlife conservation areas to be designated and administered by the Federal Government and
by Regions as well as that will be administered by Private Investors and by Local Communities
are clearly indicated here. Hunting Permit and Collection of Wildlife or Wildlife Products for
Scientific Purposes is also receive enough attention. Wildlife related economic activities such
as wildlife resources based tourism and trading in wildlife and their products is also the attention
of this proclamation.

The segregation of powers and duties of the Ministry (Ministry of Agriculture and Rural
Development), Regions, and wildlife anti-poaching officers are made clear here. There is also
a provision for penalty considerations and the power to issue regulations and directives.

Labour Proclamation in Ethiopia (Proc. No. 377/2003)

As per the Constitution of the FDRE, Sub-Article 1 and 3 of Article 55, the Ethiopian
Government issued the Labour Proclamation (Proc. No. 377/2003) on February 26, 2003 with
the following umbrella objectives. The main aim of the proclamation includes, among others:

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• To ensure that worker-employer relations are governed by the basic principles of rights
and obligations with a view to enabling workers and employers to maintain industrial
peace and work in the spirit of harmony and cooperation towards the all-round
development of the country.
• To guarantee the right of workers and employers to form their respective associations
and to engage, through their lawfully elected representative, in collective bargaining as
well as to lay down the procedure for the expeditious settlement of labour disputes, this
may arise between workers and employers.
• To strengthen and define by law the powers and duties of the organs charged with the
responsibility of inspecting, in accordance with the law, labour administration,
particularly labour conditions, occupational safety, health and work environment.
• To revise the existing labour law providing for the basic principles which govern
worker-employer relations and for labour condition taking in to the political, economic
and social policies of the government and in conformity with the international
conventions and other legal commitments to which Ethiopia is a party with a view to
translating in to practice the underlining objectives of the labour proclamation.

Administrative and Institutional Frameworks

Federal and Regional Administration

The Federal Democratic Republic of Ethiopia comprises the Federal Government and the state
members. There are Ten National Regional States and Two City Administrative Councils, who
are the members of the Federal Democratic Republic of Ethiopia. The form of government of
Ethiopia is parliamentarian. There are two kinds of representation in the federal government.
These are the House of Peoples’ Representatives and the House of the Federation. Both the
Federal Government and the Regional States have legislative, executive and judicial powers. A
policy of decentralization of authority to regional administration has been pursued since 1991.

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The powers and functions of the Federal Government are defined in the constitution under
article 51.

The Regional Governments and the City Administration have also legislative, executive and
judicial power over their administrative areas, except in matters of defence, foreign relations,
citizenship, currency, and the like, which fall under the jurisdictions of the Federal Government.
The powers and functions given to the National Regional States by the constitution under article
52 include enacting and executing the state constitution and other laws to formulate and execute
economic, social and development policies, strategies and plans of their respective regions and
to administer land and other natural resources. The administrative structures in regional
governments are Zone, Wereda and Kebele while the hierarchy at City Administration is
subdivided in to Sub City and Wereda levels as appropriate.

Environmental Council
Environmental council was established by the Provision of Environmental Protection Organs
Establishment proclamation No. 295/2002. The environmental council consists of
representative drawn from Prime Minster Office, Federal and Regional States, Ethiopian
Chamber of Commerce, local environmental NGOs (non-government organizations), the
Confederation of Ethiopian Trade Unions, and the director general of EPA and now the Minister
of MoEFCC. The Council is responsible to: -
• Review proposed environmental policies, and laws, and issue recommendations to the
government;
• Evaluate and provide appropriate advice on the implementation of the environmental
policy of Ethiopian; and
• Review and approve directives, guidelines and environmental standards prepared by
EPA/MoEFCC.

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Federal EPA/MoEFCC
The Federal Environmental Protection Authority (EPA is now upgraded and recently
reorganized as the Ministry of Environment, Forest and Climate Change) was re-established
under Proclamation No. 295/2002 as an autonomous public institution of the Federal
Government of Ethiopia entrusted with the protection and conservation of natural resources in
the country. The Ministry of Environment, Forest and Climate Change (MoEFCC) is the
competent environmental agency at the Federal level in Ethiopia with one of its objectives,
stipulated in Article 5 of Proc. No. 295/2002, indicating that the Ministry is established “to
ensure that all matters pertaining to the country’s social and economic activities are carried out
in a manner that will protect the welfare of human beings as well as sustainably protects,
develops and utilizes the resources base on which they depend for survival.”

The federal MoEFCC is the key national level environmental agency, with a mandate to address
environmental issues. The environmental legislation gives the MoEFCC powers to fulfil its role,
support all federal agencies in establishing environmental units, and develop skills in strategic
environmental analysis of policies and public instruments. The MoEFCC is involved in the
development of environmental policy and legislation, setting environmental quality standards
for air, water and soils, monitoring pollution, establishing EIA procedures and an environmental
information system, and undertaking capacity development in relevant agencies to ensure the
integration of environmental management in policy development and decision making. The
responsibilities of MoEFCC with respect to EIA process are:-

• Establishment of a system for environmental assessment of public and private sector

projects, as well as social and economic development policies, strategies, laws, and
programs of federal level functions;
• Review, decision-making and follow-up implementation of environmental impact study
reports for projects, as well as social and economic development programs or plans
where they are subject to federal licensing, execution or supervision; also proposed

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activities subject to execution by a federal agency, likely to entail inter- or trans-regional

and international impacts;
• Notification of its decision to the concerned licensing agency at or before the time
specified in the appropriate law or directives;
• Ensure that the proponent complies with requirements of the EIA process;
• Auditing and regulation of implementation of the conditions attached to the decision;
• Provision of advice and technical support to the regional environmental agencies,
sectoral institutions and proponents;
• Making its decisions and the EIA report available to the public;
• Resolution of complaints and grievances in good faith and at the appropriate time;
• Development of incentives or disincentive structures required for compliance with
regional environmental agency requirements.

Sectoral Environmental Unit

Proclamation No. 295/2002 requires establishment of in-house Environmental Protection Unit
to ensure harmony with respect to implementation of the environmental proclamations and other
environmental protection requirements. The duties and responsibilities of these Sectoral
Environmental Units are to co-ordinate and follow up of the integration of environmental
requirements in a proactive manner so as to ensure environmental sustainability of sectoral
development efforts. Based on these provisions, different ministries such as Ministry of Water
and Energy, Ministry of Mines, Ministry of Agriculture, Ethiopian Road Authority, etc… has
established sectoral environmental units. Recently, the then federal EPA now MoEFCC has
delegated its power to review EIS to these Environmental Units established at the respective
Ministries or Institutions as appropriate.

Regional Environmental Agencies

The Proclamation issued for the Establishment of Environmental Protection Organs (Proc. No.
295/2002) also states that each Regional State should establish an independent regional

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environmental agency or designates an existing agency that shall be responsible for

environmental monitoring, protection and regulation in their respective regional states.

Responsibility of Managing ROW Issues

Responsibilities of managing right-of-way (ROW) issue for developments undertaken in urban
areas is the City Administration while in rural settings the responsibility is vested up on the
Wereda Administration. In all cases, they may delegate their responsibilities to formally
established lower level administration or to the organs that may be established for that specific
purpose as appropriate. However, it has to be noted that at all circumstances, the responsibility
of managing ROW issues is either the Wereda Administration at rural areas or the City
Administration at urban settings as appropriate.

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5.1.2 Policy, Legislation and Administrative Framework on Occupational

Health and Safety (OHS) Constitution of the FDRE

The Constitution (of FDRE 1995), contains few articles related to the Rights of Labour. In
particular, in relation to workers’ safety, Article 42: 2 gives labour force the right (in general
terms) for health and safe work environment, among other the right to reasonable limitation of
working hours, to rest, to periodic leaves with pay, to remuneration of public holidays.

In other forms, the constitution also provides that every citizen is protected from inhuman
Treatment in particular. It prohibits cruel, in human or degrading treatment or punishment, and
forced or compulsory labour.Article 35 additionally states the right of women to equal right in
employment.

Major Proclamations on OHS

Ethiopia has ratified different proclamation related to the Health and Safety of workers.
Proclamations related to this area are briefly stated here:

The Occupational Safety and Health Directives of the Ministry of Labor and Social
Affair/MoLSA/ of 2007;

Labour Proc. No 377/06: under article 92 of this proclamation it is obligatory to the employer
to putting in place of all the necessary measures in order to ensure, work places are safe, healthy
and free of any danger to the wellbeing of workers. In the same article the employer is obliged
to take, in particular the following measures to safeguard the health and safety of the workers.
It necessitates precautions to avoid accident & injury on health.

The proclamation gives directive to assign safety officer, establishes an occupational, safety
and health committee, provides workers with protective equipment, clothing and other materials

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and instruct them of its use, obliged to register and notify to the nearest labour inspection
services (occupational accident and diseases), arrange according to the nature of the work at
his/her own expense, for the medical examination of newly employed workers and for those
workers engaged in hazardous work as may deemed nearly, take appropriate pre-executions to
ensure that all processes of work shall not be a source or cause of physical, chemical, biological,
ergonomical and psychological hazards to the health and safety of the workers.

Article 93 adds obligation of workers pertaining to the required co-operation and putting in to
practice of the regulation and instruction given by the employer in order to ensure safety health
and working conditions at work places. It obligates to cooperate in the formulation of safeguard
work rules, inform the employer of any defects or injury, present a hazard which he/she cannot
avoid, proper use of all safeguards, and obey all the health and safety instructions.

It further includes articles on occupational injuries, benefits, contract of employment,

Provisions related to minimum or fundamental labour conditions, Working Conditions of
Young Workers, etc…

Labour Proc. No 377/03: Has general duty clauses to the obligations of employer on Art. 92
and 93. It stipulated about the penalty which will be lodged upon the non compliers of the law
including those offenders due to violating of the provisions of the law pertaining to safety,
health, working environment and fundamental rights at work places (Article 183-186).

Labour Proc. No. 42/93: contains obligations of an employer. An employer shall take the
necessary measures to safeguard adequately the health and safety of the workers.

Public Health Proc. 200/00: This proclamation determines the mechanism and steps to be taken
for the promotion of the health of the society and creation of healthy environment the law covers

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also the obligation of putting in place of minimum requirement of health and hygiene to be
maintained in each enterprise.

The matters which directly related to occupational safety and health that are provided by the
law are those that deal with occupational health control and use of machines, and the waste
handling and disposal as a part of the obligation of the employer through the same law in its
Articles 12 and 13.

Pollution Control Proc. No. 300/02: The law deals with any pollution in whatever forms be it
in gases, mists, liquid and solid to be controlled if possible prevented the source.

Environmental Impact Assessment Proc. No. 299/02: The law deals with setting legal basis in
order to manage and control the environmental effects which are caused by development
activity before resuming operational level at design, construction, operation or an or going one
as a result of its modification or termination through impact assessment in order to put in place
mitigating intervention.

Policy of Health
Health Policy of Ethiopia (1993) was issued in 1993, with special attention to women and
children, to neglected regions and segments of the population, and to victims of manmade
disasters. The priority areas of the policy are in the field of Information, Education and
Communication (IEC) of health to create awareness and behavioural change of the society
towards health issues, emphasis on the control of communicable diseases, epidemics, and on
diseases that are related to malnutrition and poor living condition, promotion of occupational
health and safety, the development of environmental health, rehabilitation of health
infrastructures, appropriate health service management system, attention to traditional
medicines, carrying out applied health research, provision of essential medicines, and expansion
of frontline and middle level health professionals.

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Article 2.2., mainly, gives emphasis that shall be made in order to the promotion of occupational
health and safety.

Financers’ Policy
Many infrastructure projects will be financed by the Government of Ethiopia and four external
financiers, the African Development Bank (AfDB), China EXIM Bank, the Korea EXIM Bank
and the World Bank, each supporting a discrete section of the road.

❖ The African Development Bank Group

The AfDB has an Operational safeguard guidelines, which under the fifth section contains a
subsection for Labour conditions, health and safety. The guidelines give directives or
requirements for occupational safety. The principles and objectives are to:

✓ Protect workers’ rights;

✓ Establish, maintain, and improve the employee–employer relationship;
✓ Promote compliance with national legal requirements and provide supplemental due
diligence requirements where national laws are silent or inconsistent with the OS;
✓ Align Bank requirements with the ILO Core Labor Standards, and the UNICEF
Convention on the Rights of the Child, where national laws do not provide equivalent
protection;
✓ Protect the workforce from inequality, social exclusion, child labour, and forced labour;
and
✓ Establish requirements to provide safe and healthy working conditions.

❖ The World Bank (WB)

One of the financer is World Bank (WB), who also has general guidelines for Environmental
Health and Safety. Under this guideline the second section is designated to the Occupational

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Health and Safety Issues. The guideline asserts preventive and protective measures should be
introduced according to the following order of priority:

• Eliminating the hazard by removing the activity from the work process. Examples
include substitution with less hazardous chemicals, using different manufacturing
processes, etc;
• Controlling the hazard at its source through use of engineering controls. Examples
include local exhaust ventilation, isolation rooms, machine guarding, acoustic
insulating, etc;
• Minimizing the hazard through design of safe work systems and administrative or
institutional control measures. Examples include job rotation, training safe work
procedures, lock-out and tag-out, workplace monitoring, limiting exposure or work
duration, etc.
• Providing appropriate personal protective equipment (PPE) in conjunction with training,
use, and maintenance of the PPE.

In order for OHS proper implementation the guideline sets different categories which have
specific sets of standards within, which will as well be consulted for this consultancy service.

No. General Component Specific Components

1. General Facility Design and Integrity of Workplace Structures, Workspace and Exit, Severe Weather
Operation and Facility Shutdown, Potable Water Supply, Fire Precautions, Clean
Eating Area, Lighting, Lavatories and Showers, Safe Access, First Aid,
Air Supply and Work Environment Temperature.
2. Communication and OHS Training, Visitor Orientation, New Task Employee and Contractor
Training Training, Labeling of Equipment, Basic OHS Training, Area Signage and
Communicate Hazard Codes.

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3. Physical Hazards Rotating and Moving Equipment, Noise, Vibration, Electrical, Welding /
Hot Work, Eye Hazards, Industrial Vehicle Driving and Site Traffic,
Ergonomics, Working Environment Temperature, Repetitive Motion,
Manual Handling, Working at Heights and Illumination.
4. Chemical Hazards Air Quality, Fire and Explosions, Corrosive, oxidizing, and reactive
chemicals, Asbestos Containing Materials (ACM),
5. Biological Hazards Biological agents represent potential for illness or injury due to single
acute exposure or chronic repetitive exposure.
6. Radiological Hazards Radiation exposure can lead to potential discomfort, injury or serious
illness to workers.
7. Personal Protective Personal Protective Equipment (PPE) provides additional protection to
Equipment (PPE) workers exposed to workplace hazards in conjunction with other facility
controls and safety systems.
8. Special Hazard Confined Space and Lone and Isolated Workers
Environments
9. Monitoring Accidents and Diseases monitoring

❖ The Export-Import Bank of China

The Export-Import Bank of China has a Green Finance strategy. Based on this the bank asserts
attention to the hazards that the clients and major related parties thereof may bring to the
environment and the society in their construction, production and operation as well as to related
risks, including environmental and social issues concerning energy consumption, pollution,
land, health, safety, migrant relocation, ecological protection and climate change, among others.

❖ The Export-Import Bank of Korea

Similarly, the Export-Import Bank of Korea has a guideline with the objectives of among other
things,

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i. Increasing efforts to address environmental and safety concerns, including reducing

greenhouse gas emission and yellow dust,
ii. Decreasing the portion of electricity supplied using nuclear and coal energy sources
including through suspension of construction of new nuclear power plants, permanent
closing of old coal-fired generation units and converting coal-fired generation units into
LNG-fired generation units,
iii. Increasing the portion of electricity supplied from renewable energy, in particular solar
and wind power, and
iv. Promoting the replacement of coal with LNG as an energy source by reducing the gap
in expenses incurred in using the respective fuel types, for example, by adjusting the
consumption tax rates applicable to the respective fuel types.

 SUMMARY
The Constitution of the Federal Democratic Republic of Ethiopia (FDRE), adopted in August
1995, is the source of all legal and policy frameworks of the country. It has several provisions,
which have direct policy, legal and institutional relevance for the appropriate implementation
of environmental protection and rehabilitation action plans to avoid, mitigate or compensate the
adverse effects of development actions like the projects at hand. The concepts of sustainable
development and environment rights are entrenched in the rights of the people of Ethiopia
through Articles 43 and 44, which state among others the right to development and the right to
live in a clean and healthy environment.

Article 92 of the constitutions states that all Ethiopians shall live in clean and healthy
environment; no damage or destruction happened to those basic environmental rights. People
have the right to full consultation and the community has the right to express their views in the
planning and implementation of environment policies and deals with the projects that directly
affect them. The Government and citizens shall have the duty to protect the environment and
mitigate the affected parties. Furthermore, Article 44.2 of the constitution indicates that

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interventions for public goods that cause the displacement of people or adversely affect the
livelihood of the local population shall have the right to commensurate monetary or other means
of compensation including relocation (resettlement) with adequate state assistance.
5. ENVIRONMENTAL AND SAFETY REGULATIONS IN CONSTRUCTION

 Exercise 5.1:
Purpose: To familiarize participants with different legislations and polices of the country
in relation to Environmental and Safety regulations in the construction industry.

Materials: Handout no.

Time: 1 hour
Discussion Questions:
✓ Discuss the importance of Environmental Regulations in the Construction Industry
✓ Discuss the importance of Safety Regulations in the Construction Industry.
✓ Based on your experience do you believe that the Environmental and Safety
Regulations are well addressed in the current works contracts in Ethiopia?
✓ What do you recommend to be included in the works contract in order to
implement the regulations properly in the construction industry?

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Reference:
1. Conditions of Contract For Works of Civil Engineering Construction, Fourth edition (1987), Federation
International Des Ingenieurs-Conseils, PO Box 86, CH 1000 Lausanne 12, Switzerland, reprinted with
further amendments (1992)
2. Construction Law and Practice Training Manual Prepared by Zewdu Tefera and Yared Temesgen
3. FIDIC 4th a Practical Legal Guide
4. Civil Code of Ethiopia
5. FPPA Standard Condition of Construction Contract 2011
6. Contract Administration Training Manual Prepared by Melaku Tefera
7. Abraham B Tessema, Minimising Construction Claims in the Ethiopian Roads Construction Industry;
Dissertation prepared in partial fulfilment of Master of Science Degree in Construction Management at
University of Birmingham, August 2006.
8. ERA Claims Manuals and Documents (Prepared by SMEC)
9. Perry, J. (2006) Module lecture & notes construction management, University of Birmingham.
10. Perry, J. and Thompson, P. (1992) A guide to Project Risk Analysis and Risk Management, Thomas
Telford, London.
11. Evaluating Contract Claims, Second Edition, R. Peter Davison and John Mullen
12. Alpha University College, College of Distance Studies, Introduction to Law and the Ethiopian Legal
System Teaching Material, Tesfaye Abate
13. A Guide to the Project Management Body of Knowledge PMBOK GUIDE, Sixth Edition
14. PMI, Authorized PMP Exam Prep document
15. CORE Consulting Engineers PLC ISO 2015 Document
16. Abiyot Berhanu (2007), Endemic Animals of Ethiopia, a preliminary working List, MSc Thesis ,Institute
of Biodiversity Conservation, Addis Ababa Ethiopia.

17. CSA (2005). Central Statistical Authority, Statistical Abstract 2005.

18. ECRN and UNDP (2010), Literature Review of Ethiopian Forest Resources, Current State and Future
Management Options in View of Access to Carbon Finance, October 2010, Addis Ababa, Ethiopia.
19. EPA (1997), Environmental Policy of Ethiopian. Ethiopian Environmental Protection Authority.

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20. EPA (2000). Environmental Impact Assessment Guideline Document. Ethiopian Environmental
Protection Authority.
21. EPA (2003). Environmental Impact Assessment. Procedural Guideline. Ethiopian Environmental
Protection Authority.
22. ERA (2001). Federal Democratic Republic of Ethiopia, Ethiopian Roads Authority. Environmental
Procedures Manual.
23. ERA (2008), Environmental and Social Management Manual, Volume I, August 2008
24. ERA (2012), Environmental & Social Management Quality Manual, Volume 5, March 2012.
25. FDRE Proclamation No. 1/1995. The Constitution of Federal Democratic Republic of Ethiopia.
26. JAMES YOUNG (2012), Ethiopian Protected Areas, A Reference Guide for Future Strategic Planning
and Project Funding, A ‘Snapshot’, March 2012, Addis Ababa, Ethiopia.
27. Michelle Pinard et al (2009), Harena Forest Bird Monitoring Protocol, Biodiversity Monitoring in Forest
Ecosystems in Bale Mountains National Park (14-009, Darwin Initiative Project), August 2009, Addis
Ababa, Ethiopia.
28. Proclamation No. 133/2006. A Proclamation issued to provide for the Revised Rural Land Administration
and Use of the Amhara National Regional State.
29. Proclamation No. 295/2002. Proclamation for Establishment of Environmental Protection Organs.
30. Proclamation No. 299/2002. Environmental Impact Assessment Proclamation.
31. Proclamation No. 300/2002. The Proclamation for Environmental Pollution Control.
32. Proclamation No. 456/2005. Proclamation on Rural Land Administration and Land Use.
33. Proclamation No. 47/2000. Proclamation for Establishment of the Amhara Regional Environmental
Protection, Land Administration and Use Authority.
34. Proclamation No. 96/2003. Proclamation for the Establishment of the Amhara National Regional State,
Parks Development and Protection Authority.
35. United Nations Environmental Programme. 1999a. An Explanatory Leaflet about the Convention on
Biological Diversity. Available from Internet, http://unep.ch/bio/bio-leaf.html, accessed 1 March 2000.

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