Transparency of the Regulatory System
The World Bank rates Eritrea a 0 on a scale of 0-6 for transparency on publishing or consulting with the public about proposed regulations. This low ranking is indicative of the lack of transparency in GSE’s legal and regulatory systems.
There are no independent nongovernmental organizations or private sector associations that manage regulatory processes in Eritrea. As such, all rule-making and regulatory authority resides within the PFDJ and with the President.
Accounting and regulatory procedures are not transparent. Draft bills and regulations are not made available for public comment. There is no centralized online location where key regulatory actions are published. In addition, there is no centralized online location where key regulatory actions or there summaries are published. There is no transparency about how the GSE enforces the rules for its administrative processes.
There is no transparency about the process for developing new regulations. Enforcement processes in Eritrea are not legally reviewable and the enforcement mechanisms are not transparent. The GSE does not release public information about the conduct of any scientific studies or quantitative analysis conducted on the impact of regulations.
No new regulatory systems or enforcement reforms have been announced in the past year.
International Regulatory Considerations
Eritrea is not a part of any regional economic blocks, nor is it a member of the World Trade Organization (WTO).
Legal System and Judicial Independence
In theory, the Eritrean legal system is based on the legal system in Ethiopia, which was used prior to gaining independence from Ethiopia. However, in practice, the legal system is a combination of traditional village law, the old Ethiopian legal code, and Presidential Decrees.
Eritrea has a written civil code that addresses issues such as property and contracts, however there are no specialized courts for commercial cases.
The Eritrean courts are not independent of the Presidency. The civil courts lack transparency, so it is difficult to access their fairness, however they lack trained competent judges and administrators. The criminal court system in Eritrea regularly disregards due process, transparency, fairness, and reliability.
Laws and Regulations on Foreign Direct Investment
Eritrea’s legal system plays only a minor role in foreign direct investment. All large scale foreign direct investment is part of a political process and is managed by agreements negotiated directly with a small group of officials in the ruling party.
Eritrea has no “one-stop-shop” website for investment that provides relevant laws rules, procedures and reporting requirements for investors.
There have been no new major laws, regulations, or judicial decisions announced in the past year.
Competition and Anti-Trust Laws
There are no indications that the GSE makes any effort to promote market competition. All large-scale economic activity is controlled directly by the GSE or by jointly-controlled international companies operating under agreements negotiated directly with the GSE/PFDJ.
Expropriation and Compensation
There is no transparent process that would allow an individual or company to appeal any GSE expropriation of property.
In recent years, the GSE has destroyed homes that it stated were built without government permission. In the past, there have also been cases in which the GSE has expropriated property owned by citizens of Italy. Due to lack of transparency, it is impossible to determine the number of individual cases of expropriations of property from Eritreans or citizens of other countries.
In the case of several of the houses destroyed by the GSE, there were also reports of public protest against the destruction of the houses.
ICSID Convention and New York Convention
Eritrea is not a member of the International Centre for Settlement of Investment Disputes (ICSID) Convention.
Investor-State Dispute Settlement
Eritrea is not a signatory to a treaty or investment agreement in which binding international arbitration is recognized. Eritrea has no BIT with an investment chapter with the United States.
Due to a lack of transparency it is impossible to determine the number of investment disputes involving U.S. persons or foreign investors. However because of the minimal level of foreign investment, the number of disputes is presumably also very small.
Local Eritrean courts do not recognize or enforce foreign arbitral awards issued against the GSE.
International Commercial Arbitration and Foreign Courts
Some disputes between private parties are settled in traditional village courts. There is no independent, domestic arbitration body in Eritrea.
The local courts do not recognize or enforce foreign arbitral awards, nor do they recognize or enforce judgements of foreign courts.
Due to lack of transparency it is impossible to determine if state-owned enterprises (SOEs) have been involved in investment disputes, and if so, what actions if any were taken by the courts.
Bankruptcy is addressed in the Eritrean Civil Code, however due to lack of transparency in the court system, it is impossible to determine what rights, if any, creditors, shareholders and holders of other financial contracts have in practice.