Estructura interna del Departamento de Economía de la UPAAC Sus funciones.

The discussion of the issue of land institutions and the implementation of the provision of smallholder land rights would not be complete without examination of the manner of exercise and enforcement of those provisions by the smallholders themselves. It is particularly important to explore the question why most of the country’s smallholders continue to resort to the non-formal customary legal and institutional arrangements for the exercise and enforcement of their land rights rather than the formal state laws and judiciary composed of regular courts, including, for instance, the right to transfer their landholdings through lease, which is legal under both the formal state and non-formal customary land tenure systems. This Section will briefly examine the abovementioned question. In view of the purpose of the Section, the focus of the examination here will be the right of smallholders to transfer their landholdings through lease. That is because leasing is a right that requires smallholders and the judiciary to play an active role for its exercise and enforcement. It requires smallholders to conclude lease contracts, and the judiciary to adjudicate upon disputes arising in connection with such contracts. For example, during the Derg era, smallholders used non-formal rather than formal land laws to conclude land lease contracts and did not make recourse to regular courts for the adjudication of disputes due to restrictions imposed by law. Article 5 of the PMAC Proclamation 1975 prohibited smallholders from concluding contracts for the transfer land through lease. Moreover, Article 28 of the same Proclamation barred regular courts from adjudication of disputes arising over smallholder land rights. During the post-Derg period, however, those restrictions have been lifted. Federal and regional land proclamations issued as part of the post-Derg land law reform recognise the smallholders’ right to

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transfer or acquire land through lease.818 And Article 79 of the FDRE Constitution has declared that “Judicial powers, both at federal and state levels, are vested in the courts.”819

However, provisions of those proclamations and the Constitution bestowing upon the country’s smallholders the right to transfer their landholdings through lease and the judiciary exclusive judicial powers have been attenuated with restrictions and exclusions. To begin with smallholders, the exercise and enforcement of the right guaranteed for them to transfer or acquire land rights through lease validly by way of the formal legal and institutional arrangements is subject to compliance with several restrictions and preconditions. These restrictions and preconditions are attached to the identities of the lessor and the lessee, the purpose of the lease, the size of the landholding that may be legitimately leased out, and the length of the period during which the lease contract may remain valid.

First, a smallholder may lease out his landholding validly only if he has a holding certificate issued by the state as per Article 8(1) of the FDRE Proclamation 2005b and the SNNPRS Proclamation 2007 and Article 6(1) of the Tigray Proclamation 2007. Although it does not explicitly state if a smallholder needs to have a holding certificate in order to lease out his landholding, the Oromia Proclamation 2007 requires under Article 15(13) that when a smallholder landholding is leased out, the holding certificate shall be handed over to the lessee. This is a difficult precondition to fulfil not least because many smallholders do not have a holding certificate as the process of certification of smallholder landholdings has not been fully carried out or started at all in many parts of the country. Second, a smallholder is allowed to lease out only part of his landholding. That is, “in a manner that shall not displace” him as per Article 8(1) of the FDRE Proclamation 2005b and the SNNPRS Proclamation 2007, although it is not clear what that means. Article 6(1) of the Tigray Proclamation 2007 and Article 10(1) of the Oromia Proclamation 2007 stipulate more clearly that a smallholder may lease out not more than half of his landholding. Third, a smallholder may lease out his landholding only to another smallholder or an “investor”, for the purpose of “development”, and for a limited period of time. Pursuant to Article 8(1) of the FDRE Proclamation 2005b, a land lease contract may be concluded “for a period of time to be determined by rural land administration laws of regions based on particular local conditions.” According to Article 8(1) [a], [b], and [c] of the SNNPRS Proclamation 2007, the lease contract shall be valid for a period of up to five, ten, and 25 years where the

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Article 8(1)-(3) of the FDRE Proclamation 2005b and the SNNPRS Proclamation 2007, Article 10 of the Oromia Proclamation 2007, and Article 6 of the Tigray Proclamation 2007.

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landholding is leased out by a smallholder to another smallholder, any investor, and an investor cultivating perennial crops, respectively. The period during which the lease contract may remain valid shall be “not more than three years for those who apply traditional farming, and fifteen years for mechanised farming” as per Article 10(2) of the Oromia Proclamation 2007; and “up to 20 years where the lessee uses technology other than the traditional method of farming, and not more than three consecutive years where the lessee uses traditional method of farming” pursuant to Article 6(3) [a] and [b] of the Tigray Proclamation 2007. Fourth, the land lease contract must cumulatively fulfil the strict formality and validity requirements specified for transactions pertaining to immovable properties under the Civil Code of Ethiopia. According to the Ethiopian law of obligations governing contractual undertakings, contracts relating to immovables, including smallholder land lease contracts, must be made in writing. Moreover, they must be signed by all the contracting parties and attested by at least two capable witnesses.820 Fifth, the land lease contract may not be valid even if it has fulfilled all of the preceding strict formality and validity requirements. In addition, it must be examined, approved, and registered by the appropriate governmental authority as provided under Article 8(2) of the FDRE Proclamation 2005b and the SNNPRS Proclamation 2007, Article 10(3) of the Oromia Proclamation 2007, and Article 10 of the Tigray Proclamation 2007. In other words, the formal validity of a smallholder land lease contract hinges on an affirmative decision by a political appointee.

Clearly, those formality and validity requirements are onerous by any standards. But they are even more onerous given the practical situation of Ethiopian smallholders in terms of the so-called transaction costs, information asymmetry, financial means, and the like. Compliance with all those strict requirements cumulatively requires at least some form of basic literacy, information, knowledge of law, access to competent state institutions, money to conclude contracts, etc. None of these are at the disposal of the vast majority of the country’s smallholders. Ethiopian smallholders are not also accustomed to those requirements, as they traditionally conclude contracts, including land lease contracts, orally, which are valid and enforceable under the non-formal customary arrangements. The implication of the onerousness of those formality and validity requirements is critical. First, the requirements are vital for validity. That means, a smallholder land lease contract that has not fulfilled one of the requirements outlined above is void ab initio – null and void, or nonexistent in the eyes of the state and its formal legal system. Therefore, such a “contract” and any right or obligation that a

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