Abstract:
In a contemporary world, investment is one of the main sources of economic development.
Countries use investment guarantees as a method to promote investment. There are many types
of investment guarantee standards, and one of them is the “sound full protection and security”
standard, particularly in situations of political violation. The standard suggested that the state is
under an obligation to take active measures to protect investments and investors from adverse
effects. Thus, the main objective of this study was to critically examine the protection of domestic
investments during political risk under the Ethiopian investment law. The results of this study
show that domestic investors in Ethiopia face the risk of political violence. Although most
foreign investors (especially BIT-protected ones) have the opportunity to protect their
investments against political violence through different mechanisms, there are no formal or rule based compensation methods for domestic investors. Ethiopian law has made provisions for
protection against expropriation and currency risk; however, it has failed to provide protection
against political violence. The findings also indicate that there is no clear political violence risk
protection mechanism to protect the investments of domestic investors in Ethiopia. Based on the
past and present situation of political instability in the country and future possible impediments
that other countries experience, the researcher recommends that the state regulator should
consider establishing a political violence insurance market group at the national level as well as
incorporating comprehensive security and protection standards into the regulatory framework to
promote and protect domestic investments in Ethiopia.
