Case Brief: Bank of Ethiopia Vs. National Bank of Egypt and Liguori

Brief Facts:

The Bank of Ethiopia was established in accordance with Ethiopian law in 1931. According to its constitution, a board of management would consist of ten members, six of whom would be chosen by the Ethiopian government, who will own six-tenths of the capital, and four by the holders of the remaining capital. It seems that the Ethiopian Empire had only one bank.

The bank operated branches across the nation and forwarding service in Djibouti, which was on French soil. When the bank was established, Mr. Collier was named governor and it appears that he actually managed its operations.

Strangely, the bank’s constitution establishes the position of the governor but does not specify the governor’s responsibilities or powers. Instead, it seems that the board of management, which, according to the documents meets at the company’s “siège social” in Addis Ababa and must have a quorum of five members to conduct business, has complete authority over the bank. A member of the board who is absent from meetings for six months is removed from office.

Mr. Collier left Addis Ababa in April 1935 on a six-month leave of absence for Europe, where it appears he was operating on behalf of the bank and (it would seem) of the government in regards to the provision of war-like personnel and in anticipation of an apparent beginning of hostilities between the Ethiopian Government and Italy. Mr. Wright, who formally formed a member of the board in February 1936, was left in charge of the activities of the bank in Ethiopia. In reality, hostilities started in the autumn of 1935. 

After Addis Ababa fell under the control of Italy on May 5, 1936, the Italian authorities originally permitted the Bank of Ethiopia to carry on with its regular operations because they required some time to decide the Bank’s future.

They were in front of the Horn of Africa’s financial system’s target structure. On the other hand, the position calling for Ethiopia’s complete integration into the metropolitan banking and monetary system, as well as the integration of other Italian possessions in East Africa, necessarily implied the liquidation of the Bank of Ethiopia. This position was primarily based on political concerns of the Fascist regime, which ultimately prevailed.

The Italian decree was disseminated to dissolve the Bank of Ethiopia, after the 1936 invasion of Addis Ababa. That bank claimed certain accounts and orders against the National Bank of Egypt and against the liquidator appointed under the Italian decree.


It was directed to be tried whether the Bank of Ethiopia had been dissolved or had otherwise ceased to exist, and, if not, whether it had authorized the bringing of the action/filing of a lawsuit.


Clauson, J. was confronted with this problem in this case following and applying Luther v. James Sagor & Co., which held,

  • 1) That the Bank of Ethiopia had been dissolved by the Italian decree, which was the act of a de facto government in entire control of the territory occupied and therefore having complete governmental control over that territory. 
  • 2) That the action, having been brought otherwise than by the liquidator’s authority, had not been authorized by the Bank of Ethiopia. 

It was interpreted that the de facto government “must for all purposes, while continuing to occupy its de facto position, be treated as a duly recognized foreign sovereign state,” whilst the de jure monarch has merely “some right (not in fact at the moment enforceable) to reclaim the governmental control of which he has in fact been deprived” declaring the de facto government status of a fully responsible government.


In times of civil conflict, two governments—one recognized de facto and the other de jure—claim sovereignty over the same region. In such cases, the courts may be compelled to consider the administrative and legislative acts of one party as being legitimate rather than the other party’s acts.

This Court is bound to treat the acts of the government that His Majesty’s Government recognizes as the de facto government of the area in question as acts that cannot be impugned as the acts of a usurping government, and conversely, the Court must be bound to treat the acts of a rival government claiming jurisdiction over the same area, even if the later administration is acknowledged by His Majesty’s Government as the de jure ruler of the region, it will still be treated as a mere nullity and won’t be considered in any way by his Majesty’s Courts.

The principle is that the latter’s acts regarding people and property in the ruled territory will be disregarded and treated as void by the courts of this nation, while the former’s activities will be recognized and given effect. The legality of actions involving people or property in Ethiopia is unrelated to the current case. It is about the ownership of an actionable debt that can be recovered in England.


This case laid down the principle important in public international law that to be a de facto government, the government must have effective control over the territory.

This provided a clear distinction as to the authority of de facto and de jure governments. As in this case, the judge reasoned that the government of Italy was a de facto government in entire control of the territory occupied and therefore had complete governmental control over that territory.


  • Bank of Ethiopia v. National Bank of Egypt and Liguori. (1937).  The American Journal of International Law, 31(4), 742–747.
  • International Law Reports, Volume 9 By Elihu Lauterpacht 1942, Page 98
  • Research Gate, The Short Life of the Bank of Ethiopia by Arnaldo Mauri, University of Milan
Author: Madhvi Patidar

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