With the number of cases filed against Egypt for international arbitration rising, the government has been trying to avoid the potentially huge bills that could result from this situation. Alarmed by the number of cases filed and trying hard to improve the investment climate, the former Al-Beblawi government introduced amendments to the country's investment law. Some of these amendments raised controversy when they were announced last week by former minister of investment Osama Saleh, such as the article in the law that requires the approval of the minister of investment before investigation takes place into those accused of irregularities in work processes. The article also limits the right to challenge investment contracts to the government and the relevant investor. Saleh said that the total number of cases that have been settled by the Dispute Resolution Committee of the ministry of investment now amounted to 353. A further 80 real-estate investment disputes have been settled over the past three years. He said that the amendments to the investment law had been introduced in order to save investors from having to resort to international arbitration and to save the state from the possible consequences. These international arbitration cases had cost Egypt billions of dollars and could continue to do so in the future, he said. The amendments to the investment law had been sent to interim President Adli Mansour but had not yet been ratified, he added. Some have considered the amendments to be a way of reassuring foreign investors, but others have seen them as a way of signalling the government's dissatisfaction with international rulings over the cancellation of privatisation contracts made by the State Council over the past four years. If finally approved, the new law will close the door on lawsuits challenging privatisation contracts and the sale of public-sector companies or contracts for the allocation of land, such as has been the case for the Palm Hills, Omar Effendi, Tanta Flax, Nile Cotton Ginning and Shebin Spinning and Weaving projects, among others. Some years ago, administrative court and supreme administrative court rulings extended the area of interest in challenging government contracts to include all citizens interested in public affairs, especially after the verdict cancelling exports of natural gas to Israel in 2008. “It is a way of defending public funds. Any citizen who thinks that there is any sort of corruption in government contracts signed with investors, especially if the contract or concession was given by executive order and not through a bid or auction and if there are suspicions concerning the evaluation of the assets, then he or she has a right to challenge that contract,” Mohammed Adel of the Egyptian Centre for Economic and Social Rights (ECESR) said. “It is strange to have such decisions issued by the government in the wake of the 25 January and 30 June Revolutions in order to try to protect the crooked actions and wrongdoings of the former regime,” Adel said, describing the government's actions as a “clear regression” from the goals of the revolutions. “The government is trying to immunise itself from judicial control and to protect its former and future decisions from any public challenge. It is a form of manipulation on its part and is thanks to its controlling both the executive and legislative authorities,” he said. An elected parliament would not have approved the amendments, he added. Some judicial sources have also said that restricting the right to challenge the contracts contradicts the principles of the constitution, as expressed in article 97 that guarantees “the right to litigate on all cases and prohibits the immunisation of any administrative action or decision from judicial control.” However, as Egypt is one of the top four countries facing international litigation from foreign investors, other parties believe that the amendments could be the answer to what they have described as “chaos” as a result of people who have no interest in the cases other than the desire for fame or for political reasons going to court. Since the 25 January Revolution, foreign investors have filed more than 22 lawsuits against Egypt, according to the Washington-based International Centre for Settlement for Investments Disputes (ICSID). This is the leading international arbitration institution devoted to investor-state dispute settlements. “Before the 25 January Revolution, things were easier and the map was clearer. It was clear who to talk to in order to resolve issues, and investors want transparency and reliability. But since the Revolution transparency hasn't improved, and reliability has gone down as well. The decision-making process is not predictable either,” said one international lawyer who works with investors in Egypt. The courts have annulled contracts and invalidated land allocations without thinking about investor interests, the lawyer said, preferring to remain anonymous. The groups of people who can bring complaints against government contracts are much larger in Egypt than in any other country, he said. “This, in combination with legal actions filed by NGOs and business-minded lawyers, has led to the current situation where many contracts have been annulled, leading to international arbitration.” The international lawyer did not believe the new amendments to the investment law would solve the problems. “I don't think it will solve the situation while there is a lack of transparency and reliability,” he said. “If the quality of the decisions made by the government had been better, they would not have been so easily challenged.” Despite their apparent harm to public interests, successive governments have been keen on signing bilateral investment accords and free-trade agreements that restrain sovereign decision-making and the local courts. According to a report published by the ECESR in November 2013 entitled “Egypt and International Arbitration: Protection of the Investor and no Consolation for Public Money,” foreign investors are protected by such bilateral investment accords, in addition to the authority of the international arbitration courts over the local judiciary and its not taking local rulings into account. Bilateral investment accords give investors the right to disregard local courts, present cases against the state, and demand damages before courts specialising in investment issues, even if the investment is proven to be dishonest. “In the 1990s, Egypt wanted to attract more investments and realised that it needed to improve the legal framework in order to do so. As a result, it signed more bilateral investment treaties and presented the rule of law as a selling point,” the international lawyer said.
