The government last week approved a draft investment law that prevents third parties from challenging contracts made between the government and investors, two government officials said. The move came in an attempt to invigorate the country's faltering economy, which has been struggling to attract investment after three years of political turmoil that has scared away some investors and tourists. By approving this law, the government is trying to bring back foreign investment and to reassure investors who have been anxious about legal challenges to investment deals. Gulf Arab businessmen, for example, have been holding back on their investments in Egypt, attributing this to the lack of guarantees that their money will be safe. “The cabinet approved today a draft law that limits appeals on contracts between the government and investors to the parties involved only,” one of the government officials told Reuters. Since the 25 January Revolution, Egypt's courts have issued at least 11 rulings ordering the state to reverse deals signed during former president Hosni Mubarak's tenure. A number of foreign firms, including Mexican cement giant CEMEX, are locked in protracted appeals processes against renationalisation, while the London-listed gold-miner Centamin has been in the courts for months over its mining licence in Egypt. A number of real estate developers have been facing legal challenges to their land holdings as well. The lawsuits have been filed by activists and lawyers who have challenged investment deals that allegedly sold state companies at cheap prices and gave real estate companies land through illegal direct allocation. The new law will close the door on such lawsuits. 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. The new law may spare Egypt a string of international arbitration cases that could cost it billions of dollars. A recent report by the Egyptian Centre for Economic and Social Rights (ECESR), an NGO, showed that Egypt was one of the top four countries facing international litigation from foreign investors. According to the Washington-based International Centre for Settlement for Investments Disputes (ICSID), foreign investors have filed more than 22 lawsuits against Egypt since the Revolution in 2011. Shehata Mohamed Shehata, a lawyer and director of the Arab Centre for Integrity and Transparency, an NGO, said that the amendments to the investment law would only be acceptable should needed guarantees be attached. He said that investment contracts should be fair and balanced and should include setting fair prices for state land and hefty deterrent penalties to prevent violations of contracts. However, Shehata said that these conditions were unlikely to occur because hefty penalties would require amendments to the criminal law and amendments to the freedom of information law that would enable lawyers to look though contracts signed between the government and investors. These are currently undisclosed in the interests of fairness. “Without these guarantees, the amendments to the investment law will unfortunately legalise the past corrupt deals as well as any future ones,” Shehata told Al-Ahram Weekly. He added that the law could be unconstitutional because the constitution refers to the sanctity of public funds and authorises all citizens to protect them. “That's why we as lawyers are challenging certain contracts in order to preserve the rights of the state and people,” he added. Shehata pointed out that the law contradicted article 97 of the new constitution that guarantees “the right to litigate on all cases and prohibits the immunisation of any administrative action or decision from judicial control.” He said that it would have been preferable if the government had postponed the law until a new parliament was elected, because “parliaments give legitimacy to laws.” “This law has come just in time. Egypt is in dire need of investment,” said one businessman who preferred to remain anonymous. He said the law was crucial for investors to feel safe about their investments, though they would also need to see political stability before injecting sizable amounts of money into the country. To ramp up investment, successive governments have been keen on signing bilateral investment treaties (BITs), which restrain sovereign decision-making and the local courts. In its report entitled “Egypt and International Arbitration: Protections of Investors, No Consolation for Public Money,” the ECESR slammed the BITs, saying they opened the door of international courts to investors, in turn guaranteeing them rights regardless of the laws of the country and allowing them to seek international arbitration. The report criticised the exceptional measures such agreements allowed to protect foreign investors, such as the right to disregard local courts, present cases against the state, and demand damages before courts specialising in investment issues, even if the investments were proven to be dishonest. The amended 70-article investment law, number eight of 1997, was initially approved in February by the former government of Hazem Al-Beblawi. Former investment minister Osama Saleh said that the total number of cases that had been settled by the ministry's Dispute Resolution Committee was 353 and that an additional 80 real-estate investment disputes had been settled over the past three years. Saleh 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.
