Egypt's newly approved investment law restricts the capacity of third parties to challenge contractual agreements between the government and investors. It also enables the dismissal of Administrative Court rulings retroactively and the possible dismissal of pending lawsuits and challenges. The law, issued on April 22, is designed to avoid the potentially huge costs of international arbitration, to comfort investors and to restore their confidence in Egypt's economy. Since 2011, legal challenges to privatisation deals sealed during the rule of ousted former president Hosni Mubarak have left investors in a legal jungle, with foreign investors complaining of the lack of protection for funds invested in Egypt. Egypt's economy has been seriously affected by three years of political mayhem that have left the country in desperate need of foreign investment, and this has not been encouraged by the spate of legal challenges. However, opponents of the new law claim that it will end the protection of public funds. At present, any citizen who believes that there is corruption in government contracts signed with investors, especially if the contract or concession is given by direct order and not through a bid or auction and if there are suspicions regarding the evaluation of assets, has the right to challenge that contract in court. This will be ended by the new law. On 3 May, lawyers for the Egyptian Centre for Economic and Social Rights (ECESR), a NGO, succeeded in obtaining a permit from the Administrative Court to start an appeal to the Supreme Constitutional Court on the constitutionality of the recent law, which has been approved by interim President Adli Mansour. Six privatised companies have already received rulings annulling contracts and reversing deals with investors, returning them to state control. The companies include Tanta Flax Seeds, Shebin Spinning and Weaving, Nile Cotton Ginning, the Arab Company for Foreign Trade and Omar Effendi. There are another 16 lawsuits pending before the Administrative Court. The lawsuits have been brought by the workers in these companies, together with activists and lawyers, who allege that the companies were sold off too cheaply in deals representative of the corrupt business practices current under former president Mubarak. The workers describe the new law as a step backwards, potentially threatening public investment and state rights. Attending a seminar held by the Egyptian Centre for Social and Economic Rights, Omar Mohamed, a worker in the Tora Cement Company, which was sold to Suez Cement, said that the new law was a way for the government to immunise itself from judicial control and protect its decisions from public challenge. “The privatisations of many public enterprises have been corrupt. Many of these companies were generating profits when they were sold, not losing money as officials alleged. Huge assets, lands and facilities, including 188 feddans overlooking the Nile in Helwan, were sold at cheap prices and hundreds of workers lost their jobs,” he said. He claimed that the year following the selling of his company the new investor registered LE1 billion in profits at a time when cement prices were still as low as LE180 per ton. Ihab Khalil a worker at Nobaseed, a formerly public company sold to Saudi investor Abdul Illah Khaki, condemned the new law, which revokes a court ruling annulling the contract between the government and the Saudi investor and returning the company to the state. “The contract was corrupt from the beginning. The assets of the company were estimated at LE214 million, but for some reason it was sold for LE3.25 million. The main intention of this contract was to buy the land owned by the company and sell it later on at sky-rocket prices,” Khalil alleged. When the court ordered the Saudi investor to return the company, it had assets of LE17 million. Two-and-a-half-years later, it has assets of LE37 million. Tanta Flax Seeds is the only company in the world where workers cultivate the flax on the premises, said Hisham Abu Zaid, a worker in the company. While the company was making profits it was also sold to Khaki in 2005. Abu Zaid said that workers in the company had managed to prove that the investor had misappropriated funds, causing him to be sentenced to two years in jail. “But the workers were pressured into giving up the case. The workers, who hadn't been paid for two years, agreed to take LE50,000 and to leave the company,” he added. The privatisation of Tanta Flax has been annulled and its ownership returned to the state, but this order has not been executed. ECESR lawyer Khaled Ali said that the new law closed the door on lawsuits challenging privatisation contracts and the sale of public-sector companies or contracts for land allocation, such as in the case of Omar Effendi, Tanta Flax, Nile Cotton Ginning, among others. He added that in all the cases that the workers had won it had been proven that the contracts were corrupt. “The turnover of these companies before and after privatisation proved that they were making profits, but they were sold as loss-making in clear violation of the privatisation law. Egyptian industry lost productive units as a result, and Egyptian workers lost their jobs,” Ali said. An elected parliament would not have approved the new law, Ali said. “To issue a law that has a retroactive effect, two thirds of the parliament has to approve it according to the constitution,” he said. 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.” “It is strange to see such laws issued by an interim government after a Revolution that wanted to protest against the crooked actions and wrongdoings of the former regime,” Mohamed Hamed of Alexandria Cement Portland said, describing the government's actions as a “clear regression” from the goals of the revolution.
