Egyptian Investment Law Axing Proxy Litigation Harmful to Citizen Rights

2014-04-17    |   

Egyptian Investment Law Axing Proxy Litigation Harmful to Citizen Rights

Days before its resignation on February 24, 2014, the Beblawi cabinet announced its intention to amend Egypt's investment law. The change would limit the right to challenge sales contracts of public sector companies concluded between the government and investors, by limiting that right [of challenging these contracts in court] to the two parties to the contract.[1] By the time the government resigned, the proposed amendment was not submitted to the State Council’s legislative department for its review.[2] The new government led by Ibrahim Mahlab has recently approved the law.

The Right to Litigation: A “Luxury” Withheld From the Citizen

During the rule of former President Husni Mubarak and afterwards, a number of lawyers -most notably, those working with the Egyptian Center for Economic and Social Rights (ECESR)- have filed lawsuits before the State Council challenging the sale of certain public sector companies to investors. This practice is generally referred to as “privatization” (al-khas-khasa). In doing so, the lawyers were acting as proxies for the workers of those companies. The actions taken by the ECESRs lawyers did result in court rulings annulling contracts of sale. For example, on September 21, 2011, the Administrative Judicial Court issued a ruling annulling the contract privatizing the Tanta Flax company.[3]

Apparently, workers resorting to the judiciary for damages as a result of these sales, issuing judicial rulings annulling these contracts, and returning companies to the state, were all seen by state authorities as impediments to investment activity in Egypt. Hence, rather than enter into sound contracts of sale that would protect public money and preserve workers’ rights, the government -in the name of attracting investment- considered barring citizens from challenging these contracts in court.

The proposed amendment, which had also been discussed by the previous cabinet, stipulated that “the right to litigation before the courts regarding lawsuits concerning the sale of public sector companies is reserved to the state and to the parties with which it has contracted, and third parties will not be able to challenge such contracts”.[4] In doing so, the cabinet proposed immunizing contracts that it enters into from being challenged, in violation of Article 97 of the 2014 Egyptian Constitution, which states the following:

“Litigation is a right that is safeguarded and is an inalienable right for all. The State shall guarantee the accessibility of judicature for litigants and rapid adjudication of cases. It is prohibited to immunize any administrative act or decision from judicial review.”

This effectively aims to prohibit individuals with an established personal interest from filing a lawsuit (in accordance with the legal principles of the State Council), from doing precisely that. It is a clear violation of legal principles and the rule of law.[5]

Shielding the Government and Investors From Accountability: Revolutionary Justice?

This proposed amendment to the investment law is not the first one aimed at granting government officials immunity and protecting investors. In 2012, the Supreme Council of the Armed Forces (SCAF) amended the investment law to authorize settlements with investors, as long as no final judicial ruling had been issued against them. The settlement allowed for the restitution of “all funds, possessions, property, and real estate under dispute, or, when it is not possible to return them in kind, the equivalent of their market value at the time of the disputed transaction”.[6] To that end, the amendment also stipulated the formation of a committee for the purpose of resolving disputes resulting from contracts concluded between parties affiliated with the state or with investors.[7]

In addition, there have been discussions in recent months concerning a proposal to issue a law that has been referred to in the media as the law of “good intention”. This law would grant immunity to any government official who enters into an investment contract so long as there was no evidence of “ill intent”.[8] However, due to objections on the part of many, no draft of this law has come to light. Likewise, since the revolution, the successive Egyptian cabinets have been slow to enforce judicial rulings that annul contracts of sale of public sector companies.

All of the above calls for reflection on the governing trends of the Egyptian government and its investment policies after the revolution. It also calls for guarding against any amendments to the investment law, particularly concerning the guaranteed citizen’s right to litigation. If unchecked, such amendments could lead to the immunization of both government officials and investors from legal challenge, and consequently, facilitate the continued waste of public funds and systemic corruption that the State Council has condemned in multiple rulings.

This article is an edited translation from Arabic.


[1] This information was published on the website of El-Shorouk news on February 24, 2014.

[2] According to Article 190 of the Egyptian Constitution, the executive branch must send laws and decrees of a legislative nature to the State Council for review and drafting before they are issued as laws.

[3] See: “In the Name of the People: Notable Strategic Judicial Rulings of the Egyptian Center”, prepared by Khaled Ali and Alaa al-Din Abd al-Tawab, published by the Egyptian Center for Economic and Social Rights.

[4] See, for example, Yosri Fouda’s television program Akhir Kalam, episode aired on February 26, 2014.

[5] The condition of “for the sake of personal interest” is mandatory to bring a lawsuit before the judiciary, as stipulated by Article 12 of the law of the State Council.

[6] See Article 7 of the investment law, as amended by Law No. 4 of 2012, issued on January 3, 2012.

[7] See Article 66 of the investment law, as amended by Law No. 4 of 2012, issued on January 3, 2012.
[8] According to the statement of lawyer Khaled Ali on Yosri Fouda’s program Akhir Kalam, episode aired on February 26, 2014.

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