New Egyptian Investment Law: Eyes on sustainability and facilitation
At a time when the world is witnessing critical changes at the national and international levels in a new generation of investment treaties, laws, policies and regulations, Egypt contributed to this process through revamping its national and international legal frameworks regulating investment.
At the core of this contribution is the new Egyptian Investment Law No. 72 of 2017.[1] Replacing a 20-year-old law on investment guarantees and incentives, the new law signals an overt shift in investment policy from targeting quantity to quality of FDI, in line with the adoption of Egypt’s Sustainable Development Strategy (Egypt’s Vision 2030) in 2015.[2]
The new law promotes domestic and foreign investments that contribute to sustainable development and abide by responsible business conduct standards. It also provides for incentives and investment facilitation measures in a framework of balance between rights and obligations of investors and states.
Sustainable development: One of the main goals of investment in Egypt
This trend is made clear in the definition of “investment,” which entails “using money for the set-up, expansion, development, funding, holding, or management of an Investment Enterprise in a manner that contributes to the comprehensive and sustainable development of the state” (Art. 1). The same sustainable development dimension is reflected in the law as one of the main goals of investment in Egypt (Art. 2).
Principles governing investment in Egypt
The new law also identifies eight principles that should govern investment and apply to both the state and investors. These principles include (Arts. 3–8):
- Equality of investment opportunities and non-discrimination
- Supporting emerging companies, entrepreneurship and micro, small and medium enterprises (MSMEs)
- Consideration of the social dimension, public health and environment protection
- Freedom of competition, prevention of monopoly and consumer protection
- Compliance with principles of governance, transparency, prudent management and non-conflict of interests
- Maintaining stability of investment policies
- Expedition and facilitation of investors’ transactions
- Preserving national security and public interest
Guarantees and safeguards
The new law maintains fundamental safeguards provided for investors, including: general standards of treatment, entry and sojourn of foreign investors, protection against nationalization, unlawful expropriation or confiscation, warning before revocation or suspension of licenses, transfer of funds, right to appoint foreign labour force and enforcement of state contracts (Arts. 3–8).
Investment incentives
In addition, the law provides a bundle of general, special and additional financial and procedural incentives for investment. The special incentives, for example, support development-oriented enterprises on a geographic and sectoral basis. Investors may deduct from their taxable net profits 50 per cent of investment costs in Sector A and 30 per cent of investment costs in Sector B. Sector A includes the geographic locations that most urgently need development, while sector B covers all other areas in Egypt (Art. 11). Sector B targets enterprises operating in the sectors directly related to Egypt’s development plan, including labour-intensive sectors, export-oriented sectors, MSMEs, renewable energy, mega projects and a list of other sectors.
Investment facilitation
In terms of investment facilitation, a fundamental development was introduced regarding the Single Window: a one-stop shop was established at the General Authority for Investment (GAFI) in 2004. The new law created the Investor Service Centre to facilitate company incorporation and the issuance of approvals, permits and licenses for the set-up or management of investment enterprises and to provide aftercare services, among others, in conformity with Egyptian laws (Art. 21). On the same track, the law mandates the automation and unification of procedures related to incorporation and post-incorporation services, including Electronic Incorporation (Art. 48). Moreover, it provides that an Investor’s Manual covering the conditions, procedures and dates prescribed for the allocation of the real estate properties and the issuance of the approvals, permits and licenses related to investment must be made available on the website and publications of the competent authorities (Art. 19).
Corporate social responsibility
Supporting CSR, the law provides tax incentives for investors who dedicate a percentage of their annual profits to the creation of social development systems outside of their projects, including in areas such as environmental protection, healthcare, social care, cultural care, technical education, and research and development (Art. 15). To fight corruption, the law denies protection, safeguards, privileges and exemptions to enterprises established on the basis of deceit, fraud or corruption (Art. 3).
Dispute settlement
The law provides for multitiered mechanisms for the settlement of investment disputes, including domestic litigation, amicable settlement and alternative dispute resolution (ADR), and administrative review by three specialized committees:
- The Grievances Committee inside GAFI examines complaints filed against the resolutions issued in accordance with the provisions of the new law by GAFI or the authorities concerned with the issuance of the approvals, permits and licenses.
- The Ministerial Committee for Settlement of Investment Disputes looks into applications, complaints or disputes between investors or in which one of the state’s bodies, authorities or companies is involved.
- The Ministerial Committee for Settlement of Investment Contracts’ Disputes settles disputes arising from investment contracts to which the state or one of its bodies, authorities or companies is a party.
In addition, subject to the agreement between the state and the investor, the law allows for settlement through domestic or international ad hoc or institutional arbitration. Finally, the law establishes an independent centre—the Egyptian Arbitration and Mediation Centre—for the settlement of disputes between investors or with governmental entities (Arts. 82–91).
Relationship between the new law and treaty reform
The important step of issuing a new investment code expresses the intention of the Egyptian government to adopt a new generation of investment regulations at the domestic level to complement and conform to its efforts to revamp its IIAs network, especially BITs.
Egypt’s efforts to reform the international legal framework governing foreign investors in Egypt have been in place since the creation of an Egyptian BIT Model in 2007 and its subsequent updates. The BIT model serves as a roadmap for investment negotiations aimed at achieving consistency in the substantive content and language of Egyptian BITs, attracting FDI that fosters sustainable development, maintaining balance between the rights and obligations of investors, reducing the number of treaty-based disputes, and developing an effective and flexible mechanism for the settlement of investment disputes.
Author
Moataz Hussein, PhD is Senior IIAs Specialist at the General Authority for Investment (GAFI), the Egyptian Ministry of Investment and International Cooperation (MIIC). The views expressed by the author do not necessarily reflect the opinion of the GAFI.
Notes
[1] Egyptian Investment Law No. 72 of 2017, published in the Official Gazette on May 31, 2017, Article (1). Retrieved from http://www.gafi.gov.eg/English/StartaBusiness/Laws-and-Regulations/PublishingImages/Pages/BusinessLaws/Investment%20Law%20english%20ban.pdf
[2] http://www.cabinet.gov.eg/English/GovernmentStrategy/Pages/Egypt%E2%80%99sVision2030.aspx
