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Chapter 3. Legal framework for investment


This chapter provides an overview of Egypt’s legal framework for the protection of investment. It takes stock of the investment policies in force and examines the level of regulatory protection granted to both domestic and foreign investors since the enactment of the 2017 Investment Law, which constitutes a milestone in Egypt’s recent efforts to reposition itself as an attractive and safe investment destination. The chapter looks into the rules for property protection, access to land and investor-state dispute settlement, and reviews its international investment treaty practice. It also explores Egypt’s efforts to establish a corporate governance framework for state-owned enterprises, which play a major role in the country’s economic landscape.

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Summary and policy recommendations

The government of Egypt is putting strong emphasis on adopting more modern investment legislation and regulations for investment. The new Investment Law, promptly followed by a modernised Companies Law, marked an important milestone in efforts to provide a safer and more consistent regulatory environment for foreign and domestic investments. Yet, further reform endeavours are required to endow Egypt with clear and transparent regulatory and institutional frameworks governing business and investment activities. For clarity and predictability purposes, and to avoid legal loopholes, implementing regulations should also follow more promptly the enactment of new legislation. Likewise, a more uniform and harmonised implementation of these regulations across the country would greatly enhance the enabling environment for investment.

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Policy recommendations
  • The application of administrative procedures should be more consistent across all governorates and relevant public authorities. Strong, regular and transparent institutional cooperation mechanisms, including between central authorities and special economic zones, need to be put in place on a more regular basis to provide for a more efficient administration of investment activities.

  • One of the main avowed purposes of the new Investment Law was to create a more robust infrastructure for preventing and managing investment disputes. Despite the creation of new dispute settlement bodies, the current institutional setting for the resolution of investor-state disputes appears overly complex and might therefore not serve its purpose in the most efficient way.

  • Egypt has a vast network of international investment treaties. Bearing in mind the existing scope for treaty shopping, Egypt should consider reviewing and considering possibilities for renegotiation, clarification and exit of investment treaties. Treaties with vague provisions concluded in the past may lead to undesirable interpretations in ISDS disputes. Egypt should consider taking steps to update these treaties to bring them in line with government intent, Egypt’s current priorities and more recent practices in investment treaty policy.

  • GAFI, the Ministry of Justice and the Ministry of Foreign Affairs should continue to develop Investor-state Dispute Settlement (ISDS) dispute prevention and case management tools. Egypt may also wish to consider efforts to raise awareness about Egypt’s investment treaties and the significance of Egypt’s international obligations under these investment treaties for the day-to-day functions of different government agencies and officials that regularly interact with foreign investors.

  • The complex landscape of public land ownership, and myriad approvals required to allocate land to investors, means that a substantial gap remains between land demand and supply in Egypt. The centralisation of investor requests for land under GAFI is an important improvement that appears to have enabled faster distribution of state-owned land to firms. But the government could consider taking further steps to centralise the allocation of land to investors, such as empowering one agency to allocate all publicly owned land, regardless of its sectoral use. More immediately, coordination between the many different government landowners should be significantly strengthened. GAFI’s success in directing investors to the appropriate government landowner will depend on close intra-agency cooperation.

  • Short of a complete inventory and mapping of public land ownership, coordination challenges between agencies allocating public land are likely to persist. A complete registry would assist both GAFI in facilitating investment and firms in their location decisions. The Investment Map is a good step in this direction. Agencies could make public more comprehensive maps of land within their control, rather than only a selection of land available in zones, as is shown on the Investment Map.

  • The government has taken substantial measures to improve standards of corporate governance for state-owned enterprises. Yet, the current dual regulatory system, under which only a subset of firms adhere to good corporate governance practices, falls short of levelling the playing field between SOEs and their private sector competitors. The government could do more to apply standards to all state-owned enterprises and take steps to minimise the market distortions of publicly-owned firms.

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The domestic legal framework for investment protection

The Investment Law is central to business regulation

The degree of openness encountered by investors when establishing in Egypt, and the conditions they face in their on-going operations, is only one part of a broader investment environment. The protection of property, contractual rights and other legal guarantees provided to investors both in domestic legislation and in international agreements, combined with effective enforcement mechanisms and guarantees of access to efficient dispute settlement mechanisms are key building blocks of an enabling investment climate. When procedures for establishing investments and enforcing contracts are perceived as cumbersome and lack predictability, or when disputes cannot be resolved in a timely and cost-effective manner, investors may restrict their activities or refrain from engaging in the country. Providing strong, clear and predictable guarantees of legal protection for investors and offering reliable dispute resolution mechanisms are fundamental to reinforce investors’ confidence. Enforcing regulatory reforms to set the conditions for a healthy and sound investment climate is a key priority in Egypt, where the business climate has considerably suffered from the economic and political turmoil in recent years.

Egypt has a long-standing tradition of economic liberalism and openness to foreign direct investment, which, coupled with a strong legalistic culture, has given rise to a succession of laws regulating investment.

The national programme of economic liberalisation, or Infitah, was introduced with the 1971 Law on Arab Capital Investment and Free Zones, the first ever legislation dedicated to investment in Egypt. The law provided legal guarantees and incentives and marked the establishment of the Investment and Free Zones Authority, which preceded GAFI. It also opened up to foreign investments from non-Arab countries. Partly hindered in its application by a number of inconsistencies in its provisions, it was abrogated in 1973 and replaced by the 1974 Law on Arab and Foreign Capital Investment and Free Zones, which provided a more comprehensive and coherent legal framework for investment.

The 1974 law broadened the scope of sectors opened to private investments and provided more incentives and guarantees to investors, hence signalling the government’s willingness to take a pro-investment stance. Yet, the implementation of the law faced a number of challenges, mainly due to the vagueness of the provisions determining the scope of sectors open to private investment, including foreign investment, as well as of the provisions on applicable exchange rates and on incentives. In recognition of these weaknesses and of the subsequent lack of legal certainty for investors, the government adopted yet another new investment law, enacted in 1977. The amendment clarified the list of sectors open to foreign investment, introduced several dispute settlement options, including arbitration, and repealed procedural obligations for investment projects required by the then Company and Labour laws. Further amendments were introduced with the adoption of the Law No. 230 of 1989, which was subsequently repealed by a new Law on Investment Guarantees and Incentives, issued in 1997.

The 1997 legislation widened the scope of activities open to private investment and further relaxed the incorporation requirements for investing companies. It also reinforced the protection of investments against expropriation, with an explicit protection against “creeping expropriations” that may occur through administrative measures.

Recent regulatory amendments are improving the legal environment

The pace of reforms has accelerated over the past few years towards a modernised regulatory and institutional environment for investment. The aftermath of the 2011 events and of the subsequent political turmoil, during which numerous arbitration cases were brought against the state of Egypt, prompted the authorities to take steps to reposition Egypt as a safe investment destination. To respond to the pressing need to send a positive signal to both prospective and already established investors, the government introduced in 2015 substantial amendments to the 1997 Investment Law. The purpose of the in-depth revision of the law was to attract new investments to Egypt through more generous incentives and stronger guarantees, along with a streamlining of administrative obstacles and procedures.

The amendment brought substantial improvements to the core provisions of the investment legislation. It clarified and strengthened the role of GAFI as a one-stop-shop for investors operating in most sectors and streamlined the system for allocation of state land, pricing and zoning to clarify the institutional infrastructure governing the allocation of land outside of special economic zones. It also reaffirmed the core legal protections granted to investors and brought about a major change in the treatment of foreign investors by relaxing the available options to access dispute resolution mechanisms. In response to Egypt’s increasing exposure to investor-state arbitration, a new dedicated chapter established three out-of-court committees to favour the amicable settlement of disputes between private investors and public institutions.

This first step on the path toward a more enabling regulatory and institutional environment for investment nevertheless gave rise to some criticisms from the business community. The initial delays in adopting the implementing regulations, without which the legislative provisions remained too vague to be effectively enforced, hindered the expected impact of the amendment. Pending the adoption of the implementing decrees, the level of guarantees provided by law remained uncertain and led the business community to adopt a “wait-and-see” position that did not enable the economy to get off the ground as quickly as expected.

Following the lukewarm reception of the 2015 amendment, and in a renewed attempt to signal the pro-investment stance of the government, MIIC and GAFI introduced a new investment law, issued by Law No. 72 of 2017, which formally replaced the Investment Law No. 8/1997 and its subsequent amendments. It was promptly followed by the adoption of the corresponding Executive Regulations in October 2017. With this latest reform, the government marked a major milestone and reaffirmed the strong political will to improve further the business environment and the competitiveness of the country. The substantive content of the new law was hence enriched, while retaining most of the main changes introduced by the 2015 amendment.

The formal adoption of a new law and the repeal of the previous legislation marked an important symbolic step that initiated a wider reform process to spur investment. It also improved the clarity of the overall investment regime by consolidating within a single piece of legislation the investment rules that were scattered under various laws and regulations.

The new law focuses on addressing the obstacles to investment and overcoming major procedural and substantive problems faced by investors. The amendment also introduced both a set of additional incentives and an explicit principle of social responsibility of investors.

One of the main goals of the amendment was to set the foundations for a clearer and more streamlined framework for investments, by prohibiting the application of ad hoc fees and financial and procedural requirements to specific projects unless such requirements are based on the opinion of GAFI’s Board of Directors and of the Supreme Council of Investment. In the same vein, it is by virtue of the law that GAFI was given the mandate prepare an investment map in coordination and cooperation with all concerned state authorities and to be updated every three years. The law also gave authority to the Supreme Investment Council, headed by the President of the Republic, to develop a legislative and administrative reform plan for the investment environment and to approve policies and investment plan setting priorities for targeted investment projects.

Meanwhile, the 2017 amendment also introduced a set of additional advantages and incentives. It grants non-Egyptian investors residence in Egypt (Art. 3.4), and its executive regulations provide for additional guarantees for foreign employees. As further described in Chapter 4, in the same effort to shed light on available opportunities and advantages available to investors, the law provides for the development of an investment map that defines the investment type, regime, geographic areas, and sectors, in addition to the real-estate properties owned by the State or other public legal persons which are prepared for investment, and the arrangements and manner of disposal of such real-estate properties pursuant to the type of the investment regime (Art. 17).

Another prominent aspect of the amendment, as further developed in Chapter 7, is the emphasis given to the principle of investors’ social responsibility. The new law authorises the investor to allocate a percentage of his annual profits to be used for establishing a social development system outside his investment project, through participating in one or more of the following areas: environmental protection, provision of health, social or cultural care services and programmes, supporting technical education or funding research, studies and awareness campaigns aimed at developing and improving production, as well as training and scientific research. The amount spent by the investor in one of these assignments is deductible in the application of the provisions of the Income Tax Law (91/2005).

In the same impetus for reform, the government adopted several key laws governing business activities. The Collateral Registry Law (115/2015) eased the use of movable assets as collateral by businesses and established an electronic collateral registry. In 2018, the revision of the Companies Law (159/1981) substantially enhanced the investment environment by broadening the scope of available corporate structures and providing the possibility of establishing sole person companies in Egypt. The Law on Streamlining Industrial Establishments Licensing (15/2017) was a long-awaited improvement to the existing licensing system, and the Law on Restructuring, Preventive Reconciliation and Bankruptcy in Egypt (the Bankruptcy Law, 11/2018), introduced, for the first time in Egypt, a non-jurisdictional restructuring mechanism for bankrupt businesses. The Law also gave authority to judicial courts to enforce restructuring plans for businesses and created a court-supervised mediation system.

This comprehensive set of reforms, together with the new Investment Law as amended by Law No. 141 of 2019, which streamlines and reinforces the administration of investment projects, forms a more coherent and enabling legislative corpus to reinforce investors’ trust in the stability and certainty in the Egyptian regulatory and institutional ecosystem.

The business and the international community have praised this wave of legislative reforms, but have also called for further efforts to improve Egypt’s image as an investment destination. Despite a now comprehensive set of well-drafted laws, the legal environment still suffers from a perceived lack of predictability.

The implementation of the provisions of the law and of the new mandate of GAFI is sometimes challenged by administrative practices, notably at governorate level. At central level, further coordination across ministries and public agencies, both in the policy-making process and in the operationalisation of reforms would also allow the existing investment regime to achieve its potential. GAFI’s recent affiliation to the Egyptian Council of Ministers, by virtue of the Prime Minister Decree 38/2020, is expected to substantially enhance effective cooperation with all the government bodies in order to facilitate investment services.

Investors are protected by strong de jure guarantees of property rights

Egypt’s domestic legal framework grants de jure property rights protections to investors that are consistent with high, modern standards of protection. The protection of investors’ rights is recognised at constitutional and legislative levels, and, notwithstanding the application of bilateral investment treaty provisions, the same degree of legal protection and available incentives is granted to foreign and domestic investors.

The Investment Law provides the full spectrum of investment guarantees and protection standards that are required to provide a safe de jure regime for investors. It contains a provision granting fair and equitable treatment to both foreign and Egyptian investors, and a guarantee that the invested capital cannot be subject to any coercive or discriminatory measures.

The 2017 Investment Law provides protections against nationalisation and expropriation (Article 4). It also guarantees against sequestration and seizures, as well as the confiscation and freezing of property, except under court order. The state can only expropriate property for “public utility”, with fair compensation and in a prompt manner. The law stipulates this value “shall equal the fair economic value of the expropriated property on the day preceding the expropriation decision date” (Article 4). Meanwhile, Article 6 of the Law 10 of 1990 on expropriation of real estate for public interest, amended in 2018, provides that the compensation is estimated at the rates prevalent at the time of the expropriation decision plus 20% of the estimated price. Seizure of capital is only allowed by virtue of a court judgment, except for tax and social insurance contributions. Likewise, licences granted and state-owned land or property allocated to an investment project cannot be withdrawn without prior notice given by GAFI.

“Public utility” is not defined in the Investment Law or in the Law on expropriation of real estate for public interest. Reports suggest that in practice, different government agencies have adopted different criteria for expropriation (of primarily informal settlements) in the public interest (Wang, 2017[15]). The large amount of informal housing, coupled with low registration, increases the likelihood of cases of expropriation of informal settlements. This is particularly the case in cities, where more than half of residents live in informal housing. Anecdotal evidence suggests that residents in these cases are compensated, but it is not clear who determines their remuneration and how this is calculated (El Rashidi, 2018[22]).

As for ISDS cases, most of the expropriation cases pending before ICSID arbitral tribunals relate to political instability between 2011 and 2014 and were caused by the cancellation of sales of state-owned assets.

The Investment Law also details procedures for the state to recover land in the case of a breach of contract. If an investor commits a material breach of the terms of the contract, and does not rectify this after receiving written notice, GAFI may withdraw real-estate properties allocated for the project. The state can also recover property if: the investor does not receive the property within 90 days; it does not start the project within 90 days (if there are no obstructions and without reasonable excuse); it violates conditions of payment; or it changes the purpose for which the property was allocated (Article 67). In all cases, GAFI must inform the investor of the violations, allow the investor to comment, and give “an adequate grace period to rectify the causes of the breach” (Article 5).

A comprehensive yet complex framework for protecting intellectual property rights

The legal regime for protecting intellectual property (IP) rights comprises several pieces of legislation, including the 2002 Intellectual Property Rights Law, which unified former IP laws to bring Egypt's legal IP regime in line with its obligations under the WTO Trade-Related Aspects of Intellectual Property Rights (TRIPS) Agreement. The adoption of Law (15/2004) on E-signature and the Establishment of the Information Technology Industry Development Authority (ITIDA) completed the new legal arsenal for a more up-to-date system of IP protection.

ITIDA is a public authority affiliated to Ministry of Communications and Information Technology, which aims to “develop Egypt’s competitive advantages as a one-stop shop for foreign direct investors seeking to enhance their global offering and providing the Egyptian IT industry with the right tools to increase IT/ITES exports.” ITIDA has the authority to deposit, record, and register the original software and databases submitted by entities or individuals, who publish, print, and produce thereof in order to protect copyrights and other rights.

More recently, the 2014 Constitution reinforced IP rights (art. 69), providing that ‘‘the state shall protect all types of intellectual property in all fields”. It established a “specialised body” to uphold the rights of Egyptians and their legal protection, as regulated by law.

Egypt is party to the main international conventions on IP rights, such as the Berne Convention on Copyright, the Paris Convention on Industrial Property and the Madrid Agreement. The government developed an IP Rights Action Plan to bring its IP system in line with the WTO’s Trade-Related aspects of Intellectual Property Rights (TRIPS) commitments. There is a strong awareness, at the highest level of the government, of the immediate benefits of having a robust IP policy (Box 3.1).

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Box 3.1. The benefits of IP rights in developing countries: The shifting debate

Traditionally, a limited number of developed countries in which a high proportion of the world’s R&D was concentrated were the main “demandeurs” of strong IP rights internationally. Four recent developments are helping to broaden acceptance of the benefits of intellectual property rights.

More firms in more developing countries are now producing innovative products and thus have a direct stake in the protection of intellectual property rights. In Brazil and the Philippines short-duration patents have helped domestic firms to adapt foreign technology to local conditions, while in Ghana, Kuwait, and Morocco local software firms are expanding into the international market. India’s vibrant music and film industry is in part the result of copyright protection, while in Sri Lanka laws protecting designs from pirates have allowed manufacturers of quality ceramics to increase exports.

A growing number of developing countries are seeking to attract FDI, including in industries where proprietary technologies are important. Foreign firms are reluctant to transfer their most advanced technology, or to invest in production facilities, until they are confident their rights will be protected.

There is growing recognition that consumers in even the poorest countries can suffer from the sale of counterfeit goods, as examples ranging from falsely branded pesticides in Kenya to the sale of poisoned meat in China attest. Consumers usually suffer the most when laws protecting trademarks and brand names are not vigorously enforced.

There is a trend toward addressing intellectual property issues one by one, helping to identify areas of agreement and find common ground on points of difference.

Source: (OECD, 2015a).

Strong legislative and political efforts have been made in the past 20 years to meet the standards required under Egypt’s international commitments, but the domestic IP regime still lags behind and the enforcement of IP legislation continues to be perceived by the private sector as inefficient. IP rights are enforced in Egypt through a wide array of administrative and judicial institutions. Despite the creation, by virtue of the 2014 Constitution, of the high-level IP body, the institutions remain poorly equipped to enforce the protection of IP rights. Further political impetus and greater financial resources are needed to streamline the administration of IP rights and to meet the international standards that Egypt has committed to implement. The body created by the Constitution could hence play a greater coordination role to orchestrate the various responsibilities and powers scattered across public bodies and ministries.

Within the judiciary, the economic courts are specialised in disputes related to intellectual property, and judges are regularly trained on IP law enforcement. Parties have the obligation to seek amicable settlement first, by filing their case with the Economic Courts Preparation Panel. Meanwhile, arbitration remains available as a way to settle an IP dispute, in the event the concerned parties have mutually agreed to recourse to alternative dispute resolution mechanisms. Yet, the management and settlement of IP cases by Economic Courts is reported to remain too lengthy.

Access to dispute settlement and prevention

The national justice system has a fundamental role to play in reinforcing competitiveness and robust economic growth in Egypt. Its efficient functioning is key for setting the conditions for a healthy and competitive business climate. The judiciary is endowed with specialised economic and commercial courts, respectively in charge of economic and commercial disputes relating to the state economic activity, and of commercial disputes which do not involve public authorities.

In parallel to its courts system, Egypt has increasingly made available alternative dispute resolution mechanisms for resolving commercial and investment disputes. When investors perceive a lack of independence and efficiency of the court system, they tend to favour alternative dispute resolution means to settle their business disputes This is especially true in Egypt, where the reputation as a stable jurisdiction has been by the political turmoil of the past years. Along with international investment arbitration, which is provided through international investment treaty provisions (see section below), commercial arbitration has thus become the most common way of resolving business disputes before private arbitration centres, such as the Cairo Regional Centre for International Commercial Arbitration.

Despite the major role played by private institutions in steering and managing business cases, the government has remained very proactive in institutionalising mediation mechanisms to avoid having claims escalate into international arbitration proceedings, both among private parties and against public authorities. The 2015 amendment established three different committees: the Grievances Committee, the Ministerial Committee for Resolving Investment Disputes, and the Ministerial Committee for the Settlement of Investment Contracts Disputes (Box 3.2). Each committee has a different membership and is regulated by a set of specific regulatory provisions.

The 2017 Investment Law brought further clarification and emphasis on the importance of investors’ access to alternative dispute resolution mechanisms. The overall purpose of the new institutional infrastructure is to endow the government with more robust dispute avoidance, prevention and management mechanisms, and the inter-ministerial committees were established as part of a broader effort to optimise the defence of the state in the event of international investment disputes, which represent a growing challenge for the government of Egypt. GAFI is particularly aware of the importance of preventing disputes at an early stage and is recognised by the business community for its very active role in mediating at an early stage emerging disputes. GAFI has made strong efforts to establish a formal dispute prevention and early alerts mechanism to forestall potentially very costly international arbitration proceedings that may stem from investor-state disputes.

The respective roles, functioning and affiliation of each body mentioned above could however be further clarified, and it is not always clear whether the authorities themselves have a clear view on the allocation of responsibilities and of the lines of accountability. For example, it is not clear, under the new 2017 law, whether the MCRID is affiliated to the Cabinet or GAFI, while the previous legislation expressly provided that the MCRID be established under the auspices of the Cabinet. Likewise, the legal community has expressed concerns over the lack of clarity regarding the right to submit an investment contract dispute to the MCSICD. The regulatory provisions are not explicit as to whether such recourse is exclusively afforded to the investor or to the disputing governmental bodies as well. In the event of failure of settlement negotiations, there is no clear provision stating that the investor can then submit the dispute to the MCRID prior to resorting to arbitration or litigation.

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Box 3.2. Egypt’s new institutional framework for the prevention of investment disputes

The 2017 Investment Law created new mechanisms dedicated to dispute resolution, giving investors more options when facing a dispute, without prejudice to the inalienable right of the investor to recourse to the judiciary. Dedicated inter-ministerial bodies were created, as follows:

1. Grievance Committee (Article 83 of the Investment Law):

The Grievance Committee’s role is to look into the grievances against administrative resolutions passed by GAFI or other administrative bodies having competence to grant approvals, permits and licences. This committee is chaired by a justice of an authority from among the judiciary. The committee must decide on the grievance within 30 days. In addition, the committee’s resolution is final and binding on all bodies, without prejudice to the investor’s right to appeal against the committee’s resolution before the Judiciary.

2. Ministerial Committee for Investment Disputes Resolution (MCIDR) (Article 85 of the Law):

MCIDR is competent to look into the claims or disputes arising between investors and the state, or any body, authority or company affiliated to the state and relating to a wide range of administrative issues including licensing and land allocation. The Investment Law states that MCIDR resolutions are, upon the approval by the Council of Ministers, enforceable and binding on the appropriate administrative bodies and have the same effect as the writ of execution.

3. Ministerial Committee for Investment Contracts Disputes Settlement (MCICDS) (Article 88 of the Law):

Chaired by the prime minister, the MCICDS is competent to settle any disputes arising out of the investment contracts to which the state, or any body, authority, or company affiliated to the state is a party. It investigates and handles any disagreements arising among the parties to investment contracts. In order to do so and with the consent of such contracting parties, MCICDS may reach any required settlement to redress imbalances in such contracts and to extend the time limits, terms or grace periods stated in the contracts. The Law states that the settlement is, upon the approval by the Council of Ministers, enforceable and binding on all the bodies, and has the same effect as the writ of execution.

4. GAFI Dispute Settlement Centre (Article 90 of the Law):

Along with the ministerial dispute committees, the Investment Law establishes a Mediation Centre, under the auspices of GAFI, to settle investment disputes which might arise among investors. The Mediation Centre is governed by a board of directors, composed of five members appointed by Prime Ministerial Decree. Since its creation, the centre has dealt with more than 200 claims, out of which about 60% were amicably settled. GAFI Dispute Settlement Centre is also competent to deal with investors’ grievances filed against any state entity.

Source: Zulficar and Partners (2018), GAFI

Concerns were also raised about potential overlaps between MCRID and the Grievances Committee. For example, an investor could, by virtue of Art. 83 of the Investment Law, submit to the Grievances Committee a dispute that arises as a result of GAFI’s violation of provisions of the Law. Alternatively, the same investor could also, by virtue of Art. 85 of the same legislation, submit the same dispute arising out of GAFI’s violation of provisions of the new Investment Law to the MCRID. It is essential to quickly address such overlaps and to clarify whether it is an intentional choice to give investors the right to choose between the two recourse options. If so, it is then important, for legal predictability purposes, to clarify if the investor has to opt for one recourse, or whether he can proceed with the two recourses simultaneously or subsequently, and which decision should prevail.

The strong momentum for favouring dispute prevention mechanisms offers a welcome alternative to both the judicial courts, which are less specialised in business matters and suffer from lengthy delays in settling pending cases, and private arbitration centres, which are too costly for small investors. Yet, the newly established institutional infrastructure poses many unanswered questions and has yet to prove itself as an efficient mechanism to prevent disputes and reassure investors about the ability of public authorities to act neutrally when preventing and settling business disputes.

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Land access and tenure rights

Land access and security are an investment constraint in many countries. In Egypt, the complexity of the land administration system and shortage of land appropriate for investment present challenges for new investors. The ability to acquire and secure rights to land and property are important prerequisites for prospective investors. Investors need to be confident that their land rights are properly recognised and that they are protected against forced evictions without compensation. Land registers can enhance tenure security. When comprehensive and properly maintained and publicised, registers can limit the time to acquire land tenure rights, reduce corruption, and facilitate tax collection. In order to provide land tenure rights, the land administration should be accessible, reliable and transparent (OECD, 2015[1]).

The Egyptian government has in the past decade significantly improved procedures to access and register land for industrial purposes. Reforms since 2015 have helped enable the state to allocate around 1.8 times more land to investors than it distributed over the previous eight years (IMF, 2017[2]). Management of investor requests for land is now centralised under one agency, GAFI, and a new digital Investment Map helps improve transparency of public land ownership. The Investment Map includes information on projects of all sizes, indicating how close the projects are to key facilities (transport links, schools and hospitals) and provides a platform where investors and government officials can connect. Furthermore, the map indicates the location of ongoing development projects enabling investors to plan ahead for investment projects. Despite land allocation being decentralised, a central land allocation system has been put in place, which allows for the reservation of land electronically through the system (Investment Map Portal1). In addition, a cabinet decree issued in October 2019 states that allocation of industrial land can only be done through the online Investment Map Portal. The Investment Map is considered a very important step towards unifying the processes for land allocation even if the ownership is decentralised (see chapters 4 and 5).

As a result of these various efforts, the number of firms reporting access to land as a major or severe constraint has nearly halved since 2007 to 15% (WB Enterprise Survey, 2016). Very few firms list land access as the biggest obstacle to the business environment in Egypt. But according to government officials, access to land is one of the top hurdles for new investors. Unaddressed, issues related to land availability and tenure affect the stability and developmental impact of FDI.

Land-related challenges in Egypt stem from a number of factors. These include the country’s geography and overly complex legal and institutional frameworks (dozens of laws govern land ownership and registration), which has made land registration difficult (World Bank, 2015[3]). But many of the issues related to land tenure in Egypt involve the management and distribution of public land. The government controls up to 95% of Egyptian territory, much of it desert. Ownership is fragmented: 11 ministries, at least 13 different government agencies and 27 governorates hold territory along a mix of sectoral and geographic lines (World Bank, 2006[4]). Despite progress towards streamlining information on ownership to investors, land administration remains highly complex. The quality of land administration is among the lowest in the region (9 out of 30 compared to 14.2 for MENA), according to the World Bank’s 2019 Doing Business Report (World Bank, 2019[5]).2 This makes it difficult for investors to determine ownership and purchase land at market value and hinders the government’s ability to distribute land efficiently.

There have been a number of improvements with regards to dealing with land registration and access. The 2017 Investment Law clarifies the land acquisition procedures. As with investors competing to acquire real property required to set up investment projects, investors who meet the technical and financial conditions required for investment shall be selected according to a point system and based on preference principles including the value of the bid offered by the investor or other technical or financial specifications. If this proves difficult, then the highest bid is accepted. According to article 54 in the executive regulation, governmental entities shall provide a decision within a week. In addition, GAFI works in coordination with other governmental entities to further facilitate investors’ access to lands.

Main policy recommendations

Improve coordination among government landholders and strengthen centralisation of land requests

The complex landscape of public land ownership, and myriad approvals required to allocate land to investors, means that there remains a substantial gap between land demand and supply in Egypt. The centralisation of investor requests for land under GAFI is an important improvement that appears to have enabled faster distribution of state-owned land to firms. But the government could consider taking even further steps to centralise the allocation of land to investors, such as empowering one agency to allocate all publicly-owned land, regardless of its sectoral use. More immediately, coordination between the many different government landowners should be significantly strengthened. GAFI’s success in directing investors to the appropriate government landowner will depend on close inter-agency cooperation. There are reports that agencies have been slow to share their available land plots with GAFI, despite their legal obligation to do so.

Increase transparency of public land ownership

Short of a complete inventory and mapping of public land ownership, coordination challenges between agencies allocating public land are likely to persist. A complete registry would assist both GAFI in facilitating investment and firms in their location decisions. The Investment Map is a good step in this direction. Agencies could make public more comprehensive maps of land within their control, rather than only a selection of land available in zones, as is shown on the Investment Map.

Adopt more transparent processes for pricing and allocation of public land

There is no overarching authority on land allocation, pricing and development which has allowed different government agencies to pursue their own ad hoc policies. The Investment Law specifies some requirements for the valuation process, but all landholders could be more transparent about how they determine land use, select investors, and determine land pricing. This would help reduce the potential for speculation and corruption in public land sales. The government could consider naming an independent auditor to evaluate pricing set by different agencies.

Improve tenure security by streamlining registration procedures

The government should continue its efforts to ease the number of procedures and cost to register property. This includes addressing challenges of registering informal residents. Notably, reforms could ease requirements of complete records of past ownership. The Egyptian Survey Authority should be strengthened to fulfil its mission to develop and maintain an up-to-date land registry.

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Box 3.3. Legal framework for land tenure in Egypt

No one overarching law on public land management or use exists. Laws related to land tenure set out different procedures for registration, requirements for land use, and terms for ownership/lease depending on the location and owner of the land, making for a complex legislative framework.

Property law in Egypt falls under the Civil Code (adopted in 1949) and a series of subsequent laws on land rights, foreign ownership and management of public land. The legal framework allows for private ownership, public ownership, cooperative/collective ownership, lease, waqf land (reserved for religious or charitable purposes), and some forms of encroachment (FAO, 2009[6]). The Civil Code grants ownership after 15 years of unchallenged possession or use of land, but this does not apply to state-owned land. All unregistered land is technically public land. There are restrictions on the sale/lease of public land (discussed below), notably for any land deemed of military or strategic importance, including the Sinai.

Foreigners are restricted from owning certain types of land. These are set out in three laws: No. 15 of 1963, No. 143 of 1981, and No. 230 of 1996. Law 15 (1963) stipulates that foreigners (natural or legal) are prohibited from owning agricultural lands, as well as areas “susceptible of cultivation, fallow lands and desert lands” (United Arab Republic, 1963[7]). Law 143 (1981), also known as the Desert Land Law, places limits on the ownership of desert land, which the Law defines broadly as all territory two kilometres outside city borders (GAFI, 2017[8]). Partnerships and joint stock companies can own desert land up to 42 km2 (10 000 feddans) and 210 km2 (50 000 feddans) respectively, if Egyptian nationals own at least 51% of the capital. A 1998 amendment (Law 55) allows the government to treat Arab nationals as Egyptians for ownership purposes.

Law 230 (1996) sets out further conditions for foreign ownership. With some specific exceptions, non-Egyptians are limited to two real estate properties for accommodation, the area of which cannot exceed 4 000 square metres and must not be a historical site. It is not clear what classifies as a historical site. The Cabinet of Ministers set specific requirements for ownership in tourist areas. Foreign owners are prohibited from selling land for five years from the property registration date, and holders of vacant land must build within five years (GAFI, 2017[8]).

Complex public land administration delays allocation of land to investors

Companies and government officials cite timely access to land as a key barrier to new investment in Egypt. The greatest challenge, according to GAFI, is that the lack of available land suitable to investors’ needs, including with appropriate infrastructure and access to markets and workers. This is partly a geographical challenge: cities are overcrowded and the vast majority of Egyptian territory is desert, often not well connected to hubs and under-developed. But the gap between land supply and demand is largely due to Egypt’s complex and fractured system of public land administration which has caused uncertainty over ownership and delays in allocating land to investors.

Around 90-95% of Egyptian territory is state owned. More than 40 laws and executive orders stipulate which government entities control what land, whether the land can be disposed of, and who has a say in determining land use (Sims, 2015[9]) (World Bank, 2006[4]). A minority of public land is reserved for security or other state purposes. The remaining territory either has a governing authority, which in many cases can allocate land to investors, or does not yet have a designated use and no specific controlling entity.

Control of designated public land is complex: 11 ministries, at least 13 government entities and 27 governorates hold land along a mix of sectoral and geographic lines. Figure 3.1 depicts the main agencies involved in state land management. By law (143 of 1981 and 7 of 1991), Governorates manage public land located inside historical urban limits (known as the zimam), and in most cases, within 2km of this boundary. Less than 5% Egyptian territory falls within the zimam; the rest is by law “desert land”. Outside the zimam, control of designated desert public land is divided among ministries and agencies based on sector and land-use.

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Figure 3.1. Institutional framework of state land management
Figure 3.1. Institutional framework of state land management

Note: Only entities with a major stake in land management presented. Entities in blue are the main holders of public land distributed to investors.

Source: Reproduced and adapted from (World Bank, 2006[4]).

A mix of laws and de facto practice grants certain agencies priority in claiming/requesting control over undesignated desert land and determining its use. Law 143 of 1981 (Desert Land Law) gives the Ministry of Defence first right to claim any territory for military or strategic purposes. The Ministry of Agriculture and Land Reclamation has second rights to name undesignated territory for agricultural development, in coordination with the Ministry of Defence. The Ministry of Housing, Utilities and Urban Development can identify land for new urban areas, subordinate to the claims of the defence and agriculture ministries, while the Tourism Development Authority can demarcate territory for tourism projects (Law 7 of 1991).

In practice, however, other ministries and agencies delimit lands based on their historical value, extractive potential, conservation needs, and potential for industrial use (Sims, 2015[9]) (World Bank, 2006[4]). The hierarchy of these claims is not codified in law, leading to competition between agencies. The National Centre for Planning of State Land Use has the mandate to coordinate between agencies and set coherent plans for land use, but in practice, there is no overarching authority on land allocation and development. In most cases, agencies only gain control over a specific plot of land through an executive decree (of which there are hundreds), and the decision-making process of determining land use is often opaque.

Four government agencies, two SEZ authorities and two holding companies manage most of the desert public land designated for development. Together, they control around 10% of Egypt’s total territory. Table 1 shows the estimated amount of land managed by each entity, though the dearth of publicly available reports on state land ownership means that many of these figures are out of date. The data nonetheless suggest that the vast majority of designated state desert land is earmarked for agriculture, followed by industrial projects and new town development. Other agencies, including GAFI, manage a smaller amount of land through their oversight of free and investment zones. Once allocated state land, investors are prohibited from changing the original designated land use (2017 Investment Law).

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Table 3.1. Main agencies controlling public land for development



Estimated land controlled, in km2 (year)

General Authority for Reconstruction Projects and Agricultural Development (GARPAD)

Ministry of Agriculture and Land Reclamation

71 400 (2010)

Suez Canal & Golden Triangle SEZ Authorities

Prime Minister

9 761 (2018)*

Industrial Development Authority (IDA)

Ministry of Trade and Industry

7 938 (2018)*

New Urban Communities Authority (NUCA)

Ministry of Housing

3 574 (2010)

West Delta & South Valley Development Holding Company

Ministry of Water Resources and Irrigation

2 730 (2006)

Tourism Development Authority (TDA)

Ministry of Tourism

575 (2006)

* Estimates for 2018 reflect data GAFI made available that year.

Source: GAFI, (Sims, 2015[9]), (World Bank, 2006[4]).

Although there have been efforts to increase transparency of land available to investors (discussed below), there is no cadastre or complete map of which government entities control what territory. There is only one modern map with a rough estimate of agencies’ control, published by the government in 2001, and at the limiting scale of 1:1 000 000. Despite the adoption of decrees detailing land boundaries, some governorates lack knowledge about new settings of lands, and there are reports that agencies have conflicting understandings of the land they manage (Sims, 2015[9]). Notably, some governorates ignore the out-of-date zimam boundary, exerting de facto control over surrounding desert land. Governorates have the legal right to manage public land 2km outside the zimam, but only if no sectoral agency has claimed the area for their use. This means that in many cases neither investors nor the government has a clear picture of which entity owns what plot of land, particularly in areas bordering urban centres.

The entity controlling designated desert land in most cases has the authority to allocate parcels to investors. But this often requires approvals from other government bodies, such as the MoD or local branches of other ministries, a process that can take months (World Bank, 2006[4]). As a result, large portions of designated public land remain unavailable to investors. The government is well aware of these challenges, and as the next section outlines, is taking some measures to centralise land allocation.

Reforms seek to ease land access for investors, primarily in zones

The government has made significant improvements in the past decade, and notably in the past two years, in easing the process of acquiring land for investors. Management of investor requests for land is now centralised under GAFI. The 2017 Investment Law gave the agency and its Investor Service Centres (ISCs) the mandate to direct investors interested in a specific area to the appropriate controlling authority. A new digital Investment Map lists parcels of land available for investment by location and sector, detailing the governing authority of each free plot and their contact information. (The Law stipulates that all agencies must provide GAFI with detailed maps of land in their jurisdiction open to investors). The Investment Map centralises procedures for obtaining lands across the country, which is expected to greatly improve the access to land. It also streamlines the process of identifying available land parcels, which previously required a lengthy coordination with different agencies and governorates. The government has other plans to improve distribution to investors, including allowing governorates to update the Investment Map directly.

Due in part to these reforms, in 2016 and 2017 the government allocated 16.9 million m2 of industrial land, nearly 1.8 times the amount distributed over the previous eight years (IMF, 2017[2]).Fewer firms now report problems with land access: around 15% of firms considered access to land as a major or severe constraint to their operations in 2016, compared to nearly 27% in 2007 (World Bank, 2009[10]). The most recent data show no substantial difference in opinion between foreign and domestic firms (World Bank, 2016[11]).

While GAFI and the ISCs serve as the link between investors and landowners, GAFI does not allocate land used for industrial purposes: this remains the purview of the Industrial Development Authority (IDA). In ensuring transparency of IDA’s land distribution processes and simplifying the institutional framework of public land management, the government is considering establishing a committee to review processes and set standards for industrial land allocation (Government of Egypt, 2018[12]). The government has made a similar proposal to the IMF.

The Investment Map is a positive step towards transparency of public land ownership, but it primarily shows plots of land available in economic, industrial or other types of zones, reflecting the government’s strategy of zone development. Zones have also not solved issues with land access. Surveys suggest that availability of land is actually a greater obstacle for firms located in industrial zones than those outside (22% of firms in IZs reported land access as a major or severe challenge to their operations, compared to 11% of firms outside zones) (World Bank, 2016[11]). This could be due to differences in firm size; most firms in industrial zones are larger and require more land. There is also limited space in zones in areas highly sought out by investors. Incentives to investors, including cheap or free land in zones, has raised competition over land parcels (and the responsibility of zone authorities to allocate land to businesses efficiently). According to GAFI, there is not enough available land for new investments or for the expansion of existing businesses in public free zones, a point which was confirmed in discussions with firms located in the coveted public free zones of Alexandria.

Improvements to land registration but tenure security not widespread

As with land access, the government has made clear progress in easing property registration processes for investors. Compared to a decade ago, the registration process now takes less than half the time and, at 1.1% of the property value, is roughly 1/6th of the cost (Wang, 2017[13]) (OECD, 2007[14]) (World Bank, 2019[5]). Around 95% of agricultural land is now registered, but property registration remains time-consuming and can be arduous in practice. It requires nine procedures (two more than a decade ago), and takes an average of 76 days, more than double the average amount of time in the MENA region. This is despite many previous reform efforts, including in 2006 to establish a one-stop-shop for property registration, which aimed to reduce the time to one week (OECD, 2007[14]). Egypt ranks 130 of 190 economies in terms of ease of registering property in the World Bank’s Doing Business index, lower than most other countries in the region (with the exception of Algeria, Libya and Syria) (World Bank, 2019[5]). Box 3.4 lists the current procedures required to register property for firms under the inland (standard) investment regime in Cairo.

The vast majority of land and private property in Egypt is not registered. The last cadastral survey dates to 1940, and there is no cadastral map with full details on government land ownership (Sims, 2010[15]). The Egyptian Survey Authority, the body responsible for conducting cadastral mapping, lacks technical capacity and has few digital records (Chemonics International, 2005[16]). Only around 10% of urban land is registered (compared to 90% of agricultural land) (Wang, 2017[13]). The disparity is due to a fragmented legal framework for property registration. In agricultural areas, the government has worked to transfer land registered under a deed system (set up in the 1946 Deed Law, No. 114) to a title registration system, notably through a push in 2006 to automate title registration. Urban areas still use the deed system, largely due to a gap in the 1964 Title Law (No. 142), which does not permit the registration of apartment units (Wang, 2017[13]) (World Bank, 2006[4]).

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Box 3.4. Property registration procedures in Egypt

Firms under the inland regime, operating in Cairo:

Registering purchased property in most cases involves nine steps. However, these steps are relevant only if the property the buyer is purchasing is already registered and has no title disputes. Only around 10-15% of all private property is registered (Sims, 2015[9]).

Parties procure an official property tax statement from the local Property Tax Authority Office, which proves the property is registered at the Authority, has had a tax assessment, and has no mortgages. This costs EGP 2.25.

Parties get certificate from District Land Registry with details on the property ownership and encumbrances. This costs EGP 30.

Buyer submits a request to register the property with Real Estate Registry, for a maximum fee of EGP 2 000 (for property larger than 300 m2).

Egyptian Surveying Authority (ESA) conducts site inspection and a produces a report, a process that can take a month.*

Both the Measurement Department and the Real Estate Registry must approve the ESA’s report, which may take 21 days. The Registry then accepts the registration request (step 2) and gives the parties a stamped contract form.

Lawyers representing the parties send the completed contract to the Lawyers Syndicate, which verifies the lawyers’ syndicate identification and registration. In 2018 this cost 1% of the property value (up to EGP 25 000), a 0.5% increase from 2017.

Parties submit the contract to the Real Estate Registry for review and approval, which can take 10 days.

Parties stand before Notary Public, which oversees signing of contract and authenticates it.

Buyer gives notarised contract to Real Estate Registry for review, if approved the Registry gives a registration number, confirming the property registration. This may take 10 days.

Note: *The step has no cost if amount not specified.

Source: (World Bank, 2019[5]); 2017 Investment Law, ( website)

Issues with tracing ownership have been a key impediment to registering land. Unlike title registrations, which prove legal ownership of a plot of land, a deed system is a public record of a transaction between two parties. The deed registration process in Egypt is time consuming, costly and reportedly fraught with forgeries and petty corruption, as land ownership and transactions records (required for registration) are incomplete (USAID, 2010[17]) (Sims, 2010[15]). In urban areas, the low percentage of registered land under the deed system is also due to the prevalence of informal settlements; estimates suggest that more than half of Cairo’s residents live in informal housing (Sims, 2015[9]). Many property transactions rely on informal procedures and contracts (Sims, 2010[15]).

The low registration rate negatively affects tenure security, as unregistered land is technically state property. Reliable land titling and property registrars help landholders to seek legal redress in case of violation of property rights. For businesses, better land rights and registries facilitate investment decisions. Transparent, complete and secure land registration is also associated with greater access to credit, as land titles offer a form of collateral. As the majority of property in Egypt is not registered, it is often difficult to prove ownership, complicating and significantly lengthening the process of taking out a mortgage (EBRD, 2012[18]). (The 2001 Real Estate Finance Law sets out details of issuing mortgages). In 2015, the government passed a Movable Securities Law (No.115) allowing the use of other types of assets as collateral, including equipment, crops, current and future receivables and intellectual property rights, which helps facilitate loans to SMEs for example.

Reforms to land registration

The 2017 Investment Law eases some procedures required for property registration. Companies under the law are exempt from taxes and fees involved with land registration (Article 10). New Investor Service Centres (ISCs) have the mandate to receive investor applications and issue approvals, permits and licences (Article 21). For investors, the process of land registration is simplified in industrial zones and other zone types. Investors receive their property licences from zone authorities and/or GAFI. In public free zones and special economic zones, land is licensed to investors under a usufruct system (Article 37). Real-estate property in other zones may be purchased, leased, leased-to-own, or licensed for usufruct (Article 58). The law stipulates that for some sales and lease-to-own transactions, property titles are transferred to the investor after the investor pays in full and begins production, or in some cases, completes the project (Article 62).

The government is also taking steps to improve the land registration procedures. There are reports in the Egyptian press that parliament is considering a new real estate registration law, which will reduce the cost and steps involved in property registration. These efforts are a step towards improving tenure security. But to be successful, the government should evaluate lessons from the many previous efforts to broaden participation in land registers, including schemes to sell titles to informal residents (Sims, 2016[19]). Notably, reforms should address the continued high cost of registration and ease requirements of complete records of past ownership. The Egyptian Survey Authority, responsible for cadastral mapping, should be strengthened to be able to carry out its mission of developing a comprehensive and up-to-date land registry.

Gaps in transparency of state role in land market

The Egyptian state, as the largest landholder in the country, dominates the land market. Its role as both owner and price setter has led to public controversies over corruption and nepotism in land sales (Sims, 2015[9]). A lack of transparency on how land is valued and how buyers are selected has contributed to an uneven playing field for investors and lost revenue for the government, as well as land speculation. One fifth of firms see the price of land as a substantial barrier to investment (World Bank, 2016[11]). Details in the investment law on procedures for valuing land is a step towards standardising the evaluation process. The government could, however, further increase transparency of its land pricing, and in particular, weigh the benefits of selling or renting land to investors at reduced cost.

The Investment Law states that one of five different entities estimates the sale, rent or usufruct price for land based the purpose of the allocated land.3 These are: the General Authority for Government Services, Supreme Committee for Pricing of State-Owned Lands at the Ministry of Agriculture, New Urban Communities Authority, Tourism Development Authority, and the Industrial Development Authority (Article 64). The entity should include “experienced representatives as members in the estimation committees” and finalise estimations within 30 days of requests. The executive regulations of the Law detail that the estimation will involve examining the prices of adjacent property, costs of preparing the property (with infrastructure and utilities), the investment activities, and other relevant technical elements (Article 52). This evaluation is in most cases valid for one year.

A risk is that government agencies involved in evaluating land value are not neutral. The law states that the authority with jurisdiction over the land pays a fee to the entity that estimates the price (Article 64 of the Law and 53 of the Executive Regulations). But several of the entities in charge of estimating prices also control land: IDA, the New Urban Communities Authority and the Tourism Development Authority are among the largest holders of land earmarked for development in Egypt (Table 1). IDA has the authority to allocate land to investors. The Llw does not seem to prevent these authorities from setting their own land prices.

There is further potential for conflicts of interest. The law permits authorities overseeing land to have a stake in investment projects under their jurisdiction, via either in-kind shares or a partnership (Article 58). This requires approval from the Cabinet of Ministers. One of the five aforementioned government agencies estimates share prices. Once again, it appears that in some cases an agency can benefit from setting its own land sale/rent/usufruct prices and share prices. Elsewhere the Law states that in the case of publicly owned land, either GAFI or the administrative authority will “indicate” the price of the land (Article 59). It is not clear if this means that the authority overseeing the land has a final say in the value estimation.

In practice, public land is often dispersed at below-market rates as an investment incentive. The Investment law also permits the free disposal of state-owned property (primarily in zones) to investors, if the investment is for “the sole purposes of development”, and with approval through decree from the Cabinet of Ministers (Article 60). In this case, the investor must provide a cash guarantee of up to 5% of the value of the investment costs – one of the key incentives of the law. Firm-level evidence reveals that “access to land at a reduced or no cost” is the most important reason behind manufacturing firms’ choice to locate in an industrial zone (World Bank, 2016[11]). This incentive is not without distortive risks; cheaper land has created a shortage of land in zones, as discussed earlier.

The pricing of public land also tends not to be transparent. Several highly publicised court cases have involved the sale of land at what was perceived to be below-market value. There have been instances of purchasers of public land re-selling at up to 100 times the original price (Sims, 2015[9]). The government has put in place regulations to discourage land speculation, and the High Price Appeals Committee should act as a regulatory body. But the lack of transparency on land pricing, and on the selection of buyers, means that the potential for speculation and corruption in public land sales persists.

The government has recognised that selling industrial land at nominal, pre-determined prices is “not optimal for the future allocation of land, as it forgoes revenue for the state and creates opportunities for rent seeking” (from the government’s Memorandum of Economic and Financial Policies) (IMF, 2018[20]). In 2018, it proposed to create a working group, under the prime minister, tasked with reforming how industrial land is priced and allocated. The reforms will include reducing restrictions on land use and “market-based land allocation mechanisms that ensure open, transparent and competitive bidding process” (IMF, 2018[20]). The government also intends to digitalise the industrial land tender process, allowing investors to bid and submit documents online. These reforms, if implemented, will be a positive step, but the effect will be limited if the reforms are only applied to industrial land and not to land held by other sectoral agencies.

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Investment treaties

Investment treaties (also referred to as international investment agreements or IIAs) are another component of Egypt’s investment policy framework. Investment treaties entered into between two or more states typically protect certain investments made by nationals of a contracting state in the territory of another contracting state. Investment treaties include both bilateral investment treaties (BITs) and investment chapters in trade agreements. This section addresses treaty-based protection for covered investors. Increasingly, investment treaties also address market access for foreign investment (addressed separately below).

Protections afforded under investment treaties generally arise in addition to and independently from domestic law protections. Treaty-based protections generally only cover investors defined as foreign. Treaties also define types of investments and investors that are covered, frequently in broad terms.

The majority of Egypt’s investment treaties grant covered investors two different types of rights:

Substantive rights to standards of treatment for covered investments (such as protections against expropriation or discrimination, or against unfair treatment); and

Procedural rights to enforce government obligations in the treaty, often through investor-state dispute settlement (ISDS) mechanisms. These generally permit covered investors to bring claims against the host state for breach of the treaty before arbitral tribunals.

One of the main reasons motivating certain countries to conclude investment treaties has been to seek to attract foreign investment, and yet the assumption that investment treaties would encourage foreign investment has been difficult to establish as a factual matter despite a multitude of studies.4

Most of Egypt’s investment treaties contain features common to so-called first generation treaties. Concluded in the 1980s and 1990s, these include vague substantive provisions that have been broadly interpreted in ISDS cases and provide little procedural guidance for ISDS. Recent treaties concluded by other states have rejected this approach in favour of more precise definitions of the scope of government obligations and increased regulation of ISDS. These changes often reflect government efforts to improve the balance between covered investor protection and the right to regulate.5

Many governments have been substantially revising their investment treaty policy in recent years.

The European Union’s (EU) rejection of investor-state arbitration has transformed EU policy – and it continues to evolve under increasing public and academic questioning, and growing constraints imposed by EU law.

Long-standing supporters of investment treaties like the United States have recently expressed fundamental doubts about treaty-based investor protection and have exited or sharply narrowed the substantive provisions and scope of ISDS, notably in the United States-Mexico-Canada Agreement (USMCA) signed in November 2018 with Canada and Mexico.

Chinese investment treaty policy is still in flux, with pressures to strengthen covered investor protection in the context of growing outward investment accompanied by concerns about the reputation of Chinese business abroad and the possible exposure to claims which have remained minor to date.

The Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) reflects the expansion of an updated North America Free Trade Agreement (NAFTA)-inspired investment treaty model to a broader range of 11 economies including relations between advanced economies, notwithstanding US rejection of the treaty.

States in Southeast Asia have taken steps towards an ASEAN-driven landscape for regional investment policy, with a strong focus on intra-region liberalisation and protection through both domestic laws and international treaties including the ASEAN Comprehensive Investment Agreement and a host of ASEAN-led investment agreements with third states such Hong Kong (China) (2017), India (2014) and China (2009).

Major G20 capital importers like India, Indonesia and South Africa have all rejected and exited first generation investment treaties with some exiting the system more broadly. Brazil has developed a new model for investment treaties focused on investment facilitation and using state-to-state dispute settlement without ISDS.

Multilateral reform of ISDS is now underway. Following inter-governmental debate, the UNCITRAL Commission entrusted its Working Group III in July 2017 with a broad mandate to work on possible reforms for ISDS. The sixty government members of UNCITRAL as well as many government observers – including Egypt – have found by consensus that reforms should be developed to address concerns raised with eleven different issues relating to ISDS.

GAFI announced in March 2016 that it was undertaking a new investment treaty reform programme based on two main objectives: updating Egypt’s model BIT and reviewing and amending Egypt’s existing investment treaties.6 GAFI has confirmed that the process of updating Egypt’s model BIT seeks to respond to domestic and international developments regarding investment policy, enhance the role of FDI in achieving sustainable development and establish a new balance between the rights and obligations of investors and the state These reform efforts will undoubtedly be informed by Egypt’s considerable first-hand experience with ISDS cases: it is the fifth most frequent respondent state for known ISDS claims worldwide with at least 34 ISDS claims filed against Egypt.

This section outlines the current status of Egypt’s investment treaties and the historical development of Egypt’s policy towards investment treaties before identifying considerations that may assist Egypt in achieving its desired balance in investment treaty policy in the future.

Overview of Egypt’s investment treaties

Egypt has a broad range of investment treaties. GAFI indicates that as of September 2019 Egypt has concluded 111 BITs, 72 of which are currently in force.7 Egypt has BITs in force with all of the G7 states except the EU and all but three of the member states of the EU (Estonia, Ireland and Lithuania) as well as several other major capital-exporting states in the G20 group including Argentina, Australia, China, Korea, the Russian Federation and Turkey.

Egypt has a large number of signed investment treaties that are not in force. According to publicly-available information, Egypt had signed at least 101 BITs and, together with multilateral treaties, has concluded treaty relationships with at least 122 countries as of May 2019.8 The reasons for non-ratification are not clear. GAFI indicates that non-ratification may be linked to assessments of Egypt’s economic interests in respect of these treaties. In any case, many of these treaties are older treaties containing vague provisions now seen as outdated due to broad and varying interpretations in ISDS cases – few if any states are today ratifying treaties dating from this era. The analysis here generally addresses investment treaties in force except where otherwise indicated.

Egypt’s investment treaties are primarily composed of a majority of first generation BITs. The majority of Egypt’s BITs (77) were signed between 1990 and 2005.

In addition to concluding BITs, Egypt has several trade agreements in force that do not contain investment protections, including with Turkey in 2005 and the EFTA states (Iceland, Liechtenstein, Norway and Switzerland) in 2007. Egypt has signed Trade and Investment Framework Agreements (TIFA) with the United States (1998) and the European Union (2001). In June 2013 the EU and Egypt began talks about a Deep and Comprehensive Free Trade Agreement, which is planned to include an investment chapter, but negotiations are currently on hold.9 Egypt has also signed the SADC-EAC-COMESA Tripartite Free Trade Agreement and the African Continental Free Trade Agreement in 2015 and 2018 respectively; negotiations regarding investment issues are yet to start under either of these two frameworks.

At the regional level, Egypt has signed plurilateral agreements with investment protections, most importantly the Unified Agreement for the Investment of Arab Capital in the Arab States (1980) (the Arab Investment Agreement) and the Agreement for Promotion, Protection and Guarantee of Investments among Member States of the Organisation of Islamic Cooperation (1981) (the OIC Agreement).10 The remaining plurilateral agreements contain general investment promotion commitments or investment protection obligations without binding enforcement mechanisms.

The OIC Agreement and the Arab Investment Agreement provide for ISDS. Investor claimants have invoked the OIC Agreement in at least seven ISDS disputes since 201111 (none of which involve Egypt) despite uncertainties in the agreement’s appointing authority mechanism.12 OIC governments are currently discussing proposals to replace investor-state arbitration under that treaty.13

At a global level, Egypt has signed and ratified three important multilateral treaties related to enforcement of arbitral awards, including in ISDS cases under investment treaties – the New York Convention,14 the Washington Convention15 and the Riyadh Agreement.16

It is difficult to be precise about the status of Egypt’s investment protection treaties due to insufficient and inconsistent publicly-available information. Comprehensive information on the existence of Egypt’s investment treaties, along with any protocols, amendments, earlier versions of renegotiated treaties and in-force status, is not available. Egypt has made some of its investment treaties available on the official website of the Ministry of Foreign Affairs (MFA)17 in multiple languages (e.g. Egypt’s BITs with Uzbekistan and Viet Nam), but many of Egypt’s treaties are not available on this website.18 Some are accessible as part of the United Nations Treaty Collection and other foreign government or third-party websites.19 Some of Egypt’s investment treaties have been made available by the MFA in an Arabic-language version only, even though they are available elsewhere online in other languages.20 Several Egyptian BITs that are not in force are available for download on the MFA website with no indication about their current status.21 This includes the Egypt-Indonesia BIT which is understood to have been terminated recently by a unilateral notification from Indonesia.

From publicly-available information, Egypt appears to have treaty protection in force for almost all of its inward and outward FDI stock.22 A detailed summary of FDI flows into and out of Egypt is provided in Chapter 1, but for current purposes it is notable that Egypt is the only country in the world to have 100% treaty coverage for its total inward FDI stock. Four BITs cover over 85% of Egypt’s inward stock23 while eight other investment treaties cover the remaining inward stock (Figure 3.2).24

Egypt’s investment treaties cover almost 90% of its outward FDI stock, with five BITs responsible for the vast majority of this coverage.25 Likely reflecting the use of corporate structuring, Egypt’s recent BIT with Mauritius (2014) added treaty coverage to 20% of Egypt’s outward FDI stock. Many investment treaties that Egypt has concluded cover none of Egypt’s FDI stock or only negligible portions of it. This is a common phenomenon in many countries’ treaty samples around the world.

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Figure 3.2. Approximate evolution of Egypt’s inward and outward FDI stock coverage from investment treaties in force
Figure 3.2. Approximate evolution of Egypt’s inward and outward FDI stock coverage from investment treaties in force

Source: OECD calculations based on OECD treaty database; FDI data was taken from OECD FDI database and IMF Direct Investment Positions and reflects FDI stock as of 2016 rather than historical values.

Egypt’s evolving policies towards investment treaties

Based on available information, it appears that Egypt has investment treaties in force with a diverse set of economies: large and small, advanced and developing. In terms of geographical distribution, the majority of Egypt’s BITs in force today are with partners in Europe and Asia/Oceania. Almost one third of the total BITs that Egypt has signed are with African states but very few of these treaties appear to be in force.

Aside from the early regional treaties within the League of Arab States and the Organisation for Islamic Cooperation, Egypt’s first investment treaties in the 1970s and 1980s were concluded predominantly with capital-exporting countries like the United States, Japan and several European countries.

From 1990 until 2005, Egypt concluded treaties with countries from all corners of the globe, including with capital-importing partners that had smaller economies compared to Egypt at the time26 (see Figure 3.3 below for a timeline of Egypt’s concluded treaties). This development accompanied the Egyptian government’s economic reform and structural adjustment programme introduced in 1991 with IMF and World Bank support.

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Figure 3.3. Evolution of Egypt’s investment treaty relations
Signed relationships shown with the dashed line; in-force relationships shown with the solid blue line.
Figure 3.3. Evolution of Egypt’s investment treaty relations

Source: OECD calculations based on OECD treaty database; World Bank data on GDP.

In 2002, GAFI was empowered under Presidential Decree No. 79/2002 to establish a one-stop shop for foreign investors in Egypt. GAFI conducted an internal review of Egypt’s BITs in the early 2000s, which identified a lack of consistency in the content of Egyptian BITs and the absence of links between BIT content and Egypt’s economic priorities.27 This review process led to a reform programme for Egypt’s investment treaties launched in 2005 and a model BIT adopted in 2007 with assistance from UNCTAD.28 The main objectives of these reform efforts included achieving consistency within Egypt’s BIT programme and restoring a sustainable balance between seeking to attract FDI and Egypt’s right to regulate.29 In 2006, Presidential Decree No. 266/2006 was issued to grant the Ministry of Investment the mandate for negotiating and concluding IIAs with other countries under this new approach.

Egypt has concluded five new investment treaties since 2005.30 The slowing and recent reversal in the number of existing investment treaty relationships in force is a broad phenomenon reflecting the policies of many governments. As for other governments, this may reflect Egypt’s experiences as a respondent in ISDS claims.31 In Egypt’s case, it may also reflect Egypt’s development priorities in recent years following a period of political and social unrest that began in 2011. At the same time, as noted, Egypt already has broad treaty coverage for both inward and outward FDI stock leaving little need for any potential additional coverage.

Alongside its treaty-making activities in recent years, another notable development occurred in July 2007, when Egypt became the 40th country, as well as the first Arab and African nation, to adhere to the OECD’s Declaration on International Investment and Multinational Enterprises (the OECD Declaration). The OECD Declaration is a policy commitment made by OECD countries and selected other states to improve the investment climate, encourage the positive contribution multinational enterprises can make to economic and social progress and minimise and resolve difficulties which may arise from their operations (see further discussion in Egypt’s approach to responsible business conduct in Chapter 7).

Following a brief description of Egypt’s experience with ISDS cases, the balance of this chapter seeks to offer insights and recommendations that may assist Egypt in this reform process.

Treaty use: ISDS claims under Egypt’s investment treaties

Egypt and Egyptian nationals have a long history of practical experience with investment treaties as a basis for legal claims by investors. As of May 2019, 38 claims were known to have formally been brought against Egypt while four publicly-known claims have been brought by Egyptian investors under Egyptian investment treaties.

Egypt as a respondent in ISDS cases

Egypt is the fifth most frequent respondent state for known ISDS claims worldwide.32 Based on publicly available information, investors have filed at least 38 ISDS claims against Egypt: 33 under the auspices of the ICSID Convention33 and five with ad hoc arbitral tribunals constituted under the UNCITRAL Arbitration Rules.34 Egypt has also been a respondent in four cases brought before the Arab Investment Court, an institution created under Article 28 of the Arab Investment Agreement (1980).

The first known ISDS cases brought by foreign investors against Egypt in the 1980s were not filed pursuant to investment treaties but rather an ICSID arbitration clause in Egypt’s former investment law.35 The first ICSID arbitration brought against Egypt under an investment treaty was filed in July 1998.36 At least six of the treaty-based claims against Egypt since then have been filed by American investors under the United States-Egypt BIT (1986) while the rest have been filed by investors of various nationalities (predominantly from European countries) under at least 18 different BITs. Thirteen of the 35 treaty-based claims were filed from 2011 to 2013. While the level of public information regarding the most recent cases filed against Egypt is not uniform, it appears that several of them arise from events that occurred during a period of political and social unrest beginning in 2011.

Egypt’s ISDS disputes have primarily concerned tourism, infrastructure, natural resources, textiles and manufacturing projects. Several of the recent ISDS cases filed against Egypt are linked to the introduction of new labour legislation, court rulings affecting commercial transactions, and alleged government interference in natural resources projects. Fourteen of the 38 investor claims known to have been filed against Egypt were pending as of May 2019.

Five of the 24 concluded investor claims are known to have resulted in awards of monetary compensation in favour of the investor. Seven were dismissed on jurisdictional or merits grounds. Sixteen claims are known to be have been settled and discontinued by the parties. Settlement terms are unknown in 14 of the 16 cases, but may involve substantial payments – two of the settlements involved multi-million dollar payments to investors37 while two others came after the investors secured substantial awards of damages from arbitral tribunals.38

Nine cases involved applications under the ICSID Convention to annul the arbitral tribunal’s award (four made by Egypt and five made by investors). Two of these annulment applications were dismissed, one was upheld in part and led to a partial annulment of the tribunal’s award, and the remaining cases were settled or discontinued before an annulment decision was rendered.

Damages awards in some cases have been very large. Public reports indicate that Egypt faces a USD 2 billion liability for damages in one recent case.39 Egypt also has further possible exposure to several large damages claims being pursued by investors in its pending cases.40

Egyptian investors as claimants in ISDS cases

Although it is difficult to be precise given the confidentiality of certain ISDS proceedings, at least five Egyptian investors are known to have brought ISDS claims against some of Egypt’s treaty partners (Algeria, Canada, Kuwait and Lebanon).41 As of June 2019, three claims were still pending. Notably, one Egyptian investor, acting as the single beneficial owner for a group of companies, is reported to have caused the filing of two overlapping ISDS claims against Algeria in relation to a telecommunications investment, using different corporate entities and treaties.42

Reconsidering Egypt’s investment treaty policy

Egypt’s investment treaties, especially the BITs, show many features associated with first-generation investment treaties concluded in great numbers in the 1990s and early 2000s, notably a lack of clarity of the meaning of key provisions, absence of rules that most would consider to be essential and ubiquitous in a domestic law context, and extensive protections for covered investors. This scenario entails exposure, especially given that many Egyptian treaties have vague standards of protection and very little regulation of ISDS. In order to better address the balance between investor protection and the government’s right to regulate, Egypt could pursue several different courses of action separately or in tandem.

This section examines three key aspects of treaty policy reform: (a) the scope of two important substantive protections, namely the fair and equitable treatment (FET) and most-favoured nation (MFN) treatment standards; (b) ISDS mechanisms; and (c) other aspects of investment treaty reform.

a. Two central substantive aspects of investment treaties

Fair and equitable treatment clauses

The fair and equitable treatment (FET) standard is almost always at the centre of investment treaty policy debates and claims by investors under investment treaties. References to fair and equitable treatment were an almost universal feature in investment treaties for many years. Most FET clauses were agreed before the rise of ISDS claims related to this treatment standard. Starting around 2004, broad theories for the interpretation of autonomous FET clauses by arbitral tribunals quickly emerged as the number of ISDS cases increased. FET is now invoked in a great number of ISDS cases – including the vast majority of known ISDS cases brought against Egypt. Arbitral tribunals have often made damages awards to covered investors based on breaches of this treatment standard.43

Many older FET provisions do not provide guidance about what treatment will be considered fair and equitable. FET appears in 94% of Egypt’s investment treaties that are in force.44 These FET provisions generally provide little or no guidance on interpretation of this standard.45

Many arbitral tribunals deciding ISDS cases involving FET claims since 2004 have established lengthy shopping lists of alleged elements of unqualified FET.46 Among other things, some arbitral tribunals have considered unqualified FET clauses to require the host state to act in a consistent and transparent manner, free from arbitrariness and discrimination, and in good faith without transgressing the legitimate expectations of the investor. Some interpretations of FET, in particular those involving legitimate expectations, place significant restraints on the right to regulate including through non-discriminatory regulation.47 In addition, arbitral tribunals have taken different approaches leading to considerable uncertainty for investors and states alike.

Governments have reacted to these developments in various ways, including by adopting more restrictive approaches to FET in recent treaties (Box 3.5).

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Box 3.5. Recent approaches to the FET provision

Recent investment treaties indicate that states are becoming more active in the ways in which they specify or address absolute FET-type obligations. Uncertainties about FET and its scope have also led some governments to exclude it from their treaties. Some important recent approaches are outlined below.

The MST-FET approach – express limitation of FET to the minimum standard of treatment under customary international law (MST)

This approach has been used in a growing number of recent treaties, especially in treaties involving states from the Americas and Asia (Gaukrodger, 2017). It has recently been excluded by its initial sponsors, the NAFTA governments, in favour of a much more limited set of protections in the USMCA (see below). In addition to using MST-FET, the Comprehensive and Progressive Trans-Pacific Partnership Agreement (2018) (CPTPP), contains a carve-out to address legitimate expectations, and requires the claimant to establish any asserted rule of MST-FET by demonstrating widespread state practice and opinio juris, which is difficult to do. (Art. 9.6 (3)-(5), fns 15 and 17, Annex 9A). This approach has since been replicated by other states (see, e.g. Australia-Indonesia CEPA (2019), Art. 14.7). Only three of Egypt’s investment treaties1 and the COMESA Agreement2 expressly link FET to the customary international law standard for the treatment of aliens.

The defined-list approach – closed lists for the elements of FET

Recent treaties negotiated by the European Union, China, France and Slovakia contain a defined list of elements of the FET obligation. This approach adopts a positive list system to limit the elements of FET standard, including elements such as a denial of justice, fundamental breach of due process, targeted discrimination on manifestly wrongful grounds, and/or abusive treatment of investors. The ASEAN-China Investment Agreement (2009) FET provision is narrower and is limited expressly to a prohibition on denials of justice. Legitimate expectations are not generally included as an element of FET in any treaty; however, certain treaties of this type allow for possible consideration of them in narrowly defined circumstances. This approach can result in a broader concept of FET than MST-FET, especially if state practice and opinio juris are required to establish rules under MST-FET. In addition, the parties to CETA adopted a joint government interpretation to clarify that the treaty does not create greater rights for foreign investors than those available to domestic investors.3

The recent India-Belarus BIT (2018) is an example of a treaty that in effect combines the above two approaches. Reference is made to MST and a closed list of elements is provided. The words fair and equitable are not used.

Exclusion of FET

Some recent NAFTA cases have adopted relatively broad interpretations of MST-FET despite repeated NAFTA government submissions to the contrary. The recently-concluded USMCA updating NAFTA generally excludes FET-type provisions entirely from the scope of ISDS (except for a narrow class of cases involving certain government contracts). ISDS under the USMCA generally applies only to claims of direct expropriation and post-establishment discrimination (and only to Mexico-United States relations).

All of these approaches are more specific than the broad, unqualified language of most Egyptian investment treaties that only refer to fair and equitable treatment.

1. Canada-Egypt BIT (1996);, Belgium/Luxembourg-Egypt BIT (1999): 2218/v2218.pdf; Mauritius-Egypt BIT (2014),

2. COMESA Agreement (2007), Article 14: “Member States shall accord fair and equitable treatment to COMESA investors and their investments, in accordance with customary international law. Fair and equitable treatment includes the obligation not to deny justice in criminal, civil, or administrative adjudicatory proceedings in accordance with the principle of due process embodied in the principal legal systems of the world. … Paragraph 1 of this Article prescribes the customary international law minimum standard of treatment of aliens as the minimum standard of treatment to be afforded to covered investments and does not require treatment in addition to or beyond what is required by that standard.”

3. Joint Interpretative Instrument on the Comprehensive Economic and Trade Agreement (CETA) between Canada & the European Union and its Member States, Official Journal of the European Union, 14 January 2017, pp. 3-8,

The prevalence of unqualified FET obligations in Egypt’s treaty practice contrasts with the practice of many other states, including most of Egypt’s partners in Africa and the MENA region. These vague provisions create uncertainty as to the scope of Egypt’s FET obligations and exposure to expansive interpretations by arbitral tribunals in ISDS cases. Clarification of government intent could improve predictability for the government, investors and arbitrators alike, limit treaty impact on the right to regulate, and reduce Egypt’s exposure to damages claims.

One way to achieve further clarity would be to consider developing joint interpretative declarations or protocols to existing investment treaties with treaty counterparties as well as other states and stakeholders.48 Egypt may also wish to consider incorporating recent investment treaty drafting practices with respect to FET in its new draft model BIT.

Most-Favoured Nation treatment

Egypt’s investment treaties systematically grant most-favoured nation (MFN) treatment which requires Egypt to treat covered investments at least as favourably as it treats comparable investments by investors from third states. As with its FET provisions, the MFN obligations in Egypt’s investment treaties are primarily broadly-worded with little guidance on how they are to be interpreted or applied.

MFN clauses in investment treaties can have a range of unintended consequences. These provisions can but do not necessarily allow for claimants in ISDS cases to engage in “treaty shopping” – a phrase used to describe the routing of an investment through an often complex company structure in order to gain access to treaty protections where they were not previously available, as well as the process of seeking to gain access to more favourable investment treaty protection (see further detail on treaty shopping below). Some arbitral tribunals have allowed investors to use MFN provisions to “import” substantive or procedural provisions from other investment treaties that they consider more favourable than the provision in the treaty under which their case is filed.49 There is also considerable uncertainty regarding the interpretation of textual aspects of MFN clauses such as the meaning of “treatment” and “like circumstances” which appear in many MFN clauses.

Recently, an increasing number of governments concerned about the use of MFN clauses in ISDS cases have clarified their intent. Some have clarified that the treatment referred to in MFN provisions refers essentially to treatment of third country investors under domestic law, not to investment treaty provisions.50 It is understood that the MFN provision in Egypt’s new model BIT may include this clarification. As mentioned above, Egypt is currently conducting consultations with public and private stakeholders regarding its proposed new model BIT, including on the content of the MFN clause. Other treaties – like the Mauritius-Egypt BIT (2014) – clarify that MFN treatment does not extend to the ISDS provisions in other investment treaties, thereby avoiding the risk of arbitral tribunals interpreting an unqualified MFN clause in this way. India reacted strongly to an interpretation of an MFN clause in an ISDS case and has removed MFN entirely from its new model investment treaty.51

Governments have also increasingly clarified their intent with regard to what constitute comparable investments for purposes of MFN provisions. Many investment treaties require that the MFN treatment be accorded in “like circumstances” in order for the MFN clause to be applicable but do not provide further guidance, although this is changing. For example, the recent USMCA further clarifies that the “like circumstances” inquiry includes consideration of whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.52

Arbitral interpretations in ISDS cases allowing reflective loss and broadly interpreting MFN pose important obstacles to the effectiveness of investment treaty reform. There are a number of reform options that Egypt may wish to consider in this respect (see subsection (c) below regarding treaty shopping).

b. Investor-state dispute settlement (ISDS) mechanisms

ISDS mechanisms are included in the majority of Egypt’s investment treaties, allowing covered foreign investors to bring claims against Egypt in investor-state arbitration, in addition or as an alternative to domestic remedies.53 Investor-state arbitration involves arbitration tribunals selected on a case-by-case basis to adjudicate disputes in an approach derived from international commercial arbitration.

Like many other first generation treaty samples, almost all of Egypt’s treaties regulate ISDS very lightly leaving substantial decisional power to arbitrators, or to claimants and their counsel. For example, (i) only two of Egypt’s treaties54 contain time limits for covered investor claims – a feature that is standard in domestic law systems and that has become more commonplace in IIAs concluded since 2005; (ii) only 14 of Egypt’s investment treaties contain express references to the governing law in ISDS cases and those treaties use a range of different formulations; (iii) many of Egypt’s treaties give claimants and their counsel substantial power over key procedural issues, including the identity of the appointing authority, through the investor’s unilateral choice among several arbitration institutions;55 (iv) none expressly provide for non-disputing government party interventions on issues of interpretation in ISDS cases; (v) none address transparency in ISDS; and (vi) only one of Egypt’s investment treaties addresses the remedies that may be awarded by an arbitral tribunal.56

Egypt may wish to consider assessing its policy approach to ISDS mechanisms in general and, in particular, whether the low level of regulation of ISDS mechanisms in its existing treaties appropriately reflects its policy objectives. Recent treaty practice indicates that some states are beginning to circumscribe the limits of ISDS mechanisms in great detail57 while others propose to reject ISDS mechanisms altogether in favour of alternative approaches. The European Commission, for example, proposes to set up a permanent court and an appellate tribunal to resolve investor-state disputes. This approach has been included in three IIAs negotiated by the EU as of May 2019.58 Recent IIAs concluded by Brazil dispense with binding forms of ISDS altogether in favour of state-to-state disputes and designating domestic entities (“National Focal Points”) to act as an ombudsperson by evaluating investor grievances and proposing solutions to a Joint Committee comprised of government representatives from both states (see, for example, Brazil-Chile FTA (2018) and Brazil-Ethiopia BIT (2018)). South Africa has terminated its BITs with European countries and now permits, under domestic legislation, foreign investors to bring direct claims against the government in domestic courts.

As mentioned above, multilateral reform efforts are underway, with a large number of governments participating in the UNCITRAL Commission’s Working Group III having agreed by consensus that reforms to ISDS mechanisms are desirable to address a wide range of government and civil society concerns with the current system of investment arbitration.59

c. Other considerations for investment treaty reform

Clearer specification of investment protection provisions would help to reflect government intent more effectively

Investment protection standards in older investment treaties around the world have often been unqualified and relatively vague. The absence of detailed guidance gives ISDS tribunals broad discretion to interpret these provisions and thereby to determine the scope of protection. Many provisions in Egypt’s investment treaties – beyond those discussed in some greater detail here – lack specific language to indicate government intent as to their scope and meaning. More specific language in investment protection provisions would lead to increased predictability that would benefit investors, governments and arbitrators in ISDS cases.

Specifications should reflect policy choices informed by Egypt’s priorities. Policy-makers need to consider the costs and benefits of these choices and their potential impact on foreign and domestic investors, together with Egypt’s legitimate regulatory interests and potential exposure to investment claims. Egypt should continue its efforts to update its treaties and its dialogue with treaty partners regarding amending existing treaties, issuing joint interpretative declarations to clarify government intent, or terminating treaties that no longer reflect current government policies.60

Combatting “treaty shopping”

Egypt may wish to consider strengthening its investment treaties with features to combat the rise of claims brought by investors who engage in treaty shopping. As mentioned above, this phrase is used to describe, among other things, the routing of an investment through an often complex company structure in order to gain access to treaty protections or to more favourable ones. It is also used to refer to the use of MFN clauses to “import” provisions from other treaties.

Investor claimants may seek to use treaty shopping to circumvent recent reformed investment treaties by bringing claims through companies incorporated in states that still have protections under first generation treaties, thereby undermining reform efforts in individual treaties. While some features to combat this behaviour appear scattered throughout Egypt’s investment treaties, they are far from universal.

Ways to limit treaty shopping include:

  • Seeking to engage in investment treaty reform across the full network of treaties;

  • Barring ISDS claims by investors for reflective loss (Box 3.6);

  • Specifying in the definition of covered investors that the ultimate owner who controls an investment, either directly or indirectly, must be a national of the home state treaty party,61 or requiring investors to have substantial business activities, the location of their effective management or some other substantial connection to the home state;

  • Regulating the criteria for admission of a foreign investments (e.g. compliance with host state law or a registration requirement) and extending treaty protections only to established investments (although this may be considered to conflict unacceptably with liberalisation objectives);

  • Denial of benefits clauses which allow host states to deny the benefits of the treaty, including access to ISDS mechanisms, to investors who are unable to meet specific criteria, such as corporate seat, ultimate ownership, or substantial business presence requirements; and

  • Clarifying that MFN treatment does not permit an investor to import substantive or procedural rights from third-party Egyptian investment treaties, thereby preventing the investor from cherry-picking a preferred set of provisions from other treaties.

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Box 3.6. The unique ISDS approach to reflective loss

Shareholders incur reflective loss if a company in which they hold shares suffers a loss that results, in turn, in the shareholders suffering a commensurate loss, typically a loss in value of the shares. Creditors of an injured company also typically suffer reflective loss. Reflective loss is generally contrasted with direct injury to shareholder rights, such as interference with shareholder voting rights. Claims for direct injury to shareholders are generally uncontroversial; such losses occur infrequently.

Corporate law systems generally bar claims for reflective loss. Where a company is injured, the claim belongs to the directly-injured company. Only the company can recover the loss. Shareholder claims for loss derived from the company loss are generally barred. This universally-applied general rule has both procedural and substantive benefits. Procedurally, it achieves judicial economy by limiting claims, avoiding inconsistent outcomes, facilitating amicable settlement, and precluding double recovery by the company and shareholders for the same loss. It is seen as fair in particular to defendants who are not subjected to multiple claims for the same alleged injury.

In ISDS, in contrast to normal corporate law principles, arbitrators have generally allowed shareholders to claim against governments for reflective loss. This has given rise to the many of the policy issues such as multiple claims from the same injury, leading to millions of dollars in additional legal costs for the same dispute. Egypt has recently experienced some of the high costs arising from the reflective loss interpretation in the cases arising from the East Mediterranean Gas S.A.E gas pipeline project, which involve multiple company and shareholder claims arising from the same dispute and risks of double recovery.

Extensive analysis and discussion of shareholder claims for reflective loss at the OECD have demonstrated that the availability of reflective loss claims in ISDS raises a broad range of policy issues for governments including those identified above. Reflective loss claims are a causal factor in many of the concerns being addressed in multilateral ISDS reform work being conducted by the UNCITRAL Commission’s Working Group III. To date, no convincing policy arguments have been identified to explain the unique ISDS approach allowing for the general acceptance of reflective loss claims. Given that it provides claimants with exceptional benefits and greatly expands the number of actual and potential ISDS cases, however, only government-led reform is likely to address the issues.

Consistency of plurilateral and bilateral investment agreements

Egypt may wish to explore the possibility of harmonising regional investment treaty policies through existing regional frameworks. As mentioned above, Egypt – like many other countries in the MENA region – has a considerable number of overlapping treaty relationships between its BITs and multilateral agreements that duplicate treaty protections with individual countries. Moreover, many of the provisions in the OIC, COMESA and Arab Investment Agreements reflect an outdated treaty design that may undermine Egypt’s efforts to review and reform its BITs if they were to remain in place in their current form: covered investors could conceivably circumvent Egypt’s BITs in the future by choosing to bring an ISDS claim under a more favourably-worded multilateral treaty.

If one or more of the regional groupings of states to which Egypt participates wishes to create a fully integrated investment area, significant differences in investment protections in bi- and multilateral agreements do not contribute to this goal. Egypt may wish to bear these concerns in mind when preparing its new model BIT and engaging in discussions regarding reform efforts in these multilateral fora. There may be scope, for example, to develop a modern balanced approach in plurilateral investment agreements while exiting overlapping BIT relationships to reduce fragmentation in the regional investment treaty regime. The intra-ASEAN Comprehensive Investment Agreement (2009), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (2018) and the proposed Regional Comprehensive Economic Partnership (RCEP) are prominent recent examples that Egypt may wish to consider in terms of coordinated efforts to harmonise regional investment policy.

Ensuring policy space while attracting better quality investment

Egypt may wish to consider ways in which it can guarantee a higher degree of legitimate regulatory freedom and attract sustainable, quality FDI through its new model BIT and discussions with treaty partners regarding possible amendments to existing BITs. These concerns would appear to align with Egypt’s Sustainable Development Strategy (Egypt’s Vision 2030) and the clear focus on sustainable development as part of the new Investment Law.62

Aside from addressing FET provisions, as discussed above, one way to achieve greater regulatory space would be to provide expressly for it. A growing number of recent treaties clarify that non-discriminatory measures adopted by the state parties in relation to designated objectives (e.g. environmental, labour, health, social welfare or consumer protection objectives) will not breach their obligations under the treaty with respect to the treatment of covered investments.63 The upshot of such provisions is that investors are barred from invoking certain measures as the basis for claims against host states under ISDS mechanisms.

Responsible business conduct

Egypt may also wish to consider addressing sustainable development and responsible business conduct considerations in its investment treaties. Three of Egypt’s BITs, as well as the OIC, COMESA and Arab Investment Agreements, make express reference to these objectives.64 Other recent treaties clarify the state parties’ understanding that it is inappropriate to encourage investment by investors of the other contracting party by relaxing environmental or health measures,65 exclude investments procured by corruption from the scope of protections under the treaty,66 recognise that investments should contribute to the economic development of the host state,67 and recognise the importance of requiring companies to respect corporate social responsibility norms.68

As many of these areas are addressed in Egypt’s new Investment Law,69 Egypt may wish to consider cross-referring to these domestic law obligations in its investment treaties or ensuring that protection under all of its investment treaties is restricted to investments made in accordance with Egyptian law. Several of Egypt’s treaties stipulate expressly that only investments made in accordance with host state laws will be protected under the treaty. Such requirements serve as a filter mechanism that can potentially incentivise investors to be more mindful of their obligations under domestic law. The issue of whether such a requirement is implicit appears uncertain in ISDS in light of inconsistent decisions, and an express clause removes doubt in this regard.

Developing proactive approaches to prevention of ISDS claims and case management

Egypt may wish to review its strategy with respect to prevention and early settlement of investment-related disputes and its approach to case management of ISDS cases. Recent domestic legislative developments are encouraging in this respect. As outlined above (Box 3.2), the new Investment Law and its implementing regulations establish a number of non-binding dispute resolution options, including a Grievance Committee to investigate investor complaints, two different ministerial committees and a new arbitration and mediation centre to resolve investment disputes.

Egypt may wish to consider additional options to complement these encouraging steps towards promoting out-of-arbitration dispute settlement. Efforts to build awareness within government ministries, agencies and local or sub-national government entities regarding Egypt’s obligations under investment treaties and the potential impact that government decisions may have regarding investor rights under investment treaties is likely to be worthwhile. A communication protocol regarding important decisions made below ministerial level that may adversely affect investment projects should also be implemented. One OECD member country has recently reported successful outcomes with ministerial committees to consider pre-arbitration notices of dispute filed by investors under investment treaties. Evaluating investor claims candidly before any form of binding arbitration is initiated can be an important step in preventing a protracted and costly legal process. In some cases, it may be prudent to engage internal or external legal counsel to provide an independent legal assessment of the strengths and weaknesses of the investor’s claims to inform governmental decision-making and identify opportunities for early settlement or compromise.

Several states that have been frequent respondents in ISDS cases – including Argentina, Spain, the United States, Canada and Mexico – have capitalised on their own ISDS experiences to develop dedicated teams of government lawyers who now handle exclusively all ISDS cases brought against their government with no reliance on external counsel. Egypt may wish to explore ways to learn from these experiences with these states and other OECD members. While this option naturally involves considerable planning and resources to coordinate, it may be worth considering for the future if external legal fees pose budgetary concerns.

d. Treatment of domestic and foreign investors

It is clear from Egypt’s new Investment Law that Egyptian policy makers are seeking to guarantee a sound investment climate for both domestic and foreign investors. Parts of Egypt’s legal framework applicable to investment protection, including the new Investment Law, apply equally to both domestic and foreign investors.

Egyptian law also contains instruments that exclusively cover only some foreign investors, such as its investment treaties and the possibility left open in Article 3 of the new Investment Law for preferential treatment of foreigners subject to approval from the Cabinet of Ministers.

More favourable regulatory conditions for certain investors based on nationality can distort efficient investment decisions and lower overall investment.70 Where corporate nationality is easily modified through corporate structuring, nationality-based preferences can be easily exploited by investors that would not ordinarily benefit from them. Treaties designed to protect foreign investment from a particular jurisdiction can easily be used by domestic investors or third-country investors advised by legal counsel experienced in ISDS disputes (Box 3.6). At the same time, some governments consider that they need to provide certain extra incentives and guarantees to seek to attract foreign investment because they believe FDI will increase productivity, jobs and innovation. The balance between these interests is a delicate one and may evolve over time.

Investment treaties as tools to liberalise investment policy

While liberalisation provisions are common features of international trade agreements, they have been much less common in investment treaties. However, investment treaties are being used increasingly to liberalise investment policy by facilitating the making or establishment of new investments, such as by removing regulatory restrictions on FDI. (Investment liberalisation generally is discussed in Chapter 2.)

While econometric studies have failed to establish a clear link between investment protection and FDI flows, some show that reducing barriers and restrictions to foreign investments (whether through investment treaties or otherwise) does lead to more FDI flows.71 Evaluation of preferential regimes for protection of covered investors under investment treaties should include their potential dissuasive impact on incentives for investment liberalisation.

One important way that investment treaties may be able to foster liberalisation is by extending the national treatment (NT) and MFN treatment standards to investors seeking to make investments, i.e. the pre-establishment phase of an investment. Another way is through clauses prohibiting measures that block market access.72

Overall, provisions that seek to foster liberalisation are not a common feature of Egypt’s investment treaties. Only a few of Egypt’s treaties grant so-called pre-establishment NT and MFN treatment to investors. Egypt’s BITs with Canada and the United States, for example, provide that the treaty parties shall permit the establishment of a new business enterprise or acquisition of an existing business enterprise on a basis no less favourable than that which is accorded to their own and third-state investors.73 Provisions of this type are typically accompanied by certain exclusions (Box 3.7). Egypt may wish to consider more widespread inclusion of such liberalisation provisions into new or existing investment treaties.

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Box 3.7. Negative and positive list-approaches to NT and MFN exceptions

When countries grant national and/or most-favoured nation treatment, whether pre- or post-establishment, they typically do so subject to reservations. There are two broadly different approaches.

A negative list-approach typically provides that MFN and NT are generally afforded, except for specific exceptions or provisions (negative lists). The Canada-Egypt BIT (1996), for example, provides that the governments may adopt and maintain measures not conforming with the MFN and NT provisions in certain sectors and with respect to matters specified in the Annex to the BIT (Articles III and IV).

A positive-list approach specifies that MFN and NT liberalisation provisions only apply to specific identified sectors (positive lists). Generally, the negative list-approach is seen as more conducive to investment liberalisation particularly over time with the development of new areas of economic activity that are not covered by negative lists.

e. Procedural considerations: exit and renegotiation

Given the current state of its investment treaties as discussed above, Egypt may wish to consider reviewing its existing agreements to ensure that they reflect government intent and sound practices emerging in recently-concluded treaties around the world. A growing number of states are prioritising efforts to exit first-generation investment treaties, as Egypt will no doubt be aware after the recent unilateral denunciations of Egyptian BITs by Indonesia and India. Review and renegotiation of investment treaties takes time, however, and the option to terminate a treaty is not necessarily available at any moment, as the relevant provisions on temporal validity in the treaty may place limits on exit options (see Box 3.8 on designs of temporal validity provisions in investment treaties).

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Box 3.8. Designs of temporal validity provisions in investment treaties

Unlike most international treaties, which can be denounced at relatively short notice, investment treaties typically contain clauses that extend their temporal validity for significant periods of time. Three designs can be found, often cumulatively in the same agreement: First, most investment treaties set and initial validity period of often 10 years or more, counting from the treaty’s entry into force; after that period, many treaties only allow states parties to denounce the treaty at the end of specific intervals of often 10 years or more; finally, treaty obligations almost universally continue to apply for a sunset period after the termination of the treaty, again for periods of typically 10 years or more. Many treaties thus bind the states parties for at least two decades, and in some extreme cases for up to 50 years.

Treaty designs that automatically extend the validity of the treaty for fixed terms are included in around 30% of the global treaty stock, but this design is used less frequently in recent time. This design tends to prolong the period for which states parties are bound without granting additional benefits in terms of predictability for investors: on the contrary, the oscillating residual treaty validity is hard to grasp and predict without detailed study, and drops to very short residual validity of no more than six months (see figure below).

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Figure 3.4. Residual treaty validity
Figure 3.4. Residual treaty validity

Source: Adapted from OECD work on temporal validity under IIAs (Pohl, 2013).

Many of Egypt’s investment treaties that are currently in force contain temporal validity provisions that will operate to delay possibilities for unilateral exit from the treaty. All of Egypt’s treaties contain an initial validity period of between 5 and 20 years. Roughly half of Egypt’s BITs provide for an automatic renewal period after the period of initial validity and allow either state party to denounce the treaty within 6 or 12 months (depending on the treaty) of the expiry of the renewed period. Treaties that renew for fixed terms require more monitoring, as they limit the possibilities to update or unilaterally end the agreement. If no termination is effected in the defined notice period, the treaty is automatically renewed for the agreed period, thereby committing Egypt to these treaties for a further 15 or 20 years in some cases before the next opportunity to terminate the treaty will arise. Even if Egypt were to terminate successfully its treaties, almost all will continue to apply for a survival period of at least 10 years or more in the majority of cases, which leaves Egypt potentially exposed to investor claims under ISDS provisions far beyond the termination date.

Based on available treaty data for Egypt BITs (which remains incomplete for the reasons explained above), it appears that Egypt will be bound by at least one treaty until 2032 (Italy-Egypt BIT (1989)), and even if it were to unilaterally withdraw from all of its investment treaties at the earliest possible occasion, effects of its past treaty policy could bind Egypt until 2049 (Figure 3. 5).

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Figure 3.5. Projection of the temporal validity of Egypt’s investment treaties (light blue) compared to global sample (dark blue)
Figure 3.5. Projection of the temporal validity of Egypt’s investment treaties (light blue) compared to global sample (dark blue)

Source: OECD calculations based on OECD treaty database. Projections based on a hypothetical scenario of unilateral denunciation of all treaties in the available sample at the earliest possible occasion.

For those investment treaties that are in force, unilateral exit is not the only option to address perceived shortcomings in the treaties. Egypt’s possibilities for exit may, however, influence how amendments or agreed exits can be negotiated with treaty partners, especially if the renewal period is imminent. Egypt may therefore wish to consider whether the current design of its temporal validity provisions can serve its interests in discussions with treaty partners. Another avenue for improvement is a joint interpretation to a treaty. These can be issued at any time and may represent a simpler, faster and politically-acceptable device through which to address some aspects of treaty policy if the treaty text allows sufficient scope to achieve the jointly-desired interpretation. Egypt may wish to consider examples of recent joint interpretations signed by other states or develop a model for joint interpretations for its BITs through consultations with interested stakeholders. It may also be prudent to consider revising existing provisions on temporal validity systematically in the context of amendments or renegotiations of existing treaties to remove lock-in provisions and reduce post-termination sunset periods. Egypt’s new model BIT may be an appropriate place to reconsider the government’s stance on temporal validity.


Review and consider possibilities for renegotiation, clarification and exit of investment treaties. Bearing in mind the existing scope for treaty shopping, Egypt should consider its treaty network as a whole during such an exercise. Treaties with vague, unqualified provisions concluded by Egypt in the past may attract undesirable interpretations in ISDS disputes. Egypt should consider taking steps to update these treaties to bring them in line with government intent, Egypt’s current priorities and more recent practices in investment treaty policy as described above in this Chapter. In many instances, this can likely be achieved through amendments or joint interpretations agreed with treaty partners. Termination or replacement of older investment treaties by consent or unilateral action may represent an appropriate last resort in order to manage exposure and safeguard the government’s right to regulate in the public interest.

Manage potential exposure under existing investment treaties proactively. GAFI, the Ministry of Justice and the Ministry of Foreign Affairs should continue to develop ISDS dispute prevention and case management tools. Egypt may also wish to consider efforts to raise awareness about Egypt’s investment treaties and the significance of Egypt’s international obligations under these investment treaties for the day-to-day functions of different government agencies and officials that regularly interact with foreign investors.

Improve access to public information on investment treaties and ISDS cases. Egypt should consider providing a comprehensive list and complete copies of all Egyptian investment-related agreements in Arabic and English on the website of the Ministry of Foreign Affairs. Accessible information regarding Egypt’s investment agreements and Egypt’s policy regarding investment treaties reflects two of the core objectives of Egypt’s new Investment Law – transparency and equal opportunity among investors. Transparency could also be improved with respect to Egypt’s ISDS cases. Egypt is not a signatory of the 2014 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (the Mauritius Convention) – a multilateral effort to address concerns regarding the lack of transparency in ISDS cases by establishing a set of procedural rules for making information publicly available on ISDS cases. It is also unknown whether Egypt has agreed to adopt the UNCITRAL Rules on Transparency in Treaty-based Investor-State Arbitration in ISDS cases since those rules took effect in April 2014.

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Corporate governance of state-owned enterprises

State-owned enterprises74 (SOEs) in Egypt, as in many countries, are prevalent in sectors such as utilities, infrastructure and finance, whose performance affects both broad segments of the population and the business sector. Good governance of state-owned companies is critical to ensure their positive contribution to economic efficiency and competitiveness. SOEs can address market failures, ensure quality public service delivery and contribute to the broader economy – when they operate efficiently, transparently and on a level playing field with private enterprises. When SOEs operate inefficiently and subject to weak governance, they can negatively affect wider economic growth, crowd out more productive private sector activity and strain public resources. Worse, poorly governed or regulated state-owned firms can be abused for political patronage or self-enrichment, reducing the confidence of the public and private investors (OECD, 2015[21]) (OECD, 2018[22]).

Good corporate governance – which involves the relationships between a company’s management, board, shareholders and other stakeholders – can create market confidence and business integrity. For state-owned firms, good governance involves: (i) professionalising the state as an owner; (ii) making SOEs operate with similar efficiency, transparency and accountability as good practice private enterprises; and (iii) ensuring that competition between SOEs and private enterprises is conducted on a level playing field (OECD, 2015[21]). Box 3.9 presents the main policy recommendations of the OECD Guidelines on Corporate Governance of State-Owned Enterprises.

The Egyptian government has taken substantial measures to improve standards of corporate governance for state-owned enterprises. A Law on Public Sector Enterprises sets out rules of governance based on international best practices for a selection of firms, and since 2006, Egypt has had a voluntary but encouraged code of corporate governance for SOEs. The government also announced plans to improve transparency of SOE finances, aims and cost to the state budget. These efforts are important advancements, but the current dual regulatory system, under which only a subset of firms adhere to good corporate governance practices, falls short of levelling the playing field between SOEs and their private sector competitors. The government could do more to apply standards to all state-owned enterprises and take steps to minimise the market distortions of publicly-owned firms.

SOE landscape and challenges

The state is a significant economic actor in Egypt. While privatisation programmes in the 1990s and 2000s substantially reduced the economic role of the government, companies owned (in full or part) by the state remain dominant in network sectors (including utilities and transport) and prevalent in many others, including manufacturing, services, banking and real estate. According to the OECD’s preliminary Product Market Regulation (PMR) information based on Youssef et a. (2019), the state owns majority shares of the largest firms in the electricity, gas, telecom and transport sectors. See Box 3.9 for a brief background on the SOE landscape in Egypt.

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Box 3.9. Brief history of SOEs in Egypt

The role and weight of state-owned enterprises has been a central question in Egyptian economic policy since the founding of the modern Egyptian state. In the 1950s and 1960s Egypt pursued a radical transformation of the economy based on a socialist development model and protectionist trade policies of import substitution industrialisation. State-owned enterprises were seen as essential sources of industry growth, job creation and self-sufficiency. By 1961, the state controlled all banking, insurance, utilities, maritime and air transport, most large-scale industry, as well as many service sectors (Cammett et al., 2013[23]). Economic growth from the strategy was short-lived; inefficient public-sector enterprises soon became widely considered a burden on high budget deficits and public debt (Bromley and Bush, 1994[24]).

Egypt began liberalisation reforms under a policy of infitah (open-door policy) in the 1970s, but state-owned firms remained paramount in both strategic and non-strategic sectors. At the end of the decade output from SOEs contributed to 13% of GDP, and state firms accounted for 60% of value added in manufacturing, nearly double the average for developing countries (Cammett et al., 2013[23]). Privatisation efforts did not begin until 1991, promoted under the terms of structural adjustment agreements with the World Bank and IMF. According to some estimates, over the next two decades the government oversaw the full or partial privatisation of around 400 SOEs in a range of sectors, and cut SOE debt by nearly 75% (Raballand et al., 2015[25]). Compared to other countries in the MENA region, Egypt, Morocco and Tunisia were the only states to significantly reduce the size and number of state-owned enterprises (OECD, 2012[26]).

While lauded by international financial institutions, there was popular opposition to privatisations, which many believed led to layoffs and benefited politically connected businesses (OECD, 2013[27]). Sales of state-owned firms subsequently halted during the period of political instability between 2011 and 2014, and some sales were challenged in court (Adly, 2017[28]). The government is now planning partial divestments from a selection of enterprises (see Divestment plans appear well defined). Yet available information makes it clear that firms owned in full or part by the state remain an important facet of the business sector, including in manufacturing, energy, electricity, banking and construction.

By some accounts the commercial role of the state has expanded in recent years, with firms diversifying into new sectors and taking a greater role in large-scale infrastructure projects (Marshall, 2015[29]) (Abul-Magd, 2014[30]). SOE companies also became major food producers and public contractors and increasingly participated in joint public-private ventures in strategic sectors (Marshall and Stacher, 2012[31]).

The full extent of the state’s role in the economy is unknown. Some reports suggest that public sector firms account for 30% of GDP, but it is not clear whether this figure includes joint public-private ventures or companies owned in full by the state (IMF, 2017[2]). According to Central Bank figures, “public companies” accounted for nearly 16% of all investment in the 2016-17 fiscal year, and “economic authorities” another 10%.75 A subset of 121 state-owned companies generated revenues of EGP 91 billion in the same year, accounting for around 4.6% of GDP (Ministry of Public Enterprise, 2017[32]). State-owned banks control 40% of the domestic banking sector (US Department of Commerce, 2018[33]). There is however no complete list of the number and names and finances of SOEs in Egypt, nor of their finances.

Gaps in transparency are exacerbated by the dispersed nature of public ownership in Egypt. Ministries control portfolios of SOEs directly or through holding companies, which manage sub-groupings of firms by industry. There is no overarching policy or co-ordinating entity to ensure each ministry follows the same procedures on managing or disclosing information on SOEs. Some ministries do not report which companies they control. The Ministry of Public Enterprise Sector appears to oversee the largest number of firms (121), via eight holding companies. Many sectors considered strategic, including electricity, telecommunications and petroleum, are controlled by their corresponding line ministry (the ministries of electricity and energy, communications and information technology, and petroleum, respectively) (Raballand et al., 2015[25]). In some cases, presidential decrees have created holding companies with no apparent overseeing ministry, such as for Egypt’s national airline holding company (OECD, 2014[34]).

This dispersed model of SOE ownership carries an inherent risk of conflict of interest; ministries are often simultaneously responsible for owning SOEs (and benefiting from their success) and regulating them. The establishment of holding companies can improve governance, by transferring shareholding functions away from the ministry (OECD, 2018[22]). In practice however, the independence of holding companies varies widely. Dispersed SOE ownership can also lead to discordant approaches to SOE oversight. As shown in Box 3.10, establishing central co-ordinating entities could help ensure harmony of policies across the different bodies overseeing state-owned firms (OECD, 2015[21]).

Many SOEs in Egypt receive fiscal and quasi-fiscal subsidies that burden the state budget and create market distortions. This includes inputs at below market prices, which can impose high opportunity costs on the government and economy. Inputs frequently come from other SOEs, whose reduced profit in turn affects government revenue (OECD, 2013[27]). Preferential inputs include free land and the ability to defer gas and electricity payments (Egypt Council of Ministers, 2018[35]). SOEs in Egypt often benefit from preferential access to government contracts and, at times, debt relief from state-owned banks.

Further, some state firms are exempt from certain laws. All public utilities, including state-owned electricity companies, are not subject to the Competition Law (private utilities can apply to the Competition Authority for total or partial exemption) (OECD, 2013[27]). Combined, these benefits to SOEs impede competition and create barriers to entry for private-sector firms. There is a risk that SOEs crowd out not only products and services but also access to credit. Some banks may hesitate to back private sector enterprises in sectors perceived to be in competition with state-owned firms.

Despite substantial fiscal and other support, many state-owned firms are not profitable. State holding companies in the food industries, electricity, storage and aeronautics sectors reported receiving grants or subsidies equal to double their combined profits in fiscal year 2015-16 (Ministry of Finance, 2016[36]). While the eight holding companies under the Ministry of Public Enterprise Sector earned revenues equal to 4.6% of GDP in fiscal year 2016-17, their profits accounted for only 0.4% of GDP. The same year, two holding companies (in pharmaceuticals and textiles) posted losses of more than EGP 0.5 and 2.7 billion (Figure 3.6). The debts of these holding companies reportedly exceed EGP 40 billion (El-Fiqi, 2018[37]).

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Box 3.10. Main policy recommendations of the OECD Guidelines on Corporate Governance of State-Owned Enterprises

The state exercises the ownership of SOEs in the interest of the general public. It should carefully evaluate and disclose the objectives that justify state ownership and subject these to a recurrent review.

The state should act as an informed and active owner, ensuring that the governance of SOEs is carried out in a transparent and accountable manner, with a high degree of professionalism and effectiveness.

Consistent with the rationale for state ownership, the legal and regulatory framework for SOEs should ensure a level playing field and fair competition in the marketplace when SOEs undertake economic activities.

Where SOEs are listed or otherwise include non-state investors among their owners, the state and the enterprises should recognise the rights of all shareholders and ensure shareholders’ equitable treatment and equal access to corporate information.

The state ownership policy should fully recognise SOEs’ responsibilities towards stakeholders and request that SOEs report on their relations with stakeholders. It should make clear any expectations the state has in respect of responsible business conduct by SOEs.

State-owned enterprises should observe high standards of transparency and be subject to the same high quality accounting, disclosure, compliance and auditing standards as listed companies.

The boards of SOEs should have the necessary authority, competencies and objectivity to carry out their functions of strategic guidance and monitoring of management. They should act with integrity and be held accountable for their actions.

Source: OECD (2015), OECD Guidelines on Corporate Governance of State-Owned Enterprises, 2015 Edition, OECD Publishing, Paris,

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Figure 3.6. Financial performance of holding companies under Ministry of Public Enterprise Sector in 2016-2017
Figure 3.6. Financial performance of holding companies under Ministry of Public Enterprise Sector in 2016-2017

Note: Fiscal Year 2016-17.

Source: OECD calculations based on data from the Business Sector Information Centre (

Successive Egyptian governments have recognised the inefficiency and distortive nature of many state-owned enterprises. But SOEs in Egypt, as elsewhere, often have development aims, notably boosting employment, that have proven difficult to reconcile with reforms. The state is one of the largest employers in Egypt. Aggregate figures of SOE employment vary; data from a 2014 labour force survey suggest that public-sector corporations employ 3.6% of the total workforce (ILO, 2014[38]). Company-level figures demonstrate that employment-generating goals often outweigh efficiency objectives, contributing to SOEs’ large debt (OECD, 2013[27]). The government in the 1990s used a variety of measures to reduce worker opposition to SOE restructuring and privatisation, including consultations with labour unions, allowing employees to purchase company shares at a reduced cost, termination bonuses and incentives for early retirement. Though these approaches are commonly used in other countries, the results and impact on public opinion in Egypt were mixed (Kauffmann and Wegner, 2007[39]). Few firms assumed the responsibility for the rehabilitation of workers. Offering training for younger employees, redeployment or outplacement services, or short-term job protection, in consultation with employee representatives, can help reduce the negative social costs of reforming underperforming SOEs (Broughton and Manzoni, 2017[40]). Several OECD countries have sought to assist SOE employees through employment retention guarantees (OECD, 2018[41]).

Good corporate governance addresses some of the aforementioned challenges involved with state economic ventures. Clarifying the objectives and improving the performance of state-owned firms can help minimise market distortions and state budgetary pressures.

Advancements on corporate governance of some SOEs

The government has some laudable measures in place to foster standards of corporate governance for state-owned enterprises. Law 203 on Public Sector Enterprises, adopted in 1991, sets out rules of governance based on international best practices for a selection of state-owned firms. SOEs covered by the law must follow provisions of the general Companies Law (159/1981) governing private sector firms and should not receive special benefits or legal exemptions. The law also sets out procedures for the constitution of the general assembly and board, quorum requirements, rules for selection of board members, and requirements for reporting and external audits (OECD, 2012[26]) (Raballand et al., 2015[25]). These provisions are a positive step toward levelling the playing field between SOEs and their private sector competitors. The law also helps alleviate inherent conflicts of interest when a governmental body acts as both an owner and a manager, by transferring management responsibilities away from the overseeing ministry. The Ministry of Public Enterprise Sector oversees firms in a range of sectors and does not set sectoral regulations.

The law is not a comprehensive framework for SOE governance, however. It initially aimed to improve governance of 314 companies slotted for privatisation, transferring their ownership to holding companies under the supervision of what is now the Ministry of Public Enterprise Sector. More than half of the companies have been sold in full or part; the ministry now controls 121 firms (called “affiliate companies”) under eight holding companies in manufacturing, transport and service sectors (Figure 3.6). The law therefore only to applies to these 121 companies and does not cover firms in strategic sectors, including security, banking, telecommunications and water.

Reports also suggest that some provisions of Law 203 are not adhered to in practice, notably related to reporting on finances (Hassouna, 2018[42]). Government influence also remains paramount (Raballand et al., 2015[25]). The law stipulates that the overseeing minister nominates board positions in holding companies, which in turn nominate boards for affiliate companies. These appointments are political decisions, which may undermine oversight of company performance. Experience shows that these practices often compromise the objectivity and independence of boards and curtail their ability to perform effectively, i.e. to oversee company strategy and management, absent political interference (OECD, 2012[26]).

Commendably, Egypt became the first country in the region to develop a Code of Corporate Governance of the Public Enterprise Sector in 2006. The code, based on the OECD SOE Guidelines (Box 3.10), is an important reform towards improving SOE governance and operations and complements law 203 and the general corporate governance code for the private sector (adopted in 2005). The code’s recommendations include many best practices: ensuring the existence of an effective regulatory and legal framework for SOEs, guidelines for the state as an owner, equitable treatment of shareholders, relationships with stakeholders, transparency and disclosure, and responsibility of boards of directors (Egyptian Institute of Directors, 2006[43]). The Ministry of Public Enterprise Sector set up a committee in 2017 to review the corporate governance code for SOEs, to strengthen its standards and bring its provisions in line with the OECD’s updated SOE Guidelines (OECD, 2018[22]).

The code is voluntary, and it appears that adherence varies substantially among Egyptian SOEs. Firms that sell minority stakes on national stock exchanges tend to have higher standards of corporate governance, due to transparency and disclosure requirements of the country’s Capital Market Law, and efforts to appeal to foreign investors (Hassouna, 2018[42]). Other firms, notably Egypt Air Holding Company, do not fall under law 203 but were corporatised under special legislation (in this case via a 2002 presidential decree), which mandates it operate as if “it were privately owned without any interference from the government” (OECD, 2014[34]). Some firms follow some of the code’s guidelines, such as on information disclosure, but many practices are apparently applied in an ad hoc rather than formal manner. In terms of monitoring, the Central Auditing Authority can audit any company in which the state controls more than 25% of shares. These reports are generally not public, and there are questions about their thoroughness (OECD, 2012[26]) (Hassouna, 2018[42]).

While law 203 and the corporate governance codes are important advances in improving governance of state-owned firms, they fall short of levelling the playing field between SOEs and their private sector competitors. The government could consider making elements of the codes mandatory for all SOEs. These standards should be sufficiently flexible to accommodate the variety of commercial and non-commercial objectives of SOEs. To that end, clarifying and disclosing SOE objectives could help shield them from political interference that can hinder their efficiency and make them more accountable to the public (OECD, 2018[22]). More broadly, governments can benefit from following the OECD SOE Guidelines, as well as the corporate governance guidelines for the private sector, outlined in the G20/OECD Principles of Corporate Governance. Aligning SOE and private sector practices helps ensure fair competition (OECD, 2015[44]).

Progress towards transparency

A good corporate governance framework includes high levels of transparency and disclosure. The government has taken steps to increase transparency of public sector firms. Notably, it plans to publish a “comprehensive report on state-owned enterprises”, which will include a “full list of the companies owned by the government, broken down by industry, policy objectives… and type of ownership (e.g. majority or minority-owned)”. The report will also include information on the government’s ownership policy, the impact of public sector enterprises on government finances, and details on individual companies’ finances (including subsidies), board members and management. The government will publish the report annually (IMF, 2018[20]). If enacted, this is a significant step towards improving transparency of public enterprises and making them more accountable in the eyes of the public and investors.

The government does make available financial information on a subset of SOEs. The Business Sector Information Centre, a body under the Ministry of Public Enterprise Sector, publishes the latest financial summary reports (including year-end profits, revenues, investments and exports) of the eight holding companies (and their affiliate companies) under the Ministry. The Ministry of Finance also has publicly accessible financial records on 19 holding companies (including the eight controlled by the Ministry of Public Enterprise Sector), and 23 firms, including in the oil and gas and electricity sectors. These are fairly detailed, including information on current financial position, grants or subsidies received, income statements, distribution of profits, and statements of cash flows. The Ministry of Finance website also discloses budgets and spending of 47 “economic authorities”. The disclosures demonstrate that the government delivered on pledged reforms: in 2012, the Ministry of Finance announced it would improve reporting on financial accounts of some public sector companies (Raballand et al., 2015[25]).

There are currently, however, no publications showing aggregate financial data for SOEs. Individual holding companies and firms sometimes publish annual reports and information on boards of directors, though this seems to be done on an ad hoc basis. The government’s plans to release aggregate reports on all enterprises in the state’s ownership portfolio will require coordination across government. It is not clear if one state body has the mandate and resources to lead this effort. If realised, this mapping will be critical to enacting further improvements to corporate governance (OECD, 2018[22]).

Divestment plans appear well-defined

The Egyptian government announced in 2017 a five-year plan to re-start partial divestments of SOEs, after a period of few privatisations since 2011. It intends to float minority shares (between 15-30%) of at least 23 state-owned firms in a range of sectors including banking and financial services, oil and gas, petrochemicals, transport and logistics, and real estate. Table 3.2 presents the list of firms under consideration, ten of which are already listed on the Egyptian stock exchange (Ministry of Finance, 2018[45]). In line with international best practices, the government established an inter-ministerial committee in charge of developing a plan for partial sales, and consulted with independent banking and legal firms to identify viable companies and determine valuation (IMF, 2018[46]).

The government’s stated objectives are to raise funds and increase liquidity in the country’s capital market. But it has also said it hopes the sales will improve the governance, transparency and performance of SOEs (IMF, 2018[46]). There is some evidence that larger ownership by foreign investors in Egypt has had a positive impact on the performance of privatised firms. This seems to be due however to changes in the board of directors and management rather than the sale itself, emphasising the importance of good corporate governance for all firms (Omran, 2009[47]).

The state’s communication to the public on the rational for divestment and process is also a positive step. Privatisations (full and partial) have in the past been met with strong public opposition, including labour strikes, due in part to perceptions that they will lead to layoffs (OECD, 2012[26]). Moreover, a lack of transparency in previous sales fuelled popular allegations that state assets were transferred at a fraction of their market value to parties affiliated with the government (OECD, 2013[27]). It is important that the government continue to inform the public on the progress of the divestment programme, including on how companies are valued.

The government postponed the divestment programme at the end of 2018 to the following year, citing negative stock market performance across emerging economies. Reports suggest it could alter the stated list of public offerings and will proceed with plans depending on market conditions.


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← 1. Investment Map: (

← 2. The index looks at five dimensions related to land administration: “reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights” (World Bank, 2019[5]).

← 3. This does not apply to Public Free Zones, where the Board of Directors determines the value per square meter of land for usufruct, on an annual basis (Article 82 of Executive Regulation). SEZ authorities also set land plot prices for lease or usufruct.

← 4. See Pohl, J. (2018); Aisbett, E. et al. (2018); Bonnitcha, J. (2017); Bonnitcha, J. et al. (2017).

← 5. Gaukrodger (2017a); Gaukrodger (2017b.)

← 6. Said, E. G. (2016).

← 7. According to publicly-available information and the OECD’s database of international investment agreements, Egypt has signed at least 104 treaties that contain investment protections, with at least 49 BITs and one multilateral treaty in force.

← 8. For example, Egypt appears to have at least three or four different investment treaty relationships with several countries – including Comoros, Jordan, Morocco, Qatar, Saudi Arabia, Somalia, Sudan and the United Arab Emirates – but not every treaty relationship appears to be in force.

← 9. The European Commission published a Trade Sustainability Impact Assessment in 2014 in support of negotiations of a DCFTA between the EU and Egypt.

← 10. Egypt has signed a number of pluri-lateral agreements related to investment. Within the framework of the League of Arab States, Egypt has signed the Agreement on Arab Economic Unity (1957); Agreement on Investment and Free Movement of Arab Capital Among Arab Countries (1970); Convention establishing the Inter-Arab Investment Guarantee Corporation (1971); Unified Agreement for the Investment of Arab Capital in the Arab States (1980) (the Arab Investment Agreement); Agreement on the Encouragement and Protection of Investments and Transfer of Capitals among Arab Countries (2000); Agreement on the Settlement of Investment disputes in Arab Countries (2000); Agadir Agreement with Jordan, Morocco and Tunisia (2004, 2007); and Greater Arab Free Trade Area with all 18 MENA countries (1997, 2005). Within the framework of the Organisation of the Islamic Conference, Egypt has signed the Agreement for Promotion, Protection and Guarantee of Investments among Member States of the OIC (1981) (the OIC Agreement); and Articles of Agreement of the Islamic Corporation for the Insurance of Investment and Export Credit (1992). Within the framework of the Common Market for Eastern and Southern Africa, Egypt has signed the Treaty Establishing the Common Market for Eastern and Southern Africa (1993) (the COMESA Agreement); and Tripartite Free Trade Area agreement between COMESA, EAC and SADC (2015).

← 11. Hesham Talaat M. Al-Warraq v Republic of Indonesia (ad hoc, UNCITRAL, final award rendered in December 2014); Kontinental Conseil Ingénierie v. Gabonese Republic (ad hoc, UNCITRAL, final award rendered in 2017); D.S. Construction FZCO v Libya (ad hoc, UNCITRAL, claim filed in October 2016); Itisaluna Iraq LLC, Munir Sukhtian International Investment LLC, VTEL Holdings Ltd., VTEL Middle East and Africa Limited v Republic of Iraq (ICSID Case No. ARB/17/10, claim filed in April 2017); undisclosed investor v Oman (ad hoc, UNCITRAL, claim filed in 2017); beIN Corporation v Kingdom of Saudia Arabia (UNCITRAL, ad hoc, claim filed in October 2018); Trasta Energy Ltd v Libya (ad hoc, UNCITRAL, claim filed in January 2019).

← 12. Gaukrodger, D. (2018), fn. 5; Investment Arbitration Reporter (2017).

← 13. OIC (2019), para 6(III); Investment Arbitration Reporter (2019).

← 14. Egypt acceded to the Convention on the Recognition and Enforcement of Foreign Arbitral Awards (the New York Convention) on 9 March 1959 following Presidential Decree No. 171 of 1959 in February 1959.

← 15. Egypt signed on 11 February 1972 the Convention on the Settlement of Investment Disputes between States and Nationals of Other States 1965 (the Washington Convention or ICSID Convention), which entered into force with respect to Egypt on 2 June 1972.

← 16. Egypt signed the Riyadh Agreement for Arab Judicial Cooperation (the Riyadh Agreement) on 6 April 1983, which was ratified in 2014 following Presidential Decree No. 286 of 2014 and Ministerial Decree No. 43 of 2014.

← 17.

← 18. For other examples, such as Egypt’s BIT with Armenia, several pages are missing from the English version of the treaty on the MFA’s website.

← 19. Egypt’s BITs with Australia, Bahrain, Burundi, Czech Republic, Ethiopia , France, Greece, Hungary, Iceland, Italy, Japan, Kazakhstan, Latvia, Lebanon, Libya, Malawi, Malaysia, Mali, Mauritius, Oman, Portugal, Qatar, Russian Federation, Slovak Republic, Slovenia, Somalia, Sudan, Tunisia, Turkmenistan and the United Arab Emirates do not appear on the MFA’s website.

← 20. See, for example, Egypt’s BITs with Argentina, Canada, Croatia, Denmark, Finland, Germany, South Korea, Kuwait, Mongolia, Morocco, Netherlands, Nigeria, Poland, Romania, Serbia, Singapore, Spain, Sri Lanka, Sweden, Switzerland, Syria, Thailand, Turkey, Ukraine, United Kingdom, United States and Yemen.

← 21. See, for example, Egypt’s BITs with Chile, Georgia, North Macedonia, South Africa and Zambia.

← 22. The coverage is assessed based on FDI stock data (2016 or, where 2016 data was unavailable, data of preceding years, giving preference to more recent data, based on data released by OECD and IMF) and investment treaties in force in May 2019. For several reasons, reported FDI stock data is not a valid measure for assets that benefit from treaty protections (Pohl (2018)) and available data does not allow to determine ultimate ownership of assets. The proportions of FDI stock data may nonetheless serve as a rough approximation of stock held by the immediate investing country to illustrate features and outcomes of Egypt’s past investment treaty policies.

← 23. Italy-Egypt BIT (1989); Netherlands-Egypt BIT (1996); United Kingdom-Egypt BIT (1975); United States-Egypt BIT (1986).

← 24. Belgium/Luxembourg-Egypt BIT (1999); Denmark-Egypt BIT (1999); France-Egypt BIT (1974); Germany-Egypt BIT (2005); Greece-Egypt BIT (1993); Spain-Egypt BIT (1992); Switzerland-Egypt (2010); OIC Agreement (1981)

← 25. Canada-Egypt BIT (1996); China-Egypt BIT (1994); France-Egypt BIT (1974); Italy-Egypt BIT (1989); Mauritius-Egypt BIT (2014).

← 26. The comparison of GDP per capita in PPP terms between Egypt and its respective treaty partner was determined for the year when the treaty was concluded; where this data were not available, data for the earliest year available for the country-pair were used. The values of per capita GDP PPP in current terms were taken from the World Bank’s World Development Indicators as of mid-2018.

← 27. Moataz, H. (2012); UNCTAD (2012).

← 28. GAFI indicates that the 2007 model BIT is available for download on UNCTAD’s Investment Policy Hub database.

← 29. Moataz, H. (2012); UNCTAD (2012).

← 30. GAFI indicates that these BITs were signed with Ethiopia (2006), Iceland (2008), Switzerland (2010), Burundi (2012) and Mauritius (2014). Egypt’s BITs with Switzerland and Mauritius are available on the MFA website.

← 31. Skovgaard Poulsen, L. N. et al. (2013).

← 32. The discussion here refers only to known claims. Under many Egyptian investment treaties, claimants can often select arbitration rules under which claims must remain confidential. Governments also can prefer individual claims to remain confidential to avoid embarrassment. The number of actual ISDS claims against Egypt appears likely to be higher based on confidential pending cases. Egypt indicated in a prospectus for a public bond offering issued in February 2018 that “[t]here are 20 investment treaty arbitrations and international litigation proceedings against Egypt, of which nine are ICSID arbitrations.” Governments have worked collectively at UNCITRAL Commission meetings to provide for greater transparency in light of the public interest and impact on public budgets at issue in ISDS. As of May 2019, Egypt is not a signatory of the 2014 United Nations Convention on Transparency in Treaty-based Investor-State Arbitration (the Mauritius Convention) – a multilateral effort to address concerns regarding the lack of transparency in ISDS cases by establishing a set of procedural rules for making information publicly available on ISDS cases.

← 33.

← 34. Yosef Maiman, Merhav (MNF), Merhav-Ampal Group, Merhav-Ampal Energy Holdings v. Arab Republic of Egypt, PCA Case No. 2012/26 (Egypt-Poland BIT); Mohamed Abdel Raouf Bahgat v. Arab Republic of Egypt, PCA Case No. 2012-07 (Finland-Egypt BIT); Nile Douma Holding v. Egypt (Bahrain-Egypt BIT); MetroJet (Kogalymavia) Limited v Egypt (Egypt-Russia BIT); Prens Turizm Kuyumculuk Tasimacilik ve Dis Ticaret Limited v Egypt (Egypt-Turkey BIT). It has also been reported that Saudi investors initiated three arbitrations against Egypt under the OIC Agreement (1981) in 2014 relating to hotel and tourism investments but none of the three claims ultimately proceeded due to the OIC Secretariat’s reluctance to make default arbitrator appointments after Egypt declined to nominate an arbitrator.

← 35. Southern Pacific Properties (Middle East) Limited v. Arab Republic of Egypt (ICSID Case No. ARB/84/3); Manufacturers Hanover Trust Company v. Arab Republic of Egypt and General Authority for Investment and Free Zones (ICSID Case No. ARB/89/1). The investors in these cases are understood to have invoked an ICSID clause in Law No. 43 of 1974 Concerning the Investment of Arab and Foreign Funds and the Free Zones, as amended by Law No. 32 of 1977. Law No. 43 repealed the prior investment regime established by Law No. 65 of 1971, which had been issued by President Sadat on 23 September 1971 and published in the Official Gazette on 30 September 1971.

← 36. Wena Hotels Limited v. Arab Republic of Egypt (ICSID Case No. ARB/98/4).

← 37. It has been reported by Bloomberg and Global Arbitration Reporter that a settlement deal in Fund III Egypt, LLC, LP Egypt Holdings I, LLC and OMLP Egypt Holdings I, LLC v Arab Republic of Egypt (ICSID Case No. ARB/16/37) involved a payment of approximately USD 20 million and that Egypt agreed to pay USD 54 million to the investor as part of a settlement deal in Indorama International Finance Limited v Arab Republic of Egypt (ICSID Case No. ARB/11/32).

← 38. Southern Pacific Properties (Middle East) Limited v Arab Republic of Egypt (ICSID Case No. ARB/84/3), Award, 20 May 1992 (awarding the investor approximately USD 27.7 million plus interest); Waguih Elie George Siag and Clorinda Vecchi v Arab Republic of Egypt (ICSID Case No. ARB/05/15) Award, 1 June 2009 (awarding the investor approximately USD 74.6 million plus interest).

← 39. Unión Fenosa Gas, S.A. v. Arab Republic of Egypt (ICSID Case No. ARB/14/4), Award, 31 April 2018. Egypt filed for annulment of the tribunal’s award under Article 52 of the ICSID Convention in January 2019 and the annulment proceedings remain pending as of May 2019.

← 40. See, for example, Abd-El-Aziz Saleh Esmail Abdallah Al-Rashed, Awrad International Holding, International Holding Project Group and others v Arab Republic of Egypt (ICSID Case No. ARB/18/31) (reported to involve damages claims by Kuwaiti investors of around USD 15 billion); Yosef Maiman, Merhav (MNF), Merhav-Ampal Group, Merhav-Ampal Energy Holdings v Arab Republic of Egypt (PCA Case No. 2012/26) and Ampal-American Israel Corp., EGI-Fund (08-10) Investors LLC, EGI-Series Investments LLC, BSS-EMG Investors LLC and David Fischer v Arab Republic of Egypt (ICSID Case No. ARB/12/11) (two related cases reported here and here to involve damages claims totalling over USD 1 billion).

← 41. Eastern Company S.A.E. v Lebanon (CRCICA, award issued in June 2002); Orascom Telecom Holding S.A.E v People’s Democratic Republic of Algeria (PCA Case No 2012-20, consent award issued on 12 March 2015); Global Telecom Holding S.A.E. v Canada (ICSID Case No ARB/16/16, claim registered on 6 June 2016); Almasryia for Operating & Maintaining Touristic Construction Co. L.L.C. v State of Kuwait (ICSID Case No ARB/18/2, claim registered on 14 February 2018); Ayat Nizar Raja Sumrain and others v State of Kuwait (ICSID Case No ARB/19/20, claim registered on 30 June 2019).

← 42. Orascom TMT Investments S.à.r.l. v People’s Democratic Republic of Algeria (ICSID Case No. ARB/12/35), Award, 31 May 2017.

← 43. According to case analysis covering the period 1997 to mid-2018 and made publicly available by UNCTAD, out of 499 cases for which data on alleged breaches was available, investors worldwide have invoked the standard in 411 claims, or 82%, and tribunals have found a breach in 104 cases.

← 44. Egypt’s BITs with Albania, Georgia, Iran, Japan, Libya, Palestine, the United States and Uzbekistan do not provide for FET (but only the BITs with Albania, Japan and the United States are in force); nor do the regional OIC and Arab Investment Agreements. At least two of Egypt’s BITs contain FET wording in the preamble only rather than in the main text of the treaty: see Azerbaijan-Egypt BIT (2002); Turkey-Egypt BIT (1996). This is a common trait of Turkey’s investment treaty practice. Brazil, Turkey and Japan have a lower rate of FET provisions in their concluded investment treaties but these countries’ treaty samples are considerably younger than Egypt’s, on average, which makes Egypt’s regime unique in this respect.

← 45. There are a few exceptions. For example, one of Egypt’s early investment treaties links FET to domestic law obligations: see Finland-Egypt BIT (1980), Article 2(1): “Each Contracting State shall, subject to its laws and regulations, at all times ensure fair and equitable treatment to the investments of nationals and companies of the other Contracting State.” Another gives examples of prohibited conduct: see Article 3: “Chacune des parties contractantes s’engage à garantir un traitement juste et équitable sur son territoire et sa zone maritime pour les investissements des nationaux et sociétés de l'autre partie contractante, excluant la prise de toute mesure injustifiée ou discriminatoire qui pourrait entraver en droit ou en fait la gestion de ces investissements ou leur maintenance, ou leur utilisation, ou la jouissance ou leur liquidation.” At least two of Egypt’s BITs contain a unique “non-impediment” qualification to the FET obligation but this is unlikely to have particular significance in the interpretation of FET in practice: see Article 3 of the France-Egypt BIT (1974): “Each Contracting Party shall undertake to accord in its territory just and equitable treatment to the investments of nationals and companies of the other Party and to ensure that the exercise of the right so granted is not impeded either de jure or de facto.” (Emphasis added.). See also Chile-Egypt BIT (1999), Article 4(1).

← 46. Gaukrodger, D. (2017b), pp. 14-15.

← 47. Gaukrodger, D. (2017b).

← 48. For a recent example, see the Joint Interpretative Declaration between Columbia and India (2018) regarding the Columbia-India BIT (2009). See also Gaukrodger, D. (2016); Gordon, K. and Pohl, J. (2015).

← 49. See, e.g., Emilio Agustín Maffezini v. Kingdom of Spain (ICSID Case No. ARB/97/7). For a recent discussion of the uncertainty surrounding the interpretation of MFN clauses in ISDS disputes, see Batifort, S. and Benton Heath, J. (2018) “The New Debate on the Interpretation of MFN Clauses in Investment Treaties: Putting the Brakes on Multilateralization”, American Journal of International Law, Volume 111, Issue 4 (October 2017), pp. 873-913.

← 50. See, e.g., EU-Canada CETA (2016), Article 8.7(2): “For greater certainty, the [most-favoured-nation treatment] does not include procedures for the resolution of investment disputes between investors and states provided for in other international investment treaties and other trade agreements. Substantive obligations in other international investment treaties and other trade agreements do not in themselves constitute ‘treatment,’ and thus cannot give rise to a breach of this Article, absent measures adopted or maintained by a Party pursuant to those obligations.” See also OECD (2018b), “Background information on treaty shopping”, Agenda and Conference Material for the OECD’s 4th Annual Conference on Investment Treaties (12 March 2018).

← 51. The arbitral tribunal in the White Industries case allowed the investor to import an “effective means” clause from a third-party treaty via the MFN clause in the India-Australia BIT with no analysis of how it considered the relevant MFN clause to operate: White Industries Australia Limited v. Republic of India, UNCITRAL, ad hoc, Final Award, 30 November 2011, paras 11.2.1-11.2.9.

← 52. United States-Mexico-Canada Agreement (2018), Article 14.5(4) (“For greater certainty, whether treatment is accorded in “like circumstances” under this Article depends on the totality of the circumstances, including whether the relevant treatment distinguishes between investors or investments on the basis of legitimate public welfare objectives.”)

← 53. Egypt’s BITs with Qatar (1990), Tunisia (1989) and Uzbekistan (1992) do not contain ISDS provisions. Likewise, Egypt’s early BITs with Germany (1994), the Netherlands (1976) and Switzerland (1974) did not contain ISDS provisions but these BITs have all been replaced with newer treaties that contain ISDS mechanisms.

← 54. Canada-Egypt BIT (1996), Article XIII(3)(d); Switzerland-Egypt BIT (2010), Article 12(5).

← 55. Gaukrodger, D. (2018).

← 56. Canada-Egypt BIT (1996), Article XIII(9).

← 57. See, for example, Australia-Indonesia CEPA (2019), EU-Canada CEPA (2016).

← 58. See EU-Canada CETA (2016), EU-Viet Nam Investment Protection Agreement (2018); EU-Singapore Investment Protection Agreement (2018).

← 59. See, generally, UNCITRAL Commission, Working Group III, “Investor-State Dispute Settlement Reform”.

← 60. For a recent example, see the Joint Interpretative Declaration between Columbia and India (2018) regarding the Columbia-India BIT (2009). See also Gaukrodger, D. (2016).

← 61. See, e.g., Arab Investment Agreement (1980), Article 1(4) (defining an “Arab citizen” protected by the Agreement as “an individual or a body corporate having the nationality of a State Party, provided that no part of the capital of such body corporate belongs either directly or indirectly to non-Arab citizens. Joint Arab projects which are fully owned by Arab citizens shall be deemed to be included within this definition in instances where they do not have the nationality of another State”).

← 62. Article 2 of the new Investment Law provides: “Investment in the Arab Republic of Egypt aims at improving the national economic growth rates and the domestic production rates, as well as provision of employment opportunities, promotion of exports, and boosting of competitiveness which contribute to achieving the comprehensive and sustainable development. Investment is governed by the following principles: … 2. Consideration of all aspects with social dimension, protection of the environment and the public health. … These investment principles apply to the Investor and the State, each in their respective areas of responsibility.”

← 63. See, for example, Australia-Indonesia CEPA (2019), Article 14.16; United States-Mexico-Canada Agreement (2018), Article 14.17; Brazil-Chile FTA (2018), Article 8.17; Argentina-United Arab Emirates BIT (2018), Article 11.

← 64. See Canada-Egypt BIT (1996) (in a general exceptions clause), Mauritius-Egypt BIT (2014) (in the preamble text and the security exceptions clause); Switzerland-Egypt BIT (2010) (in the preamble text); OIC Agreement (1981) (in the preamble and Article 3); COMESA Agreement (1994) (in the preamble and Articles 3, 72, 122, 123, 126, 129 and 154); Arab Investment Agreement (1980) (in the preamble).

← 65. See, for example, Japan-Viet Nam BIT (2003), Article 21; Netherlands Model BIT (2018), Article 6(3); Argentina-United Arab Emirates BIT (2018), Article 12.

← 66. See, e.g., Brazil-Chile FTA (2018), Article 8.16.

← 67. See, e.g. China-Peru FTA (2009), which states in the preamble that the State Parties “RECOGNIZE that this Agreement should be implemented with a view toward raising the standard of living, creating new employment opportunities, reducing poverty and […]”.

← 68. See, e.g. Australia-Indonesia CEPA (2019), Article 14.17; United States-Mexico-Canada Agreement (2018), Article 14.17; Brazil-Chile FTA (2018), Article 8.16.

← 69. See, for example, Articles 3 and 15 regarding corruption and corporate social responsibility.

← 70. See, for example, the findings of the Australian Productivity Commission: Australian Government (2010), “Bilateral and Regional Trade Agreements”, Productivity Commission Research Report, Australian Government, November 2010.

← 71. Berger et al., 2013.

← 72. See, for example, EU-Canada CETA (2016), Article 8.4; EU-Vietnam FTA (2018), Article 8.4.

← 73. Canada-Egypt BIT (1996), Article II(3); United States-Egypt BIT (1986), Article II(1), (2). Some other Egyptian treaties extend MFN and NT treatment to “activities associated with” investments, which arguably also covers pre-establishment activities: see, for example, China-Egypt BIT (1994), Article 3(2). Others clarify that MFN and NT treatment only applies after an investment is established in the territory of one of the treaty parties: see, for example, Turkey-Egypt BIT (1996), Article II(2).

← 74. State-owned enterprises mentioned in the present report refer to enterprises engaged in commercial and non-commercial activities, and owned by a wide range of public authorities, including sectoral ministries and the military authorities.

← 75. Economic authorities are public bodies that manage, regulate or provide services. They include some corporatised entities, such as the Egyptian General Petroleum Corporation, as well as railway and port authorities, and authorities in charge of free, investment and special economic zones. While some of these entities are involved in economic activity, they are for the most part government branches and are not included in this analysis.

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