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The International Centre for Settlement of Investment Disputes Report

 

Highlights

Established in 1966 by virtue of a multilateral treaty formulated by the Executive Directors of the World Bank, the International Centre for Settlement of Investment Disputes (“ICSID”) is the world’s leading arbitration institution devoted to the settlement of the legal international investment disputes between the international investors and states. The ICSID is considered an independent, depoliticized and effective institution aimed primarily at providing confidence in the dispute resolution process between the aforementioned parties.

To date, the ICSID has administered more than 700 international investment cases through several mechanisms, including conciliation, mediation, arbitration and fact-finding.

The ICSID’s latest Report, issued on 17 March 2022 (“Report”), focuses on the arbitration cases filed against countries of the Middle East and North Africa region (“MENA region”), including Egypt, during the past five (5) decades.

By analyzing the Report, we may better understand Egypt’s current situation concerning foreign investment and learn about the proposed solutions to enhance the same.

Important Statistics

The Report covers twenty-two (22) countries in the MENA region, among which twenty (20) are Arab countries, as well as Iran and Turkey (“Countries”).

  1. Since ICSID’s establishment until 31 December 2021, the number of cases filed against the Countries amounted to a total of ninety-seven (97) cases as follows:
    1. Forty-two (42) cases were filed against Egypt, representing; among which thirty-three (33) have had final rulings;
    2. Fifty-five (55) cases were filed against the other Countries, representing 7% of the total cases filed against the Countries.

Based on the above, we can conclude that the percentage of cases filed against Egypt before the ICSID is considerably high. Moreover, the above-mentioned number does not include cases filed against Egypt before other Arbitration centres, such as the International Chamber of Commerce in Paris and the London Court of Arbitration.

Important Analysis

Although Egypt’s competent authorities exert their best efforts to win the cases filed against the same; many experts and professionals believe that the main reason for the cases against Egypt lies in Egypt’s non-compliance with the ratified investment-related bilateral and multilateral international treaties besides the unilateral termination by Egypt of several foreign investment agreements.

In addition to the above, the following may also be considered as potential direct reasons for the number of cases filed against Egypt:

  • The non-compliance with binding international obligations, including the rules of fair, equitable and non-discriminatory treatment;
  • Taking measures that have an equivalent impact to nationalization, without justification; and
  • The non-compliance with recognized international.


Experts and Professionals Proposed Solutions

In light of the above, experts and professionals believe that the solution lies in establishing a specialized Egyptian body (“Investments Implementation Authority”) to review the implementation (and termination) of the international investments agreements.

The Investments Implementation Authority shall be responsible for the following:

  • Drafting and reviewing all international investment agreements to be concluded by Egypt as well as their negotiation to enhance Egypt’s rights and obligations under said agreements, ensuring that the agreements with the investors are on an equal standard and avoiding any unexpected outcomes in case of disputes;
  • Supervising and reviewing the implementation of aforementioned agreements, especially those of great economic value, in light of an updated legal framework of investment-regulation treaties for contract globalization to avoid any failure of investments; and
  • Supervising any investment agreement's termination process to suspend the unilateral termination practice and enhance the principle that “contract is the parties’ law and cannot be amended or terminated except by the parties’ agreement or by virtue of a law”.


Conclusion

Egypt’s economy is considered one of the most developed in the MENA Region, having one of the oldest and most developed stock exchanges, rendering Egypt popular among investors as a primary frontier market.

Most importantly, since 2011, Egypt has recently started exerting significant efforts in implementing regulatory reforms to stabilise its economy, attract investors, and spur stable economic growth, which yielded foreign investment inflows to increase steadily. In that regard, despite more modest inflows over some years, 2018 witnessed Egypt as the largest recipient of foreign direct investment in Africa and the second highest in the MENA Region.

That being said, the issues referred to in the brief constitute a challenge that the Egyptian government must resolve soon to enhance its investment environment further and pave the way to the current promising economic position.

Lastly, to implement the recommended approach, the Egyptian Prime Minister recently issued a decree no. 1679 of 2022 proposing solutions to the issues mentioned above at stake and regulating the technical Secretariat of Arbitration and International Disputes Authority, specifying certain prerogatives and competencies thereto, including without limitation (i) studying the administrative agreement concluded with foreign investors; (ii) proposing a template for the dispute resolution clauses to be included in such agreement; and (iii) analysing the arbitration cases filed against Egypt; all to settle the current disputes and prevent future ones.

Ultimately, the aim is to see Egypt implementing such a decree to capitalise on its location “bridging the Middle East, Africa, and Europe” to become a regional trade & investment gateway and energy hub, as it deserves.

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