Amr Arafa Hasaan, LL.M.*
Egypt has suffered massively in economic terms since the onset of the Arab Spring in 2011. Since then, there have been continuous endeavors to mitigate the loss, for instance, by holding the economic forum at Sharm El-sheikh in 2015, and concluding amendments to the investment law pending the same year. Thus, it sought to enact a new investment law which ought to offer tempting attractions for investors, and it shall be completely different from the “old”, if I can say so. The Egyptian Parliament approved the new investment law on May 7, 2017, which came into force on 1st of June 2017
Indeed, the new investment law has some distinguishes from the “old” investment law which worth a commentary. Yet, this blog post underlines the Egyptian perspective regarding arbitration in particular under the new law.
Under Article 90(1) of the new law potential disputes with the investor may be settled either according to the mechanism agreed upon with the investor, or pursuant to the Egyptian Arbitration Act 1994 as amended in 1997. Further, Article 90(2) potentially gives the disputing parties the possibility to resolve their dispute amicably through the available means of settlement including ad hoc arbitration or institutional arbitration. The executive regulations of the law are yet to be issued.
Hasty call for myriad claims
Article 90(1) avails the addressees of the new law to either resolve their disputes according to the agreed mechanism or via arbitration according to the Egyptian Arbitration Act.
Well, for me, this provision seems promising from the investor’s perspective. Investors are identified globally wide under the provisions of the new law. This provision reading seems, from the investor’s perspective, as offering the option either to resolve its dispute through the agreed mechanism with the counter-party, or arbitration under the Egyptian Arbitration Act 1994.
Outwardly, this provision gives any investor a carte blanche to refer to arbitration any dispute that might arise with any official authority.
This conclusion rings a bell in my ears. A few years ago I was attending “the Berthold Goldman Lecture on Historic Arbitration Stories” in Paris, where Jan Paulsson presented how he could manage to resolve, what it seemed during 1990’s, a dilemma for suing Egypt for the breaches of its commitments under Hong Kong-Egypt BIT. The presentation was about the well-known SPP v. Egypt Case, or as Paulsson named “the Pyramids Case”. This case landmarked the first investment case where the investor could sue a host state based on its domestic law.
Paulsson rehearsed his discussion with his boss, at that time, Mr. Laurie Craig, with his invented theory for suing Egypt. Mr. Craig was dissatisfied with Paulsson’s theory which seemed irrational. Mr. Craig, to express his restlessness with the theory, said “Egypt might not even know who can sue it in Arbitration”. Article 8 of the Egyptian Investment law no. 43 of the year 1974 availed the investor to refer its dispute directly to the International Centre for the Settlement of Investment Disputes (ICSID). In Paulsson’s words, “Article 8 established that any dispute between an investor and the State could be decided in one of four ways; (…..) (1) [b]y a complaint to the Egyptian courts; or (2) in a manner agreed between the investor and the State; or (3) in accordance with the terms of an agreement between the State of Egypt and the home State of the investor; or (4) under the ICSID Rules”.
Reading Article 90(1) of the new investment law, in abstract, makes an unreasonable conclusion. It reads as giving the addressees “the option” either to resolve investment disputes (i) in accordance with the agreed forum, or (ii) pursuant to the Egyptian Arbitration Act. The absurdity of this conclusion lies in the fact that the first option is the agreed forum. It does not need a law to be effective. Likewise, the second option, in principle, is permissible under the Egyptian Arbitration Act. Briefly, interpreting Article 90(1) in this manner makes it has no added value to the law. However, reading it in an effective mode looks like lodging a machine gun with bolts without a safety catch. In fact, the bolts here are the potential arbitration disputes.
Article 90(1) of the new law ostensibly recreates the spirit of Article 8 of the Egyptian Investment law no. 43 of the year 1974. Still, Article 90(1) has a limited application only to resolve investment disputes under the Egyptian Arbitration Act.
Offering a blank check for the addressees of the new law to refer any dispute to arbitration seems a tempting option for filing arbitration disputes against governmental entities and the vice versa. The said provision gives a probability that investors may be motivated to invest in Egypt, but it, unquestionably, guarantees never-ending arbitration claims against administrative entities.
These prospective arbitration cases might affect the economy undesirably. Arbitration in Egypt, unlike some western countries, is much costly than referring disputes to domestic courts. This implies a bunch of the government budget to be located for expenses of arbitration disputes.
Would it be an ad hoc arbitration, or is it just an inoperative arbitration offer?
Expression of the intent to refer a dispute to arbitration will constitute an acceptance of the offer to arbitrate. However, once the applicant considers the content of the offer to arbitrate, it will figure out that it is in an inaccessible situation.
Incompatibility with the Egyptian Arbitration Act
Initial reading put the operation of this open-ended offer to arbitrate in dilemma. Article 90(1) affirms that potential disputes shall be resolved in accordance to the Egyptian Arbitration Act. Article (1) of the Egyptian Arbitration Act requires a formal approval of the competent minister, or its similar competent, to refer a dispute to arbitration.
So, would Article 90 replace the formal requirement stated under Article (1) of the Arbitration Act? Unquestionably, it will be subject to opposing interpretations by disputing parties. Under international arbitration, some imminent scholars support the proposition that the arbitration agreement shall be valid, and domestic law requirements shall be irrelevant. Others confirm that the formal requirement shall prevail. Though, this would foray expectations of investors who sought to refer their disputes to arbitration depending on Article 90(1).
Non-executive offer to arbitrate
Article 90(1), per se, by referring to the Egyptian Arbitration Act implies that the Egyptian courts shall be competent with the annulment proceeding, and the seat of arbitration will be Egypt. However, it lacks salient features for an arbitration agreement to be operational. For instance, there is no determination of the rules of arbitration, language of proceeding, number of arbitrators, appointing authority, location of hearings. The Geneva Protocol of 1923 stipulated the instances where an arbitration agreement is considered inoperative. Without cementing these gaps in Article 90(1), referring disputes to arbitration pursuant to Article 90 will be standstill in case the counter party chooses not to cooperate.
* Amr Arafa Hasaan, LL.M., Counsellor at the Egyptian State Lawsuits Authority, Foreign Disputes Department