ECESR has published a new report titled: ”Egypt & International Arbitration: Protection Of Investor, No Consolation for Public Money“, The report addresses Bilateral Investment Treaties (BITs) and their relationship to international arbitration and impact on corruption in Egypt.
Egypt attracts investments that are not beneficial to its economy, there is a need to investment in labor intensive sectors
The report begins by listing the rates of rampant corruption in the country and its various negative consequences, resulting in the loss of Egypt’s resources and wealth and impacting the level of confidence in the country’s investment climate. The report indicates, for example, that Egypt faces “losses of around 40 billion Egyptian Pounds ($6 billion) annually due to corruption, which is one and a half times the health budget of 2012-2013 (LE27 billion, $4 billion).”
The report also discusses foreign investments, indicating that Egypt attracts investments that are not beneficial to its economy. Foreign investment in Egypt has been limited, until today, to the purchase of state owned assets. It was a result of the privatization program, which led to the dismantling of Egyptian industry, the redundancy of the a large section of Egyptian labor, as well as investment in the building and construction sector, which remains confined to building luxury residential resorts, which is also one of the main industries involved in litigation against Egypt in international investment courts.
Egypt is one of the top four countries facing international litigation from foreign investors
Thus, there is an urgent need to review investment priorities in Egypt, which could focus more on attracting investment in labor intensive sectors, with an evaluation of previous contracts and the reasons behind Egypt’s failure to attract useful and genuine investment.
Following this, the report addresses international arbitration cases against Egypt filed by foreign investors. It indicates that Egypt is one of the top four countries facing international litigation from foreign investors. Since the January 2011 revolution, foreign investors have filed more than ten lawsuits against Egypt at the International Center for Settlement of Investment Disputes (ICSID) alone. The real number is certainly more than these publicized cases, since many are dealt with in secret, based on the rules followed by various international courts specialized in arbitrating investment issues.
Despite the harm it caused the country in the past years, before and after the revolution, Egypt keeps restraining its courts and political sovereignty in decision making by entering into new bilateral investment accords and free trade agreements. Foreign investors are thus immunized and accorded with exceptional protection, in addition to imposing the authority of international arbitration courts on the country.
Moreover, the Egyptian state keeps neglecting the dangerous negative impacts resulting from its entry into such international investment agreements, particularly the exceptional protection they provide for foreign investors. This includes giving them the ability to overstep local courts, present cases against the state, and demand compensation before courts specialized in investment issues, even if the investment was proven to be corrupt. Courts specialized in investment issues are different from other international courts, overstepping the local judiciary and not taking its rulings into account. Another difference is that such courts – as per the nature of the bilateral investment agreement – have the ability to implement its decisions. This situation has cost Egypt billions of dollars and will continue to do so in the future.
Egyptian governments began amending local laws related to investment, tenders, bids, and investment guarantees and initiatives to block the channels of local litigation against corruption – for fear of international litigation
After decades of corruption and squandering Egypt’s public money and its peoples’ right to their wealth, the Egyptian state is still unable to hold corruptors accountable or return the plundered rights. This happens particularly due to investment agreements signed by Egypt with over one hundred countries. Instead of reviewing its position concerning such agreements – as many countries are currently doing, Egypt lamentably tended to amend its legislations in a manner that reconciled with corruption and neutralized the decisions of Egyptian courts, which had uncovered corruption in several cases involving privatization and land sales. This was justified by fear of international litigation.
Moreover, successive Egyptian governments began amending local laws related to investment, tenders, bids, and investment guarantees and initiatives to block the channels of local litigation against corruption – for fear of international litigation also, which threatens to increase corruption and reconcile with crimes, which threaten the Egyptian economy and its citizens’ livelihoods.
The Report introduces alternative approaches by visiting upon experiences of different countries, especially those of Latin America
The report puts forward an alternative approach, adopted by several countries to escape the unfair bilateral agreement regime, which currently threatens the Egyptian economy and the rights of Egyptians to preserve their wealth. It illustrates the experiences in Latin America, South Africa, and even Australia, states which utilized several methods, either to escape the authority of international arbitration or to review bilateral agreements, and even annul them. This came about after it became clear that such agreements are not attracting investments and they only aim to provide foreign investors with unlimited powers, in the name of encouraging investment.
Since the beginning of the transitional phase, following the 25 January 2011 Revolution, Egyptians have been awaiting the economic decisions of their governments, hoping for a change in policies, which the revolution came to change. Unfortunately, Egyptians did not witness the change to which they aspired in the last two and a half years, but saw the same policies that are biased towards businessmen and investors and policies that lead to profiteering by one social class.
We still find huge loans, pegged to unfair and non transparent policies, and austerity measures, which lead to more poverty, in addition the clear curtailment of the state’s developmental role. This policy package does not respond to the demands of the Egyptian street, but to that of international organizations and private interests.
What is certain is that the government of Ganzouri tread the same path of Mubarak and the Qandil government kept going in the direction set by Ganzouri, and now the Beblawi government has followed suit.
Egypt & International Arbitration (English)