EGYPT Trends and Developments Contributed by: Inji Fathalla, Salma Nasreldine, Haya El Samra and Ismaël Sedky, Shahid Law Firm
MFN clauses and their possible extension to dispute resolution provisions has long been debated. As to the FPS standard, it has traditionally been draft- ed in broad terms, requiring the host state to grant investors a certain level of protection and security. In the Egypt―KSA treaty, although it is clarified that legislative amendments in themselves do not consti- tute a breach of the FPS standard. This clarification is highly significant, and marks a considerable step forward in the drafting of this standard, and of BITs more generally. Without it, any investor whose stake was affected by a regulation could claim breach of FPS. By narrowing the scope of the FPS, the provision safeguards the state’s right to regulate. While this drafting might first appear restrictive, in fact it strikes a balance between investor protection and state autonomy. An overly broad interpretation could effectively “freeze” the legal framework, preventing the state from adapting its laws to serve public inter- est. For instance, in Wena Hotels Ltd. v Arab Repub- lic of Egypt, ICSID Case No ARB/98/4, the tribunal found that Egypt had breached both the FPS and FET standards without clearly distinguishing which actions amounted to a breach under each, treating both col- lectively instead. Whether direct or indirect, these clauses remain anchored in evolving principles, such as sustainable development, for example, a concept that is difficult for tribunals to qualify, and that is therefore difficult to establish as grounds for breach. The effectiveness of such clauses remains to be seen, and will largely depend on tribunals and their willingness to enforce them against investors. For now, investors have little to fear. Finally, as part of a modernised approach to trea- ty drafting, Egypt devotes an entire section of the Egypt―KSA BIT to ISDS, thereby ensuring clarity and structure in the dispute resolution process. The initial stage is amicable settlement between the host state and the investor. The Egypt―KSA BIT provides investors with multi- ple arbitration options (including ICSID, UNCITRAL, and others) offering flexibility in dispute resolution but
also including a fork-in-the-road provision to prevent parallel proceedings by restricting claims arising from the same factual background, even if based on dif- ferent legal grounds. While this aims to circumvent conflicting decisions and procedural abuse, it may limit access to ISDS for certain claims. Additionally, the treaty distinguishes between contract claims and treaty claims, excluding contract claims from ISDS when a contract already includes its own dispute reso- lution mechanism, thereby preserving the integrity of negotiated agreements. Egypt’s Response to Recurring Investor Claims Investor―state arbitration cases against Egypt have featured certain recurring issues. Allegations are fre- quently directed against state-owned entities, or stem from decisions and actions of regulators that inter- fered with the investor’s rights or with the investment itself. Discrimination and unjustified measures are also recurring, with investors often claiming that Egypt took actions that directly undermined their investment. Other common concerns relate to access to justice, given the complexity and delays of the Egyptian Courts, with allegations pointing to the ineffectiveness of judicial remedies. Investors have also advanced claims based on eco- nomic and political hardship, especially during periods of crisis. In Unión Fenosa Gas, S.A. v Arab Republic of Egypt, ICSID Case No. ARB/14/4, for example, due to the needs of the Egyptian population, Egypt inter- rupted its supply of gas to the investor, which directly affected its investment. Despite these recurring issues, a clear trend has emerged: most cases against Egypt are resolved by settlement rather than proceeding through to a final award. This trend is illustrated by several recent cases. • In Tantalum International Ltd. and Emerge Gam- ing Ltd. v Arab Republic of Egypt, ICSID Case No ARB/18/22 , arbitration was initiated following the cancellation of licenses granted to the investor.
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