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Getting The Deal Through

Egypt: The Legal Landscape

Mahmoud Bassiouny and Kholoud Hafez

Matouk Bassiouny


Country overview

1    Give an overview of the country’s economy, its structure and main characteristics, and prevailing government economic policy, particularly as regards foreign investment.

Egypt follows a free market system. Egypt’s economy has been planned to be diversified, and currently depends mainly on industry, agriculture and services sectors, while the services sector represents half of the GDP.

GDP (gross domestic product) composition by sector is roughly 11 per cent in agriculture, 36 per cent in industry and around 53 per cent in services.

In 2015-16, higher levels of foreign investment contributed to a slight rebound in GDP growth after a particularly depressed post-revolution period. In 2016, Cairo enacted a value-added tax, implemented fuel and electricity subsidy cuts, and floated its currency, which led to a sharp depreciation of the pound and corresponding inflation. In November 2016, the IMF approved a
$12 billion, three-year loan for Egypt and disbursed the first
$2.75 billion tranche.

– CIA World Factbook

Egypt’s economy grew by 5.2% in H1-FY18 (July/June), compared to 3.7% a year earlier, mainly driven by investment, exports and consumption. On the sectoral side, the gas extractives sector has been a main contributor to growth, notably since the recent operationalization of the large Zohr gas field. The improvement in energy supply is also starting to have positive spill-overs on other sectors, especially manufacturing. The tourism sector is rebounding gradually, helped by the effect of local currency depreciation.

- The World Bank Report, April 2018

The Egyptian Government’s policies are now focused on economic recovery and growth through the following five channels; mega infrastructure, tourism, improvements to economic policy, increasing private sector investments. Sectors seen by the Government to be of particular focus for foreign investors in the short to medium term include energy, construction and real state, transportation and telecommunications.

– Doing Business in Egypt – PwC

Legal overview

2    Describe the legal framework and legal culture in your jurisdiction as regards business and commerce.

Egypt follows a civil law system, with strong influences from the Napoleonic Code. Egypt’s legal system is hierarchal. The Constitution is the supreme source of law, followed by international treaties ratified by the House of Representatives (the legislative power), laws, then acts of the executive, such as ministerial decrees and circulars. In the absence of a codified legal rule, a judge will decide according to custom, Islamic Shari’a and principles of natural justice and equity.

The Egyptian Constitution provides for the rule of law, and for separation of powers. The President of the Republic heads the executive branch, a unicameral House of Representatives composes the legislative branch and the judiciary is divided across three categories:

  • civil courts, comprises of three tiers namely, the courts of first instance, courts of appeal and the Court of Cassation, have jurisdiction over disputes arising between private persons whether natural or juridical;
  • the State Council’s administrative courts have jurisdiction over disputes between the state and its subdivisions or the state and private parties; and
  • courts of special jurisdiction, such as military courts.

Although Egyptian courts tend to follow correct legal rules, lengthy timelines and the frequent procedural delays deter most businesses from choosing courts as a dispute resolution mechanism to govern their contractual arrangements. A vast number of laws, and the large bureaucracy can be an impediment to the timely execution of a deal, but the Ministry of Investment, empowered by the current drive to attract foreign direct investment, has helped overcome a lot of these obstacles. Institutional and ad hoc committees have been established to settle investment disputes, away from the traditional court systems, and this system has proved largely successful.

3    What are the main sources of civil and administrative law applicable to companies?

Egyptian Civil Code No. 131 of 1948 (Civil Code) and Commercial Code No. 17 of 1999 are the main sources of legislation applicable to companies. The key legislation for the establishment of a corporate presence are the new Investment Law No. 72 of 2017 (which replaced the old investment Law No. 8 of 1997), the Companies Law No. 159 of 1981 (Companies Law) and Capital Market Law No. 95 of 1992 (Capital Market Law) and the executive regulations enacted thereunder. It is worth noting that the executive regulations of New Investment Law No. 72 of 2017 have not been issued to date. In the public business sector comprising holdings companies (replacing the historic public sector authorities) and their subsidiaries, the latter are subject to the Public Business Sector Law No. 203 of 1991 further to the aforementioned key legislations.

Dispute resolution

4    How does the court system operate with regards to large commercial disputes?

The Courts of First Instance are first degree courts, which have competence to consider lawsuits filed before them only if they fall under their jurisdiction. Their rulings are, generally, subject to appeal. The Courts of First Instance are divided into primary courts and district courts. Cases are mainly divided between both courts on the basis of their value, leaving minor cases of less than E£40,000 to be decided by the district courts. Accordingly, large commercial disputes would be handled by primary courts.

Appeals made on the judgments of primary courts are brought before a court of appeal.

There are around seven courts of appeal in Egypt, all located in major cities. These are second-degree courts that review the awards of the courts of first instance. Their review covers questions of fact as well as questions of law. Appeals from rulings rendered by the courts of first instance should be made within specific time frames, otherwise an appeal will be rejected. As such, time limits are a matter of public policy. Judgments rendered by a Court of Appeal are only subject to challenge before the Court of Cassation, and on the grounds of wrongful application of law.

Moreover, economic courts, established by Law No. 120 of 2008 have jurisdiction over certain matters set out by law, the key of which are bankruptcy proceedings, intellectual property rights, the Capital Market Law, Companies Law and mortgage finance.

5    What legal recourse do consumers typically have against businesses?

Consumer Protection Law No. 67 of 2006 is the key law governing legal recourse of consumers against businesses. The law established a public authority entitled the Consumer Protection Agency that aims at the protection of consumers and their interests. Class actions are recognised in collective relationships such as collective labour agreements. Egyptian Labour Law No. 12 of 2003 provides procedures for settlement of collective labour disputes between employers and employees or a group of employees. There is no mechanism for class actions under Egyptian law other than collective labour disputes.

6    How significant is arbitration as a method of dispute resolution?

Arbitration has become a prominent alternative for resolving business, commercial and investment disputes in Egypt.

Arbitration Law No. 27 of 1994 regulates the conduct and enforcement of arbitral proceedings in Egypt or international commercial arbitrations taking place outside Egypt, where the parties have agreed to subject their proceedings to the law. Courts refrain from accepting a case if there is an agreement to resort to arbitration, unless the respondent waives its right.

Article 39 of the Arbitration Law provides that:

The arbitral tribunal shall apply to the substance of the dispute the rules chosen by the two parties. If they agree on the applicability of the law of a given State, only the substantive Rules thereof shall be applicable and not its conflict of laws rules, unless otherwise agreed by parties.

This means that the parties have the right to choose the applicable rules, and the arbitral tribunal should apply such rules to the substance of the dispute. If the parties choose to apply the law of any state, only the substantive rules of the law shall be applicable, without the need to apply the rules regarding the conflict of laws. The rules regarding conflict of laws are only applicable in the absence of an agreement among the parties on a governing law. The Cairo Regional Centre for International Commercial Arbitration (CRCICA) is the leading arbitral institution in Egypt; however, there are no requirements in Egyptian law that an arbitration be conducted under the auspices of the CRCICA.

It is worth noting that an agreement to arbitrate in relation to disputes arising out of administrative contracts requires the competent minister’s approval, or the official assuming his or her powers with respect to public juridical persons.

7    What other methods of dispute resolution are commonly used?

Besides arbitration, there is no formal regulation for alternative dispute resolution methods. Other methods such as mediation and conciliation are subject to contractual agreements. CRCICA, for example, has rules for mediation and conciliation that are applied in accordance with the parties’ contractual agreement.

To accelerate the process of settling investment disputes between the state and investors, Egypt has created a settlement committee (pursuant to Decree No. 1067/2012) to amicably settle disputes arising out of contracts entered into between investors and any governmental entity.

8    How easy is it to have foreign court judgments and foreign arbitral awards recognised and enforced in your jurisdiction?

With respect to the recognition and enforcement of foreign judgments, a request to enforce a foreign judgment is submitted to the court in which the enforcement takes place. The foreign judgment shall fulfil the following requirements:

  • Egyptian courts lack jurisdiction over the dispute, while the foreign courts enjoy jurisdiction in accordance with their international jurisdiction’s rules;
  • parties to the dispute have been notified and validly represented before the competent court;
  • the foreign judgment shall be final and binding; and
  • the foreign judgment is not in conflict with a prior judgment rendered by Egyptian courts or public policy considerations.

The prescription period with respect to enforcement requests and actual enforcement is 15 years in accordance with the general rules on prescription under the Civil Code.

Similarly, for enforcement of foreign arbitral awards, a request for enforcement should be submitted to the competent court, which, in the case of international commercial arbitration, is the Court of Appeal. An enforceable foreign arbitral award shall:

  • be valid;
  • not be in conflict with prior Egyptian award on the same issue; and
  • not violate public policy considerations.

A request for enforcement of an arbitral award will not be accepted unless the period for filing a nullity action has lapsed in cases where a nullity action is possible.

Egypt is a signatory party to the New York Arbitration Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

At the recognition or enforcement stage, arbitral awards and foreign judgments are not reviewed on their merits.

Foreign investment and trade

9    Outline any relevant treaty organisations, economic or monetary unions, or free trade agreements.

Egypt is a member state of the World Trade Organization, the International Monetary Fund, the United Nations Conference on Trade and Development and the Wold Customs Organization.

Egypt is a signatory state to several free trade agreements (FTA) including:

  • COMESA: the Common Market for Eastern and Southern Africa.
  • the Greater Arab Free Trade Area;
  • the European Union–Egypt Free Trade Agreement (Association Agreement);
  • the Egyptian-European Mediterranean Partnership Agreement;
  • Agadir Free Trade Agreement: by virtue of which a free trade zone is established between Egypt, Tunisia, Morocco and Jordan;
  • the Pan-Arab Free Trade Area;
  • the Egypt–Turkey FTA: by virtue of which is established a free trade zone between the two states;
  • Egypt EFTA FTA: by virtue of which is established a free trade agreement between Iceland, the Principality of Liechtenstein, Norway, the Swiss Confederation; and
  • the Protocol on Trade Negotiations.

10  Are foreign exchange or currency controls in place?

As a general rule, there are no foreign exchange or currency controls in place. Foreign exchange operations in Egypt are regulated by Law No. 88 of 2003 on the Central Bank, the Banking Machinery and Exchange and its Executive Regulations. Almost all banks licensed to operate in Egypt are authorised to deal in foreign currency. Banks are the only entities allowed to transfer currency abroad. Branches of foreign banks are permitted to deal in local currency as well as foreign currency.

Authorised foreign exchange dealers are permitted to buy and sell foreign currency on their own account. However, they are not authorised to transfer foreign currency abroad. Individuals or entities may deal in foreign currency but only through licensed banks or foreign exchange dealers.

The exchange rate of Egyptian pound against foreign currency is subject to the underlying forces of supply and demand, in accordance with the rules and regulations issued by the Prime Minster through the Central Bank.

11  Are there restrictions on foreign investment?

In principle, the Investment Law No. 72 of 2017 (New Investment Law) explicitly stipulates that investment projects shall be restrictions-free. It additionally provides for the facilitation of all cash remittance operations associated with the foreign investment freely to and from the state. However, some of the most noteworthy restrictions on foreign investment are as follows.

  • Importation for commercial purposes must be undertaken by companies owned 51 per cent by Egyptian shareholders, and its managers must be all of Egyptian nationality.
  • Commercial agency must be undertaken by companies owned 100 per cent by Egyptian shareholders (which would include the ultimate shareholder).
  • Civil aviation must be undertaken by companies owned 60 per cent by Egyptian shareholders. In addition, the Egyptian board members must be at least 51 per cent of the board members.
  • In higher education (private universities) 51 per cent of the shareholding structures must be owned by Egyptians.
  • Land ownership in Sinai Peninsula is only allowed to companies owned 100 per cent by Egyptians.
  • Companies operating in Sinai Peninsula’s comprehensive development area must be undertaken by a joint stock company owned 55 per cent by Egyptian shareholders and must only conduct integrated projects with an infrastructure at state level.

12  Are there grants, incentives or tax reliefs for foreign investors or businesses?

The New Investment Law further offers tax and non-tax incentives to investment projects subject to this law, which can be divided into general, specific and additional incentives as follows.

General incentives

All investment projects enjoy the following general incentives, except for the public free zone projects:

  • projects are exempt from stamp duties and notarisation fees of incorporation contracts, and facility agreements necessary for the embellishment of the project for five years from the date of registration with the commercial register. Land registration contracts shall also be exempted from said taxes and fees; and
  • projects are subject to a flat rate of 2 per cent customs duty on imported equipment and machinery necessary for the embellishment of the project.

Specific incentives

All investment projects that have been newly incorporated with fresh assets after the issuance of the New Investment Law and are within three years of the issuance of the executive regulation of the New Investment Law, shall enjoy, based on their geographic location, the following tax incentives for seven years, which shall be deducted from the taxed net profits:

  • 50 per cent of the investment cost for the projects that will be incorporated in the geographical location in most need for development as will be further determined in the executive regulation;
  • 30 per cent of the investment cost for the following projects:
    • extensive labour projects to be determined by executive regulation;
    • small and medium-size projects;
    • projects that relay or produce new and renewable energy;
    • national, strategic and touristic projects as determined by the Supreme Investment Council;
    • projects that produce or distribute electricity as determined by the Prime Minister;
    • projects that export their products outside Egypt;
    • automotive projects;
    • wood manufacturing, furniture, printing and packing and petrochemical projects;
    • antibiotics, pharmaceuticals, cancer drugs and cosmetics products;
    • agriculture, food manufacturing and recycling of agriculture waste; and
    • engineering, metallurgical, textile and leather industries.

The above tax incentives are subject to a ceiling of 80 per cent of the company’s paid capital.

Additional incentives

The New Investment Law also provides for additional incentives that can be granted by a Cabinet decree, which include the following:

  • the establishment of a special customs zone for the export and import of the products needed for an investment project;
  • the state may bear the cost, in whole or part, of the public utilities connection;
  • the state bears part of the occupational training cost of employees;
  • rebate of 50 per cent of the land value allocated to industrial projects if they commenced production within two years from the receipt of that land; and
  • the allocation of free of charge lands for strategic projects.

13  What are the main taxes that apply to cross-border or foreign-owned business and investors?

If a company is established according to Egyptian law, its headquarters are located in Egypt, or a public juridical person owns more than 50 per cent, it is considered tax resident. Non-resident companies are only taxed on Egyptian source income.

Taxation of dividends

90 per cent of dividends received by a resident parent company from an entity residing inside or outside the country, are exempted from corporate tax.

Capital gains

Ten per cent corporate income tax on capital gains by resident or non-resident company resulting from the sale of listed shares in the Egyptian stock market. This tax is suspended until 17 May 2020.

Rate

The standard corporate tax rate is 22.5 per cent.

Foreign tax credit

May be deducted from Egyptian income tax – does not exceed the total tax payable in Egypt.

Stamp duty

0.1 per cent per quarter for banking transaction; 20 per cent on commercial advertisements; 1.08 to 10.08 per cent on insurance premiums.

Withholding tax

  • Dividends paid to resident or non-resident entities are subject to 10 per cent withholding tax. The rate may be further reduced pursuant to an applicable tax treaty;
  • interest, royalties, technical service fees are subject to 20 per cent withholding tax; and
  • branch remittance tax, profits gained by a foreign company’s branch or permanent establishment are subject to 5 per cent withholding tax.

Regulation

14  Which industry sectors are regulated or controlled by the government?

The government has enacted regulations for almost all industry sectors.

15  Who are the key industry regulators, and what are their powers?

There is a regulator for almost all industry sectors, including but not limited to the Egyptian Drug Authority, the pharmaceutical regulatory body; New and Renewable Energy Authority, the Egyptian Electric Utility and Consumer Protection Agency; National Telecom Regulatory Authority, General Authority for Supply Commodities; and the Egyptian Financial Supervisory Authority is responsible for supervising and regulating non-banking financial markets and instruments, including the capital market, the Exchange, as well as all activities related to insurance services, mortgage finance, financial leasing, factoring and securitisation.

Their powers include monitoring the safety and quality of the products, regulation and legislation of the industry’s practice, strategic planning and policy making for the sector, and setting standards for rendered services. In certain fields it regulates prices and tariffs.

16  What are the other main enforcement authorities relevant to businesses?

  • GAFI: General Authority for Investment and Free Zones;
  • The Central Bank in Egypt;
  • Industrial Development Authority;
  • EFSA: Egyptian Financial Supervisory Authority;
  • Egyptian Competition Authority; and
  • Egyptian Tax authority.

17  On which areas have regulators particularly focused their recent enforcement activities?

Taxation, investment and banking.

Compliance

18  What are the principal bribery, corruption and money laundering concerns for businesses?

Egypt has taken several measures to strengthen its fight against the corruption. Besides adopting a legislative framework that has criminalised bribery and related corruption offences, Egypt ratified the United Nations Convention against Corruption in 2005.

It is worth noting that the Penal Code penalises not only the bribe recipient but also the briber and the mediator with the same penalty. However, the briber or the mediator shall be exempted from such penalty if he or she notifies the authorities of the crime or admits to it.

The Anti-Money Laundering Law No. 80 of the year 2002 (Anti-Money Laundering Law) regulates anti-money laundering in Egypt. The Anti-Money Laundering Law set in place a Money Laundering Combating Unit, which is an independent unit functioning within the Central Bank of Egypt that has been duly established by virtue of Presidential Decree No. 164 of 2002.

19  What are the main data protection and privacy risks for businesses?

There are no clear or direct laws that concern data protection for businesses in Egypt, however, several laws provide for protection for entities and individuals in some businesses, including but not limited to, confidentiality of employee information, client information in banks and telecommunications.

Article (68) of the Constitution is the main (if not only) legal regulatory regarding information and data protection. In the absence of comprehensive national regulations, data-related practices are usually regulated by each company through its by-laws or the rules of the company’s headquarters.

20  What are the main anti-fraud and financial statements duties?

The Capital Market Law requires that a company offering securities for public subscription, submit its semi-annual activity and progress reports (financial statements) to the Capital Market Authority (Authority). The financial statements should be prepared in accordance with the accounting and auditing principles as specified, by the Executive Regulations. The law further requires every company to notify the Authority a month prior to the general assembly meeting of its balance sheet and other financial statements, as well as reports of the board of directors and the company’s auditor.

An adequate summary of the company’s semi-annual reports and annual financial statements shall be published in two daily morning and widely circulated newspapers, at least one of which is an Arabic newspaper.

The Authority may examine the aforementioned documents and notify the company of any necessary amendments. If the company fails to comply, the Authority publishes its remarks at the company’s expense.

The Companies Law requires that a company prepare its financial statement in accordance with the accounting criteria issued by the Minister of Economy. Any company whose purpose is to participate in the foundation of other companies or to participate in companies in any aspect shall prepare accumulated financial statements (balance sheet inventories) for these companies.

The law further provides that the board of directors shall prepare:

  • the financial statements of the company for each financial year;
  • a report on its activity during the financial year; and
  • its financial situation.

21  What are the main competition rules companies must comply with?

Antitrust practices are regulated in Egypt by Egyptian Competition Law No. 3 of 2005. There are three main arrangements or practices prohibited by the said law, and they are:

  • abuse of dominance;
  • vertical agreements entered into between an entity and any of its suppliers or clients that results in restrictions on competition in the relevant market; and
  • agreements entered into between competing entities that are concluded with the intention of fixing prices, dividing markets, rigging bids and limiting manufacturing, production, distribution or marketing of goods or services.

22  Outline the corporate governance regime.

The Egyptian Corporate Governance Code issued by EFSA’s Board of Directors Resolution No. 48 of 2016 is a comprehensive guide to governance and transparency. This code applies to all listed and unlisted companies, banking and non-banking, financial institutions, industrial, commercial and service companies, regardless of their size and nature of activity, or whether they are family-owned or publicly owned.

The general framework emphasises market transparency and efficiency as well as the segregation of authorities in the light of existing applicable legislation. It:

  • protects shareholders’ rights and their equitable treatment;
  • provides economic incentives to institutional investors;
  • recognises the rights of stakeholders and encourages cooperation between the latter and companies;
  • ensures timely and accurate disclosure; and
  • ensures effective monitoring of executive management by the board of directors.

23  Can business entities incur criminal liability? What are the sanctions for businesses, related companies and their directors and officers for wrongdoing and compliance breaches?

Business entities as juridical persons cannot face criminal liability – except for complimentary sanctions such as seizing the company’s assets. However, natural persons representing the company can be held criminally liable for certain major breaches or violations.

For example, the board of directors of joint stock companies and managers of limited liability companies should be held liable if they breach their fiduciary duty as regards the company, in ways such as the following:

  • the director resolves matters related to the distribution of dividends in violation of the law or the articles of association of the company;
  • the director intentionally commits an act of forgery with the documents of the company or presents misleading documents to the general assembly; or
  • the director fails to observe the parameters of directorship or intentionally obstructs the invitation of the General Assembly.

Also, the chairman, board member, director or officer who misappropriates funds, property or documents that are held thereby as a result of his or her position, or lays his or her hands thereon without due right, or facilitates third parties to undertake same, by any means whatsoever, can be penalised with imprisonment for a period not exceeding five years.

Business operations

24  What types of business entity are most commonly used by foreign investors and why? What are the main requirements for their establishment and operation?

Foreigners wishing to establish a business presence in Egypt have various options available, the most common of which are joint stock companies (JSCs) and limited liability companies (LLCs). The reason is that liability of shareholders in JSCs and LLCs for the company liability is limited to their respective shareholdings in such company, which is the main trait of capital companies.

JSC

To incorporate a JSC, a minimum of three shareholders must participate in its share capital, with no maximum limit. A JSC may be wholly owned by foreigners; however, if the company is to carry out certain activities such as importation or commercial work, the JSC must be at least 51 per cent or wholly owned and managed by Egyptians, respectively.

A JSC is managed by a board of directors comprising a minimum of three members and is appointed by the general assembly. There are no nationality requirements for the board members.

Generally, a JSC’s minimum share capital is E£250,000. Please note that the minimum share capital of a JSC may vary depending on the company’s activity and in light of the decrees issued regulating such activity.

LLC

For the purpose of incorporating an LLC, a minimum of two and a maximum of 50 quota-holders must participate in its capital. Please note that, as a general rule, there is no restriction on foreign ownership in an LLC.

The day-to-day management of an LLC is carried out by at least one Egyptian, and further Egyptian or foreign managers may be appointed.

25  Describe the M&A market and the merger control regime. How easy is it to complete deals in your jurisdiction?

M&A in Egypt is regulated by diverse legislation (laws and decrees). This legislation mainly includes (i) the Egyptian Companies Law 159 of 1981 and its executive regulation, which govern, inter alia, corporate governance issues; and (ii) the Capital Market Law 95 of 1992 and its executive regulations, which mainly govern listed companies and publicly prescribed companies. In particular, M&A for unlisted shares are regulated by the Companies Law and decrees issued by EFSA, while M&A for listed shares are regulated by decrees issued by EFSA and the Egyptian Exchange.

Although the 2011 revolution affected foreign investment in Egyptian equities, favourable valuations maintained a relatively active M&A market. The past two years have witnessed several successful deals fuelled by recent economic reforms. The floating of the Egyptian pound was a particular boost, since it provided much needed stability and relief on conversion rates, and on the repatriation of profits.

26  Outline the corporate insolvency regime. Is bankruptcy protection available for corporates?

Under Egyptian law, insolvency is regulated by the Civil Code and it applies to non-traders with non-commercial debts. Hence, a non-trader debtor with insufficient assets to pay his or her non-commercial debts is considered insolvent.

On the other hand, bankruptcy is regulated by the newly issued Law No. 11/2018 regulating Restructuring, Bankruptcy and Bankruptcy-Avoiding Settlement (New Bankruptcy Law). Issued on 19 February 2018, the New Bankruptcy law is part of the economic reforms aiming at encouraging investment. The law mainly aims at simplifying and managing the duration of post-bankruptcy procedures. It introduces new mediation and re-structuring systems to help traders and entities who are facing financial or administrative trouble. The law further revokes imprisonment in cases of bankruptcy.

Before the issuance of the New Bankruptcy Law, bankruptcy provisions were governed by Chapter 5 of the Egyptian Commercial Law No. 17 of 1999. This chapter is now repealed and replaced by the New Bankruptcy Law.

Employment

27  How easy is it to enter into and terminate employment contracts?

Employment and labour relationships in Egypt are regulated by the Labour Law No. 12 of 2003.

Employment contracts can be drawn up for a definite or indefinite period of time. However, the practice is to sign a one-year fixed-term contract, with a new contract signed every year.

Fixed-period employment contracts expire automatically upon the lapse of their term. However, according to article 105 of the Labour Law, if the employee and employer continue implementing a fixed-period contract after the expiration of its term, this shall be considered as an automatic renewal of the contract for an indefinite term.

Pursuant to article 69 of the Labour Law, the employer cannot dismiss the employee unless he or she commits a gross mistake, as listed in the law, and which includes but is not limited to, false identity, error resulting in material loss, compliance with safety rules and breach of fiduciary duties causing severe damage.

If grave mistakes occur, and the employer wishes to dismiss the employee, the employer shall follow a set of procedures, according to which if any dispute relating to the employment relationship has taken place between the employer and the employee, the desiring party can settle the dispute as follows:

  • apply to the competent committee, within 10 days of the occurrence of the dispute, to seek an amicable settlement. If the dispute has not been settled within 21 days of the application date, either party may ask the committee to refer the dispute to the labour court; or
  • submit the dispute directly to the labour court within a period of 45 days, commencing from the expiry of the period specified, as explained in the previous paragraph, to refer the dispute to the committee to reach an amicable settlement.

28  What are the key rights of local employees?

Working time and time off

According to the Labour Law, working hours should not exceed eight hours per day or 48 hours a week, excluding break periods. If an employee is requested to work hours in addition to the normal working hours, he or she shall be entitled to overtime payments in addition to his or her salary.

Pursuant to article 47 of the Labour Law, an employee who has completed one year of service is entitled to a minimum annual paid leave of 21 days for every year of service and proportionally if his or her period of service is less than one year (and more than six months).

Article 54 of the Labour Law provides that an employee whose illness has been proven shall be entitled to sick leave as determined by the competent medical authority, noting that the employee shall be entitled to salary compensation as regulated under Social Insurance Law No. 79 of 1975 (Social Insurance Law).

Pension and medical insurance

Pursuant to the Social Insurance Law, certain insurance benefits shall be granted to the employee, including a pension for retirement, old age, death or disability, compensation for work-related injuries, sickness and medical treatment, in return for a monthly contribution paid by the employee.

Foreign employees shall be subject to the Social Insurance Law, if their employment contracts are concluded for duration of one year or more, and there is a reciprocity treaty between the foreign employee’s country and Egypt.

Trade unions and collective issues

As per the Labour Unions Law No. 35 of 197, union organisations in Egypt may take the form of a union committee, a general syndicate or a general federation of labour unions. The union organisations are established to defend and opine on workers’ rights.

29  What are the main restrictions on engaging foreign employees?

Article 28 of the Labour Law states that foreigners are not allowed to work in Egypt unless they obtain work permits from the competent manpower authority. As a rule, the foreign workforce shall not exceed 10 per cent of the total workforce in any establishment.

30  What are the other key employment law factors that foreign counsel, investors and businesses should be aware of?

As per Income Tax Law No. 91 of 2005, employers are under an obligation to deduct the income taxes from employees’ salaries and pay it to the Tax Authority. In addition, according to the Social Insurance Law, employers are also under an obligation to deduct certain social insurance contributions from employees’ salaries and transfer them to the Social Insurance Authority (in addition, an employer is also required to pay itself certain social insurance contributions). However, self-employed independent contractors are paid gross and are responsible for their own taxation.

Intellectual property

31  Describe the intellectual property environment. How effective is enforcement and what are the key current issues?

Intellectual Property Right Law No. 82 of 2002 and its Executive Regulations, as amended (IP Law) is the relevant law in Egypt in respect of the protection of intellectual property. The IP Law is divided into four books. Book one covers patents, utility models, layout-designs for integrated circuits and undisclosed information; book two deals with trademarks, trade names, geographical indicators and industrial designs; book three covers copyright and related rights; and book four deals with plant varieties.

There is no immediate legal remedy available under Egyptian law to counter the intellectual property infringement.

According to the IP Law, a court order is required to decide the necessary interim and coercive measures to force the infringer to cease the infringement. The court takes around three months to issue such order. The Public Prosecution and the police do not have the authority to issue such interim or coercive measures against the infringer. Before submitting a request to the court to order interim or coercive measures, the intellectual property owner must first obtain an official certificate from the Protection of Intellectual Property Department, evidencing that the intellectual property is registered in Egypt and, hence, is protected under Egyptian IP Law. In practice, the court normally refuses to order such interim and coercive measures. Such decision of refusal could be appealed.

Legal reform and policy

32  What are the key issues in legal reform, government policy and the economy?

See our opinion in question one.

33  Are there any significant legal developments ongoing or pending? What are their effects on the business environment?

In line with the pace of reforms, Egypt is currently witnessing several steps aimed at removing restrictions on investments, and an encouragement of the private sector to participate in the economy. From a legislative action standpoint, foreign lenders should soon be able to take commercial mortgages that are more aligned with the English law floating charge, and legislation is expected to allow the importation of oil and gas by private parties (as opposed to the current system where state-owned entities have a monopoly over importation and subsequent distribution). The government has also announced its intention of selling stakes in several state-owned companies in the petroleum and industrial sectors.

Resources and references

34  Please cite helpful references, for example, sources of law, websites of major regulators and government agencies.

www.cia.gov/library/publications/the-world-factbook/geos/eg.html

http://documents.worldbank.org/curated/en/124621523639496916/pdf/125251-MEM-April2018-Egypt-EN.pdf

www.worldbank.org/en/country/egypt/overview#3

www.amcham.org.eg/information-resources/trade-resources/doing-business-in-egypt/laws-regulations

http://crcica.org.eg/rules/arbitration/2011/cr_arb_rules_en.pdf

www.nyulawglobal.org/globalex/Egypt1.html

www.tas.gov.eg/English/Trade%20Agreements/Publications/

www.amcham.org.eg/information-resources/trade-resources/doing-business-in-egypt/laws-regulations#/business-law-9

www.gafi.gov.eg/English/eServices/Documents/LAw72-english.pdf

www2.deloitte.com/content/dam/Deloitte/global/Documents/Tax/dttl-tax-egypthighlights-2017.pdf

www.dlapiperdataprotection.com/index.html?t=law&c=EG

www.efsa.gov.eg/content/efsa_en/eisa_pages_en/hawkama_eisa1_en.htm

www.iflr.com/Article/3673231/2017-Mergers-and-Acquisitions-Report-Egypt.html

Published August 2018




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