WHAT’SNEW?THE

INVESTMENT LAW

No. 8/1997

General Direction

• Centralization: the Ministers’ Cabinet will micromanage the logistics of economic development. It will basically be responsible for determining investment areas, fields, priorities & incentives.

Specific Amendments

New Incentives To Investors

Investment ZonesFree Zones

Land AppropriationDispute Settlement

Competition Over Available Licenses

Strategic Investment ProjectsOne Stop Shop

New Incentives

The amendment to the investment law does not prejudice the current guarantees and incentives currently enjoyed by relevant projects. 1

Employees of Law 8 Companies established on 13 March 2005 or after WILL STILL be entitled to 10% of the company’s annual profits as was the case before, because the amendment is later corrected in a subsequent correction dated 5/5/2015 (Art. 14(1) IL). 2

The unified tax on imported equipment and machines by Law 8 Companies is lowered from 5% to 2% (Art. 23 IL). 3

The conditions of converting the capital from EGP to Foreign Currency are loosened. Shareholders need to transfer only 25% of the foreign currency from abroad instead of 50% (Art. 8 EXEC REGS). 4

Criminal Liability: The amendment explicitly provides that the acting manager(s) is only liable for crimes committed in the name and to the benefit of the corporation, if it is proven that the acting manager(s) possesses the knowledge and intent to commit the crime to achieve an interest to himself or others (Art.7bis 1 IL). This is the case anyway under criminal law jurisprudence, but it is not explicitly stated in any law including the Penal Code. 5

Criminal Liability: If the acting manager is not proven guilty as above, the company shall only be liable for a non-corporal penalty, as follows:• No less than 4 times and no more

than 10 times the fine imposed on the natural person.

• The judge may suspend the license of the investment project for no more than one year.

• In case of repeat offence, the judge may terminate the license or liquidate the project. (Article 7bis 1 IL) 6

The amendment introduces a new clause to the effect that investments established by fraud or corruption, as proven by a court verdict, do not enjoy the privileges and guarantees of Law 8 (Art. 10bis1 IL). 7

Art. 69 of Law 8, which excepted Law 8 from the application of laws regulating the public sector and the public works sector and their employees, is repealed. 8

Non-Tax Incentives ToStrategic Investment Projects

The amendment introduces non-tax incentives to specific investments.

Article 20bisInvestment Projects

These are different from investment zones.

Article 20bisInvestment Projects

(a) Investments requiring heavy labor. (b) Investments in the electricity sector. (c) Investments with a large local component. (d) Logistic projects and Internal Trade Projects.(e) Transport projects.(f) Land Reclamation.(g) Investments in Article 1 objectives in Upper Egypt, Sinai, Nubia & Marsa Matrouh.

What are these investments?

(a) Establishing special custom area for the project’s exports and imports. (b) Lower energy tariffs. (c) Refund of value of extending utilities to the project or part thereof after operation. (d) Subsidies by the state in relation to part of the cost of training labour.(e) Subsidies by the state of the social insurance subscriptions of employees or part thereof.(f) Free or reduced price land (see slides 47 and 48 below).

What are theincentives?

No. They are subject to the issuance of a decree from the Ministers’ Cabinet (based on a report of the Minister of Investment) defining the investment and the incentive it is entitled to. (Article 20bis IL and Art. 37 EXEC REGS)

Are these Incentives Automatic?

One-Stop Shop

The amendment introduces a One-Stop Shop for certain investment fields to be determined by a Presidential Decree, whereby GAFI will obtain all permits for the investor and finalize all the licenses. The inventor will not be permitted to deal directly with any other authority other than GAFI. This Presidential Decree is not issued to date.

CompetitionOver Available

Licenses

• In the context of temporary licenses which were permitted before the amendment (whereas an investor may be granted a temporary license pending the issuance of the final one), the amendment introduces new procedures in case of overcrowding of applicants over limited licenses.

• Awarded investors will be chosen based on a point system, without recourse to the Tender & Bids Law 89/1998.

• The authority shall assess the applications based on criteria issued by GAFI, including the following:• Costs• Previous experience• Technology

(Art. 54(3) IL & Art. 20(4) EXEC REGS

Free Zones

The law continues to allow the establishment of public free zones but cancelles private free zones (Art. 29 IL). 1

A decree of the Ministers’ Cabinet shall define the activities that will be permitted to be carried out inside a free zone (Art. 29 IL). 2

Although free zone companies will continue to benefit from tax and customs exemptions, they will now be subject to tax and customs supervision (Art. 29 IL and 61 EXEC REGS). 3

The amendment adds projects with high energy intake to be defined by the Ministers’ Cabinet to projects that may not be established under a free zone (originally prohibited projects included those relating to manufacturing wine and spirits; weapons, ammunition, and explosives; fertilizers; steel; oil products; liquefied natural gas and its transfer). 4

The amendment to the EXEC REGS provides conditions for the conversion from a free zone project to a domestic project (originally introduced in 2005). The main modification is that the project must move its location outside the free zone (Art. 86 EXEC REGS). 5

A free zone company is obligated to dispose of wastes in compliance with the environment law and on its own expense (Art. 72(2) EXEC REGS). 6

The cap for the service fee for free zone companies is raised from 1’000US$ to 3’000US$ (Art. EXEC REGS). 7

• Free zone companies will not be subject to import & export regulations regarding their operational needs from the domestic market (Art. 56(4) EXEC REGS).

• Free zone companies do not need to register in the industrial register (Art. 31(4)) &More

Investment Zones

Investment zones have been introduced to Law 8 in 2007. The new EXEC REGS of Law 8 provides detailed regulations on how they will operate, which were essentially the content of Prime Minister Decree 1675/2007.

What are they?They are not defined. They can be zones for any field of activity and may be established, developed or operated by GAFI or by any private company (Art. 46bis IL).

How do they operate?

Per the 2007 PM Decree:• An investment zone is established by a

prime minister decree.• A private company may create, manage,

and/or develop these zones by submitting a request to GAFI.

• A GAFI committee shall study the request to issue its recommendation to the PM.

What’s newabout investment zones?

• A request to establish a project inside an investment zone will no longer be automatically accepted if the authorities do not answer in time, which was the case under Decree 1675/2007.

Land Appropriation

The amendment introduces new regulations about allocation of land to investors governed by Law 8. Originally, Law 8 and its EXEC REGS included a few articles on allocation of land in specific areas to be defined by the Ministers’ Cabinet for Article 1 activities free of charge. 1

Now, GAFI will be responsible for allocating land to potential investors through its offices, based on a request from an investor or an invitation from GAFI (Art. 72 IL and 100 EXEC REGS). 2

The Public Tenders & Bids Law will not apply on the allocation of such lands (Art. 71 IL). 3

The Law defines the authorities in charge of determining the price as well as the criteria to be followed. (Art. 80 IL). 5These criteria include the price of neighboring real estate; the cost of preparing the infrastructure; and the potential activities that may be established on such lands.

Lands and immovable (constructions) may be granted to the investor via one of the following ways (Art. 72 IL):

• Sale.• Rent.• Rent-to-own.• Usufruct license.• In-kind share by the relevant

government authority owning the land (and who will become a partner in the project) in cases to be defined by a decree of the Minister’s Cabinet (Art. 78 IL and Art. 107 EXEC REGS). 4

The authorities owning the land may not rescind the allocation and take back the land except through GAFI and only after GAFI’s approval (Art. 114 EXEC REGS.). 6

Too much investors… too few lands…

• In case of excessive applications, lands are appropriated using a public lottery mechanism taking place in GAFI (Arts 74 & 79 IL and Arts. 101-104 EXEC REGS).

Reduced Price &

Free Land• In case of excessive applications over lands, applicants who fulfill

the financial and technical requirements will be selected (Art. 77 IL).

• Choosing applicant shall take place via lottery OR via points basis.• In case of choosing applicants based on points, the following

factors are considered: (Art. 77 IL)• The area of the project• The nature of the project• The size of the project

Full Price Land

Full Price Land(Art. 73, 75, 76, 77, 78)

• Regular terms similar to the current practice.• In case of competition and overcrowding of

investors over land, a lottery or a point system applies (see Slide 45 above “Click here”).

Reduced Price Land(Art. 79 IL and Art. 108 EXEC REGS)

• Investment projects in areas specified for development may be offered lands/constructions with reduced pre-determined prices.

• Price of land may be reduced only up to 50% of its value.

• In case of competition of investors over such lands, a lottery takes place (see Slide 45 above “Click here”).

Lands Free of Charge(Art. 74 IL)

• Offered in specific areas to be defined by a Presidential Decree based on an approval by the Ministers’ Cabinet.

• Objective of the project must be economic development. • This offer is only available for 5 years starting from April 2015.• Only investors with technical and financial qualifications to be

defined by a decree of the Ministers’ Cabinet may apply for such offer.

• In case of competition of investors over such lands, a lottery takes place (see Slide 45 above “Click here”).

• A bond shall be deposited by the awarded investor of 1% of the project costs. This bond may be refunded 5 years after the actual start of the project’s activities.

Dispute Settlement

NOW BEFOREArticle 101 Committee• (Arts. 101-103 IL and 125-129

EXEC REGS)• Headed by a judge, and

requires the membership of two experts.

• Established by the competent minister

• Decides on appeals by the investor from administrative decisions issued by GAFI (Click here for examples).

• The decisions is binding to GAFI.

Article 65 Committee• Headed by a Judge.• Established by head of

GAFI.• Carries out conciliation

between investors and the authorities.

• Issues recommendations (not binding to the parties).

• Dissatisfied party may submit an appeal before the committee under article 66. (See slide 51 below)

. . .

NOW BEFOREArticle 104 Ministerial CommitteePM Decrees no. 1272 and 1273 for 2015• Settles investments disputes between

investors and administrative authorities resulting from the application of the law.

• (Click here for examples).• Decisions are binding to the

administrative authority • Without prejudice to investor’s right to

recourse to the court.

Article 66 Ministerial CommitteePM Decree 1115 for 2003 • Settles investments disputes between

investors and administrative authorities resulting from the application of the law.

• Decisions are binding to the administrative authority

• Without prejudice to the right to recourse to the court.

NOW BEFOREArticle 108 Ministerial Committee For Settlement of Investment Contracts’ DisputesPM Decree 1299/2015• Settles disputes resulting from

investment contracts between investors on the one hand and the State or any of it organs on the other.

• For example, disputes where an entity allocating a land wishes to take it back from the investor (Art. 114 EXEC REGS).

Article 66bis Ministerial Committee For Settlement of Investment Contracts’ DisputesPM Decree 1559/2014• Settles disputes resulting from

investment contracts between investors on the one hand and the State or any of it organs on the other.

Thank you