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Business Organizations [I] EGYPTIAN COMPANIES Investors establish or acquire Egyptian companies. The types of Egyptian corporate entities most commonly used by investors are Joint Stock Companies and Limited Liabilities Companies. An investor incorporate an Egyptian Joint Stock Company or a Limited Liability Company either under the Investment Guarantees and Incentives Law, (the “Investment Law”) or the Companies Law. Investors tend to prefer to incorporate Egyptian companies under the Investment Law to benefit from the privileges available under it (see below). There are no minimum Egyptian capital participation requirements. Business Organizations [II] JOINT STOCK COMPANIES The rules and regulations governing Joint Stock Companies are more comprehensive than those for Limited Liability Companies. Joint Stock Companies that offer their shares to the public are subject to additional Regulation. Founders A founder is the one who actually participate in incorporating a company in addition of having the intent of being liable for the consequences of incorporation. Any one shall sign the statute of a company, request licensing its incorporation or introduce share in kind at the time of its incorporation is considered to be a founder Constitutive Documents Egypt has a streamlined procedure for forming Joint Stock Companies. The company’s founders or their deputy need to notify the Companies Department of the pending formation of a company attaching: • The constitutive documents of the company to be formed (the Articles of Association and Statues). Model Articles of Association and Statutes have been issued by Ministerial Decree • a certificate from an authorized bank to the effect that the required capital has been deposited in a blocked account. This capital is then released upon the company’s formation; and • a receipt for payment of incorporation fees equal to 0.1% of the Company’s issued capital (with a minimum of LE 100 and a maximum of LE 1,000). Upon submission of these documents and notification to the Companies Department, a certificate is issued to the founders, confirming that complete documentation has been received. This certificate is registered in the Commercial Register and a company acquires its legal status upon the lapse of 15 days from such registration Date The Companies Department may object within 10 days from the date of the Company’s registration in the Commercial Register, only if: - The Article of Association or Statutes deviate from the models with respect to mandatory requirements or violate any law; - the purpose of the company violate any law or public order; or - one of the founders is not qualified to be a founder under the law. Minimum Share Capital The minimum share capital for a Joint Stock Company whose shares are not open to public subscription is LE 250, 000. If the shares are offered to the public, the minimum share capital is LE 5000,000. Only 10% of the issued capital must be paid in upon incorporation with an additional 15% to be paid up within three months from the incorporation date of the company . The reminder of the issued capital shall be paid within 5 years from the incorporation date of the company. The shareholders of a Joint Stock Company may increase its issued capital up to its authorized capital by a board of directors’ Resolution provided that its existing issued capital is fully paid. The shareholders of a Joint Stock Company may increase its issued capital by way of an Extraordinary General Assembly Resolution without the requirement of having the existing issued capital fully paid. Value of Shares The nominal value of shares must not be less than LE 5 or more than LE 1,000. Preferred shares may also be issued but shares from the same kind should have the same rights, privileges and restrictions. The Capital Market Law authorizes the issuance of bearer shares, subject to certain restrictions. Bearer shares carry no vote at the General Assembly. Bearer shares may not exceed 25% of the issued and outstanding shares of a Joint Stock Company. The full nominal value of bearer shares must be paid up at the time of incorporation. Number of Shareholders There must be a minimum of three founding shareholders whether natural persons or legal entities. There is no maximum limit to the number of shareholders, however, if the number of shareholders reaches 100, the company would be considered to be offered to the public with those rules applicable to public companies applied to it. Purpose Provided they do not conflict with public policy or public morality, there are no restrictions on a Joint Stock Company’s intended commercial purposes. However, to benefit from the incentives and guarantees granted under the Investment Law ,Joint Stock Companies established under the Investment Law must have as their purposes one of the objectives specifically listed in the Investment Law or such other qualifying purposes as may be provided for by the Cabinet of Ministers. Name The name of the company should indicate the activity or objects of the company. It shall not include the name of any shareholder unless such name is a registered trade name. Bonds A Joints Stock Company may issue nominal bonds, however such bonds must be of equal value and have equal rights with respect to each security of the same series. Transfer of Shares Founding stakes and shares issued in return for in-kind (i.e. non-cash) contributions may not be transferred (except to other founders) until the financial statements of two full fiscal years are published. Nominal shares may not be transferred except after being registered in the commercial register. Nevertheless, nominal shares might promptly transferred if the increase in the capital of the company is due to converting bonds issued by the company into shares. A Joint Stock Company is managed by its Board of Directors. The Board of Directors must have at least three members. The Board of Directors must be composed of an odd number of members. Companies established under the Investment Law are not under the aforementioned requirements. There are no nationality requirements for board members. Profits A Joint stock Company’s profit after-tax earnings for each fiscal year, as reduced by any loss of the company that is carried forward from prior years and after funding its legal and regular reserve (if required), is available for distribution in pursuant to a resolution of the General Assembly. 1-The Joint Stock Company is required to establish, and must always maintain, a legal reserve equal to at least 5% of its issued capital. 2-A joint Stock Company is required to allocate employees’ share in profit equal to a minimum of 10% of its distributable profits (if any) with a maximum equal to the gross annual payrolls of its employees. Allocation of such amounts should be determined by the General Assembly on the recommendation of the Board of Directors. 3- Distributable profits are distributed in order of priority as follows: - An initial amount from the distributable profits equal to a minimum of 5% of the capital are distributed to shareholders and to the employees. - An amount of equal to a maximum of ten percent (10%) of the distributable profit may be paid to members of the Board of Directors as a bonus. - The balance of the distributable profits may be paid to the shareholders as additional dividends and to the employees as additional employee bonus. It may also be carried forward to the following year as retained earnings or allocated to fund a special reserve to be used as determined by the General Assembly on the recommendation of the Board of Directors. Business Organizations [III] LIMITED LIABILITIES COMPANIES Constitutive Documents A limited Liability Company’s constitutive documents are its Statutes.Model Statutes have been issued by Ministerial Decree. Share Capital The minimum capital of Limited Liability Company is LE 50,000. Quotas, commonly referred to as shares, must be of equal value and cannot have a nominal value of less than LE 100. The capital must be fully paid in at the time of incorporation. Cash contributions are placed in a blocked bank account, which are then released upon the incorporation of the Limited Liability Company. Number of Shareholders Limited Liability Companies must have a minimum of two founding shareholders and a maximum of 50 shareholders. Shareholders may be natural persons or legal entities. Shares in Limited Liability Companies may not be offered to the public. Purpose A Limited Liability Company may not engage in insurance, banking, savings, deposit taking, investment funds. Limited liability company also may not conduct securities brokerage ,merchandising and covering subscription to securities ,participating in the foundation of companies issuing securities or in increasing their capital, venture capital ,clearing and settlement in securities dealing or portfolio management activities. Name The name of a Limited Liability Company should refer to its activities and may include one or more of its shareholders’ names. Bonds Limited Liability Companies may not issue bonds. Transfer of Shares Shareholders wishing to transfer their shares in a limited Liability Company must first offer them to existing shareholders, who have no month within which to purchase such shares on a pro rata basis. The Statutes of a Limited Liability Company may prohibit any transfer of shares unless approved by the other shareholders. Management Limited Liability Companies are managed by one or more managers. A Limited Liability Company that has over 10 shareholders must establish a Supervisory Council with a minimum of 3 shareholders. Employee participation in management is not required. Profits Profits are required to be distributed to employees of a Limited Liability Company as and when the capital of the Limited Liability Company reaches LE 250,000. The rules governing such distributions are the same as those that apply to Joint Stock Companies. Incentives for Special Zone of Development [i] The Investment Law The Investment Law provides certain incentives for foreign investors who carry out activities in Egypt in accordance with its provisions. To qualify for these benefits, and in order to receive Government consent, GAFI must approve the foreign investor’s application. Incentives for Special Zone of Development [ii] Qualification The investment Law grants privileges to companies that carry out any of the following activities: land reclamation and the cultivation of barren land; animal, poultry and fish production; manufacturing and mining; tourism projects (including tourist transportation, hotels and hotel- related facilities); transport of goods in cooling vans, cold stores for agricultural and industrial product preservation; aviation and transportation services; overseas maritime transportation; oil exploration services; housing and infrastructure projects (including installation, operation and management of cable and wireless communication systems); medical facilities that offer 10% of their capacity free of charges; lease financing; underwriting securities, venture capital projects; information technology; projects funded by the Social Fund for Development and other activities as may be added by the Council of Ministers. The types of investments that benefit from the Investment Law were recently expanded by the Council of Ministers to include an expanded definition of the scope of some of the above activities as well as: construction and operation of the underground transportation systems and tunnels; new towns and industrial zones; software development, establishing technology and incubator zones; market and credit analysis; financial planning; factoring and securitization activities; river transport; utilities for industrial projects; and waste treatment. Incentives for Special Zone of Development [iii] Guarantees and Incentives Available Under the Investment Law Under the Investment Law, investors are granted guarantees against expropriation and nationalization. Companies and their assets cannot be attached, seized or expropriated by way of an administrative order. The Investment Law further provides no administrative body may interfere in setting prices or profit margins or revoke or suspend a license for the use of property except where the license terms are violated. - Companies established under the Investment Law enjoy a basic tax holiday from revenue tax of commercial and industrial activities and corporate income tax for a period of five years from the first fiscal year following the commencement of production or the company’s activities. - Projects that are established in designated new industrial zones, remote areas, new projects funded by social fund for development and new urban communities enjoy 10 year tax holiday. Likewise, projects established in areas outside the “old valley” enjoy 20 years tax holiday. The Council of Ministers is authorized by the Investment Law to issue Decrees specifying those areas. - The companies’ statutes, establishments and mortgage and loan agreements connected to its activities are exempt from stamp duties, registration and notarization fees for three years from the date of the company’s registration with the Commercial Register. Land purchased for use by such company is also exempt from the payment of real estate registration fees. - A flat rate of 5% of the value of machinery and equipment that are imported which are deemed necessary for the company’s project is assessed as customs. - The Investment Law grants various exemptions from certain labor requirements under the Companies Law and the Labor Law. For example, companies establishes under the Investment Law are exempt from the requirement that certain types of employees (such as drivers and messengers) be hired in the order of their registration at the employment offices. Incentives for Special Zone of Development [iv] free Zones Egyptian, Arab and foreign investors may carry out projects in the Egyptian free zones, regulated by the Investment Law. Most goods and materials imported to a free zone are not subject to import duties or regulations. There are two types of free zones, public and private. Public free zones are established in specific locations by cabinet resolution upon the proposal of GAFI. Such locations include areas in Alexandria, Suez, Port Said and Cairo. Private free zones are established exclusively for a specific project or company. The following should be the grounds on which GAFI grants its approval for converting a project set up inside the country to a private free zone: 1- The project shall have already started its activity. A company formed to operate in a free zone is exempted from all Egyptian taxes for an unlimited period. However, free zone projects are subject to a duty of 1% of the value of goods entering the free zone for storage in respect of warehousing projects and 1% of the value of goods leaving the free zone in respect of manufacturing and assembling projects. Projects maintaining activities that require no entry or exit of goods are subject to an annual fee equal to 1% of their total revenue, based on audited accounts. A project by establishing a Private Economic Zone “Zone”. A project by establishing a new economic zone is expected to be submitted to parliament. The project propose establishing a governmental entity “Institution” that shall be responsible for developing the Zone and specifying the conditions and requirements for licensing projects established therein. The Institution shall substitute the Companies Authority ,Commercial Register ,Taxes Authority and Tariffs Authority in all its powers and jurisdictions .The institution shall establish a supreme committee for taxes and another one for tariffs . The challenges against the resolutions of the supreme committees shall be submitted to the Mediation committee in the settlement of disputes center of the Zone. It is not permitted to submit taxes or tariffs challenges to Arbitration or judiciary prior to Mediation committee resolution. Under the project, companies located at the Zone are granted guarantees against expropriation and nationalization. Companies and their assets cannot be attached, seized or expropriated unless by a court order. The project further provides no administrative body may interfere in setting prices or revoke or suspend a license for the use of property except where the license terms are violated. The regulations regarding the employees’ share in profits and the employees’ participation in management are not applicable to companies conducting its activity at the Zone. Under the project persons or companies located at the Zone are subject to a unified tax equal to 20% from there net revenue from movable capitals , property, non commercial carriers , commercial and industrial activities in addition of a unified income tax equal to 10%. The Zone is not subjected to sales tax laws, stamp duty law nor notarization and publication fees and not subjected to any taxes (except stated above). Companies located at the Zone are exempted from taxes on loans’ interest rates. Incentives for Special Zone of Development [v] currency Regulation The Foreign Exchange Law and its Executive Regulations regulate foreign exchange operations in Egypt. The Executive Regulations list entities authorized to deal in foreign currency. These include almost all banks licensed to operate in Egypt. Under the Executive Regulations banks are permitted to buy foreign currency for their own account and on behalf of third parties. Banks are the only entities allowed to transfer currency abroad. The Foreign Exchange Law permits the establishment of authorized foreign exchange dealers. Foreign exchange dealers are authorized under the Foreign Exchange Law to buy and sell foreign currency for their own account and under their own responsibility. However, foreign exchange dealers are not authorized to transfer foreign currency abroad. Individuals or entities may deal in foreign currency but only through licensed banks or foreign exchange dealers. Maintaining Foreign Currency Both natural persons and legal entities are free to maintain any amount of foreign currency. Foreign currency accounts may be held with any approved bank in Egypt and may be maintained abroad at the owner’s discretion. Funds kept in foreign currency accounts may be used in Egypt or remitted overseas. Buying Foreign Currency The purchase of unlimited amounts of foreign currency from any of the authorized banks or dealers is permitted. Banks and dealers are allowed to sell foreign currency either in cash or by means of wire transfers to individuals or to private or public sector companies. Furthermore, banks and dealers are authorized to sell foreign currency to allow for repatriation of dividends earned on Egyptian stocks and interest from Egyptian bonds. The Executive Regulations of the Foreign Exchange Law introduced the concept of forward exchange transactions whereby the purchase or sale of foreign currency at an exchange rate established at the time of agreement can be effected, with payment and delivery at a specified future date. Free Foreign Exchange Market A single market for foreign exchange transactions, called the Free Foreign Exchange Market, was established by Ministerial Decree. Exchange rates for transactions effected on the Free Foreign Exchange Market are determined by the Central Bank of Egypt (“CBE”), other approved banks and dealers in accordance with the free market mechanism. The Insurance Law Since 1995, new laws have led to a more investor friendly policies. The Insurance Law has been amended in 1998 to permit foreign investors to own up to 100% of the shares of Egyptian insurance companies. Any direct insurance transactions should be via an insurance company governed by Egyptian insurance law .Nevertheless, The Insurance Authority might authorize insuring via an insurance company that is not governed by Egyptian insurance law only if the insurance can not be executed locally. In all cases insuring via an insurance company that is not governed by Egyptian insurance law is governed by the rules stated by the boards of directors of the Insurance Authority. Banking Law The Banking Law regulates the activities of the banking system. The Central Bank Law as amended, regulates the activities of the CBE. The Minister of Economy in consultation with the Board of Directors of the CBE may grant a branch of a foreign bank that deals only in for approval to deal in local currency, without the need for the foreign bank to form an Egyptian banking subsidiary. Banking Law Bank Secrecy Law The Bank Secrecy Law governs the obligation of Egyptian banks not to disclose information relating to their customers’ accounts, deposits, safe deposit boxes and transactions, in the absence of either the written permission of the customer or a decision rendered by a competent judicial or arbitration tribunal. Any party legally authorized to view information relating to a customer’s account, deposits or safe deposit box is also prohibited from disclosing such information unless either of the above mentioned criteria have been met. Capital Markets Law The Capital Markets Law regulates the capital markets in Egypt. Under the Capital Markets Law, any company intending to issue securities must notify the Capital Markets Authority (CMA), which then has three weeks in which to review the proposed securities issuance. For a public issuance of securities, a company must prepare a prospectus approved by the CMA and must provide the CMA with periodic reports and information relating to such a public issuance. A Company offering part of its shares in a public offering, or trading a minimum of 30% of its shares on the stock exchange, must inform all shareholders owning at least 1% of the company’s capital of any other shareholder wishing to increase its shareholding above 10%. The Capital Markets Law also allows the issuing company to set a return on securities that exceed the limits established to other laws (i.e. 7% ceiling in the Civil Code) The Capital Markets Law provides that securities transactions may only be undertaken by financial services companies licensed by the CMA. Board members of such companies must have a minimum of five years’ experience in the field of securities or must have four years’ experience and have participated in a training course set up by the CMA Capital Markets Law [i] Areas Covered by the Capital Markets Law The Capital Markets Law regulates both companies that offer their shares to the public as well as companies that deal in securities. In particular, it regulates activities of companies engaged in the following six types of securities related activities: • Promoting and underwriting investments in securities; • participation in the formation of companies that issue securities, or in the increase of their capital (Egyptian equivalent to the Holding Company); • venture capital; • securities clearing and settlement activities; • the creating of securities portfolios and investment funds and portfolio and investment fund management; and • securities brokerage activities. Any other activities relating to the field of securities may be added to this list by a decision of the Minister of Economy after obtaining the approval of the CMA. Capital Markets Law [ii] Registration Joint Stock Companies must register with Cairo and Alexandria stock exchange. A joint Stock Company’s securities can be listed in either the official or the unofficial register. The following securities may be listed in the official register: • A public issuance of a securities that represents no less than 30% of the Joint Stock Company’s nominal shares and that is subscribed to by no fewer than 150 persons; and • A public issuance of a securities by the government or a public–sector company. • Securities that do not meet the criteria for listing in the official register (including foreign securities) could be listed in the unofficial register. Investors dealing in securities listed in the official register are exempt both from stamp duties ordinarily due at the time the securities are issued and from the annual stamp duties. Capital Markets Law [iii] Central Depository A new Law on Central Registration and Depositary was adopted. This law provides for the creation of a licensed Central Depository Company that is to issue deeds that will be able to be used instead of material shares. For the first time the law introduces a concept of beneficial ownership of shares. Banks and other licensed securities companies are required to enter into agreements with the Central Depository that includes certain mandatory provisions. They are required to participate in a special fund that will guarantee settlement of securities transactions. The Central Depository will be owned by its members, none of which may own more than 5% of its capital. Transactions are to be based on cash against delivery, with a settlement time to be specified by the CMA. Capital Markets Law [iv] Investment Funds and ESOPs The Capital Markets Law stipulates that an investment fund must take the legal form of a Joint Stock Company. The CMA board of directors has the authority to review and object the members of an investment fund company’s Board of Directors as well as the fund managers. An investment fund must be managed by an experienced investment management company. The Capital Markets Law provides that an investment fund must maintain a ratio between its paid –in capital and its financial resources. Only banks that have been authorized by the Minister of Economy may deal in the subscription to investment fund shares. Banks and insurance companies may establish investment funds without having to create a separate Joint Stock Company if they have received authorization to do so from both the CMA and either the CBE (in the case of banks) or the General Organization for Insurance Supervision (in the case of insurance companies). The Capital Markets Law also introduced the concept of Employee Share Option Plans (ESOPs) whereby employees of a Joint Stock Company may form an association that owns shares in the Joint Stock Company’s capital on behalf of the employees. Capital Markets Law [v] Brokers Obligations and Restrictions The Executive Regulations of the Capital Markets Law set out the obligations of, the restrictions on, brokerage companies. Brokerage companies are bound by fiduciary duties of honesty and integrity regarding their clients. Therefore, brokerage companies are required to disclose any conflict of interest that may exist. Also included in their fiduciary duty is the obligation not to disclose any information regarding their clients prior to there written agreement. Insider trading rules have been established in accordance with which brokerage companies, their directors and employees are expressly prohibited from engaging in insider trading by using non-public information in accordance with, among other things, these rules: • Brokerage companies may not execute transactions on behalf of their clients, without sufficient evidence justifying their advice and the resulting transactions; • brokerage companies are prohibited from “churning” (i.e. entering into transactions for clients participating in excessive trading, with the aim of increasing commissions, expenses or other fees); • brokerage companies may only deal on behalf of their clients in transactions for which they have been granted specific instructions. These instructions should be recorded by the broker; • the client must be informed of the completion of a transaction within 24 hours; and • transactions on behalf of the brokerage companies’ directors, employees or relatives are permitted only through with the explicit written consent of the Board of Directors of the Brokerage Company. Labor Law The Labor Law and Articles 674 to 698 of the Civil Code of 1948, contain the most significant rules governing the relationship in Egypt between employers and employees. Labor Law [i] Work Certificates and Permits All Egyptian workers, except part-time or temporary, must obtain work certificates. Labor Law [ii] Employment Contracts Employment contracts are required to be in writing, in triplicate and in the Arabic language. The employer, employee and social insurance office shall receive a copy of the employment contract. The employment contract must include certain information specified in the Labor Law. If an employee is hired on probation, the employment contract should indicate the probationary period, which cannot exceed three months. An employment contract may be drawn up for a fixed or indefinite period time. A fixed-term contract with an Egyptian employee, if renewed, automatically becomes an employment contract for an indefinite period. Employees should not work more than eight hours a day or 48 hours over a six day work week. Most private sector employees work only five days a week, usually Sunday through Thursday. The duration between the commencement of work and its termination shall not daily exceed 11 hours within a day. Employees are entitled to one day off each week. The day off cannot be for less than 24 hours. The day off shall be fully paid. Certain exceptions apply when work is intended to prevent a serious accident or to cope with a heavy workload. In such situations, the employee must be paid overtime. An employee is entitled to a minimum annual paid leave of 21 days starting after one full year of service this annual leave is increased to one month after the employee has worked for 10 consecutive years or is over 50 years old. Every employee is entitled to full pay for holidays designated by the Minister of Manpower and Training, not to exceed 13 days a year. If employees are required to work during such holidays, the employees are entitled to overtime (paid at twice their normal pay) The labor law provides that an employee is entitled to up to six months of paid sick leave at between 75% and 100% of the employee’s normal wage. Employment of foreigners -Any foreigners wishing to work in Egypt must obtain a work permit from the Ministry of Manpower and Training. Work permits are usually granted for a period of one year or less, and may be renewed. -The foreigner shall introduce the following documents to the foreigners permit administration to obtain the work permit 1-The agreement of the company that he intend to join (if the foreigner is the applicant for the permit.) 2-The license for conducting a certain profession (if required) 3-The presidential republic approval if the applicant is a political refugee. Joint stock companies may not employ technical and administrative foreign employees in excess of 25% of its work force nor to pay them more than 30% from the technical and administrative employees’ total payrolls. The same applies to limited liability and simple commode by shares companies if its capital exceeds 50,000LE In case of facing shortage in recruiting Egyptians in a specific field the Minister of Manpower and Training may permit foreign employment for specific periods without being calculated in the aforementioned percentages. Labor Law [iii] Health Care and Pension Payments All private sector companies in Egypt are required to provide free health care for their Egyptian employees either through the Medical Insurance Plan of The Ministry Of Social Insurance or privately. They are also required to contribute to the Pension Insurance Fund Of The Ministry of Social Insurance. Labor Law [iv] Dismissal and Termination The Labor Law lists the grounds under which an employee may be dismissed. The employee may not be dismissed until the matter is brought before the local conciliation committee at the Ministry of Manpower and Training. The committee seeks to help parties settle employment related disputes and can issue non-binding recommendations. However, the employer may be thereafter dismiss an employee against such recommendation and the employee retains the right to challenge the dismissal in court. The Egyptian labor courts retain discretion in reviewing an employment dismissal. Compensation awards may be granted to employees for wrongful dismissal on the basis of a review of the facts and circumstances of each case. Court decisions have tended to award payments of between two and three months’ salary for each year of employment for wrongful dismissal. Grounds for legal termination without notice include the expiration of a fixed-term employment contract, retirement, resignation, death , total incapacitation of the employee to work at the relevant job or his unfitness during probation period.The Anti- Dumping Law In line with its obligations under the World Trade Organization (WTO) of which Egypt is member, Egypt introduced an Anti–Dumping Law. This law was designed to protect Egypt’s national economy from the consequences of detrimental practices carried out in international commerce. The Anti-Dumping Law already lead to a series of decisions by the Ministry of Trade & Supply in which anti-dumping penalties are imposed and collected. The Anti-Dumping Law grants the ministry of Trade and Supply powers to protect the national economy from the damaging consequences of subsidies, dumping or unjustified increases in importation of goods. Its responsibilities include providing studies and all other necessary data needed to evidence the above mentioned types of incidents. The Ministry of Trade and supply shall apply the instructions of the article of regulations of the antidumping law to WTO non-member countries. Individuals and public authorities responsible for investigating a complaint must maintain the confidentiality of the information provided to them by the parties as evidence. Violation of this confidentiality obligation may result in a fine of between LE 10,000 and LE 50,000 Intellectual Property Rights Egypt adopted an integrated IPR law on June 02, 2002. The said law integrate the following laws: 1- Patents, Patents, Trademarks and Copyright [i] Patents and Industrial Designs The Patents and Industrial Designs Law, closely modeled on the TRIP’S agreement, allows inventors to obtain patent protection for 20 years from the date of application. The patent-holder has the exclusive right to exploit the invention, including the right to pledge, assign or license the patent. Provided the employee receives a fair remuneration, the employer has all the patent rights resulting from his employee’s inventions invented during the work link or within the scope of the contact between them and for 1 full year following thereof. After 20 years, the patent-holder’s exclusive rights end and the invention enters the public domain. Manufacturing process, and final are patentable. A separate office and register is maintained for the industrial designs. Industrial Designs are granted protection for 10 years from the date of registration, renewable for two similar periods International Agreements Egypt is a signatory to the Paris Convention and PCT Treaty. If a patent application is made in a member country of the Paris Convention or in any other country offering reciprocal treatment, the applicant has a priority right to apply for a patent in Egypt within one year of the related application abroad. If a patent application is made in a member country of the PCT treaty or in any other country offering reciprocal treatment, the applicant has a priority right to apply for a patent in Egypt within 30 months of the related application abroad. Patents, Trademarks and Copyright [ii] Trade marks The Trademark Law allows trademark holders protection for 10 years from the date of application, renewable indefinitely for similar periods. Any renewal must be specifically applied for and the procedure for renewals is the same as for the initial registration of the trademark. Service marks may also be registered. Patents, Trademarks and Copyright [iii] Trade Statements The Trademark Law provides for protection against false or misleading trade statements, including any description or claim relating to: • The number, measurement, weight, components and contents of goods; Other International Agreements Egypt is a party to the Madrid Agreement concerning the international registration of marks and the TRIP’S Agreement. Patents, Trademarks and Copyright [iv] Copyright The Copyright Law defines copyright protection to include, among other things, architectural designs, speeches, theatrical pieces, musical works, photographic and cinematography works, maps, and works for broadcast on television or radio. The Copyright Law was amended in 1992 so as to broaden the scope of its protection to include video tapes and computer software. The amendment also increased the penalties that apply in copyright infringement cases. Protection under the copyright law, extends for 50 years from the death of an author. In case of legal entity the aforementioned term of protection begins on the date of the first publication. In certain circumstances, in the field of photographic and cinematography works, the protection ends 15 years from the date of first publication. Egypt is a member state of the Berne Convention of 1886, although it does not consider itself bound by the provisions of Article 33 of the Convention concerning the jurisdiction of the International Court of Justice. Egypt is also a signatory to the 1971 Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of their Phonograms. Patents, Trademarks and Copyright [v] Licensing In general, the contract terms entered into between the parties will govern the terms of any technology licensing agreements, subject to certain rules protecting the interests of Egypt in technology licensing agreements established by the Commercial Code. These requirements inter alia, require agreements for the transfer of technology to be subject to Egyptian law. Sale of Goods [i] Vienna Convention Egypt, along with many trading nations, is party to the United Nations Convention on Contracts for the International Sale of Goods, also known as the Vienna Convention. The Vienna Convention is based on elements of both common law and civil law, and regulates contractual terms for international transactions for the sale of goods between nationals or residents of member states. The Vienna Convention rules concerning contracts and contract interpretation differ from local rules. Importers and exporters from states that are party to the Vienna Convention should carefully review their sales contracts in light of the Vienna Convention to ensure that the Convention’s rules do not conflict with the intentions of the party. If they do, the parties can opt out the application of the Vienna convention by an express provision in their agreement. Sale of Goods [ii] Import Regulations Import regulations state that goods may be freely imported and exported, provided they are not prohibited by law and the relevant duty is paid. The Import Registration requires that an importer must be registered in the Register of Importers and is an Egyptian national. The Import Registration Law requires a number of other conditions for such registration, including conditions relating to minimum capital and past commercial experience. Export activities can be conducted by companies with foreign participation. Public Tender Law The Public Tender Law governs all supply, service and construction contracts entered into with an Egyptian governmental entity. Government contracting must be by way of public tenders or by public negotiations between the government entity and the contractor. The following cases are exceptional ways in contracting • limited negotiations may be used where items manufactured are only available from certain contractors or the nature of the items or its purpose requires obtaining it from its production locations or where technical works require certain specialists, or where national security dictates confidentiality, • direct contracting, but in extraordinary cases. There is no standard Government contract. Each Ministry or Government agency uses its own form of contract (conforming to the provisions of the Public Tender Law). Public tenders must advertised in a daily newspaper locally or abroad, depending on the nature of the contract and must ensure equal opportunity and free competition. Although a government contract must be awarded on the basis of the most qualified and lowest bid, an Egyptian domestic contractor is accorded priority if its bid does not exceed the lowest foreign bid by more than 15%. Each tender must be accompanied by the payment of a provisional deposit of up to 2% which is returned to unsuccessful tenders. A final deposit of up to 5 % from the value of the contract must paid by the winner within 10 days of their tender being accepted. The contract may be cancelled if payment of the final deposit is not made, and any losses suffered by the government entity as a direct result may be recovered. A maximum fine of up to 10% of the value of construction contracts and up to 3% of the value of supply contracts and technical assistance contracts may be levied on contractors for late performance or late delivery. The Public Tender Law Permits Government entities to terminate contracts where the bidder has acted fraudulently, declared bankruptcy. Tenders may be rejected upon receipt due to (among others): • For reasons of public interest and welfare, A contract may be terminated by the Government entity at any time if the contractor party defaults. Any losses incurred may be recovered. In cases of late-performance or non-performance the concept of force majeure is recognized in accordance with principles of the Egyptian Civil Code under which certain types of hindrances must be clearly stated in the contract if they are to be considered force majeure (e.g. the unavailability of materials, strikes and shipping delays.) Environmental Law There has been a heightened level of concern by the Egyptian public and government over environmental issues over the past few years. This trend is due to an awareness Environmental Law [i] International Conventions Egypt has signed and ratified 16 international conventions and treaties on the environment. Some of the more prominent ones include: • the Basel Convention on the disposal of hazardous materials, • the Convention of London of 1954, as amended, concerning maritime pollution by oil and the Protocol of 1978, attached to the Convention of London of 1973,for the prevention of pollution by ships. Egypt has signed but not ratified a number for other conventions on the environment. Environmental Law [ii] The Law on the Environment The Law on the Environment radically transformed the field of Egyptian environmental law through both the consolidation of enforcement authorities within the Agency of Environmental Affairs (AEA) and the introduction of comprehensive regulations superseding earlier environmental legislation. The AEA has been charged with the enforcement of the Law on the Environment and provided with an independent budget to ensure its autonomy. The Law on the Environment created bodies of Law governing hazardous waste disposal, Air, water and land pollution. Environmental Law [iii] Protection of Land In order to obtain license to build, investors engaging in all new developments are now required to prepare Environmental Impact Statements (EIS). The Law places a duty on the developer to monitor its compliance with environmental laws. Owners of existing facilities must also prepare an EIS for all new development. Environmental Law [iv] Hazardous Waste and Materials The Law on the Environment provides for detailed restrictions on the use, transportation, handling and disposal of hazardous wastes and materials, as defined in the law. Environmental Law [v] Air Pollution Egypt’s air pollution control efforts include emission control standards, zoning restrictions, controls on the use of pesticides, noise limits and standards for the maintenance of acceptable levels of radiation. Furthermore, limits are prescribed for the amount of heat, humidity and the quality of ventilation in the workplace. Environmental Law [vi] Salt Water Environment The Law on the Environment also regulates ship- based pollution of the marine environment, including discharges of oil and hazardous materials and the disposal of sewage waste and rubbish. The force of these provisions extends to both Egypt’s territorial waters and its exclusive economic zones Land- based sources of marine pollution are also dealt with by means of zoning restrictions and the granting the AEA sweeping enforcement powers to deal with polluters. Environmental Law [vii] Other Elements The Law on the Environment contains incentives for entities that operate in Egypt in an environmentally friendly manner thus encouraging compliance. The Law on the Environment provides for fines and in extreme cases prison for violations of its provisions. Disputes Egypt is civil law legal system with a constitution that is fully independent. Egypt has two levels of civil courts of primary jurisdiction: the Summary Courts generally hear cases where its value don’t exceed 10,000 and it also include Urgent Matters Courts. Courts of First Instance generally hear cases where its value exceed 10,000 and also hear criminal, labor and commercial matters. Courts of First Instance hear appeals from the Summary Courts and appeals from the Court of First Instance are made to the main Courts of Appeal which are located in the principal cities of Egypt. A separate judicial system for administrative disputes exist and operate under the jurisdiction of the Council of state (Conseil d’Etat) )) The administrative courts are empowered to hear challenges to the validity of decisions issued by administrative entities as well as disputes involving contracts with the Government. The Council of State also has a Legislative Department that reviews draft legislation and Government contracts and renders legal opinions for the Government. The Constitution, provides that the Supreme Constitutional Court is “vested solely with judicial control over the constitutionality of laws and regulations”. The Constitutional Court also reviews administrative decisions and conflicts of jurisdictions between the civil and administrative courts. Disputes [i] Arbitration Contracts between Egyptian and foreign parties commonly provide for some form of international arbitration in the event of any disputes. The Court of Cassation has on a number of occasions confirmed the validity of such arbitration clauses. An Egyptian court will generally respect an arbitration clause and stay proceedings brought before it. Arbitration may be conducted under any set of rules chosen by the parties. One of the most popular set of rules used in contracts between Egyptian and foreign parties is that International Chamber of Commerce (ICC). Arbitration under the ICC rules may be held in Egypt or abroad. The local arbitration body that is often used is the Cairo Regional Center for International Commercial Arbitration (the Center). The Center applies the rules of the United Nations Commissions on International Trade Law (UNCITRAL). There are no requirements in Egyptian law that arbitration be conducted under the auspices of the Center or in Egypt. The Arbitration Law brings Egypt further into line with the UNCITRAL model law on international commercial arbitration (which it appears to have been largely modeled after). The Law is a comprehensive statement of the law on Arbitration and therefore facilitates the conduct and enforcement of international arbitration proceedings in Egypt. The Arbitration Law now requires only that the following conditions to be met for the enforcement of an arbitration award in Egypt: • the award does not contravene any judgment issued by Egyptian courts on the subject matter of the dispute; • the award does not contravene public order or policy in Egypt; and • the award is in respect of an arbitration to which the defendant received due notice. The Arbitration Law also clarifies certain aspects of Egyptian arbitration law by legislating in areas that were previously neglected. Under the Arbitration Law, the Egyptian Government is specifically deemed accountable for arbitration agreements it enters into and may no longer take the position that is not subject to commercial arbitration clauses. In addition, the ability of the arbitration tribunal to appoint experts are outlined in the text of the Arbitration Law. The Arbitration Law provides that annulment proceedings all arbitration awards must be initiated within 90 days from notification of the award’s issuance. However, this requirement does not preclude the enforcement of the award except under certain circumstances. Disputes [ii] Enforcement of Foreign Arbitration Awards An award is issued pursuant to an arbitration that has taken place outside Egypt may be enforced in Egypt if it is either covered by one of the international conventions to which Egypt is a party or satisfies the conditions set out in the Arbitration Law. Egypt is a signatory state to: • the New York Convention of 1958 on the Recognition and Enforcement of Foreign Arbitral Awards; • the Washington Convention of 1965 on the settlement of Investment Disputes between States and the Nationals of other States; and • the Convention of 1974 on the Settlement of Investment Disputes between the Arab States and the Nationals of other States. Egypt has also signed a series of investment protection treaties that also contain arbitration enforcement provisions. Investment protection treaties were signed with Belgium, Luxembourg, France, Germany, Greece, Iran, Italy, Japan, Lebanon, Morocco, Netherlands, Romania, Sudan, Switzerland, the United Kingdom, the United States, and Yugoslavia. These treaties generally provide that arbitration awards issued in one country may be enforced in the other if the award is supported by written evidence of the parties’ agreement to arbitrate, the dispute in question is capable of arbitration in the country where the award is to be executed, and the award does not conflict with public policy. Where no international convention applies, the provisions of the Arbitration Law must be satisfied for a foreign arbitration award to be enforced. Disputes [iii] Enforcement of Foreign Court Judgment To enforce a foreign judgment in Egypt the party seeking to enforce the judgment must obtain an exequator. To apply for an exequator the normal procedures for initiating a lawsuit must be followed. In order for an Egyptian court to issue an exequator it must be satisfied that the following conditions have been met: • competence of the court rendering the judgment: the foreign court has jurisdiction over the dispute and Egyptian courts do not have exclusive jurisdiction over the dispute; • due process: all parties to the dispute were duly notified and represented (i.e., not in contravention of the rule of natural justice); • final judgment: the judgment is final (res judicata); and • conflict of judgments: the judgment does not conflict with any existing judgment by any Egyptian court and the enforcement of such judgment will not contravene public policy, order or morality in Egypt. Egypt is a signatory state to the Arab League Convention that allows for the mutual enforcement of court judgments among signatory States. |
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