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New Law Pertaining to Development i

New Law Pertaining to Development in Sinai
Rules for Real-Estate Ownership Finally Clarified
Background Investment in Sinai has always been a difficult and contentious issue, because of the difficult balance between the need to develop this area of Egypt that is full of opportunities and potential and between the political and strategic position it occupies. This has been reflected over the last years in an unclear legal framework which has prevented investment from taking off fully and hampered attempts to provide a long term view over the future of investment in Sinai. Thus in January 2012, the Supreme Council for the Armed Forces (“SCAF”) issued Decree/Law No. 14 of 2012 (Official Journal, Issue No. 3(bis), published on January 19th, 2012) providing a comprehensive framework for investment in Sinai. Restriction on Ownership Perhaps the most important aspect of the new Law is that it settles once and for all the issue of real estate ownership in Sinai, but stating in Article (2) ownership of real estate whether land or built assets is only allowed to Egyptians with both parents of Egyptian nationality and to juristic personality wholly owned by Egyptians. Moreover, if such ownership passes to a non-Egyptian as a result of inheritance then it has to be disposed off within six months. Non-Egyptians may, however, have rights of use, rent or usufruct over real estate in Sinai. There is one clear exemption from the above, which is the right of the President of the Republic – after the approval of the Ministries of Defense and of Interior as well as the Intelligence – to award the right of ownership to Arabs only which allow Egyptians to own real estate in their home countries. Moreover, even with respect to Egyptians, they may not own real estate in designated Investment Areas except with the permission of the Board of Directors of a new authority responsible for the development of Sinai and the Ministries of Defenseand Interior and the Intelligence. Right of Use With respect to the right of use (usufruct) over real estate, the new Law states the following conditions: 1) The Usufruct must be for less than 30 years, renewable up to 50 years. 2) It may not be transferable into a right of ownership. 3) It may not also be transferable to other parties without obtaining the original approvals. 4) It must be used for the purposes stated upon application. New Authority The new Law establishes “The National Authority for the Development of the Sinai Peninsula” which is a public entity, under the supervision of the Council of Ministers. The new Authority shall have a Board of Directors chaired by a Chairman of the Board appointed by the Prime Minster and to include representatives of the Ministries of Defense, Agriculture, Water Resources, Housing, Industry, Tourism, Petroleum, Transport, Finance, Planning, Electricity, Interior, Communications, Governorates of North Sinai and of South Sinai, Investment Authority, the Intelligence and the Local Councils of North and South Sinai, as well as three Investors in Sinai. The new Authority shall be appointed for three years and shall be responsible for studies, strategic planning and promoting the development of Sinai, for proposing laws and regulations, for following up on implementation and for monitoring investments therein. It is also empowered to issue as well as withdraw investment licenses, provide services, and in general act as a supervisor of investment in Sinai. Comment Clarity is the key to a good legal framework, and this Law is welcome – and long overdue – in view of the fact that it finally clarifies a number of key issue with respect to investment in Sinai, especially those pertaining to real estate ownership. From this angle it is a positive development. It may, however encounter certain operational problems, especially with respect to the registration of usufruct rights, lending to investment projects which normally need to mortgage their assets, and ensuring that a smooth process is maintained. The new Authority will also need to better clarify its role, independence, and specific powers versus other state organs. But it is a step in the right direction.
Rules for Real-Estate Ownership Finally Clarified
Background Investment in Sinai has always been a difficult and contentious issue, because of the difficult balance between the need to develop this area of Egypt that is full of opportunities and potential and between the political and strategic position it occupies. This has been reflected over the last years in an unclear legal framework which has prevented investment from taking off fully and hampered attempts to provide a long term view over the future of investment in Sinai. Thus in January 2012, the Supreme Council for the Armed Forces (“SCAF”) issued Decree/Law No. 14 of 2012 (Official Journal, Issue No. 3(bis), published on January 19th, 2012) providing a comprehensive framework for investment in Sinai. Restriction on Ownership Perhaps the most important aspect of the new Law is that it settles once and for all the issue of real estate ownership in Sinai, but stating in Article (2) ownership of real estate whether land or built assets is only allowed to Egyptians with both parents of Egyptian nationality and to juristic personality wholly owned by Egyptians. Moreover, if such ownership passes to a non-Egyptian as a result of inheritance then it has to be disposed off within six months. Non-Egyptians may, however, have rights of use, rent or usufruct over real estate in Sinai. There is one clear exemption from the above, which is the right of the President of the Republic – after the approval of the Ministries of Defense and of Interior as well as the Intelligence – to award the right of ownership to Arabs only which allow Egyptians to own real estate in their home countries. Moreover, even with respect to Egyptians, they may not own real estate in designated Investment Areas except with the permission of the Board of Directors of a new authority responsible for the development of Sinai and the Ministries of Defenseand Interior and the Intelligence. Right of Use With respect to the right of use (usufruct) over real estate, the new Law states the following conditions: 1) The Usufruct must be for less than 30 years, renewable up to 50 years. 2) It may not be transferable into a right of ownership. 3) It may not also be transferable to other parties without obtaining the original approvals. 4) It must be used for the purposes stated upon application. New Authority The new Law establishes “The National Authority for the Development of the Sinai Peninsula” which is a public entity, under the supervision of the Council of Ministers. The new Authority shall have a Board of Directors chaired by a Chairman of the Board appointed by the Prime Minster and to include representatives of the Ministries of Defense, Agriculture, Water Resources, Housing, Industry, Tourism, Petroleum, Transport, Finance, Planning, Electricity, Interior, Communications, Governorates of North Sinai and of South Sinai, Investment Authority, the Intelligence and the Local Councils of North and South Sinai, as well as three Investors in Sinai. The new Authority shall be appointed for three years and shall be responsible for studies, strategic planning and promoting the development of Sinai, for proposing laws and regulations, for following up on implementation and for monitoring investments therein. It is also empowered to issue as well as withdraw investment licenses, provide services, and in general act as a supervisor of investment in Sinai. Comment Clarity is the key to a good legal framework, and this Law is welcome – and long overdue – in view of the fact that it finally clarifies a number of key issue with respect to investment in Sinai, especially those pertaining to real estate ownership. From this angle it is a positive development. It may, however encounter certain operational problems, especially with respect to the registration of usufruct rights, lending to investment projects which normally need to mortgage their assets, and ensuring that a smooth process is maintained. The new Authority will also need to better clarify its role, independence, and specific powers versus other state organs. But it is a step in the right direction.