The Economic Courts Law: What are t
The Economic Courts Law: What are they, What effect will they have on business?
On May 22nd, 2008 The Economic Courts Law was published in the Egyptian Gazette after Parliament had approved it a few days before. Unlike most laws which become effective upon their publication, the Economic Courts Law will come into effect as at October 1st, 2008, i.e. more than four months following its publication. The delayed application of the Law is understandable in view of the fact that it will require significant logistical, technical and awareness efforts to precede its coming into force.
The passing of the Economic Courts Law was the culmination of a long and protracted debate in Egypt within the legal, judicial and business circles with respect to whether or not it will lead to a tangible improvement in commercial dispute settlement. Commercial litigation in Egypt has been a key source of complaint by local and foreign investors alike for the long time that it takes to resolve disputes and for the lack of specialization of the judiciary. The ultimate effect of the passing of this law on business climate in Egypt, however, will not be immediately felt. But it is important at this stage to be aware of the way that it may immediately impact the way that commercial litigation is conducted.
The Law in a Nutshell
The new Law should contribute in improving commercial dispute settlement based on the following three key principles:- The establishment of a new set of specialized courts.
- The limitation of the jurisdiction of these courts to a specific list of commercial activities.
- The application of «fast track procedures» for the settlement of the disputes brought before the new courts.
New Courts within the Existing System
The new Economic Courts are not totally independent from the rest of the Egyptian judicial system. They are specialized courts that are integrated into the overall system. In fact the Law states that one such “Court” will be established as part of each of Egypt’s Courts of Appeal. This does not necessarily mean that they need to be physically housed within the same buildings of the Courts of Appeal. In fact they are better housed outside of them. But each of those new Courts will be an integral part of the competent Court of Appeal. Ordinary litigation in Egypt is, on the whole, conducted on two substantive levels – i.e. two steps that each may consider the substantive merits of the case – followed by the possibility of a review of the legal (but not substantive) issues by the highest court in Egypt, the Cassation Court. This applies for both criminal, as well as civil/commercial disputes. (Disputes involving organs of the State are settled through a parallel judicial structure called Administrative Courts). In applying the above to the new Economic Courts, the same principles will not be significantly altered. Accordingly, all civil/commercial disputes, or criminal cases brought before the new Courts will be reviewed on two stages, preliminary and appeal. However, if a decision by the Economic Court of Appeal is eligible for review on legal matters, then it shall be taken to the same Cassation Court, except civil/commercial cases with a value below five million Egyptian Pounds. This will ensure that, in spite of the existence of two separate systems for litigation – economic and traditional – all matters of principle or legal interpretation are reviewed and determined through the unifying role of the Cassation Court.Jurisdiction
Jurisdiction is the legal term which refers to the scope of activity of the court. In other words, which cases it can review and which fall outside of its scope or «jurisdiction». The determination of jurisdiction for the Economic Courts is the most critical factor in their future success. Simply put, the dilemma is the following: If the jurisdiction of the new Courts is too large, it risks recreating the same overcrowding of the ordinary judicial system. If, on the other hand, the jurisdiction is too narrow, then the new Courts may be extremely efficient and speedy, but only with respect to a limited number of disputes, thus be of limited effect. The new Law determined the jurisdiction of the Economic Courts to include all criminal as well as civil/commercial disputes relating to the following:- Company Law
- Capital Market law
- Investment Law
- Financial Leasing law
- Mortgage Finance Law
- Intellectual Property Protection Law
- Banking Law
- Investment Companies Law
- Protection from Bankruptcy provisions in the Code of Commerce
- Competition Law
- Investor Protection Law
- Communication Regulation Law
- Electronic Signature Law
Composition and Fast Track Procedures
The composition of Economic Courts – whether Preliminary or Appeal – is of three judges. Each Court will further have a Summary Judge empowered with issuing quick injunctions in matters that can not be delayed. The real breakthrough to be anticipated from the new Law is its departure from a number of established norms in ordinary litigation procedures through “fast track procedures”. The key elements in this alternative approach are the following:- The Summary Judge is obliged – should he not accept or reject the injunction request – to schedule the matter to be viewed by the competent Economic Court. This should ensure the speedy decisions on urgent matters.
- Economic Courts will have the jurisdiction to decide on all requests pertaining to the “execution” of substantive decisions. This is an important element because one of the key reasons for the delay in closing commercial disputes in the ordinary system is that the decision by the court, once issued, may be obstructed from execution by numerous procedural challenges. The fact that the new Economic Courts will be dealing with the execution as well will undoubtedly ensure a speedier resolution of disputes.
- The Law introduces the concept of requiring a judge to “prepare” the case before it is submitted to the Court. The process of “preparation” involves listening to the parties, completing the file, attempting an amicable resolution of the dispute and in general ensuring that once the file is submitted to the Court,will not be delayed for completion of documents or procedures. The process of preparation may only take up to sixty days at most.
- The use of “experts” in the Egyptian judicial system is standard. However, those experts are employees of the Ministry of Justice. The new Law departs from this practice, by allowing the use of experts from the business community and outside experts. This is a crucial provision because it will allow the Courts to have access to professional experts in complex financial and commercial matters without being restricted to the traditional pool of Ministry employees.
What the New Courts Will Not Do
For the purposes of business environment, the new Economic Courts will not do everything that pertains to commercial operations in Egypt. Some important limitations exist, the most important of which are the following:- Economic Courts have no jurisdiction over “administrative matters”. In other words, any dispute involving State organs – ministries, public authorities, governorates, local government councils, etc – will continue to be viewed by the ordinary Administrative Courts.
- Some key laws are not included in the jurisdiction of the Courts over civil/criminal matters. For example insurance contracts, ordinary civil disputes involving a business outside of the list above, such as disputes with respect to construction agreements, labor relations, tax assessment, sale, purchase, rent, etc.
- Disputes relating to the execution of arbitration awards are not within the jurisdiction of the new Courts.
Assessment
The Economic Courts Law was issued after a prolonged discussion and debate. At the heart of this debate is whether departures should be permitted from the traditional “French School” principles of law. That the new Law breaks some of the established norms in judicial procedure is, in itself, a major and welcome step forward. This is a Law which attempts to take a practical view of the need to resolve disputes in a speedy manner and by a specialized judiciary. However, some of the specifics in the Law may not allow it to fully realize the impact hoped for. In particular, the delineation of jurisdiction is not based on a business-sensitive approach. The new Courts will be better focused if a number of “regulatory laws” are deleted from the list of jurisdiction, including the Investment, Consumer Protection, Electronic Signature, Investment Companies, and Communication Regulation Laws. Instead, the new Courts should be able to review a broader range of disputes involving business transactions, especially where they are above a certain value threshold. But on the whole, the new Law promises to open new frontiers for judicial reform.
On May 22nd, 2008 The Economic Courts Law was published in the Egyptian Gazette after Parliament had approved it a few days before. Unlike most laws which become effective upon their publication, the Economic Courts Law will come into effect as at October 1st, 2008, i.e. more than four months following its publication. The delayed application of the Law is understandable in view of the fact that it will require significant logistical, technical and awareness efforts to precede its coming into force.
The passing of the Economic Courts Law was the culmination of a long and protracted debate in Egypt within the legal, judicial and business circles with respect to whether or not it will lead to a tangible improvement in commercial dispute settlement. Commercial litigation in Egypt has been a key source of complaint by local and foreign investors alike for the long time that it takes to resolve disputes and for the lack of specialization of the judiciary. The ultimate effect of the passing of this law on business climate in Egypt, however, will not be immediately felt. But it is important at this stage to be aware of the way that it may immediately impact the way that commercial litigation is conducted.
The Law in a Nutshell
The new Law should contribute in improving commercial dispute settlement based on the following three key principles:- The establishment of a new set of specialized courts.
- The limitation of the jurisdiction of these courts to a specific list of commercial activities.
- The application of «fast track procedures» for the settlement of the disputes brought before the new courts.
New Courts within the Existing System
The new Economic Courts are not totally independent from the rest of the Egyptian judicial system. They are specialized courts that are integrated into the overall system. In fact the Law states that one such “Court” will be established as part of each of Egypt’s Courts of Appeal. This does not necessarily mean that they need to be physically housed within the same buildings of the Courts of Appeal. In fact they are better housed outside of them. But each of those new Courts will be an integral part of the competent Court of Appeal. Ordinary litigation in Egypt is, on the whole, conducted on two substantive levels – i.e. two steps that each may consider the substantive merits of the case – followed by the possibility of a review of the legal (but not substantive) issues by the highest court in Egypt, the Cassation Court. This applies for both criminal, as well as civil/commercial disputes. (Disputes involving organs of the State are settled through a parallel judicial structure called Administrative Courts). In applying the above to the new Economic Courts, the same principles will not be significantly altered. Accordingly, all civil/commercial disputes, or criminal cases brought before the new Courts will be reviewed on two stages, preliminary and appeal. However, if a decision by the Economic Court of Appeal is eligible for review on legal matters, then it shall be taken to the same Cassation Court, except civil/commercial cases with a value below five million Egyptian Pounds. This will ensure that, in spite of the existence of two separate systems for litigation – economic and traditional – all matters of principle or legal interpretation are reviewed and determined through the unifying role of the Cassation Court.Jurisdiction
Jurisdiction is the legal term which refers to the scope of activity of the court. In other words, which cases it can review and which fall outside of its scope or «jurisdiction». The determination of jurisdiction for the Economic Courts is the most critical factor in their future success. Simply put, the dilemma is the following: If the jurisdiction of the new Courts is too large, it risks recreating the same overcrowding of the ordinary judicial system. If, on the other hand, the jurisdiction is too narrow, then the new Courts may be extremely efficient and speedy, but only with respect to a limited number of disputes, thus be of limited effect. The new Law determined the jurisdiction of the Economic Courts to include all criminal as well as civil/commercial disputes relating to the following:- Company Law
- Capital Market law
- Investment Law
- Financial Leasing law
- Mortgage Finance Law
- Intellectual Property Protection Law
- Banking Law
- Investment Companies Law
- Protection from Bankruptcy provisions in the Code of Commerce
- Competition Law
- Investor Protection Law
- Communication Regulation Law
- Electronic Signature Law
Composition and Fast Track Procedures
The composition of Economic Courts – whether Preliminary or Appeal – is of three judges. Each Court will further have a Summary Judge empowered with issuing quick injunctions in matters that can not be delayed. The real breakthrough to be anticipated from the new Law is its departure from a number of established norms in ordinary litigation procedures through “fast track procedures”. The key elements in this alternative approach are the following:- The Summary Judge is obliged – should he not accept or reject the injunction request – to schedule the matter to be viewed by the competent Economic Court. This should ensure the speedy decisions on urgent matters.
- Economic Courts will have the jurisdiction to decide on all requests pertaining to the “execution” of substantive decisions. This is an important element because one of the key reasons for the delay in closing commercial disputes in the ordinary system is that the decision by the court, once issued, may be obstructed from execution by numerous procedural challenges. The fact that the new Economic Courts will be dealing with the execution as well will undoubtedly ensure a speedier resolution of disputes.
- The Law introduces the concept of requiring a judge to “prepare” the case before it is submitted to the Court. The process of “preparation” involves listening to the parties, completing the file, attempting an amicable resolution of the dispute and in general ensuring that once the file is submitted to the Court,will not be delayed for completion of documents or procedures. The process of preparation may only take up to sixty days at most.
- The use of “experts” in the Egyptian judicial system is standard. However, those experts are employees of the Ministry of Justice. The new Law departs from this practice, by allowing the use of experts from the business community and outside experts. This is a crucial provision because it will allow the Courts to have access to professional experts in complex financial and commercial matters without being restricted to the traditional pool of Ministry employees.
What the New Courts Will Not Do
For the purposes of business environment, the new Economic Courts will not do everything that pertains to commercial operations in Egypt. Some important limitations exist, the most important of which are the following:- Economic Courts have no jurisdiction over “administrative matters”. In other words, any dispute involving State organs – ministries, public authorities, governorates, local government councils, etc – will continue to be viewed by the ordinary Administrative Courts.
- Some key laws are not included in the jurisdiction of the Courts over civil/criminal matters. For example insurance contracts, ordinary civil disputes involving a business outside of the list above, such as disputes with respect to construction agreements, labor relations, tax assessment, sale, purchase, rent, etc.
- Disputes relating to the execution of arbitration awards are not within the jurisdiction of the new Courts.