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Major Amendment to the Environment

Major Amendment to the Environment Law: The New Amendment Provides a Wider Scope for the Private Sector and Facilitates Strengthens Supervision Business Start-up: How the New Amendment will Affect Business and Investment
The law regulating environment protection in Egypt is Law Number 4 of 1994. Although this law replaced a number of previous laws and decrees which dealt with various aspects of environment protection, it should still be considered the first comprehensive law in Egypt on this subject both from the substantive and the institutional aspects. This Law has not been amended at all so far – amendments were occurring in its Executive Regulations – because it only comprises general provisions, hence the importance of the overall amendment recently issued (Law Number 9 of 2009 published in the Official Journal on March 1st, 2009) which covers various aspects of environmental protection and will have an impact on investment and commercial activities. In order to appreciate the new amendments, it is useful to realize that the Law covers six different subjects:
  • Definitions
  • The composition and powers of the Environmental Agency
  • Environment protection on land
  • Environment protection in the air
  • Water environment protection
  • Penalties
It is also worth noting that the competent minister in the application of the Law is the Minister of State for Environmental Affairs, and that the Executive Regulations are issued by decree from the Prime Minister.
Overall View of the New Amendment
The new amendments to the Law fall under five subjects:
  • Expanding the scope of environmental protection
  • Simplification of procedures regarding the environmental approval
  • Strengthening the Environment Protection Fund
  • Strengthening the penalties and civil damages
  • Opening up of new investment opportunities
Expanding the Scope of Environmental Protection
In spite of the fact that the Law, before its amendment, was already covering land, sea and air, however the elements of such protection have been expanded. The most significant addition here is that whereas Article 28 only restricted the slaughtering of certain wild birds and animals (determined in the Executive Regulations) the amended Article 28 now includes new restrictions on destroying plants determined by Regulations (in addition to penalties under agriculture laws pertaining to the protection of agricultural lands) and on collecting and trading in fossils in natural reserves (a much needed provision in light of the abuse of natural reserves fossils particularly in Sinai and Fayoum). Moreover, the Law has also added the whole notion of “noise pollution” and considered the emission of “foul smells” a form of pollution. The most important addition, however, is that the Law has added new provisions concerning the burning of garbage. This is a subject that has a big impact on investment not only in the field of garbage collection but also in co-called “Carbon Certificates”, as will be explained below in this review. However for the purposes of completing the overall description of the new amendments, the Law now forbids totally the “open” burning of garbage and solid waste (whereas previously this applied only to residential and certain other places). The Law also imposes an obligation on local council departments to provide the spaces needed for such burning.
Simplifying Start-Up Procedures
One of the main concerns of investors in industry and other activities (tourism, services, etc) is the difficulty of obtaining the environmental permit. The new amendment in the law provides for an important shift in policy – although potentially costly – which is that projects will now be required to submit their own environmental impact assessment studies to the various regulatory agencies (each in its own field whether industry, tourism, services or otherwise) instead of previously relying on such studies being made by the governmental authorities themselves. Accordingly the new amendment will allow the much wider use of private sector expertise and consultants to conduct such assessments, thus opening the way for a speedier and more transparent process.
Strengthening the Environmental Protection Fund
The Environmental Protection Fund (“the Fund”) was already stated in the Law since its issuance in 1994, but its legal nature was vague, which hampered its capacity to operate and be effective. This is now changed as the Law states that the Fund will have its own independent public legal personality (although reporting to the Minister of State for Environment). The law also states now that the Fund’s Board will include representatives from the State Council, Ministries of Interior, Finance, Economic Development and International Cooperation, as well as from NGOs active in the field of environmental protection. This strengthening of status and composition will have an impact in allowing the Fund to be more active and more independent from the policies of both the Ministry and the Environment Agency, especially as its resources include the proceeds of penalties and fines imposed in accordance with the law, which are expected to increase as discussed below.
Strengthening Fines and Civil Damages
On the whole fines imposed in accordance with the provisions of the Law have been significantly increased. These are too many and detailed to be listed here but the net effect of the amendment is to more than double most of the fines. Moreover, more severe violations are now punishable by imprisonment. It is imperative now that various companies, factories and establishments take the issue of environmental compliance much more seriously and resort to professional expertise in this matter. On the other hand, the Law now includes a new provision under the definition of “Compensation” in Article (28), whereby such definition includes “compensation shall include the restitution of traditional and environmental damages and the costs of bringing things to their original state or fixing the environment”. This is an extremely relevant provision, because it expands the scope of civil damages to include restitution. It is true that under general principles of Civil Law the result would likely be achieved in the absence of this new provision, however, its explicit inclusion adds strength to the duty of compensation.
Opening New Fields of Investment
The Environment Law is one of the highly technical pieces of legislation, but which at the same time have a significant impact on the investment climate and on investment opportunities. And since the prime purpose of Egypt Legal Update is not to just describe new laws and regulations but to also comment on their economic and business impact, the following impact should be observed:
  • There is a huge opportunity for investment in the field of garbage collection and treatment. This has always been the case, but companies – both local and multinational – which have been involved in this field during the last ten years have faced significant obstacles in dealing with local councils. However, this continues to be an important and hardly explored field of investment, especially as the Environment Law gets tougher. This is true especially with the new absolute ban on the open burning of garbage and solid waste.
  • The other interesting aspect of the Law from an investment point of view is the strengthening of the Environment Protection Fund. According to the new provisions, this fund will have better resources, more independence and a bigger role. This presents a major opportunity for setting up Environment Investment Funds in accordance with the Capital Market Law and to invite the Environmental Protection Fund to participate in such funds or indirect equity in projects that have a positive impact on the environment.
  • Finally the law has now added a new Article (47 bis) stating that: “It is forbidden to illegally trade in products that destroy the Ozone layer or use them in industry or import or own them in violation of the law and ministerial decrees regulating the same and the international agreements to which the Arab Republic of Egypt is a party”. This provision will have an important effect on one of the untapped fields of investment in Egypt, which is trading in carbon certificates in accordance with the Kyoto Agreement to reduce carbon emissions. The Law now indicates that the Government will regulate this highly immoral market and this should present a big investment opportunity.
Conclusion
The new amendments strengthen environment protection, which is a highly needed goal. The results, however, are what matter, and this will depend on the capacity of the competent agencies to implement the new provisions. On the economic front, the new law now opens up some interesting investment opportunities and banks and investment companies should consider the opportunities carefully.
The law regulating environment protection in Egypt is Law Number 4 of 1994. Although this law replaced a number of previous laws and decrees which dealt with various aspects of environment protection, it should still be considered the first comprehensive law in Egypt on this subject both from the substantive and the institutional aspects. This Law has not been amended at all so far – amendments were occurring in its Executive Regulations – because it only comprises general provisions, hence the importance of the overall amendment recently issued (Law Number 9 of 2009 published in the Official Journal on March 1st, 2009) which covers various aspects of environmental protection and will have an impact on investment and commercial activities. In order to appreciate the new amendments, it is useful to realize that the Law covers six different subjects:
  • Definitions
  • The composition and powers of the Environmental Agency
  • Environment protection on land
  • Environment protection in the air
  • Water environment protection
  • Penalties
It is also worth noting that the competent minister in the application of the Law is the Minister of State for Environmental Affairs, and that the Executive Regulations are issued by decree from the Prime Minister.
Overall View of the New Amendment
The new amendments to the Law fall under five subjects:
  • Expanding the scope of environmental protection
  • Simplification of procedures regarding the environmental approval
  • Strengthening the Environment Protection Fund
  • Strengthening the penalties and civil damages
  • Opening up of new investment opportunities
Expanding the Scope of Environmental Protection
In spite of the fact that the Law, before its amendment, was already covering land, sea and air, however the elements of such protection have been expanded. The most significant addition here is that whereas Article 28 only restricted the slaughtering of certain wild birds and animals (determined in the Executive Regulations) the amended Article 28 now includes new restrictions on destroying plants determined by Regulations (in addition to penalties under agriculture laws pertaining to the protection of agricultural lands) and on collecting and trading in fossils in natural reserves (a much needed provision in light of the abuse of natural reserves fossils particularly in Sinai and Fayoum). Moreover, the Law has also added the whole notion of “noise pollution” and considered the emission of “foul smells” a form of pollution. The most important addition, however, is that the Law has added new provisions concerning the burning of garbage. This is a subject that has a big impact on investment not only in the field of garbage collection but also in co-called “Carbon Certificates”, as will be explained below in this review. However for the purposes of completing the overall description of the new amendments, the Law now forbids totally the “open” burning of garbage and solid waste (whereas previously this applied only to residential and certain other places). The Law also imposes an obligation on local council departments to provide the spaces needed for such burning.
Simplifying Start-Up Procedures
One of the main concerns of investors in industry and other activities (tourism, services, etc) is the difficulty of obtaining the environmental permit. The new amendment in the law provides for an important shift in policy – although potentially costly – which is that projects will now be required to submit their own environmental impact assessment studies to the various regulatory agencies (each in its own field whether industry, tourism, services or otherwise) instead of previously relying on such studies being made by the governmental authorities themselves. Accordingly the new amendment will allow the much wider use of private sector expertise and consultants to conduct such assessments, thus opening the way for a speedier and more transparent process.
Strengthening the Environmental Protection Fund
The Environmental Protection Fund (“the Fund”) was already stated in the Law since its issuance in 1994, but its legal nature was vague, which hampered its capacity to operate and be effective. This is now changed as the Law states that the Fund will have its own independent public legal personality (although reporting to the Minister of State for Environment). The law also states now that the Fund’s Board will include representatives from the State Council, Ministries of Interior, Finance, Economic Development and International Cooperation, as well as from NGOs active in the field of environmental protection. This strengthening of status and composition will have an impact in allowing the Fund to be more active and more independent from the policies of both the Ministry and the Environment Agency, especially as its resources include the proceeds of penalties and fines imposed in accordance with the law, which are expected to increase as discussed below.
Strengthening Fines and Civil Damages
On the whole fines imposed in accordance with the provisions of the Law have been significantly increased. These are too many and detailed to be listed here but the net effect of the amendment is to more than double most of the fines. Moreover, more severe violations are now punishable by imprisonment. It is imperative now that various companies, factories and establishments take the issue of environmental compliance much more seriously and resort to professional expertise in this matter. On the other hand, the Law now includes a new provision under the definition of “Compensation” in Article (28), whereby such definition includes “compensation shall include the restitution of traditional and environmental damages and the costs of bringing things to their original state or fixing the environment”. This is an extremely relevant provision, because it expands the scope of civil damages to include restitution. It is true that under general principles of Civil Law the result would likely be achieved in the absence of this new provision, however, its explicit inclusion adds strength to the duty of compensation.
Opening New Fields of Investment
The Environment Law is one of the highly technical pieces of legislation, but which at the same time have a significant impact on the investment climate and on investment opportunities. And since the prime purpose of Egypt Legal Update is not to just describe new laws and regulations but to also comment on their economic and business impact, the following impact should be observed:
  • There is a huge opportunity for investment in the field of garbage collection and treatment. This has always been the case, but companies – both local and multinational – which have been involved in this field during the last ten years have faced significant obstacles in dealing with local councils. However, this continues to be an important and hardly explored field of investment, especially as the Environment Law gets tougher. This is true especially with the new absolute ban on the open burning of garbage and solid waste.
  • The other interesting aspect of the Law from an investment point of view is the strengthening of the Environment Protection Fund. According to the new provisions, this fund will have better resources, more independence and a bigger role. This presents a major opportunity for setting up Environment Investment Funds in accordance with the Capital Market Law and to invite the Environmental Protection Fund to participate in such funds or indirect equity in projects that have a positive impact on the environment.
  • Finally the law has now added a new Article (47 bis) stating that: “It is forbidden to illegally trade in products that destroy the Ozone layer or use them in industry or import or own them in violation of the law and ministerial decrees regulating the same and the international agreements to which the Arab Republic of Egypt is a party”. This provision will have an important effect on one of the untapped fields of investment in Egypt, which is trading in carbon certificates in accordance with the Kyoto Agreement to reduce carbon emissions. The Law now indicates that the Government will regulate this highly immoral market and this should present a big investment opportunity.
Conclusion
The new amendments strengthen environment protection, which is a highly needed goal. The results, however, are what matter, and this will depend on the capacity of the competent agencies to implement the new provisions. On the economic front, the new law now opens up some interesting investment opportunities and banks and investment companies should consider the opportunities carefully.