Contractors’ Compensation Law Is Ou

On 9 July 2017, the awaited Contractors’ Compensation Law (the “Law”) was published in the Official Gazette.[1] The Law was passed by Parliament in the end of May 2017, and has been awaiting sign off from the President and publication in the Gazette so that it may come into force. The Law addresses contracts that have been affected by the economic decisions issued in the period between 1 March 2016 and 31 December 2016, in an attempt to mitigate financial imbalances caused by the floating of the Egyptian Pound in November 2016, and the hike in the prices of public utilities.

Background

Earlier in 2017 there has been news of issues facing contractors in government projects which almost led to the suspension of these works. These issues were mainly in relation to losses resulting from the dramatic change in foreign currency price following the float of the EGP in late 2016. There has therefore been a general anticipation for a law to compensate suppliers for these incurred losses, and a bill was presented to Parliament, which it approved by the end of May 2017.

The Law

The Contractors’ Compensation Law creates a committee – the Supreme Compensation Committee – within the Ministry of Housing, Utilities and Urban Communities. The Committee’s role is to set the terms, standards, and compensation percentages for damages resulting from economic decisions issued within the 9-month period running from March to December of last year, including the decision to float the Egyptian Pound in November 2016. The Law explicitly states that its aim is to address any financial imbalances in supply, contracting, and public service contracts that the government is party to, and that was in force during the specified period, for works implemented starting 1 March 2016 and until the end of the contracts. The Law specifies that compensations are applicable as long as there are no delays in implementation that are attributable to the contractor/supplier. A party may submit a compensation request to the authority to be determined by the Minister of Housing including any difference in prices in accordance with the Bids and Tenders Law, which is the governing text for the government’s public procurement contracts. The Committee is headed by the Minister of Housing and is to include among its members representatives from the State Council, and the Ministry of Finance, among others. It is to revise contracts on a case by case basis and submit a report to the Cabinet of Ministers for ratification. Finally, the Law states that the Minister of Housing is to issue its implementing decisions within 30 days from its issuance on 9 July 2017.   [1] Law No. 84/2017 on Compensation in Contractors’, Supply, and Public Service Contracts, Official Gazette, Issue No. 27 (bis), 9 July 2017.