Amendments to the Egyptian Railways

On 3 April 2018, Law No. 20 of 2018 was issued amending the law promulgating the establishment of the Egyptian National Railways Authority (“ENR”). The amendment is aimed at increasing private sector participation in the construction, operation, management, and maintenance of railway projects.

Background

Early last month, the House of Representatives passed amendments to Law No. 152 of 1980 establishing the Egyptian National Railways Authority (the “Law” or “Law 152/1980”).[1] Following being passed by the House of Representatives, the amendment was signed by the President and published in the Official Gazette as Law No. 20 of 2018 (“Law 20/2018”).[2]

Law 152/1980

Passed in July 1980, the Law established the national railways authority – ENR – in its current form, making it subordinate to the Minister of Transport. It stated that ENR is to be managed centrally from Cairo and have branches throughout Egypt. Importantly, the Law provided under Article (2) that the authority shall be “solely” responsible for constructing and operating railway networks on the national level, as well as the development and improvement of these networks within the framework of the general economic policies of the State. Article (2) specifically defined the scope of ENR responsibilities as follows:

• Establishing, operating, and providing services in relation to railway networks throughout Egypt;
• Constructing and maintaining facilities that are required for providing the above services; and,
• Implementing the necessary projects in line with ENR purposes, or those that are related thereto, and for the improvement of its services.

The Law also stated that ENR may undertake any transactions and works that are necessary for the discharge of its duties, including laying out plans, programs, and management techniques that are in line with its activity under the Law, “without being bound by government rules and regulations”. Article (4) of the Law used to state that ENR may – in order to fulfil its purposes – establish joint stock companies alone or with others, the shares of which can be traded upon establishment. Article (4) further granted ENR employees a priority right in purchasing stocks in companies which ENR establishes. In 2006, Law 152/1980 was amended by virtue of Law No. 149 of 2006. The 2006 amendment was in relation to Article (4). It allowed, as an exception to Article (2), that the government grants concessions to private sector investors for the construction and operation of new railway lines and networks. The term of the concessions could be up to 99 years, following which ownership of the networks would lie with the State.

Law 20/2018

The amendment passed under Law 20/2018 changes Articles (2) and (4) of Law 152/1980. The amended Article (2) no longer contains reference to ENR being “solely” responsible for the establishment and operation of railways. Instead, the Article states that ENR undertakes the establishment (/construction), management, operation, and maintenance of railway networks on the national level. As for Article (4), the allowance for concessions introduced in 2006 stands, though with significant variations. The Article now states that ENR may – in order to achieve its purposes – and upon the approval of the Minister of Transport, establish joint stock companies on its own or with others. The Article still provides that the stocks of these ENR established companies may be traded immediately upon establishment, but while capping the priority right of ENR employees to acquire these stocks at 10% of company stocks. While the 2006 amendment excluded ENR concessions from the application of Law No. 129 of 1947 on Public Utility Concessions, and Law No. 61 of 1958 on Granting Concessions in Relation to Investments in Natural Resources and Public Utilities, Law 20/2018 additionally excludes the application of Bids and Tenders Law No. 89 of 1998 regulating public tenders. Another significant amendment is that the new amendment caps concession terms to 15 years rather than 99. It is also worth noting that Article (32) of the Egyptian 2014 Constitution limits public utility concessions to 30 years.

Conclusion

The most recent amendment comes in light of government announcements highlighting an interest in an overhaul of the railway system, including by increasing private sector participation in the sector with an aim of attracting investment, improving performance, and avoiding related risks. Despite media reports however, the importance of the most recent amendment specifically lies in that it (1) eliminates ENR’s exclusivity in the construction and operation of railway networks; (2) it adds ‘management’ and ‘maintenance’ as types of concessions that can be granted to private sector players; and, (3) it clearly exempts concessions from the application of the Bids and Tenders Law while capping their term at 15 years.   [1] Law No. 152/1980 establishing the Egyptian National Railways Authority, Official Gazette, Issue No. 28 (bis) (b), 14 July 1980. [2] Law No. 20/2018 amending certain provisions of Law No. 152/1980 establishing the Egyptian National Railways Authority, Official Gazette, Issue No. 13 (bis) (c), 2 April 2018.