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Repeal of Maximum Income at Some Ba

Repeal of Maximum Income at Some Banks Following Administrative Court Ruling
Since the issuance of the law introducing a maximum income for public sector employees and the entities denoted therein,[1]  the economic and legal spheres have witnessed a debate about the feasibility of the law’s application, and the direct and indirect effects it has resulted in, such as the departure of qualified employees from the public sector, and the possible weakening of the performance of the financial sector. The Maximum Wage Law, as it is more commonly referred to, set the maximum net income of a government employee at 35 times the minimum wage and in no case more than EGP 42,000 per month. This provision was applicable with respect to salaries paid by the state, public authorities, and public sector companies. Following the enactment of the Maximum Wage Law, many of the entities falling within its scope requested to be exempted from its provisions, or argued that the provisions of the law were inapplicable. On 17 February 2015, the Housing and Development Bank and the Export Development Bank of Egypt obtained a favourable judgment[2] from the Administrative Court, which ruled that the maximum wage provisions did not apply to their institutions.
The Administrative Court’s Ruling and its Implications
The Prime Minister issued a decree[3] enacting the Executive Regulations detailing the application of the Maximum Wage Law, the text of which reiterated the validity of the Law on public juridical persons, including employees of public sector banks which fall under the regulation of the Central Bank of Egypt and the banking and financial sector. The Administrative Court's ruling was reached on the basis that the maximum wage law was too narrow in its scope. By setting out exactly which entities it applied to, it resulted in a situation where it would be impossible to add new entities without amending the Law. The Law does not provide a process whereby its scope can be expanded. Furthermore, if the Executive Regulations attempted to detail such a process it would be deemed contrary to constitutional principles, as the Executive Regulations of the Law cannot enact new provisions, but can only detail what is decreed in the Law itself, according to the Court’s opinion.  The ruling confirmed that the employees of the Housing and Development Bank did not fall within any of the categories set forth in Article I of the maximum wage law, provided below:
  • Administrative employees of the State;
  • Employees in the local government units;
  • Employees of the entities that have special budgets;
  • Employees of public and national economic bodies, public utilities, and other public legal persons;
  • Employees whose employment is governed by special laws or special programs.
The Administrative Court’s ruling touched on many of the legal issues that have severe implications in both economic and legal terms, beyond the direct effect of the ruling on the appellants themselves, and perhaps even beyond the question of the validity of the Maximum Wage Law on the banks in general. Firstly, the Court defined the term "State apparatus", determining that the term applies only to those entities that fall within the scope of the executive authority of the State as specified by the Constitution. The Court also confirmed that the State’s possession of shares in both banks did not affect their legal status as both remained private juridical persons; this was confirmed by the decree establishing the banks through money from private funds, despite some State ownership. Secondly, the Court's ruling set out that the Prime Minister's decision infringes on the terms of reference of the General Assemblies and the Boards of Directors of the banks, which are responsible for managing the banks. Thirdly, in a move that may open the door to challenging the constitutionality of the Law, the Court ruled that the Prime Minister’s decision violated the fundamental right of employees to receive remuneration equal to their work, because the employee expects certain consideration for the work undertaken. The Court ruled that, "if the State retains income earned by employees without a legal basis to do so, this could be considered expropriation of the private money of the citizen”. It is notable that the Maximum Wage Law has in the past been subjected to accusations of unconstitutionality due to the fact that it was never submitted to the State Council for review, a measure which is provided for in Article 190 of the 2014 Constitution.
Other Attempts to Avoid the Application of the Law
In general, the Administrative Court’s ruling is one of a series of legal disputes concerning the scope of application of the Maximum Wage Law. In addition to the banks in which the State holds shares, some oil companies have raised similar claims before the Administrative Court demanding that the Law not be applied against them. Less than two weeks prior to the ruling in favour of the Housing and Development Bank and the Exports Development Bank of Egypt, the General Assembly of the Fatwa (Interpretation/Advice) and Legislation Department of the State Council ruled that employees of Telecom Egypt were not subject to the Maximum Wage Law. The reasoning set out affirmed that the Maximum Wage Law did not apply to joint stock companies organised under Company Law No 159/1981, even if the State did contribute to their share capital. In the following month, the same body issued another ruling stating that judges and prosecutors did not fall under the scope of the law, and moreover that they did not fall under the concept of the "State apparatus". In the last days of March, an employee of the stock exchange brought a case before the Administrative Court, requesting that the Maximum Wage Law not be applied to his employment.
Conclusion
The Court's ruling that the Maximum Wage Law will not apply to many of the banks was welcomed by many in the banking and financial sector, especially those banks that had suffered from some resignations, which may have possibly been partially avoided if the Law was issued after consultation with the relevant stakeholders. Thus, in addition to questions about the application of the Law, another important consideration is why both the Law and the Executive Regulations were issued hastily and without entering into consultations with the parties affected, and without prior submission to the State Council, actions which if taken could have prevented the current state of confusion. Finally, it is worth mentioning that the ruling comes out of the Administrative Court, which means that it could be appealed and brought before the Supreme Administrative Court.   [1] Presidential Decree-Law No. 63/2014 on the maximum entry for wage earners within State agencies, Official Gazette, Issue No. 26 (bis) (c), 2 July 2014. [2] Administrative Court ruling dated 17 February 2015, Judgment in the Appeal No. 14886 and No. 17579 of Judicial Year 69. [3] Prime Minister's Decree No. 1265/2014 enacting the Executive Regulations of the Maximum Wage Law, Official Gazette, Issue No. 29 (bis), 19 July 2014.
Since the issuance of the law introducing a maximum income for public sector employees and the entities denoted therein,[1]  the economic and legal spheres have witnessed a debate about the feasibility of the law’s application, and the direct and indirect effects it has resulted in, such as the departure of qualified employees from the public sector, and the possible weakening of the performance of the financial sector. The Maximum Wage Law, as it is more commonly referred to, set the maximum net income of a government employee at 35 times the minimum wage and in no case more than EGP 42,000 per month. This provision was applicable with respect to salaries paid by the state, public authorities, and public sector companies. Following the enactment of the Maximum Wage Law, many of the entities falling within its scope requested to be exempted from its provisions, or argued that the provisions of the law were inapplicable. On 17 February 2015, the Housing and Development Bank and the Export Development Bank of Egypt obtained a favourable judgment[2] from the Administrative Court, which ruled that the maximum wage provisions did not apply to their institutions.
The Administrative Court’s Ruling and its Implications
The Prime Minister issued a decree[3] enacting the Executive Regulations detailing the application of the Maximum Wage Law, the text of which reiterated the validity of the Law on public juridical persons, including employees of public sector banks which fall under the regulation of the Central Bank of Egypt and the banking and financial sector. The Administrative Court's ruling was reached on the basis that the maximum wage law was too narrow in its scope. By setting out exactly which entities it applied to, it resulted in a situation where it would be impossible to add new entities without amending the Law. The Law does not provide a process whereby its scope can be expanded. Furthermore, if the Executive Regulations attempted to detail such a process it would be deemed contrary to constitutional principles, as the Executive Regulations of the Law cannot enact new provisions, but can only detail what is decreed in the Law itself, according to the Court’s opinion.  The ruling confirmed that the employees of the Housing and Development Bank did not fall within any of the categories set forth in Article I of the maximum wage law, provided below:
  • Administrative employees of the State;
  • Employees in the local government units;
  • Employees of the entities that have special budgets;
  • Employees of public and national economic bodies, public utilities, and other public legal persons;
  • Employees whose employment is governed by special laws or special programs.
The Administrative Court’s ruling touched on many of the legal issues that have severe implications in both economic and legal terms, beyond the direct effect of the ruling on the appellants themselves, and perhaps even beyond the question of the validity of the Maximum Wage Law on the banks in general. Firstly, the Court defined the term "State apparatus", determining that the term applies only to those entities that fall within the scope of the executive authority of the State as specified by the Constitution. The Court also confirmed that the State’s possession of shares in both banks did not affect their legal status as both remained private juridical persons; this was confirmed by the decree establishing the banks through money from private funds, despite some State ownership. Secondly, the Court's ruling set out that the Prime Minister's decision infringes on the terms of reference of the General Assemblies and the Boards of Directors of the banks, which are responsible for managing the banks. Thirdly, in a move that may open the door to challenging the constitutionality of the Law, the Court ruled that the Prime Minister’s decision violated the fundamental right of employees to receive remuneration equal to their work, because the employee expects certain consideration for the work undertaken. The Court ruled that, "if the State retains income earned by employees without a legal basis to do so, this could be considered expropriation of the private money of the citizen”. It is notable that the Maximum Wage Law has in the past been subjected to accusations of unconstitutionality due to the fact that it was never submitted to the State Council for review, a measure which is provided for in Article 190 of the 2014 Constitution.
Other Attempts to Avoid the Application of the Law
In general, the Administrative Court’s ruling is one of a series of legal disputes concerning the scope of application of the Maximum Wage Law. In addition to the banks in which the State holds shares, some oil companies have raised similar claims before the Administrative Court demanding that the Law not be applied against them. Less than two weeks prior to the ruling in favour of the Housing and Development Bank and the Exports Development Bank of Egypt, the General Assembly of the Fatwa (Interpretation/Advice) and Legislation Department of the State Council ruled that employees of Telecom Egypt were not subject to the Maximum Wage Law. The reasoning set out affirmed that the Maximum Wage Law did not apply to joint stock companies organised under Company Law No 159/1981, even if the State did contribute to their share capital. In the following month, the same body issued another ruling stating that judges and prosecutors did not fall under the scope of the law, and moreover that they did not fall under the concept of the "State apparatus". In the last days of March, an employee of the stock exchange brought a case before the Administrative Court, requesting that the Maximum Wage Law not be applied to his employment.
Conclusion
The Court's ruling that the Maximum Wage Law will not apply to many of the banks was welcomed by many in the banking and financial sector, especially those banks that had suffered from some resignations, which may have possibly been partially avoided if the Law was issued after consultation with the relevant stakeholders. Thus, in addition to questions about the application of the Law, another important consideration is why both the Law and the Executive Regulations were issued hastily and without entering into consultations with the parties affected, and without prior submission to the State Council, actions which if taken could have prevented the current state of confusion. Finally, it is worth mentioning that the ruling comes out of the Administrative Court, which means that it could be appealed and brought before the Supreme Administrative Court.   [1] Presidential Decree-Law No. 63/2014 on the maximum entry for wage earners within State agencies, Official Gazette, Issue No. 26 (bis) (c), 2 July 2014. [2] Administrative Court ruling dated 17 February 2015, Judgment in the Appeal No. 14886 and No. 17579 of Judicial Year 69. [3] Prime Minister's Decree No. 1265/2014 enacting the Executive Regulations of the Maximum Wage Law, Official Gazette, Issue No. 29 (bis), 19 July 2014.