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Administrative Court Orders Disclos

Administrative Court Orders Disclosure of Government Settlements with Investors
The Administrative Court recently ordered the Cabinet of Ministers to disclose the details of settlement agreements related to state-investor contract disputes.[1] The Court’s decision (the “Decision” or “Judgment”) highlighted the importance of disclosing information and data related to those settlements in a way that facilitates the identification of the principles and reasons behind each settlement separately.
The Court’s Decision  
In 2012, an amendment to the Investment Guarantees and Incentives Law (the “Investment Law”) introduced the possibility of reconciling with investors involved in crimes related to public funds. The same amendment also stipulated the creation of the Committee for the Settlement of Investment Contracts Dispute (“CSICD”), tasked with settling disputes between the government and investors that arise as a result of contracts between both parties. Subsequent decisions by the Prime Minister decreed the formation of such committees, but did not specify whether the details of settlement agreements, which become binding after adoption by the Cabinet of Ministers, will be disclosed or not. The latest Decision by the Administrative Court, however, does precisely that. The Court opined that state contracts with investors are of extreme importance for society as a whole, and that the government is therefore obliged to disclose the particulars of those settlements. The Court’s Decision is based on the importance of economic and trade disputes that result from contracts between the state and investors, and on the necessity of fulfilling society’s “right to know” with respect to such agreements. The court determined that giving effect to the right to know in these circumstances is important in order to ensure transparency and public oversight. Moreover, the Court went as far as saying that disclosure and transparency in these cases would achieve better economic results, since they “guarantee that such settlements are made in the best way possible, combat corruption, and lead to the taking of better calculated decisions”. The Judgment is based in part on Article 68 of the 2014 Egyptian Constitution, which stipulates that “Information, data, statistics and official documents are the property of the People and the disclosure thereof from their various sources is a right guaranteed by the State for all citizens. The State is committed to provide and make them available to citizens in a transparent manner. The Law shall regulate the rules for obtaining them and terms for their availability and confidentiality”.
General Context
The latest Decision is the outcome of a lawsuit filed after the enactment of Law No. 4 of 2012,[2] which amended some provisions of the Investment Law and introduced the possibility of reconciliation with investors.[3] The amendment allowed for reconciliation with regards to crimes relating to public funds before a conviction has been reached, provided that illicitly gained funds (or equivalent value if actual return is not possible) are returned. In case a final judgment condemning the investor is reached, he or she is required to return the illicitly gained funds and to pay a monetary penalty. According to the amendment, the criminal case against the investor shall be dropped after reconciliation is reached. The same 2012 amendment added a further provision to the Investment Law stipulating the creation of the Committee for the Settlement of Investment Contracts Dispute. It is important here to distinguish between settlements (which the CSICD is in charge of), and reconciliation. Reconciliation occurs as a result of a crime related to public funds. The reconciliation process involves the investor and other prosecutorial and judicial parties. On the other hand, settlement occurs only through voluntary agreement between investor and state, and is a result of disputes related to the commercial contract between both parties – it is thus not related to any criminal activity.[4] In the months and years following the 2012 amendment to the Investment Law, several decisions were issued by the Prime Minister related to the formation and functions of the CSICD. In March 2015, the significant amendments introduced to a number of investment-related laws (commonly known as the New Investment Law) added several important provisions concerning the CSICD in the Investment Law itself. In June 2015, the Prime Minister issued a decision stipulating the formation of the CSICD and detailing its responsibilities (which we covered in the July 2015 Issue of the Egypt Legal Update). As detailed below, the Prime Minister’s decision guarantees the confidentiality of information provided by the settlement parties (investor and state). The settlement reached by the CSICD between the parties only becomes binding following approval by the Cabinet of Ministers.
Significance of the Judgment
The Judgment includes many important points for investors who enter into contracts with the state, including the following:
  1. The Court considered that any Egyptian citizen has a legal "standing" (that is, he holds the right or has a direct personal interest in the matter) that allows him to file a lawsuit demanding access to information related to investor-state dispute settlement agreements. The Court held that every Egyptian citizen is affected by conflicts arising from those contracts, given that the contracts are related to state property, and that the settlements relating thereto “affect the rights and capabilities of all Egyptians”. It is important here to compare the Court's expansive approach to investor-state contracts to that of the government’s. In April 2014, the government adopted a law that severely limited the concept of “standing” with regards to challenging state-investor contracts, limiting it only to the parties of the contract (i.e. the state and the investor), except if one of the parties is convicted of a crime related to public funds (through a final court order), or if the party challenging the relevant contract has a personal or property interest in it (e.g. if he/she is a shareholder).
  1. The Court’s Decision stipulated that until a law that regulates the constitutional “right to know” is adopted, the relevant authority (the Cabinet of Ministers in this case) must issue a decision regulating this right with respect to investor-state dispute settlement agreements. If the principle adopted by the Court is generalized (through other judgments for example), it would mean that all administrative entities may become obliged to issue decisions regulating the right to obtain information on matters under their jurisdiction.
  1. The Decision stressed on the importance of disclosing and sharing information related to settlements in a way that allows for the identification of the principles and standards that lead to the adoption of each settlement separately. This means that the government has a bigger obligation than merely disseminating general standards for settlements.
  1. Despite its emphasis on the importance of access to information, the Judgment underlined twice the need to maintain the confidentiality of the agreements’ details. The Court, however, failed to clarify the types and categories of information that need to be kept confidential (e.g. contract parties, type of dispute, type and amount of settlement). The Decision does not go into any detail on how to achieve a balance between the principles of information accessibility and confidentiality.
Confidentiality and Disclosure
The Decision follows the issuance of the Prime Minister’s decision in June 2015 forming the CSICD. The Prime Minister’s decision stipulated that "the information disclosed by the parties of the contract to CSICD or one of its members or the members of its technical secretariat during the settlement process are deemed confidential and may not be disclosed to others". The same core principle can be found in earlier decisions stipulating the formation and functions of the CSICD. This indicates a government’s preference to maintain secrecy and confidentiality of the reconciliation and settlement agreements. Such confidentiality is generally one of the reasons (in addition to avoiding punishment) that drives investors to try to reach amicable settlements instead of seeking judicial remedies, as undisclosed settlements will avoid them the reputational damages associated with public lawsuits. On the other hand, the recent Administrative Court Judgment focuses on the importance of transparency with regards to such settlements. On the surface, there appears to be no contradiction between the judgment and decisions by the Cabinet of Ministers. The Cabinet of Minister’s decisions stress on the secrecy of information provided by the parties to a settlement, while the decision itself only orders the disclosure of the details of the final settlement agreements that are adopted by the Cabinet of Ministers. While both are different documents, in practice the final settlement agreement may include at least some of the information provided by the settlement parties. The Judgment itself highlighted twice the need to maintain the confidentiality of information related to the settlement, without explaining how to achieve the balance between these two contradictory trends. Unfortunately, this ambiguity creates an uncertain legal environment that needs to be addressed.
Conclusion
Allowing reconciliation and settlement with investors is one of the steps taken by the government in recent years to deal with the effects and consequences of complex legal situations resulting from many judicial decisions. In particular, these steps attempt to address the effects of decisions by the Administrative Court judgments that invalidated a number of contracts of the privatization program initiated by the government in the early nineties. In April 2014, the government took another step in the same direction after the enactment of the law regulating appeals of state contracts, which limits appeals of such contracts to the state and the investor only, with a couple of exceptions. Furthermore, amendments to the Illicit Gains Law in August 2015 introduced the possibility of reconciliation with relevant public officials through returning illicitly gained funds in exchange for dismissal of the criminal case. Similar amendments to the Criminal Code of Procedures also point towards the government’s emphasis on confidentiality and reconciliation. It is clear that the government is trying to restore the investors’ confidence in the contracts concluded with the state through these legislative steps, with the aim of attracting more investments. The government also seeks to avoid the risk of international arbitration proceedings by protecting the investors’ interests and by adding more stability to contracts with the state. On the other hand, the adoption of several laws that tend to diminish or limit judicial oversight – whether through reconciliation with investors or public officials, or by restricting the parties that are allowed to appeal state contracts – threatens to erode supervision and accountability for transgressions related to some contracts. Thus, the importance of the recent administrative court Judgment lies in the fact that it is made within a context of push and pull between those who prefer confidentiality and settlement and those who prefer transparency and disclosure. It would have therefore been more beneficial for the court to explicitly address how it intends to achieve a balance between the two competing principles. A few days after the judgment was published, a further decision by the Cabinet of Ministers was issued, stipulating a new formation and revising some of the functions of the CSICD.[5] Once more, the decision stressed on the secrecy of information provided by the settlement parties, and made no reference to the decision of the Administrative Court. This is further evidence that there needs to be some more clarity in this area. It is worth mentioning that the Administrative Court Judgment is the judgment of the Court of first degree – which means that it is subject to appeal before the Supreme Administrative Court. [1] Administrative Judicial Court, the First Circuit, Case No. 59439 for the year 67, Judgment issued on 17 November 2015, and circulated on 18 December 2015. [2] The Supreme Council of Armed Forces' Decree-Law No. 4/2012 amending some provisions of the Investment Guarantees and Incentives Law promulgated by Law No. 8/1997, Official Gazette, Issue No. 52 bis (e), 3 January 2012. [3] It is worth mentioning that the majority of the illicitly gained funds crimes (the crimes set forth in Chapter IV of Volume II of the Penal Code) deal primarily with acts committed by public officials and not by investors. The most important exception is Article 116 of the Penal Code which imposes a prison sentence on "whoever intentionally violates the implementation of all or some of the obligations imposed on him by a contract, or transfer, or supply, or concession, or public works contracts concluded between him and one of the parties set forth in Article 119 or with one of the joint-stock companies, which result in a serious harm, or in case he or she commit any fraud in the implementation of that contract”. [4] Note that an amendment to the Code of Criminal Procedures in 2015 added a provision that deals with reconciliation in crimes related to public funds as well; see Presidential Decree-Law No. 16/2015 amending the Code of Criminal Procedures Law 150/1950, Official Gazette, Issue No. 11 (cont.), 12 March 2015. [5] Prime Minister’s Decree No. 3412/2015 forming the CSICD, Official Gazette, Issue No. 53, 31 December 2015.
The Administrative Court recently ordered the Cabinet of Ministers to disclose the details of settlement agreements related to state-investor contract disputes.[1] The Court’s decision (the “Decision” or “Judgment”) highlighted the importance of disclosing information and data related to those settlements in a way that facilitates the identification of the principles and reasons behind each settlement separately.
The Court’s Decision  
In 2012, an amendment to the Investment Guarantees and Incentives Law (the “Investment Law”) introduced the possibility of reconciling with investors involved in crimes related to public funds. The same amendment also stipulated the creation of the Committee for the Settlement of Investment Contracts Dispute (“CSICD”), tasked with settling disputes between the government and investors that arise as a result of contracts between both parties. Subsequent decisions by the Prime Minister decreed the formation of such committees, but did not specify whether the details of settlement agreements, which become binding after adoption by the Cabinet of Ministers, will be disclosed or not. The latest Decision by the Administrative Court, however, does precisely that. The Court opined that state contracts with investors are of extreme importance for society as a whole, and that the government is therefore obliged to disclose the particulars of those settlements. The Court’s Decision is based on the importance of economic and trade disputes that result from contracts between the state and investors, and on the necessity of fulfilling society’s “right to know” with respect to such agreements. The court determined that giving effect to the right to know in these circumstances is important in order to ensure transparency and public oversight. Moreover, the Court went as far as saying that disclosure and transparency in these cases would achieve better economic results, since they “guarantee that such settlements are made in the best way possible, combat corruption, and lead to the taking of better calculated decisions”. The Judgment is based in part on Article 68 of the 2014 Egyptian Constitution, which stipulates that “Information, data, statistics and official documents are the property of the People and the disclosure thereof from their various sources is a right guaranteed by the State for all citizens. The State is committed to provide and make them available to citizens in a transparent manner. The Law shall regulate the rules for obtaining them and terms for their availability and confidentiality”.
General Context
The latest Decision is the outcome of a lawsuit filed after the enactment of Law No. 4 of 2012,[2] which amended some provisions of the Investment Law and introduced the possibility of reconciliation with investors.[3] The amendment allowed for reconciliation with regards to crimes relating to public funds before a conviction has been reached, provided that illicitly gained funds (or equivalent value if actual return is not possible) are returned. In case a final judgment condemning the investor is reached, he or she is required to return the illicitly gained funds and to pay a monetary penalty. According to the amendment, the criminal case against the investor shall be dropped after reconciliation is reached. The same 2012 amendment added a further provision to the Investment Law stipulating the creation of the Committee for the Settlement of Investment Contracts Dispute. It is important here to distinguish between settlements (which the CSICD is in charge of), and reconciliation. Reconciliation occurs as a result of a crime related to public funds. The reconciliation process involves the investor and other prosecutorial and judicial parties. On the other hand, settlement occurs only through voluntary agreement between investor and state, and is a result of disputes related to the commercial contract between both parties – it is thus not related to any criminal activity.[4] In the months and years following the 2012 amendment to the Investment Law, several decisions were issued by the Prime Minister related to the formation and functions of the CSICD. In March 2015, the significant amendments introduced to a number of investment-related laws (commonly known as the New Investment Law) added several important provisions concerning the CSICD in the Investment Law itself. In June 2015, the Prime Minister issued a decision stipulating the formation of the CSICD and detailing its responsibilities (which we covered in the July 2015 Issue of the Egypt Legal Update). As detailed below, the Prime Minister’s decision guarantees the confidentiality of information provided by the settlement parties (investor and state). The settlement reached by the CSICD between the parties only becomes binding following approval by the Cabinet of Ministers.
Significance of the Judgment
The Judgment includes many important points for investors who enter into contracts with the state, including the following:
  1. The Court considered that any Egyptian citizen has a legal "standing" (that is, he holds the right or has a direct personal interest in the matter) that allows him to file a lawsuit demanding access to information related to investor-state dispute settlement agreements. The Court held that every Egyptian citizen is affected by conflicts arising from those contracts, given that the contracts are related to state property, and that the settlements relating thereto “affect the rights and capabilities of all Egyptians”. It is important here to compare the Court's expansive approach to investor-state contracts to that of the government’s. In April 2014, the government adopted a law that severely limited the concept of “standing” with regards to challenging state-investor contracts, limiting it only to the parties of the contract (i.e. the state and the investor), except if one of the parties is convicted of a crime related to public funds (through a final court order), or if the party challenging the relevant contract has a personal or property interest in it (e.g. if he/she is a shareholder).
  1. The Court’s Decision stipulated that until a law that regulates the constitutional “right to know” is adopted, the relevant authority (the Cabinet of Ministers in this case) must issue a decision regulating this right with respect to investor-state dispute settlement agreements. If the principle adopted by the Court is generalized (through other judgments for example), it would mean that all administrative entities may become obliged to issue decisions regulating the right to obtain information on matters under their jurisdiction.
  1. The Decision stressed on the importance of disclosing and sharing information related to settlements in a way that allows for the identification of the principles and standards that lead to the adoption of each settlement separately. This means that the government has a bigger obligation than merely disseminating general standards for settlements.
  1. Despite its emphasis on the importance of access to information, the Judgment underlined twice the need to maintain the confidentiality of the agreements’ details. The Court, however, failed to clarify the types and categories of information that need to be kept confidential (e.g. contract parties, type of dispute, type and amount of settlement). The Decision does not go into any detail on how to achieve a balance between the principles of information accessibility and confidentiality.
Confidentiality and Disclosure
The Decision follows the issuance of the Prime Minister’s decision in June 2015 forming the CSICD. The Prime Minister’s decision stipulated that "the information disclosed by the parties of the contract to CSICD or one of its members or the members of its technical secretariat during the settlement process are deemed confidential and may not be disclosed to others". The same core principle can be found in earlier decisions stipulating the formation and functions of the CSICD. This indicates a government’s preference to maintain secrecy and confidentiality of the reconciliation and settlement agreements. Such confidentiality is generally one of the reasons (in addition to avoiding punishment) that drives investors to try to reach amicable settlements instead of seeking judicial remedies, as undisclosed settlements will avoid them the reputational damages associated with public lawsuits. On the other hand, the recent Administrative Court Judgment focuses on the importance of transparency with regards to such settlements. On the surface, there appears to be no contradiction between the judgment and decisions by the Cabinet of Ministers. The Cabinet of Minister’s decisions stress on the secrecy of information provided by the parties to a settlement, while the decision itself only orders the disclosure of the details of the final settlement agreements that are adopted by the Cabinet of Ministers. While both are different documents, in practice the final settlement agreement may include at least some of the information provided by the settlement parties. The Judgment itself highlighted twice the need to maintain the confidentiality of information related to the settlement, without explaining how to achieve the balance between these two contradictory trends. Unfortunately, this ambiguity creates an uncertain legal environment that needs to be addressed.
Conclusion
Allowing reconciliation and settlement with investors is one of the steps taken by the government in recent years to deal with the effects and consequences of complex legal situations resulting from many judicial decisions. In particular, these steps attempt to address the effects of decisions by the Administrative Court judgments that invalidated a number of contracts of the privatization program initiated by the government in the early nineties. In April 2014, the government took another step in the same direction after the enactment of the law regulating appeals of state contracts, which limits appeals of such contracts to the state and the investor only, with a couple of exceptions. Furthermore, amendments to the Illicit Gains Law in August 2015 introduced the possibility of reconciliation with relevant public officials through returning illicitly gained funds in exchange for dismissal of the criminal case. Similar amendments to the Criminal Code of Procedures also point towards the government’s emphasis on confidentiality and reconciliation. It is clear that the government is trying to restore the investors’ confidence in the contracts concluded with the state through these legislative steps, with the aim of attracting more investments. The government also seeks to avoid the risk of international arbitration proceedings by protecting the investors’ interests and by adding more stability to contracts with the state. On the other hand, the adoption of several laws that tend to diminish or limit judicial oversight – whether through reconciliation with investors or public officials, or by restricting the parties that are allowed to appeal state contracts – threatens to erode supervision and accountability for transgressions related to some contracts. Thus, the importance of the recent administrative court Judgment lies in the fact that it is made within a context of push and pull between those who prefer confidentiality and settlement and those who prefer transparency and disclosure. It would have therefore been more beneficial for the court to explicitly address how it intends to achieve a balance between the two competing principles. A few days after the judgment was published, a further decision by the Cabinet of Ministers was issued, stipulating a new formation and revising some of the functions of the CSICD.[5] Once more, the decision stressed on the secrecy of information provided by the settlement parties, and made no reference to the decision of the Administrative Court. This is further evidence that there needs to be some more clarity in this area. It is worth mentioning that the Administrative Court Judgment is the judgment of the Court of first degree – which means that it is subject to appeal before the Supreme Administrative Court. [1] Administrative Judicial Court, the First Circuit, Case No. 59439 for the year 67, Judgment issued on 17 November 2015, and circulated on 18 December 2015. [2] The Supreme Council of Armed Forces' Decree-Law No. 4/2012 amending some provisions of the Investment Guarantees and Incentives Law promulgated by Law No. 8/1997, Official Gazette, Issue No. 52 bis (e), 3 January 2012. [3] It is worth mentioning that the majority of the illicitly gained funds crimes (the crimes set forth in Chapter IV of Volume II of the Penal Code) deal primarily with acts committed by public officials and not by investors. The most important exception is Article 116 of the Penal Code which imposes a prison sentence on "whoever intentionally violates the implementation of all or some of the obligations imposed on him by a contract, or transfer, or supply, or concession, or public works contracts concluded between him and one of the parties set forth in Article 119 or with one of the joint-stock companies, which result in a serious harm, or in case he or she commit any fraud in the implementation of that contract”. [4] Note that an amendment to the Code of Criminal Procedures in 2015 added a provision that deals with reconciliation in crimes related to public funds as well; see Presidential Decree-Law No. 16/2015 amending the Code of Criminal Procedures Law 150/1950, Official Gazette, Issue No. 11 (cont.), 12 March 2015. [5] Prime Minister’s Decree No. 3412/2015 forming the CSICD, Official Gazette, Issue No. 53, 31 December 2015.