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House of Representatives in Session

House of Representatives in Session
The election of the House of Representatives (Parliament) constitutes an important event due to the role it plays in complementing the constitutional institutions of the Egyptian State. The direct result of holding the House of Representative’s first session on 10 January 2016 is the transference of legislative power to Parliament. This comes after an exceptional situation, whereby two consecutive presidents exercised legislation for more than two and a half years, during which around 435 decree-laws have been promulgated, since the dissolution of the Shura Council on 6 July 2013 and until the end of 2015. In light of this, the below offers a discussion of the most important consequences of holding the Parliament’s session, in terms of its role in reviewing laws enacted by virtue of presidential decrees during the relevant period.
Background
The Constitutional Declaration of 8 July 2013 conferred upon the President the right to enact decrees having the force of law, without any significant limitations apart from “seeking the opinion of the Cabinet of Ministers”. Later, the Constitution enacted on 18 January 2014 acknowledged the President’s right to issue decree-laws when Parliament is not in session or is absent. The 2014 Constitution, however, added that such decree-laws shall be: discussed and approved within 15 days from the date the new House Convenes. If such decrees are not presented to the House and discussed, or if they are presented but not approved, their legality is revoked retroactively (…). Therefore, our interpretation of the situation established by both the Constitutional Declaration of 8 July and the 2014 Constitution is that the House of Representatives’ obligatory review covers only decree-laws enacted during the period from 18 January 2014 to 10 January 2016. During the said period, the two consecutive presidents of Egypt promulgated around 340 decree-laws, of which 213 were issued in 2014 and 127 during 2015. These decree-laws can be classified in several categories. Some of them – 165 decree-laws – are pertinent to the budget of the State and its institutions and divisions, and hence there is no reason to revoke them as they have produced complicated legal positions. Seven decree-laws established other transitional positions, e.g. those related to presidential and parliamentary elections and daylight saving time. Others – 18 decree-laws – established privileges to prospect petrol and natural gas. Furthermore, there are eight decree-laws on taxes, 11 related to social insurance and pensions, eight establishing regulations on agriculture, eight on the protection of environment and regulation of the energy sector, and 22 other decree-laws dealing with different economic activities and matters. Decree-laws that dealt with prisons, criminal procedure, criminal issues and combating terrorism numbered 13. Decree-laws that dealt with regulation of the Police and traffic totalled seven, while those dealing with the regulation of the Armed Forces and Security and Defence Councils totalled 19. There are also four decree-laws on issues related to certain occupations, four decree-laws on the regulation of universities, and 16 dealing with miscellaneous matters. Finally, it is worth mentioning that twenty laws took numbers in the legislative database of 2014 but were not promulgated in the Official Gazette, in addition to ten similar (absent or unpublished) decree-laws during 2015. In light of the abovementioned, below is a summary of the most important economic laws that shall be reviewed over the course of the next two weeks, as well as a brief description of some decree-laws which were addressed in former editions of Egypt Legal Update.
Contentious Laws in the Business Environment
According to Article 156 of the 2014 Constitution, the House of Representatives is bound to review during the first 15 days of its session approximately 340 decree-laws. Despite the practical impossibility of such a task, a number of specific decree-laws are of sufficient gravity to merit careful discussion in the course of the Parliament’s ordinary meetings. These laws are:
  • The New Investment Law (April 2015 ELU Edition)
Summary: Among other things, the Law granted the Investment Authority the power to issue commercial licenses for investors through the one-stop shop system in fields determined by the President. It also established a new system, independent of the Government Procurement Law, for tenders and bids related to state-owned land. The Law crated a number of incentives for investors and introduced a new system of appeals from decisions of the Investment Authority that is similar to the system followed by the Egyptian Financial Supervisory Authority. The Law also amended some stipulations concerning the nature and competencies of the Investment Authority. Main points of contention: Regarding the allocation of State-owned land, the Law established that in case of competition between companies over the same land, a “toss” or a “draw” shall be made. It also conferred upon the Investment Authority the right to dispose of state-owned land for free in during the first five years starting from 1 April 2015, in areas determined by the President, provided that the Cabinet of Minsters’ approval is secured. Such a new system may lead to corruption in the allocation of State-owned land, especially bearing in mind the lack of appropriate supervision of such operations. The Law also dealt with the Investment Authority in an entire chapter – Chapter VI. It granted the Authority wide regulatory powers and powers to impose administrative sanctions, in a manner that contradicts with the Authority’s nature and raison d'être – as an investment promotion vehicle. This new role is not in line with the Authority’s lack of sufficient divisions and expertise that could give effect to the new broad mandate. Moreover, the Law contained ambiguities with regards to a number of its stipulations on free zones, incorporation of companies, and rights of workers.
  • The Civil Service Law (April 2015 ELU Edition)
Summary: The Law amended the methods of appointment, evaluation and termination of civil servants, as well as the regime of wages, bonuses and vacations, and the provisions pertinent to discipline and control. Main points of contention: This Law has significant consequences that extend over tens of years, and directly affect the lives of millions of Egyptians and the society as a whole. It is therefore more appropriate for such law to be extensively discussed through the Parliament’s ordinary meetings, in a process that includes relevant stakeholders, in order to attain the highest possible social consensus. Although the lack of proper social dialogue is prevalent with regards to most laws that were issued during the relevant period, the importance of the Civil Service Law and its significant impact on society as a whole are reason to stress on the need to reject this particular law and revise it later after proper discussion.
  • Amendments to the Special Economic Zones Law (August 2015 ELU Edition)
Summary: The Law abolished certain aspects of the tax incentives provided to entities in special economic zones. It ensured that authorities responsible for establishing and developing special economic zones are equipped with necessary tools to do so efficiently, by conferring a higher degree of independence upon such authorities. Finally, the Law asserted the role of national security considerations in the decision-making process. Main points of contention: The Law introduced insufficient and superficial amendments to the former legal framework. It also failed to provide the appropriate legal environment for the development of the Suez Canal area.
  • Law Permitting the Sacking of Heads of Regulatory Authorities
Summary: The Law determines the cases where heads of regulatory and supervisory authorities and agencies may be sacked by the President. Main points of contention: In Articles 215-222, the 2014 Constitution established several rules regarding the above-mentioned authorities and agencies, in order to ensure their independence and provide the needed constitutional protection. It is worth noting that the mere recognition of the President’s right to sack the heads of such entities does not necessarily contradict the independence of such entities or breach the Constitution. However, the cases where the President could exercise its right to sack the heads of such entities were formulated in a broad, vague and open-ended manner. According to the Law, the President has the right to sack the head of a regulatory or supervisory authority or agency if: 1) s/he behaves in a way that threatens national security or safety, 2) if s/he acts in a way that leads to loss of confidence or respect, 3) if s/he fails to fulfil his/her duties in a way that is detrimental to the State or its institutions, or 4) if s/he loses one of the preconditions of appointment. This endangers the independence of such entities as it permits arbitrariness, and may hence constitute a breach of the 2014 Constitution.
Previously Covered Legislation
In addition to the above-mentioned laws, the same period witnessed the adoption of a plethora of other laws that have a significant impact on the economy. This includes a number of laws which we have discussed at length in previous issues of the Egypt Legal Update, such as:
  • Law 32/2014 regulating challenges of state contracts (September 2014 Issue)
  • Law 36/2014 which imposes stricter rules and encourages reporting of money laundering crimes (September 2014 Issue)
  • Law 44/2014 imposing additional income tax (September 2014 Issue)
  • Law 85/2014 imposing additional sales tax on some products, such as wine, beer and cigarettes (September 2014 Issue)
  • Law 63/2014 setting maximum income for state employees (September 2014 Issue)
  • Law 117/2014 amending the Real Estate Tax (October 2014 Issue)
  • Law 127/2014 regulating health insurance for farmers who are not covered by other forms of health insurance (October 2014 Issue)
  • Law 135/2014 amending the mandates of authorities responsible for regulating renewable energy related matters (December 2014 Issue)
  • Law 141/2014 regulating microfinance activities by defining such activities, setting applicable rules and standards and regulating the tax treatment of microfinancing (December 2014 Issue)
  • Law 198/2014 reorganizing the mineral resources sector and detailing the process for obtaining licenses for mines, quarries and saltpans (January 2015 Issue)
  • Law 201/2014 setting new provisions related to tax collection (January 2015 Issue)
  • Law 203/2014 stimulating the production of renewable energy (January 2015 Issue)
  • Law 5/2015 obliging several governmental entities to give preference to projects with a 40% local component when offering a tender, and providing some exemptions for small and micro-businesses when such local component quota is met (February 2015 Issue)
  • Law 23/2015 amending the Construction Law (May 2015 Issue)
  • Law 87/2015 reorganizing the electricity sector and related governmental agencies (August 2015 Issue)
  • Law 96/2015 imposing highly important amendments to the income tax law legislative structure (September 2015 Issue)
  • Law 97/2015 amending the Illicit Gains Law (September 2015 vol.2 Issue)
  • Law 102/2015 imposing more stringent penalties on acts damaging the environment, especially those damaging the Nile River and its waterways (October 2015 Issue)
  • Law 103/2015 regulating the disposal of waste into the Nile and associated waterways (October 2015 Issue)
  • Law 105/2015 reorganizing the Environmental Protection Fund and putting stricter rules on importing and using coal (November 2015 Issue)
  • Law 115/2015 introducing guarantees over movable assets (November 2015 Issue)
  • Law 127/2015 allowing public law juridical persons to establish joint-stock companies (January 2016)
  • The above laws and issues were also regulated by a significant number of executive decisions which were mostly covered in the ELU. The above list only details some of the important decree-laws which were issued by presidential authority.
Commentary
It is highly unlikely –bordering on the impossible - for Parliament to review in detail over 340 laws that were issued in the relevant period. It is therefore expected that most of these laws will be adopted without much change. It is to be noted that there is a dire need to review some specific laws that present significant problems in terms of constitutionality or in terms of their impact on public interest. For a sub-group of these laws, such as Law 32/2014 regulating challenges to state contracts, and Law 16/2015 amending the Criminal Code of Procedures, and Law 97/2015 amending the Illicit Gains Law, an outright rejection may present significant problems in the future because these laws would have already created considerable consequences. Their outright abolishment may create uncertainty as to how this impacts the legal situations that followed from their adoption. Parliament, however, may discuss these laws in detail in the future and amend them in a way that achieves more transparency by imposing more objective standards on issues such as reconciliation and settlement with regards to economic disputes between the state and investors. While some laws may better be left to future discussions in Parliament, there are other laws which Parliament may be better off rejecting outright, such as the New Investment Law, the Civil Service Law, the Special Economic Zones Law and the Law permitting the sacking of regulatory authorities.
The election of the House of Representatives (Parliament) constitutes an important event due to the role it plays in complementing the constitutional institutions of the Egyptian State. The direct result of holding the House of Representative’s first session on 10 January 2016 is the transference of legislative power to Parliament. This comes after an exceptional situation, whereby two consecutive presidents exercised legislation for more than two and a half years, during which around 435 decree-laws have been promulgated, since the dissolution of the Shura Council on 6 July 2013 and until the end of 2015. In light of this, the below offers a discussion of the most important consequences of holding the Parliament’s session, in terms of its role in reviewing laws enacted by virtue of presidential decrees during the relevant period.
Background
The Constitutional Declaration of 8 July 2013 conferred upon the President the right to enact decrees having the force of law, without any significant limitations apart from “seeking the opinion of the Cabinet of Ministers”. Later, the Constitution enacted on 18 January 2014 acknowledged the President’s right to issue decree-laws when Parliament is not in session or is absent. The 2014 Constitution, however, added that such decree-laws shall be: discussed and approved within 15 days from the date the new House Convenes. If such decrees are not presented to the House and discussed, or if they are presented but not approved, their legality is revoked retroactively (…). Therefore, our interpretation of the situation established by both the Constitutional Declaration of 8 July and the 2014 Constitution is that the House of Representatives’ obligatory review covers only decree-laws enacted during the period from 18 January 2014 to 10 January 2016. During the said period, the two consecutive presidents of Egypt promulgated around 340 decree-laws, of which 213 were issued in 2014 and 127 during 2015. These decree-laws can be classified in several categories. Some of them – 165 decree-laws – are pertinent to the budget of the State and its institutions and divisions, and hence there is no reason to revoke them as they have produced complicated legal positions. Seven decree-laws established other transitional positions, e.g. those related to presidential and parliamentary elections and daylight saving time. Others – 18 decree-laws – established privileges to prospect petrol and natural gas. Furthermore, there are eight decree-laws on taxes, 11 related to social insurance and pensions, eight establishing regulations on agriculture, eight on the protection of environment and regulation of the energy sector, and 22 other decree-laws dealing with different economic activities and matters. Decree-laws that dealt with prisons, criminal procedure, criminal issues and combating terrorism numbered 13. Decree-laws that dealt with regulation of the Police and traffic totalled seven, while those dealing with the regulation of the Armed Forces and Security and Defence Councils totalled 19. There are also four decree-laws on issues related to certain occupations, four decree-laws on the regulation of universities, and 16 dealing with miscellaneous matters. Finally, it is worth mentioning that twenty laws took numbers in the legislative database of 2014 but were not promulgated in the Official Gazette, in addition to ten similar (absent or unpublished) decree-laws during 2015. In light of the abovementioned, below is a summary of the most important economic laws that shall be reviewed over the course of the next two weeks, as well as a brief description of some decree-laws which were addressed in former editions of Egypt Legal Update.
Contentious Laws in the Business Environment
According to Article 156 of the 2014 Constitution, the House of Representatives is bound to review during the first 15 days of its session approximately 340 decree-laws. Despite the practical impossibility of such a task, a number of specific decree-laws are of sufficient gravity to merit careful discussion in the course of the Parliament’s ordinary meetings. These laws are:
  • The New Investment Law (April 2015 ELU Edition)
Summary: Among other things, the Law granted the Investment Authority the power to issue commercial licenses for investors through the one-stop shop system in fields determined by the President. It also established a new system, independent of the Government Procurement Law, for tenders and bids related to state-owned land. The Law crated a number of incentives for investors and introduced a new system of appeals from decisions of the Investment Authority that is similar to the system followed by the Egyptian Financial Supervisory Authority. The Law also amended some stipulations concerning the nature and competencies of the Investment Authority. Main points of contention: Regarding the allocation of State-owned land, the Law established that in case of competition between companies over the same land, a “toss” or a “draw” shall be made. It also conferred upon the Investment Authority the right to dispose of state-owned land for free in during the first five years starting from 1 April 2015, in areas determined by the President, provided that the Cabinet of Minsters’ approval is secured. Such a new system may lead to corruption in the allocation of State-owned land, especially bearing in mind the lack of appropriate supervision of such operations. The Law also dealt with the Investment Authority in an entire chapter – Chapter VI. It granted the Authority wide regulatory powers and powers to impose administrative sanctions, in a manner that contradicts with the Authority’s nature and raison d'être – as an investment promotion vehicle. This new role is not in line with the Authority’s lack of sufficient divisions and expertise that could give effect to the new broad mandate. Moreover, the Law contained ambiguities with regards to a number of its stipulations on free zones, incorporation of companies, and rights of workers.
  • The Civil Service Law (April 2015 ELU Edition)
Summary: The Law amended the methods of appointment, evaluation and termination of civil servants, as well as the regime of wages, bonuses and vacations, and the provisions pertinent to discipline and control. Main points of contention: This Law has significant consequences that extend over tens of years, and directly affect the lives of millions of Egyptians and the society as a whole. It is therefore more appropriate for such law to be extensively discussed through the Parliament’s ordinary meetings, in a process that includes relevant stakeholders, in order to attain the highest possible social consensus. Although the lack of proper social dialogue is prevalent with regards to most laws that were issued during the relevant period, the importance of the Civil Service Law and its significant impact on society as a whole are reason to stress on the need to reject this particular law and revise it later after proper discussion.
  • Amendments to the Special Economic Zones Law (August 2015 ELU Edition)
Summary: The Law abolished certain aspects of the tax incentives provided to entities in special economic zones. It ensured that authorities responsible for establishing and developing special economic zones are equipped with necessary tools to do so efficiently, by conferring a higher degree of independence upon such authorities. Finally, the Law asserted the role of national security considerations in the decision-making process. Main points of contention: The Law introduced insufficient and superficial amendments to the former legal framework. It also failed to provide the appropriate legal environment for the development of the Suez Canal area.
  • Law Permitting the Sacking of Heads of Regulatory Authorities
Summary: The Law determines the cases where heads of regulatory and supervisory authorities and agencies may be sacked by the President. Main points of contention: In Articles 215-222, the 2014 Constitution established several rules regarding the above-mentioned authorities and agencies, in order to ensure their independence and provide the needed constitutional protection. It is worth noting that the mere recognition of the President’s right to sack the heads of such entities does not necessarily contradict the independence of such entities or breach the Constitution. However, the cases where the President could exercise its right to sack the heads of such entities were formulated in a broad, vague and open-ended manner. According to the Law, the President has the right to sack the head of a regulatory or supervisory authority or agency if: 1) s/he behaves in a way that threatens national security or safety, 2) if s/he acts in a way that leads to loss of confidence or respect, 3) if s/he fails to fulfil his/her duties in a way that is detrimental to the State or its institutions, or 4) if s/he loses one of the preconditions of appointment. This endangers the independence of such entities as it permits arbitrariness, and may hence constitute a breach of the 2014 Constitution.
Previously Covered Legislation
In addition to the above-mentioned laws, the same period witnessed the adoption of a plethora of other laws that have a significant impact on the economy. This includes a number of laws which we have discussed at length in previous issues of the Egypt Legal Update, such as:
  • Law 32/2014 regulating challenges of state contracts (September 2014 Issue)
  • Law 36/2014 which imposes stricter rules and encourages reporting of money laundering crimes (September 2014 Issue)
  • Law 44/2014 imposing additional income tax (September 2014 Issue)
  • Law 85/2014 imposing additional sales tax on some products, such as wine, beer and cigarettes (September 2014 Issue)
  • Law 63/2014 setting maximum income for state employees (September 2014 Issue)
  • Law 117/2014 amending the Real Estate Tax (October 2014 Issue)
  • Law 127/2014 regulating health insurance for farmers who are not covered by other forms of health insurance (October 2014 Issue)
  • Law 135/2014 amending the mandates of authorities responsible for regulating renewable energy related matters (December 2014 Issue)
  • Law 141/2014 regulating microfinance activities by defining such activities, setting applicable rules and standards and regulating the tax treatment of microfinancing (December 2014 Issue)
  • Law 198/2014 reorganizing the mineral resources sector and detailing the process for obtaining licenses for mines, quarries and saltpans (January 2015 Issue)
  • Law 201/2014 setting new provisions related to tax collection (January 2015 Issue)
  • Law 203/2014 stimulating the production of renewable energy (January 2015 Issue)
  • Law 5/2015 obliging several governmental entities to give preference to projects with a 40% local component when offering a tender, and providing some exemptions for small and micro-businesses when such local component quota is met (February 2015 Issue)
  • Law 23/2015 amending the Construction Law (May 2015 Issue)
  • Law 87/2015 reorganizing the electricity sector and related governmental agencies (August 2015 Issue)
  • Law 96/2015 imposing highly important amendments to the income tax law legislative structure (September 2015 Issue)
  • Law 97/2015 amending the Illicit Gains Law (September 2015 vol.2 Issue)
  • Law 102/2015 imposing more stringent penalties on acts damaging the environment, especially those damaging the Nile River and its waterways (October 2015 Issue)
  • Law 103/2015 regulating the disposal of waste into the Nile and associated waterways (October 2015 Issue)
  • Law 105/2015 reorganizing the Environmental Protection Fund and putting stricter rules on importing and using coal (November 2015 Issue)
  • Law 115/2015 introducing guarantees over movable assets (November 2015 Issue)
  • Law 127/2015 allowing public law juridical persons to establish joint-stock companies (January 2016)
  • The above laws and issues were also regulated by a significant number of executive decisions which were mostly covered in the ELU. The above list only details some of the important decree-laws which were issued by presidential authority.
Commentary
It is highly unlikely –bordering on the impossible - for Parliament to review in detail over 340 laws that were issued in the relevant period. It is therefore expected that most of these laws will be adopted without much change. It is to be noted that there is a dire need to review some specific laws that present significant problems in terms of constitutionality or in terms of their impact on public interest. For a sub-group of these laws, such as Law 32/2014 regulating challenges to state contracts, and Law 16/2015 amending the Criminal Code of Procedures, and Law 97/2015 amending the Illicit Gains Law, an outright rejection may present significant problems in the future because these laws would have already created considerable consequences. Their outright abolishment may create uncertainty as to how this impacts the legal situations that followed from their adoption. Parliament, however, may discuss these laws in detail in the future and amend them in a way that achieves more transparency by imposing more objective standards on issues such as reconciliation and settlement with regards to economic disputes between the state and investors. While some laws may better be left to future discussions in Parliament, there are other laws which Parliament may be better off rejecting outright, such as the New Investment Law, the Civil Service Law, the Special Economic Zones Law and the Law permitting the sacking of regulatory authorities.