EGYPT: An Introduction to Dispute Resolution: Litigation

Women’s Empowerment 

2021 marked the beginning of a new era in the Egyptian courts. For the first time in history, 98 female judges were appointed to the Egyptian State Council Court (per Presidential Decree No 446/2021).

Since then, female judges have become a common presence in various Egyptian courts, hearing a wide range of cases. This represents a major step forward in terms of enhancing the legitimacy of the Egyptian courts.

Reforms to “Business-Oriented Courts” – aka Economic Courts

Economic courts, established in 2008 under Law No 120/2008, are specialised in handling matters of an economic and commercial nature. They have both commercial and criminal divisions and are equipped with expertise in over 20 laws. This includes laws related to the capital market, competition, telecommunications, electronic signatures, consumer protection, and cybercrimes.

The process is often expedited before economic courts compared to ordinary courts. Pre-trial is also available to accelerate the mediation of disputes.

Electronic filing 

Recently, economic courts recognised the e-filing of cases and the e-service of court notifications. This gradual transition to e-filing and e-service began in 2019 when a new provision – introduced to the law establishing economic courts (Law No 149/2019) – allowed the uploading of cases (endorsed by e-signature), the exchanging of notifications and submissions and the receipt of judgments via email. Further progress was made in 2020 when the Minister of Justice issued Decree No 8548/2020, which established an electronic registry. This registry compiles the email addresses of all public and private entities that opt to receive judicial services electronically from the economic courts. By late 2022, this electronic registry had become fully operational.

Efficiency of pre-trial judges 

Pre-trial judges, once perceived as mired in bureaucracy, have emerged as increasingly effective mediators, facilitating successful dispute resolution outside the courtroom.

Modernising the Egyptian Court System: Digitalisation, Remote Attendance, and Mobile Notary Service

Digitalisation 

The modernisation of the Egyptian court system represents a significant shift towards more accessible and efficient legal processes, driven by the adoption of digital technologies and innovative services. This transformation is evident in several key developments:

Remote attendance 

Initially introduced during the COVID-19 pandemic, remote attendance has been retained for use in criminal proceedings. This system allows for the virtual interrogation of the accused, who may be detained at a police station, by the judge, with the accused’s lawyer also present virtually.

Mobile notary services 

Launched in late 2021, mobile notary services offer clients a convenient and expedited way to issue proxies compared to traditional notary offices, albeit at a higher cost. These services come in two forms: fixed stations located at designated points and hotline stations reachable upon arrival at a specific location.

Key Takeaways: 2024 Update to Criminal Procedures, and 2023 Tax Reforms

Appeals introduced to felony trials 

Law No 1/2024 introduces a major change in the criminal justice system for felony convicts. Previously, such convicts were limited to appealing to the Egyptian Court of Cassation solely for the verification of the correct legal application in their cases. However, with the new law, they now have the opportunity to appeal first-instance sentences on the merits before resorting to the Court of Cassation. This expansion of the appeals process enhances the rights of the defence. However, it also raises important questions about the potential impact on the structure and operation of the criminal courts.

Tax reforms 

Law No 159/2023 removed the tax exemptions for economic and investment activities undertaken by the Egyptian government. This move is seen as a positive step towards levelling the playing field between public and private sectors in terms of tax liabilities. Similarly, Law No 30/2023 removed the income tax exemption for T-bills. Meanwhile, Law No 175/2023 amended income tax brackets, increasing the exemption threshold and introducing a maximum bracket of 27.5% for higher-income taxpayers.

Challenges for Clients, and How to Overcome Them

Practice shows that clients typically face three challenges: tax conflicts, EGP devaluation “shocks”, and enforcement obstacles.

Taxation 

In Egypt, taxpayers have recently faced challenges with “roughly estimated tax claims”, which, if left uncontested within the specified timeframes, become final tax assessments. This typically leads to litigation, where positive results are achieved but the process takes time. In lieu of litigation, there is the option to resort to tax dispute resolution committees (TDRCs). Occasionally, the Egyptian government opens portals for tax reconciliation with TDRCs for temporary periods. This procedure enables investors to negotiate a tax assessment with the government, which in turn negotiates expedited tax collection. Hence, a “win-win” situation is achieved.

The latest tax reconciliation portal was opened in 2020 (per Law No 173/2020), where taxpayers had to submit reconciliation requests by 31 December 2020. In practice, negotiations yielded outstanding results within accelerated timeframes; however, official confirmation of TDRC results by the Egyptian Ministry of Finance could take months).

Trends in international trade following EGP devaluation

The Egyptian Pound (EGP) experienced a dramatic devaluation after the Central Bank of Egypt announced the floatation of the Egyptian currency in 2016, and later in 2022. This caused the official value of EGP against the USD to drop from 0.07 to 0.03, with the black market EGP value hitting 0.016 against the USD.

As a result, international trade was adversely affected, leading to new challenges, for example with respect to vehicle imports and unpaid shipments.

Vehicle imports 

Now a major public issue, the importing of vehicles has been seriously impacted by the EGP devaluation. Vehicle prices typically increase from the date on which a customer order is placed until the delivery date. Consequently, resellers require customers to pay the price difference. In turn, customers typically demand that they receive their vehicle at the original price. To reduce this tension, the Consumer Protection Agency (CPA) recently issued Decision No 4/2022, granting customers an extra 18% of their down payment, in case of a refund. However, courts have adopted varying approaches to this issue. Therefore, guiding clients towards settlement negotiations with customers is often the recommended path for reaching mutually beneficial outcomes.

Unpaid shipments 

There is also a growing trend of foreign exporters facing issues with local importers defaulting on delivered shipments. Egyptian courts are increasingly familiar with these types of claims and are capable of delivering enforceable judgments against defaulting customers within months, which is a significant improvement given that litigation in Egypt typically takes at least a year. Proper case filing and documentation are crucial in these scenarios.

Enforcement obstacles 

Enforcing a judgment or arbitral award, whether obtained in Egypt or abroad, is a complex process. It involves navigating through various statutory procedures and limitations, and prompt action is essential to prevent the losing party from evading enforcement. This often requires collective actions like serving disclosure requests to all banks in Egypt regarding the losing party’s accounts and conducting thorough field investigations to identify their assets or businesses with third parties. Then comes the process of seizing the losing party’s property, and finally there is the collection of debt or the sale of property at public auction.

There is no specific timeframe for enforcement, but with experienced legal representation and procedural deputies specialised in enforcement, effective results can be achieved.