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Sunday, 23 December 2018

The upside to Egypt’s exposure to investment arbitration and affinity for settlements

The upside to Egypt’s exposure to investment arbitration and affinity for settlements: The volume of international arbitration cases brought against Egypt and settled out of court following the events of 2011 has earned Egypt a misplaced reputation that the government is on a losing streak, Youssef & Partners Managing Partner Karim Youssef says, according to the Global Arbitration Review (paywall). All countries face investor claims, but these cases are often seen in Egypt as proof of some kind of shortcoming, instead of being viewed as an indicator that the country is hosting significant investments and that it follows the correct legal procedures by relying on bilateral investment treaties, Youssef says. “The real issue is not whether a state is exposed to investment claims. The real issue is how the state reacts and how it manages those claims.” Egypt, Youssef says, has “aced” that test and — as a result — has seen its FDI levels recover to a great extent following the Arab Spring.

Settlements are not always an indicator the state is wrong or in a weak position: “The view that states like Egypt that settle investment disputes or adopt a policy in favour of settlement ‘know they are at fault and that’s why they settle,’ is false and simplistic, Youssef said. In fact, states that consider settlement show ‘a sophisticated … reaction to investor claims.’” This policy, Youssef says, indicates that the government is wary of the importance of earnings and maintaining investor confidence in the country and improving Egypt’s ratings “in terms of political risk and other economic indicators,” all of which are key to driving FDI inflows.

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