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Sunday, 29 December 2019

Cabinet passes amendments to restrict legal actions against Egypt’s SWF

CABINET WATCH- Cabinet passes amendments to restrict legal action against Egypt’s SWF: The Madbouly Cabinet greenlit on Thursday legislative amendments that would limit the scope of legal action that can be taken against the Sovereign Fund of Egypt (SFE), according to a statement out following cabinet’s weekly meeting. The changes would, if passed, shield contracts the fund has signed from third-party legal challenge. The fund cannot be challenged in a legal context for “any measures” it had undertaken “to achieve its goals.” The only exception allowed is in the case that the fund or the party that has signed a contract with the fund is implicated in criminal wrongdoing related to the contract. Presidential decrees to transfer public assets to the fund can also only be appealed by the entity which directly owns those assets or by the fund’s management team. The fund’s goals were broadly specified in a 2018 law as “contributing to sustainable economic development [in Egypt].”

Why is this necessary? Think for a moment about what certain grandstanding members of the bar have done with the power to file third-party lawsuits.

SFE now legally entitled to manage state assets, closing legal loophole: The wording of an article of the SFE law was changed to give the fund the legal right to manage state-owned assets. The article describing the fund’s activities now states that among its responsibilities is to “manage assets and holdings of state-owned entities and bodies, or [state-]affiliated bodies and companies” when called for. Also, the fund’s official name is now “the Egyptian sovereign wealth fund for investment and development.”

SFE-affiliated companies will also be receiving VAT refunds: Another amendment to the SFE law will provide value-added tax (VAT) refunds to any company that is more than 50% owned by the SWF and its sub-funds. The fund is already exempt from all types of taxes and other fees under the unamended law, but not its sub-funds and companies in which it holds stakes.

Draft clinical research law also approved: The council of ministers also gave a thumbs up to a draft law to regulate clinical research and protect human subjects. The House of Representatives had initially signed off on the law in May of last year, but President Abdel Fattah El Sisi refused to ratify the bill, citing a number of concerns. House Speaker Ali Abdel Aal then ordered the establishment of a sub-committee to review the law and address El Sisi’s concerns, including provisions that set harsh penalties for the transfer of human research samples outside of Egypt without government approval, which the president said could be problematic for future scientific exchange with other countries.

A handful of recent grants and funding agreements were ratified during Thursday’s meeting, which was the first since last week’s cabinet shakeup. The agreements include:

  • A EUR 1.02 bn funding package arranged by the Hungarian Export-Import Bank and Russia’s State Specialized Russian Export-Import Bank for Egypt’s purchase of 1,300 railcars from Russia’s Transmashholding;
  • A KWD 25 mn (c. USD 82.4 mn) facility from the Kuwait Fund for Arab Economic Development (KFAED) to fund the construction of a road that connects the tunnel running under the Suez Canal with Sharm El Sheikh; and
  • A CNY 300 mn (c. USD 42.9 mn) grant agreement signed with China on 23 November for unspecified projects.

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