KluwerArbitration
Document information
Publication
Arbitral Awards of the Cairo
Regional Centre for
International Commercial
Arbitration IV
Jurisdiction
Egypt
Organization
Cairo Regional Center For
International Commercial
Arbitration
Case date
7 March 2006
Case number
CRCICA Case No. 382/2004
Parties
Claimant, Malicorp Ltd.
(UK)
Respondent, The
Government of the Arab
Republic of Egypt and
others
P 2 alleged to be the competent court. The Supreme Constitutional Court, upon
Bibliographic reference
'Malicorp Ltd. (UK) v. The
Government of the Arab
Republic of Egypt and
others, Final Award, CRCICA
Case No. 382/2004, 7 March
2006', in Mohie-Eldin Alam-
Eldin (ed), Arbitral Awards
of the Cairo Regional
Centre for International
Commercial Arbitration IV,
(© Kluwer Law
International; Kluwer Law
International 2014) pp. 1 -
72
Malicorp Ltd. (UK) v. The Government of the Arab
Republic of Egypt and others, Final Award, CRCICA Case
No. 382/2004, 7 March 2006
Case No. 382/2004
March 7, 2006
Airport Construction
Final Award
(with developments through 2013)
Spanish chairman
Arbitrator from Lebanon
Arbitrator from Egypt
Procedural law: Egyptian law on arbitration
Substantive law: Egyptian administrative law
Language: English
Summary
This case is one of the longest-running cases within the CRCICA. It began in 2004, has
continued through 2013 and is expected to be pursued for years to come. The
developments in this case evolve around the challenges against this award and are not
yet finished. The case was initiated in respect of the establishment of an Airport in Ras
Sudr (in Sinai on the East bank of the Suez Canal). The Claimant Malicorp is a British
company, and the Respondent is the Ministry of Civil Aviation and other State entities.
The award has allotted around US$14 million as damages to the Claimant, but some time
before the award was rendered, the proceedings had been suspended by the Court of
Administrative Judiciary which invalidated the arbitration clause embedded in the
Contract between the parties. This BOT (build, operate and transfer) project has not been
implemented because of mistake committed by the Claimant company, coupled with
corruption allegations against the Egyptian Government, which led, accordingly, to penal
prosecutions against employees of both parties. The award has been challenged before
the Court of Administrative Judiciary in the State Council, and before the Cairo Court of
Appeal. This resulted in a conflict of jurisdiction between these two courts, where each
request
from Malicorp, settled this conflict in favor of the Cairo Court of Appeal. The Cairo Court of
Appeal resumed its consideration of the challenge and, on December 5, 2012, ordered the
dismissal of the said challenge on the basis that the dissenting arbitrator had withdrawn
from the Arbitral Tribunal and that, according to the Egyptian law, a truncated tribunal
can never give a valid award. Malicorp challenged this judgment before the Court of
Cassation and is still pending. While these events unfolded, the British company brought
a new case before the ICSID, claiming damages, but the Centre dismissed the case for
reasons of a mistake committed by Malicorp. An ad hoc committee has been formed in
ICSID upon request from Malicorp but it found no reason to accept this challenge.
Held in the Award of March 7, 2006
1. The Arbitral Tribunal finds that although the Arab Republic of Egypt was a party to the
arbitration agreement in the Concession Contract and named as Respondent in the
Request for Arbitration by the Claimant, the Arab Republic of Egypt (specifically the
Ministers of Transport and Civil Aviation), the Egyptian Holding Company for Aviation, and
the Egyptian Airport Company have all by their conduct agreed to participate in this
arbitration and accepted the participation of all the others. All have been treated on an
equal footing, and each have been accorded an equal and full opportunity to present
their cases within the meaning of Article 26 of Arbitration Law No. 27 of 1994 and Article 15
of the CRCICA Rules. Accordingly, the Arbitral Tribunal has jurisdiction to determine the
dispute between the Claimant on the one side, and, on the other, the Arab Republic of
Egypt (specifically the Ministers of Transport and Civil Aviation), the Egyptian Holding
Company for Aviation, and the Egyptian Airport Company.
2. Jurisdiction; consent to Arbitrate: The Respondents challenge the jurisdiction of this
Arbitral Tribunal on the basis of the second paragraph of Article 1 of Arbitration Law No.
27 of 1994. This paragraph requires an arbitration agreement in an administrative
contract to “have the approval of the concerned minister or the official assuming his
power, with respect to public juridical persons.” This submission requires the Arbitral
Tribunal to consider, first, whether the Concession Contract is an administrative contract
in Egyptian law and, if so, to examine whether the arbitration agreement had the
 appropriate approval required by Article 1 of Arbitration Law No. 27 of 1994.
3. The legal Nature of the Concession Contract. In Egypt, there is a fundamental
distinction between private law and administrative law. According to Article 172 of the
Egyptian Constitution, the Council of State is an independent judicial organization
competent in administrative disputes. The Council of State has built up a theory of
administrative contracts distinct from civil contracts. The nature of administrative
contracts was considered (in the context of arbitration) by a General Meeting of the
Council of State whose legal opinion presented three differences between administrative
contracts and civil contracts (see Dr. Mohie Eldin I. Alam Eldin, Arbitral Awards of the Cairo
P 3 Regional Centre for International Commercial Arbitration, Case No. 2 – Commentary):
(1) “administrative contracts always include a party who represents public authorities;
(2) such contracts are not related to ordinary transactions such as sale or lease among
private law persons, but they deal with the creation, development or maintenance
of public utilities; and
(3) such contracts contain exceptional clauses not found in civil contracts.”
The concession contract is, by accord parties, an administrative contract, but the parties
disagree on its particular characteristics as an administrative contract and the legal
consequences. The Respondents submit that the Concession Contract is a typical
administrative contract. The Claimant submits that “[t]he Egyptian doctrine and case law
consider the BOT, contracts as international administrative contracts and the
international arbitration doctrine considers it as a contract of particular nature[ (1) ]and
therefore the regulations of an ordinary administrative contract do not apply.”
4. The determination of the juridical nature of the Concession Contract must begin by
considering the terms and conditions of the Concession Contract itself. The Preamble to
the Concession Contract states that the Concession Contract is “based on the investment
Laws No. 3 and 8 both of the year 1997.” The Preamble to the Heads of Agreement also
refers to the same laws. Law No. 3 of 1997 relates to granting the concession of a public
utility for constructing, managing, and exploiting airports and landing lands, and contains
specific provisions relating to the airport concessions “without restriction by the
provisions of law No. 139 for 1947 for the concessions of the public utilities and Law No. 61
for 1958 concerning granting concession related to the investment of natural resources
and the public utilities …” Law No. 8 of 1997 relates to investment guarantees and
incentives and their executive regulations, and includes, inter alia, detailed regulations
relating to the incorporation and capital of investment companies, which are considered
in further detail below. Both the Preamble to the Concession Contract and the preamble
to the Heads of Agreement relate the construction of Ras Sudr airport to a plan at a
national level to build new airports to take advantage of the development opportunities
offered by air transport. It was also conceived as part of a larger project potentially
including “hotels, tourism, shopping, centers, industrial agriculture etc. in order to
achieve the necessary demand for passengers needed by the airport for economic
liability.”
5. The Arbitral Tribunal is satisfied that the Arab Republic of Egypt committed an
essential mistake in entering into the Concession Contract in that it believed that the
registered and paid-up capital of the Claimant was £100 million. Further, it is satisfied
that the Claimant could have, and should have, detected this mistake, and that the
mistake is of such gravity that, had it not been committed, Egypt would not have entered
into the Concession Contract. Articles 120 and 121 of the Civil Code provide for essential
mistake. These Articles read as follows:
“Article
120. A party to a contract may demand the avoidance of the contract if he
committed an essential mistake, if the other party committed the same
mistake or had knowledge thereof, or could have easily detected the
mistake.
P4
“Article
121. A mistake is an essential mistake when its gravity is of such a degree that
if it had not been committed the party who was mistaken, would not
have concluded the contract.
The mistake is deemed to be essential more particularly:
(a) When it has a bearing on the quality of the thing, which the parties
have considered essential or which must be deemed essential,
taking into consideration the circumstances surrounding the
contract and the good faith that should prevail in business
relationships.
(b) When it has a bearing on the identity or on one of the qualities of
the person with whom the contract is entered into, if this identity or
this quality was the principal factor in the conclusion of the
contract.”
6. The responsibility for this mistake rests primarily with the Claimant for the ambiguous
information it provided in circumstances when it should have realized the importance of
the issue of paid up capital to the Egyptian officials. However, there is also some
 responsibility of the Egyptian officials in failing to clarify the importance of this issue or
to make independent inquiries. The Arbitral Tribunal assesses the respective
responsibility of the parties as ninety percent with the Claimant and ten percent with the
Respondent. The Arbitral Tribunal therefore declares the Concession Contract is void for
mistake. The consequences are described in Articles 138–144 of the Egyptian Civil Code
and particularly Article 142, which reads as follows:
“Article 142. When a contract is void or annulled, the parties are reinstated in
their position prior to the contract. If such reinstatement is impossible,
damages equivalent to the loss may be awarded.”
7. The Arbitral Tribunal notes that the Concession Contract contains express provisions for
compensation in the event of cancellation of the Contract by the Republic of Egypt.
However, as the Arbitral Tribunal has found that the Concession Contract is void for
mistake it considers that the damages should be calculated in accordance with Article
142 of the Civil Code on the basis of damages in lieu of reinstatement.

Facts [In Brief]

This arbitration arises from a contract between the Claimant and the Respondents
entitled “Concession Contract or the building operation and transfer of … Airport in
accordance with the B.O.T. system” (hereafter the “Concession Contract” or the
“Contract”). The English text of the Contract was undated, although it was alleged by the
Claimant and not denied by the Respondents that the Contract was signed on November
2, 2000.
Two articles of the Concession Contract provided for arbitration of disputes in the
following terms:
“If a dispute of any kind whatsoever arises between the Concession on the one
hand and the Concessionaire on the other hand in concession without arising
P5 out of the Concession Contract including, but not limited to, any dispute as
to any opinion, determination certification or valuation of the Expert or the
Expert [sic] then either Party may send a notice to the other Party giving
details of the dispute and an amicable settlement thereof.
If the dispute is not resolved amicably within 35 (thirty-five) Days of the notice
referred to in Clause … or such shorter period as the Parties may agree, the
Concession and Concessionaire shall meet and endeavor to resolve the
dispute. The joint and written decision of such chief executive officers of the
Parties shall be final and binding upon the Parties but if they do not meet or
are unable to agree within 35 Days of the reference to them then the matter
shall be referred to arbitration pursuant to Clause …
Any such dispute which cannot be settled amicably pursuant to Clause … and
… of Concession Contract within 70 (seventy) Days after receipt by one Party of
the notice referred to in Clause … or within such shorter period as the Parties
may agree, shall be settled by International Commercial Arbitration Rules in
force on the date of this Concession Contract for a decision which shall be and
binding [sic], such arbitration shall be conducted in Cairo Regional Arbitration
Centre and arbitration law is the Egyptian Law.
Arbitration shall be conducted in the English language before a panel of three
arbitrators. Each of the Parties shall select one arbitrator within 30 (thirty)
Days after commencement of the arbitration and, within such 30 (thirty) Days
period each Party shall notify the other Party in writing of the identity of the
arbitrator so should either Party not appoint its arbitrator in this period, the
other Party may notify the appointing authority and request that the
appointing authority appoint such arbitrator. The arbitrators selected in terms
of this clause shall select in concession with both Parties. The third arbitrator
… will act as Chair of the Arbitral panel. If the arbitrators do not agree on the
selection of the chairperson of The Arbitral panel within 30 (thirty) Days from
the date of appointment of the second of the two arbitrators, then upon
written request of either Party, the president of The Arbitral panel shall be
selected by the appointing authority. The third arbitrator shall not be national
of either Parties, nor of the domicile of any Shareholder holding more than
10% (ten percent) of the Concessionaire.
Notwithstanding any contrary provisions in this Concession Contract, any Party
shall have the right to approach any court having appropriate jurisdiction for
urgent or interim relief.
Any Party shall be entitled to apply for any arbitration award pursuant to this
Concession Contract to be made an order of the Court.
Obligations during Arbitration: Pending any attempt at amicable settlement
or any award of an arbitral panel, the Concessionaire shall, and shall cause the
Contractor and Operator to, continue to perform its obligations hereunder
unless otherwise instructed in writing by the Concessor. Pending any such
settlement or award, the Concessor shall continue to perform its obligations
under the Concession Contract.”
P6
The Claimant has been incorporated pursuant to English law in 1997. Its share capital on
incorporation was “1000 Pounds divided into 1000 shares each of one Pound” and its
object was stated to “… to carry on business as a general commercial company.” Its paid-
up capital on incorporation was £2. The changes to its capital, and the confusion between
its authorized and paid-up capital are a central issue in this case. The Egyptian Civil
Aviation Authority announced the tender for a new Airport, and made available tender
documents. Claimant submitted an offer in response to the tender. The tender was signed
on behalf of the Claimant by the “General Director.” It was accompanied by a first
demand guarantee “in the amount of … by … Bank in Cairo for the construction of an
International Airport …,” and addressed to the General Civil Aviation Authority. It is not
clear what documentation accompanied the bid, and in particular whether the Claimant
presented an extract from the Companies Register in England and Wales in order to
confirm its objects and capital.
The Claimant was invited to appear before a committee presided by the President of the
Civil Aviation Sector. The letter of invitation set out a list of six matters which the
Claimant was expected to clarify. The first question related to the details of the
Claimant's issued and licensed capital.
The Respondents state that the Claimant produced at this meeting an extract from the
register of Companies House, Cardiff, Limited, dated … The object of Malicorp Limited
was stated in this extract to be “to build, develop and operate the Ras Sudr Airport and
to develop associated sites for industrial and tourist purposes.” In respect of capital this
extract stated: “The Company's share capital is UK£100 million divided into one million
shares of UK£100 each.”
The Chairman of the Egyptian Civil Aviation Authority advised the Claimant that its offer
had been selected for the construction of the Airport, adding that “all the previous
procedure of the brochure of terms, the Authority's specification, your offer and all
Minutes in relation to the operation shall be considered an integral part of the contract
which shall be concluded in this respect.”
A preliminary contract or heads of agreement was signed between the parties. This Heads
of Agreement consisted of eight articles, and anticipated further investigation and
negotiation between the parties of professional, technical, legal, and scheduling matters
leading to a detailed contract.
The Concession Contract was executed by the Government of the Republic of Egypt
represented by the Egyptian Civil Aviation Authority as Concessor, and Malicorp Limited
and Ras Sudr International Airport Ltd (a company to be formed) as Concessionaire. The
Concession Contract included the following terms:
(a) Single Purpose Concessionaire: “The Concessionaire shall be a single purpose
corporation with the sole purpose of implementing the Project except as the
Concessor may otherwise agree in writing and shall not assume any liability other
than that in connection with the project. The Memorandum of Association of the
Concessionaire shall include a provision to such effect.”
(b) Delivery of the Site: “The Concessor shall deliver the Airport Site to the
Concessionaire free from any delaying marks in 2 months from the Effective Date
and after handing over the Performance Bond to the Concessor.”
P7
(c) Effective Date is defined to mean “the date of signing the final BOT Contract.”
(d) Representations and Warranties by the Concessionaire:
“[T]he Concessionaire hereby represents and warrants to the Concessor
as follows:
The Concessionaire is a company duly incorporated under the laws of
United Kingdom with all requisite corporate power to carry out its
obligations under this Concession Contract and to execute and deliver
this Concession Contract, and acknowledges that except as the Concessor
may otherwise agree in writing, its sole purpose is to implement the
Project. A time and complete copy of the documents constituting the
Concessionaire's Certificate of Incorporation, Memorandum of
Association and Articles of Association and associated documents
certified by the duly authorized representative of the Concessionaire,
and in effect on the date hereof.
In executing the Concession Contract, Malicorp Ltd. is acting for and on
behalf of the Concessionaire. This Concession Contract has been duly
authorized by all necessary corporate action, is legally valid and binding
upon it, and does not require approval in any form in order to give full
effect thereto, provided, however, that this Concession Contract is
subject to the fulfillment of all the conditions set forth in this Contract.
The Concessionaire is not prevented or restrained legally, commercially,
or otherwise from entering into and undertaking the provisions of this
Concession Contact in accordance with its terms. All representations,
warranties, Information and data of the Concessionaire contained in any
written statement (including financial statements), certificate, exhibit, or
 schedule in connection with this Concession Contract, shall be true and
correct as of the date hereof. The Concessionaire should form a Company
in Egypt according to the Law of Egypt, for the purposes of Construction.
Management and Operation of the Airport. Twenty-five percent of the
Board Members will be appointed by the Concessor. The Concessionaire
will make available to the Concessor all Incorporation documents no
more than 90 days from the date of signing the Contract. Provided it shall
furnish the Concessor with what proves its application for the
Incorporation of this company. The Concessionaire agrees to increase the
Bank Guarantee to the amount of two million Egyptian Pounds during the
first two months from the date of signing the final Contract and before
taking possession of the allocated site. The Concessor will release the
Concessionaire's Bank Guarantee when a proof of Construction work is in
place and it has approved release thereof. Two years prior to the end of
the Concession period, the Concessionaire shall submit a Bank
Guarantee for handing over the Airport in an amount equivalent to 5
percent of the entire project value before the Concessor receives the
P8 Airport. It shall be valid for 6 months after the handover of the Airport
in accordance with Clause 3.8.”

Representations and Warranties by the Concessor

The Concessor has the necessary power and authority to grant the Concession to the
Concessionaire and to grant the Annexed Site Freehold to the Concessionaire. This
Concession Contract has been duly authorized by all necessary action which is legally
valid and binding upon the Concessor. The Concessor is not prevented legally,
commercially, or otherwise from entering into and undertaking the provisions of this
Concession Contract in accordance with its terms.
The approval of the Council of State: Insofar as this Concession Contract places
obligations on the State and/or any Relevant Authority, such obligations shall be backed
by the full faith and credit of the Egyptian Council of State. By signing this Concession
Contract, the State indicates its acceptance of its rights and obligations as herein set out
and as a principal obligation guarantees the performance by the Concessor of all its
obligations as herein recorded. Both parties shall abide by the revision of the Council of
State of this contract. The application was submitted in Egypt for the establishment of a
company pursuant to Law No. 8 of 1997 (on investment guarantees and incentives) “to
build, manage, utilize and transfer Ras Sudr International Airport.” Its three shareholders
included Malicorp Ltd., which was going to hold 9,800,00 of the 10,000,000 shares valued
at E£10,000,000. The same document stated that the “Sources of Financing” will be
“Capital E£100,000,000, Loans E£150,000,000” giving a total of E£250,000,000. The
Claimant issued another bank guarantee for one million Egyptian pounds, thereby
bringing the total amount guaranteed to two million Egyptian pounds. Claimant renewed
its application for the incorporation of an Egyptian joint stock company according to the
provision of Law No. 8 of 1997 for establishing and managing Ras Sudr International
Airport. The capital in this application was stated to be E£20,000,000 of which the
Claimant was to contribute E£19,600,000 and two individuals (one of British nationality
and the other Egyptian) were to contribute E£200,000 each. This application also stated
that the “investment costs” of the company in its commercial activity would be
E£250,000,000, and that the funding Sources would be “100,000,000 capital” and
“150,000,000 Loans and facilities.” The Claimant wrote to the Egyptian Authority for Civil
Aviation advising that the documents relating to the establishment of the Egyptian
company according to Law No. 8 of 1997 had been submitted and “we are expecting the
approval of the Investment Authority to finalize the approval”; that “as soon as the
Investment Authority's approval was received, the Egyptian Company would issue a final
letter of guarantee and withdraw the initial two letters of guarantee in your possession”;
that nominations for the Board of the Egyptian Company are requested; and that “[w]e
declare that we stand ready, after the Investment Authority's approval on the formation
of the Egyptian Company in compliance with the contract … to proceed with the
formalities of receiving the land in preparation of determining the final airport site for
which we hope that we can put the first stone in August 2001 as the starting of the
construction works.”
Around this time, the Egyptian Civil Aviation Authority was restructured and replaced by
P 9 other entities of powers. Article 1 of Presidential Decree No. 72 of 2001 established the
Egyptian Holding Company for Aviation and two subsidiaries, including the Egyptian
Airports Company. Article 2 of the Presidential Decree provided that: “All duties and
personal rights of both the sector of airports and air utilities and the engineering sector
of the Egyptian Civil Aviation Authority shall be vested in the holding company [i.e. the
Egyptian Holding Company for Aviation] and the two subsidiaries, and all the obligations
of the aforementioned sectors shall be devolved upon the holding company and the two
subsidiaries…” The Claimant wrote to the Egyptian Holding Company for Civil Aviation
requesting the “approval to commence procedures for delivering the airport site.” The
letter went on to advise that the Claimant was “still following the procedures of
registration of the Egyptian Company, [but that] we cannot overcome the routine and the
procedures followed by the Investment Authority…” The response from the Egyptian
Holding Company for Civil Aviation was that the delivery procedures for the airport site
could not commence “unless the Concessionaire Company is publicized and notified with
the registration and publication documents, according to the applicable regulations and
 law…”
The Egyptian Holding Company for Aviation first expressed serious concern in writing
regarding the Claimant's “seriousness,” and the truthfulness of information provided to
the Egyptian authorities. The letter concluded: “Therefore your company must submit to
us the following: Authenticated contracts about the Company's situation which must be
adopted and legalized in the United Kingdom and adopted by the Ministry of Commerce
and the Chamber of companies in London then adopted from the commercial attaché in
the Embassy of the Arab Republic of Egypt in London. The partnership contract between
your honorable company and the Norwegian Company NERC and this shall be to ensure
its verity.”
There followed correspondence as the Claimant sought to expedite the formation of the
Egyptian Company and the transfer of the Airport site, writing to the General Authority for
Investment and Free Zone (GAFI), to the Egyptian Holding Company for Aviation, the
Minister of Transportation, the Prime Minister, and to the President of the Republic. The
Claimant wrote to the Egyptian Holding Company for Civil Aviation seeking extra time to
obtain exceptional approvals of the Prime Minister and the Minister of Transport. It also
wrote to the Minister of Transportation.
A Special Commission was chaired by the Minister of Transport and was composed of
senior Egyptian officials and legal counsel in the aviation and tourism sectors, as well as
representatives of National Security and the Investment and Free Zones Authority. There
was extensive discussion on the background and problems with the Concession Contract
regarding discussing the reasons that prevented the formation of the company. Colonel
…, delegate from the National Security, replied that there was difference between the
names in the company that ratified the Contract and the names of the founders of the
Egyptian company for the building and operation of the airport. Mr.…, legal consultant of
the General Investment Authority said that he approves the erection of an airport in the
Ras Sudr area and that the Authority contents on the formation of any investment
company. However, the southern and northern areas of Sinai have special statutes and
require the approval of the National Security for the founders of companies in that area.
And, that the formation of the company was submitted to the National Security but it was
refused. Therefore, the rest of the formalities were stopped, and he added that the
P 10 names mentioned in the formation of the Egyptian company differ completely from those
mentioned in the formation of the mother company and based on that it was rejected by
the National Security. Pilot …, Chairman of the Egyptian Holding Company for Aviation,
reviewed the beginning of the project when the Authority for the Development of Tourism
requested that it was in need for an airport in the Ras Sudr region. The Egyptian General
Authority for Civil Aviation declared the creation, operation, exploitation and transfer of
Ras Sudr Airport under BOT system according to the list of conditions and specifications
prepared by the Authority, several companies submitted in this respect. A commission
from the authority was constituted to select the Best and most suitable offers. Two
companies were chosen from a technical point of view. Malicorp was selected for being
the best and most suitable offer, technically and financially, whereby it will accomplish
the financial and technical result contemplated by the government in this respect. Based
on the above, the commission adopted the resolutions:
(1) To notify to the Egyptian Holding Company for Aviation and Malicorp a letter from
GAFI about the non-approval on the formation of such company due to the rejection
of the security on the formation.
(2) The procedure of rescinding the contract and the cashing of the letter of guarantee
will take place.
(3) To be proposed to face the legal consequences resulting from the cancellation and
the seizing of the letter of guarantee.
The bank guarantees provided by or on behalf of the Claimant in respect of the
Concession Contract were, confiscated and the State Security Organism of Investigation
formally advised the Public Authority for Investment that it did not approve the Claimant
for the establishment of Ras Sudr Airport. No reasons were given by the Security
Organization for this decision. The Egyptian Holding Company for Aviation gave notice to
Malicorp of the cancellation of the Concession Contract by letter dated August 12, 2001.
The Claimant stated that the Egyptian Holding Company for Aviation was a private law
entity without the power to unilaterally terminate the Concession Contract and rebutted
the statements regarding the presentation of plans, the submission of dubious
documents, and the alleged presentation of a false document concerning the names of
the partners in the British company. The Claimant stated that the delay in forming the
Egyptian Company lay with the Investment Authority of the host country, and not with the
Claimant, and it denied any lack of seriousness. It added further reasons why there was
no right to cancel the Concession Contract and concluded as follows: “We inform that the
issuance of a decision to annul the Contract is null and does not concern the Company
nor affect it, it is an internal matter that concerns you solely and does not affect the
Company concerning the Contract ratified by the Government which is currently in force
until now, and by considering the decision null and void according to the contract and
law, request the Government to deliver the airport site in order to start the execution in
the interest of the Company and of the Government.” Claimant commenced this
arbitration for:
“(1) Expenses in the amount of US$ …
P 11
(2) The value of liquidated LGs amounting to US$ …
(3) Loss of profits in the amount of US$ …
(4) Damages in the amount of 1 (one) million USD to compensate the
Claimant for the moral damage.
(5) Interest on the amounts claimed at the legal rate.
(6) All costs caused by the present arbitration proceedings and any
consequences thereof, including but not limited to the Cairo Regional
Center's administrative expenses, fees and expenses of arbitrators,
experts, witnesses, attorneys, in amount to be determined later on.”
Egypt requests that this Tribunal:
“(i) Rule as a preliminary question that it does not have jurisdiction to rule
on the claims made by Malicorp, and if this Tribunal finds that it has
jurisdiction Egypt respectfully requests that this Tribunal:
(ii) rule that the claims made by Malicorp are entirely not admissible in
opposition to the Egyptian Minister of Transportation and the Egyptian
Minister of Civil Aviation, and if this Tribunal finds that the claims made
by Malicorp are admissible as regards both of the aforementioned
Egyptian Ministers requests that this Tribunal;
(iii) reject the claims made by Malicorp in its entirely; and
(iv) in all events order Malicorp to reimburse all of the costs that Egypt has
incurred in connection with these proceedings.”
Egypt also requested the termination and discontinuance of this arbitration pursuant to
Article 46 of arbitration Law No. 27 of 1994. The Rejoinder of the Egyptian Holding
Company for Aviation and the Egyptian Airport Company requested that the Arbitral
Tribunal rule:
“Main Principal Request: 1. The Third & Fourth Respondents adhere to and hold
the substantial pleas pertaining to the Public Order that have been raised by
them in their Memorandum of Defense pertaining to the non-jurisdiction and
nullity in addition to all the pleas mentioned therein.
2. After determination of all the substantial pleas pertaining to the Public
Order we pray The Arbitral Tribunal to dismiss the Claimant's case entirely i.e.
to reject the claim of indemnity for the absence of its elements of fault and
damage and the causal relationship between them and to obligate the
Claimant with all the expenses and fees of the present arbitration.
Auxiliary Request of Respondents: 1. To suspend The Arbitral case in
accordance with Article (46) of the Arbitration Law No. 27/94 until the
determination of the Felonies case No. 327/2004 (inclusive Public Funds). As
the Tribunal will keep the matter under review. 2. In case of non-responding to
the previous request by the Arbitral Tribunal, then the Third and Fourth
Respondents pray the permission to start and proceed upon the forgery
challenging of Mallicorp's commercial register and other documents that had
P 12 been submitted by the Claimant according to Article No. (49) and
subsequent articles of the Egyptian Evidence Law.”
The Minister of Civil Aviation complained to the Public Prosecutor of fraudulent practices
by the Claimant and officials of the Egyptian Authority for Civil Aviation. The Public
Prosecutor submitted an Order of Referral to the Court of Felonies in Cairo, including a
supporting Memorandum of Facts produced by the Public Prosecutor. The Order of
Referral alleges various illegal and fraudulent acts on the part of persons connected with
the Claimant as well as certain Egyptian officials involved in the review of the Claimant's
bid. The accusation included various Egyptian officials, as well as “partners” in Malicorp,
accused of colluding with the accused Egyptian officials in the execution of their illegal
acts, and of cooperating with an unknown person in order to forge Malicorp's commercial
register No. … “through simulating and changing by agreeing with an unknown person to
prepare and forge the abovementioned document … and thus the unknown person has
edited in the forged document that the capital of the company is one hundred million
sterling pounds, and this was untrue.” A further accusation against three persons existed
for “attempting to turn a forged business concern to be correct” by attending before the
committee of evaluation of the bid on “… on behalf of Malicorp Limited …, and alleging
that the capital of the said company amounts to one hundred million pounds sterling,
and supported it by submitting the forged commercial register …”

Reasons
The Arbitral Tribunal for convenience classifies the arguments as procedural,
jurisdictional, and substantive in nature, and deals with them in this order. It recognizes
that this classification is for convenience only, and many of the arguments are
interrelated or have implications not confined to procedure, jurisdiction, or the merits
alone. The first party to the concession contract is described as “The Arab Republic of
Egypt, represented by the Egyptian Civil Aviation Authority.”
 The Arbitral Tribunal finds that, although the Arab Republic of Egypt was a party to the
arbitration agreement in the Concession Contract and named as Respondent in the
Request for Arbitration, the Claimant, the Arab Republic of Egypt (specifically the
Ministers of Transport and Civil Aviation), the Egyptian Holding Company for Aviation and
the Egyptian Airport Company have all by their conduct agreed to participate in this
arbitration and accepted the participation of all the others. All have been treated on an
equal footing, and each has been accorded an equal and full opportunity to present its
case within the meaning of Article 26 of Arbitration Law No. 27 of 1994 and Article 15 of the
CRCICA Rules. Accordingly, the Arbitral Tribunal has jurisdiction to determine the dispute
between the Claimant on the one side, and, on the other, the Arab Republic of Egypt
(specifically the Ministers of Transport and Civil Aviation), the Egyptian Holding Company
for Aviation and the Egyptian Airport Company.
This conclusion relates solely to the jurisdiction of the Arbitral Tribunal over parties that
have voluntarily appeared and fully participated in the arbitration. Their implicit
consent to arbitrate involves no admission of any substantive liability, which was
vigorously denied. Accordingly, substantive liability under the Concession Contract must
P 13 be separately examined, in light of the arguments of all counsel and the applicable
principles of Egyptian law including Article 145 of the Egyptian Civil Code that confines
the effects of a contract “to the parties and to their universal successors in title, unless it
follows from the contract, from the nature of the transaction or from a provision of the
law, that the effects of the contract do not pass to the universal successor in title of a
party.”
The Arab Republic of Egypt made a submission based upon Article 45 of Arbitration Law
No. 27 of 1994 which reads as follows:
“The Arbitral Tribunal shall issue the award finally ending the entire dispute
within the time frame agreed by the parties. In the absence of such
agreement, the award must be rendered within twelve months from the date
of commencement of the Arbitral proceedings. In all cases, the Arbitral
Tribunal may extend the deadline, provided the period of extension shall not
exceed six months, unless the parties agree to a longer period. If the Arbitral
award is not rendered within the period referred to in the preceding
paragraph, either of the two parties to arbitration may request the president
of the court referred to in Article (9) of this law, to issue an order setting a new
deadline or terminating the Arbitral proceedings. In such case either party
may raise his claims to the court of original jurisdiction.”
A contract (including an arbitration agreement) may be entered into by an agent and be
binding on its principal. However, an arbitration arising from such a contract is usually
commenced against either the principal as the only party or (if an arbitration agreement
can be established with the agent as well as the principal) against both principal and
agent as two separate parties. In the present case the Claimant adopted neither of these
possibilities, but has pretended to commence the arbitration against only one party (the
Arab Republic of Egypt) through four representatives.[ (2) ]

Jurisdiction/Consent to Arbitrate
The Respondents challenged the jurisdiction of this Arbitral Tribunal on the basis of the
second paragraph of Article 1 of Arbitration Law No. 27 of 1994. This paragraph requires an
arbitration agreement in an administrative contract to “have the approval of the
concerned minister or the official assuming his power, with respect to public juridical
persons.”
In Egypt, there is a fundamental division between private law and administrative law.
According to Article 172 of the Egyptian Constitution, the Council of State is an
independent judicial organization competent in administrative disputes. The Council of
State has built up a theory of administrative contracts distinct from civil contracts. The
nature of administrative Contracts was considered (in the context of arbitration) by a
general Meeting of the Council of State whose legal opinion presented three differences
between administrative contracts and civil contracts (see Dr. Mohie-Eldin I. Alam-Eldin:
“Arbitral Awards of the Cairo Regional Centre for International Commercial Arbitration,
P 14 Case No. 2 – Commentary”):

“(1) [A]dministrative contracts always include a party who represents public

authorities;
(2) such contracts are not related to ordinary transactions such as sale or
lease among private law persons, but they deal with the creation,
development or maintenance of public utilities; and
(3) such contracts contain exceptional clauses not found in civil contracts.”
The concession contract is, by accord parties, an administrative contract, but they
disagree on its particular characteristics as an administrative contract and their legal
consequences. The Respondents submit that the Concession Contract is a typical
administrative contract. The Claimant submits that “The Egyptian doctrine and case law
consider the BOT contracts as international administrative contracts and the
international arbitration doctrine considers it as a contract of particular nature[ (3) ] and
therefore the regulation: of an ordinary administrative contract do not apply.”
 The determination of the juridical nature of the Concession Contract must begin by
considering the terms and conditions of the Concession Contract itself. The Preamble to
the Concession Contract states that the Concession Contract is “based on the investment
Laws No. 3 and 8, both of the year 1997.” The Preamble to the Heads of Agreement also
refers to the same laws. Law No. 3 of 1997 relates to granting the concession of a Public
utility for constructing managing, and exploiting airports and landing lands and contains
specific provisions relating to the airport concessions “without restriction by the
provisions of law No. 139 for 1947 for the concessions of the public utilities and Law No. 61
for 1958 concerning granting concession related to the investment of natural resources
P 15 and the public utilities…”[ (4) ] Law No. 8 of 1997 relates to investment guarantees and
incentives and their executive regulations, and includes, inter alia, detailed regulations
relating to the incorporation and capital of investment companies. Both the preamble to
the Concession Contract and the Preamble to the Heads of Agreement relate the
construction of Ras-Sudr airport to a plan at a national Level to build new airports to
take advantage of the development opportunities offered by air transport. It was also
conceived as part of a project potentially including, hotels, tourism, shopping centers, in
order to achieve the necessary demand for passengers needed by the airport for
economic liability.
The Concession Contract is for a period of forty-one years. Article 24 of the Concession
P 16 Contract provided that “[b]oth Parties shall abide by the revision of the Council of
State of this Contract.” This requirement accords with Article 5 of Law No. 3 of 1997 that
provides that “[a] decree of the Council of Ministers shall be issued upon the proposal of
the competent Minister, awarding the concession as well as determining or amending its
conditions or provisions.” Article 21.1 states that it is “deemed to be a civil law contract
and governed by the civil law of the Republic of Egypt.” Turning to the Egyptian Civil Code
1948, Article 668 provides: “A concession of a public utility service is a contract whose
object is the management of a public utility service of an economic nature. Such a
contract is concluded between the administrative authority in charge of the organization
of such service and a private person or company to whom the exploitation of the service
is entrusted for a fixed period.” The proper description of the contract is a legal question
(and therefore not within the exclusive power of the parties to designate, so that Article
21.1 of the Concession Contract cannot be considered determinative of the nature of the
Concession Contract). Accordingly, the Arbitral Tribunal concludes that the Concession
Contract is a public concession within the meaning of Article 668 of the Civil Code, and
also an administrative contract in Egyptian law. The factors demonstrating its
administrative nature include:
(i) One party is the Egyptian state, represented by a public authority (namely the
Egyptian Civil Aviation Authority which is described as a public authority in
Presidential decree No. 2931 of 1971;
(ii) The contract is a concession contract relating to a public utility (namely airports
and landing grounds which are described as a public utility concession, for
example, in law No. 3 of 1997);
(iii) The Concession Contract raises issues of state sovereignty and national policy in
respect of air traffic, safety, tourism, and infrastructure development;
(iv) The Concession Contract is subject to a specific regulatory framework (law No. 3 of
1997);
(v) The Concession Contract contains exceptional clauses not found in civil contracts
(most importantly the requirement of approval by the council of State and the
granting in Article 2.6.5 of “all rights, privileges and warranties as stated in Law 8 of
the year 1997.”

The International Character of the Concession Contract

The Claimant has submitted that the Concession Contract should be described as an
international administrative contract. The Claimant has not identified any particular
rules or exemptions applicable to the Concession Contract as a matter of domestic
Egyptian administrative law by reason of its international nature. Counsel for the
Egyptian Holding Company for Aviation and the Egyptian Airports Company submitted
that the international element in an administrative contract is irrelevant where there is
an explicit choice of law, as it exists in the Egyptian law in this case. This Concession
Contract is properly described as an international contract. The Claimant is an English
company; the contract relates to an international airport; and the Claimant must ensure
that the Airport complies with the international obligations imposed by the Warsaw
P 17 Convention. The arbitration agreement within the Concession Contract is international.
The importance of the characterization of the Concession Contract as international does
not lie within the domestic Egyptian legal order. Its international nature means that
some aspects of the Contract, most significantly the arbitration agreement, are part of
international legal relations and therefore may be subject to rules outside the domestic
Egyptian legal order. In the present case, the international nature of the Concession
Contract and arbitration agreement has consequences for the rules applicable to certain
issues raised in this arbitration.

Jurisdiction
The Respondents challenge the jurisdiction of this Arbitral Tribunal on the basis that,
being an administrative contract, the arbitration agreement did not “have the approval
 of the concerned minister or the official assuring his powers with respect to public
juridical person” as required by the second paragraph of Article 1 of Arbitration Law No.
27 of 1994 (as amended). The Claimant submits that the arbitration agreement in the
Concession Contract complies with the second paragraph of Article 1 of Arbitration Law
No. 27 of 1994. The Claimant states that, pursuant to Presidential Decree No. 2931 of 1971,
the Egyptian Civil Aviation Authority was a public juridical person, with its own juridical
personality and patrimony, and represented by the Claimant. Further, the Chairman of
the Egyptian Civil Aviation Authority was the official who in fact signed the Concession
Contract. The Claimant also states that the Minister of Transportation clearly approved
the Concession Contract, even if he did not sign it. Egypt does not dispute that the
Minister of Transportation approved the Concession Contract, but states that Article 1,
second paragraph, requires the approval of the arbitration agreement, which as a matter
of Egyptian law is separate from the Concession Contract, and the arbitration agreement
has not been approved by the Minister. Presidential decree No. 2931 of 1971 created the
Egyptian Civil Aviation Authority. Article 7 states that the Egyptian Civil Aviation Authority
is managed by its Chairman in accordance with “the terms of this decree and under the
supervision of the State Minister for Civil Aviation matters.” Article 7 goes on to state that
“[t]he Chairman represents the Authority in its relations with other Authorities, third
parties and the judiciary.” The Chairman in fact signed the Concession Contract, and
every page of it is initialed by its signatories, including the page containing the
arbitration agreement.
The Arbitral Tribunal notes that Dr. Soleman El-Tamaoui in Administrative Law: A
Comparative Study at pages 335–336 includes the Egyptian Civil Aviation Authority in the
category of Egyptian public authorities. Accordingly, the Arbitral Tribunal is satisfied that
the Chairman of the Egyptian Civil Aviation Authority was an official empowered under
Egyptian law to enter into an arbitration agreement with respect to an administrative
contract. It follows that the arbitration agreement is binding and effective, and the
Arbitral Tribunal has jurisdiction over this dispute. The Arbitral Tribunal is also satisfied
that the Minister of Transportation knew and approved of this arbitration agreement.
As a final point, the Arbitral Tribunal notes that, while Article 1, second paragraph, is
clearly part of Egyptian domestic law and arbitration, its status in an international
commercial arbitration with a foreign investor is less certain. There is ample indication in
P 18 this case that the Arab Republic of Egypt has sought to establish a secure regime for
the protection of foreign investment in Egypt (for example, the protections in Laws No. 3
and 8 of 1997 and the UK–Egypt BIT and Arbitration Law No. 27 of 1994), so that in normal
circumstances this right to arbitrate should not be lost on the basis that a senior official
lacked the appropriate authority. Such a result would be contrary to good faith (pacta
sunt servanda). Indeed, the Cairo Court of Appeal in its judgment of March 3, 1997 has
recognized the importance of good faith in this context. The Arbitral Tribunal refers to the
well-recognized principle in public international law that a State is bound by the acts of
an official vested with government authority when he acts in his official capacity, even if
he exceeds his authority or contravenes instructions (Article 7 of the International Law
Commission's Articles on State Responsibility) and of the principle of transnational public
policy which should not be invoked by a State party or public after having signed an
arbitration undertaking its own domestic incapacity.

The Administrative Judiciary Court Decision

The Administrative Judiciary Court decision found that, under Egyptian law, this Court
shared jurisdiction with an arbitration Tribunal to rule on a challenge to the validity of
arbitration agreement (“While [Article 22 of Arbitration Law No. 27 of 1994] conferred upon
the Arbitral Tribunal the authority to rule on such challenge and pleas, it does not and
should not deprive the judge of the authority to rule. If the Legislator wanted to limit the
competence to The Arbitral panels, it would have been easy for it to add the expression
‘exclusively’”). It went on to find that there was no Ministerial approval of the arbitration
agreement in this case, as required by Article 1, second paragraph, of Arbitration Law No.
27 of 1994, and therefore the arbitration agreement was null and void. Article 22.1 of
arbitration Law No. 27 of 1994 reads as follows:
“(1) The Arbitral Tribunal is empowered to rule on motions related to its non-
competence, including motions based on the absence of an arbitral clause, its
expiry or nullity, or its failure to include the subject of the dispute.”
Article 22(1) reflects the internationally recognized principle of Kompetenz-Kompetenz in
arbitration. In accordance with Article 22(1) and this principle, this Arbitral Tribunal, for
the reasons set out above, finds the arbitration agreement in the Concession Contract
binding and effective on the Arab Republic of Egypt. This Tribunal also considers that it
has the sole and exclusive jurisdiction to make a decision. The effect of the
Administrative Judiciary Court Decision is that one State organ (the Administrative
Judiciary Court) is seeking to release the State from an international obligation entered
into by another State organ (the Chairman of the Egyptian Civil Aviation Authority) on the
basis of a failure to comply with the State's own administrative law. Domestic legal
obligations might be dealt with in this manner, but where senior officials of the State
enter into obligations with the citizen of another State (in this case, an arbitration
agreement with a British company) then the resulting responsibility of the State is to be
determined according to international rules and principles, and not domestic law.
 Article 58 of Council of State Law No. 47 of 1972
The Egyptian Holding Company for Aviation and the Egyptian Airports Company
submitted that Article 58 of Council of State Law No. 47 of 1972 required the Egyptian Civil
P 19 Aviation Authority to submit the Concession Contract and the arbitration agreement
for approval by the Council of State, and as this was not done the Concession Contract is a
nullity. Article 24 of the Concession Contract specifically provided for the agreement and
revision of the Concession Contract by the Council of State. The substantive effects of this
Article 24 are considered below. At this point the Tribunal notes that the doctrine of the
separability of the Arbitral agreement is established in Egyptian law, and insofar as
Article 58 is relied upon to annul the arbitration agreement itself, it refers to the
principle of transnational public policy already mentioned, by which in respect of an
international contract a State party cannot invoke its domestic law to escape the effects
of an arbitration agreement entered into by its officials.

The Significance of the UK–Egypt BIT

The Arbitral Tribunal in Procedural Order No. 2 specifically asked the parties to clarify at
the hearing the “significance (if any) of the United Kingdom–Egypt Bilateral Investment
Treaty to the matters at issue in this arbitration.” The Claimant stated that the
Respondents have not only abusively cancelled the Concession Contract, but have also
breached their obligations under the Egypt–UK BIT, and referred to the “wide reading” of
“umbrella clauses” in investment treaties: “However, [the] Claimant has requested from
the present Arbitral Tribunal compensation for this abusive cancellation as a contractual
breach and has reserved its right to further recourse to ICSID if necessary.” Egypt stated
that “the Concession Contract includes a forum selection clause which governs all the
claims of the parties under the contract, and not under the Treaty. Thus all the treaty
based claims fall outside the scope of the Tribunal's jurisdiction.” The Agreement
between the Government of the UK and the Government of the ARE for the Promotion and
Protection of Investments (“UK–Egypt BIT”) entered into force on February 24, 1976. The
UK–Egypt BIT establishes the investor's protections established by customary law in such
treaties as national and most-favored-nation treatment (Article 3), the right to
compensation in the event of expropriation (Article 5), and repatriation of investment
(Article 6). Article 8 addresses disputes between a State party and an investor, which
establishes a right to conciliation or arbitration pursuant to the Washington Convention
of 1966, after attempts to resolve the dispute by other means during a period of at least
three months. The significance of the UK–Egypt BIT to the present dispute arises from the
final sentence of Article 2(2). Article 2(2) reads as follows:
“Promotion and protection of investment (1) …
(2) Investments of nationals or companies of either Contracting Party shall at
all times be accorded fair and equitable treatment and shall enjoy full
protection and security in the territory of the other Contracting Party. Each
Contracting Party shall ensure that the management maintenance, use,
enjoyment or disposal of investments in its territory of nationals or companies
of the other Contracting Party is not in any way impaired by unreasonable or
discriminatory measures. Each Contracting Party shall observe any obligation
it may have entered into with regard to investments of nationals or companies
of the other Contracting Party.”
P 20
The final paragraph of Article 2(2) is a pacta sunt servanda clause (sometimes called an
“umbrella” clause) that purports to bring within the Treaty the breach of obligation not
specifically created or enumerated in the treaty. In this case, “ any obligation” in Article
2(2) refers principally to contractual obligations, as it is followed by the expression “may
have entered into, ” which suggests an agreement or at least a formal undertaking.
The Claimant has not submitted any request to arbitration under the UK–Egypt BIT, and
so at present, there is no parallel arbitral proceedings considering issues arising between
the same parties or relating to the same dispute. Article 21.3.1 of the Concession Contract
confers jurisdiction upon this Arbitral Tribunal in respect of “a dispute of any kind
whatsoever … between the Concessor … and the Concessionaire … in connection with or
arising out of the Concession Contract” (emphasis added). The jurisdiction of this Arbitral
Tribunal is very wide and it certainly has jurisdiction over “any obligation” that “may
have been entered into” by the Arab Republic of Egypt in connection with or arising out of
the Concession Contract.
By virtue of Clause 21.3 of the Concession Contract, the parties have submitted to the
Arbitral Tribunal the dispute arising from the Concession Contract. The fact that Article
2(2) of the UK–Egypt BIT on its face might allow the Claimant to submit the present
dispute (or some parts of the present dispute) to another form does not affect or in any
way limit the jurisdiction of the present Tribunal. The Claimant has elected to submit
these disputes to the jurisdiction of this Arbitral Tribunal, and these same disputes have
not already been submitted to or determined by any ICSID tribunal established pursuant
to the UK–Egypt BIT. Therefore, this Tribunal does not need to consider and is not in any
manner constrained by issue of lis pendens or res judicata.
Accordingly, the Arbitral Tribunal accepts the position of Egypt, and finds that it has
jurisdiction over all claims arising from the Concession Contract, and does not have any
 jurisdiction over Treaty claims under the Egypt–UK BIT. It also notes that the Claimant has
only requested compensation for breaches of the Concession Contract.

Breach/Annulment of the Concession Contract

The first substantive issue relates to the parties to the Concession Contract. Article 145 of
the Egyptian Civil Code confines the effect of a contract “to the parties and to their
universal successors in title, unless it follows from the contract, from the nature of the
transaction or from a provision of the law, that the effects of the contract do not pass to
the universal successor in title of a party.” Egypt submits that it is not a party to this
“municipal” Concession Contract. It states that the Egyptian Civil Aviation Authority was a
separate legal entity and had no authority to conclude a contract on behalf of the
Minister of Transport or of the Minister of Civil Aviation, and therefore could not bind the
Republic of Egypt. Counsel for the Egyptian Holding Company for Aviation and the
Egyptian Airports Company submit that the Egyptian Civil Aviation Authority was
representing the Ministry of Transport by virtue of Presidential Decree No. 360 of 1999,
and so Egypt, and not the successor entities to the Egyptian Civil Aviation Authority, is a
party to the Concession Contract.
The Arbitral Tribunal finds that the Concession Contract binds the Republic of Egypt
within the framework of restrictions imposed both by its own terms and by applicable
P 21 Egyptian administrative law. The evidence clearly established that the Egyptian Civil
Aviation Authority was acting with the knowledge and under the control of the Minister of
Transport, and that this situation persisted for eighteen months between the signature of
the Heads of Agreement and the termination (by the Minister of Transport) of the
Concession Contract. For example, the Minister of Transport expressly invited the
Norwegian ambassador to the signing ceremony and appeared at the ceremony. The
Minister of Transport chaired the Special Commission that on July 21, 2001 made the
decision to cancel the Concession Contract. The Minister of Transport confirmed the
cancellation of the Concession Contract by letter dated September 28, 2001. Finally, the
letters of Guarantee were called by the Head of the Financial and Administrative
Department of the Ministry of Transport.
The Egyptian Civil Aviation Authority has a correct fact in the Concession Contract as the
representative of the Arab Republic of Egypt, and its signature on the Concession
Contract is a clear representation to the Claimant of its power and authority to enter into
the Concession Contract on behalf of the Arab Republic of Egypt. It also has express rights
under the Concession Contract (such as the right of access to Air Traffic Navigation
Facilities). The evidence establishes that the successors in title to the Egyptian Civil
Aviation Authority, particularly pursuant to Presidential Decree No. 72/2001, include the
Egyptian Holding Company for Aviation and the Egyptian Airports Company. As the
Egyptian Civil Aviation Authority was at all times acting as an agent and was not a party
to the Concession Contract, the claims against the Egyptian Holding Company for Aviation
and the Egyptian Airports Company are accordingly dismissed.
The Concession Contract was expressly subject to “revision” by the Council of State. The
introduction of the Concession Contract recognized that the contract was subject to a
feasibility study and “may be cancelled if the relevant Feasibility Study shows the Airport
Project and Annexed Projects cannot be carried out in a sound economic manner.”
Further, the Concession Contract was expressly subject to the Laws No. 3 and No. 8 of 1997;
and Article 5 of Law No. 3 of 1997 requires a decree from the Council of Ministers “upon a
proposition by the competent minister concerning granting the concession defining its
terms and provisions, or amending them…” The Claimant has not demonstrated that any
such decree was ever promulgated in respect of the Concession Contract. Accordingly, the
Arbitral Tribunal is satisfied that the Concession Contract, although binding on Egypt, was
not unconditionally effective, and Egypt retained the power to cancel the Concession
Contract. The evidence satisfies the Arbitral Tribunal that the Concession Contract was in
fact cancelled by Egypt for a combination of reasons, including: (i) concerns regarding the
delay in incorporating the mandatory Egyptian subsidiary and doubts regarding the
accuracy or authenticity of information provided for this purpose;(ii) concerns regarding
the identity of the shareholders and associates of the Claimant and its proposed
Egyptian subsidiary; (iii) a perceived lack of professionalism (“seriousness”) and
suitability of the Claimant for a project of this nature arising from delays and problems in
the provision of information; and (iv) the fact that the Claimant had failed to comply with
its obligations under the Concession Contract. Egypt also submitted that the Concession
Contract could be cancelled because of the breaches of contract by the Claimant
(exceptio non ad impleti contractus) and for breach of good faith. The Arbitral Tribunal is
not required to enter into these arguments in detail in light of its other decisions in this
P 22 award, particularly regarding mistake. The Respondents submit that the Concession
Contract is void for the “artifices which led to the conclusion of a contract, and [which]
were of such gravity that, but for them, the contracting party would not have concluded
the contract.” The allegations of fraud relates to the capital of the Claimant, and include
a serious allegation that a forged “commercial register” of the Claimant company,
fraudulently misrepresenting its capital, was used to obtain the Concession Contract. The
Arbitral Tribunal has reviewed exhaustive submissions of the parties on this question. It
notes that these allegations of fraud in relation to this contract were not relied upon at
the time of the termination of the Concession Contract and were not raised until after this
arbitration was commenced. The importance of the capital of the Claimant, the
incorporation of the Egyptian subsidiary, and the approval of the Investment Authority
arises from Article 4 of the Law No. 8 of 1997.
 Article 4 has strict and detailed requirements relating to the revision of the articles and
memorandum of association, the corporate activities, its capital, the share and
contribution of Egyptian and non-Egyptian parties, the means of subscription, and the
authentication of signatures. However, by contrast, Law No. 3 of 1997 – the law most
directly connected with the construction and management of airports – does not contain
any explicit requirements relating to the capital of an investor. In fact, Article 1 of Law
No. 3 of 1997, by providing that airport concessions may be granted to Egyptian or foreign
investors “whether natural or juridical persons” suggests there is no mandatory capital
requirements. The issue here was the method of financing of the project. The Claimant
considered that the capital requirements were satisfied, by increasing the authorized
capital to one hundred million UK pounds. Whether this capital was subscribed and
issued, or financing was arranged from alternative sources, was an issue that might be
addressed during the performance of the Concession Contract. By contrast, the Egyptian
officials considered this to be an important substantive requirement at the outset.
The different perceptions of this issue led to confusion. The Claimant was casual in the
presentation of its documentation and in response to questions, and did not distinguish
between authorized (and not paid) and issued (paid up) capital. The Egyptian officials,
for their part, in an issue of this importance, could have made further independent
inquiries. The Arbitral Tribunal is satisfied that the Arab Republic of Egypt committed an
essential mistake in entering into the Concession Contract in that it believed the
registered and paid-up capital of the Claimant. Further, it is satisfied that the Claimant
could have, and should have, detected this mistake, and that the mistake is of such
gravity that, had it not been committed, Egypt would not have entered into the
Concession Contract. Articles 120 and 121 of the Civil Code provide for essential mistake.
These Articles read as follows:
“Article
120. A party to a contract may demand the avoidance of the contract if he
committed an essential mistake, if the other party committed the same
mistake or had knowledge thereof, or could have easily detected the
mistake.
Article
121. A mistake is essential when its gravity is of such a degree that if it had
not been committed the party in mistake would not have concluded it.”
The mistake is deemed to be essential more particularly: (a) when it has a bearing on the
P 23 quality of the thing, which the parties have considered essential or which must be
deemed essential, taking into consideration the circumstances surrounding the contract
and the good faith that should prevail in business relationships; (b) when it has a bearing
on the identity or on one of the qualities of the person with whom the contract is entered
into, if this identity or this quality was the principal factor in the conclusion of the
contract. The responsibility for this mistake rests primarily with the Claimant for the
ambiguous information it provided in circumstances when it should have realized the
importance of the issue of paid up capital to the Egyptian officials. However, there is also
some responsibility of the Egyptian officials in failing to clarify the importance of this
issue or to make independent inquiries. The Arbitral Tribunal assesses the respective
responsibility of the Parties as ninety percent with the Claimant and ten percent with the
Respondent.
The Arbitral Tribunal therefore declares the Concession Contract is void for mistake. The
consequences are described in Articles 138–144 to the Egyptian Civil Code and
particularly Article 142, which reads as follows:
“Article 142. When a contract is void or annulled, the parties are reinstated in
their position prior to the contract. If such reinstatement is impossible,
damages equivalent to the loss may be awarded.”
The Arbitral Tribunal notes that the Concession Contract contains express provisions for
compensation in the event of cancellation of the Contract by the Republic of Egypt.
However, as the Arbitral Tribunal has found that the Concession Contract is void for
mistake, it considers that the damages should be calculated in accordance with Article
142 of the Civil Code on the basis of damages in lieu of reinstatement.

Article 46 Arbitration Law No. 27 of 1994. Suspension for Criminal Proceedings

The Respondents have submitted that the Arbitral Tribunal must suspend these
arbitration proceedings pursuant to Article 46 of Arbitration Law No. 27 of 1994 until a
final judgment is issued in the criminal proceedings relating to the Concession Contract.
This request was made during the proceedings and was the subject of a majority ruling of
the Arbitral Tribunal dated September 19, 2005. The Egyptian Holding Company for
Aviation and the Egyptian Airports Company renewed this request for an Article 46
suspension, submitting that as a matter of Egyptian public order the criminal
proceedings must take precedence.
In considering the relationship between criminal proceedings and arbitral proceedings,
the Arbitral Tribunal notes that the principle of “le penal tient le civil en état” does not
apply in any absolute way in Egyptian law. The Claimant referred the Arbitral Tribunal to
the decision of the High Constitutional Court (Challenge No. 8 Judicial Year 22; hearing of
April 8, 2001) which concerned the conflict between an arbitral award finding in favor of a
 party that had cancelled a check, and a decision of a criminal court condemning the
same party for issuing a bad check. The High Constitutional Court decided that the
Arbitral Award should prevail, stating that the analysis of the transaction by the criminal
court “consists in a usurpation of the competence of the Arbitral Tribunal despite the
P 24
consent of the parties to submit to arbitration within the limit of the law.” An Arbitral
Tribunal sometimes must consider whether a party has committed any criminal act.
For example, if a contract (or investment treaty) requires a party to act “according to
law,” and the submission is made that there is a breach of the contract (or the treaty)
because one party has acted illegally, the Arbitral Tribunal has the jurisdiction and the
duty to determine whether a particular act occurred, and whether it breached a penal
provision of the applicable law. It then determines the contractual consequences of
these findings for the dispute between the parties. It does not make any decision as to
the guilt or innocence of a particular individual, or determine the criminal consequences
or sanctions for particular behavior, which are matters for the domestic criminal courts.
An arbitral tribunal might therefore consider the same conduct as a criminal court,
although for different purposes and with different consequences.
Whenever same facts are before an arbitral tribunal and any other tribunal, the Arbitral
Tribunal must proceed with care, and doctrines such as res judicata and lis pendens are
significant. When criminal proceedings are involved, the Arbitral Tribunal needs to
consider whether the existence of criminal proceedings might compromise the ability of
one party (particularly the party facing prosecution) to fully present its case in the
arbitration. However, it is for the Arbitral Tribunal itself and not the domestic court
(whether directly or indirectly) to decide how best to respond to the parallel
proceedings, and whether a suspension is justified. Accordingly, the decision of the
Egyptian criminal courts to initiate criminal proceedings against the Malicorp employees
and Egyptian officials must be carefully considered by this Arbitral Tribunal, but as a
matter of principle should neither bind this Tribunal nor automatically suspend these
proceedings.
A provision such as Article 46 that seeks to automatically suspend an arbitration simply
because criminal proceedings have been commenced that require investigation of the
same facts amounts to an interference with the jurisdiction of the Arbitral Tribunal. In the
present case, the reliance by the Respondents on Article 46 arguably amounts to the
reliance of the State on its own law to defeat an arbitration agreement, and this is
contrary to international public policy. In the present case the Arbitral Tribunal has
found that there was a mistake relating to whether the paid-up capital of the Claimant
amounted to E£100 million, and accordingly the Concession Contract was void. Forgery, if
proved, would mean that Claimant was also guilty of fraudulent misrepresentation.
However, the civil consequences of fraudulent misrepresentation under Article 125 of the
Civil Code are the same as those for a mistake; that is, the contract is void and damages
may be awarded pursuant to Article 142. On this basis, it is unnecessary for the Arbitral
Tribunal to make any decision on forgery or the other criminal acts alleged, and so,
Article 46 has no application to the present arbitration. There remains the question of
whether the Tribunal in its discretion should suspend these proceedings because of the
criminal proceedings commenced in Egypt. The Arbitral Tribunal considers that in the
circumstances of this case no suspension is required, and in reaching this decision notes
the following: (i) no party to this arbitration has been prosecuted for any criminal offence
(the Claimant is a British company and is not any of the individuals named in the
prosecution); (ii) the offences alleged are serious, and some of the individuals involved
are closely connected with the Claimant; (iii) the alleged offences are closely connected
with the making of the Concession Contract, and so with the matters at issue in this
arbitration; (iv) nevertheless, the Arbitral Tribunal is satisfied that the matters at issue in
the arbitration can be decided without making determinations as to whether the
P 25 Claimant have committed criminal acts of fraud, theft or criminal collusion in the
breach of duty by Egyptian public officials; (v) the Claimant opposes any suspension and
(subject to the accommodation made to take the evidence of certain witnesses by
videoconference) considers that it can and has been fully able to present its case in this
arbitration; (vi) the prosecutions did not take place immediately after the alleged
criminal actions or after the suspicion of irregularities contributed to the decision to
cancel the Concession Contract, but four years later and during an intense phase of
activity in this arbitration; (vii) the criminal proceedings are of an indefinite and maybe
lengthy duration; (viii) a suspension of this arbitration and consequent delay might
prejudice the Claimant in the exercise of its right to arbitration in terms of uncertainty
and increased costs.

Damages
The Claimant submitted as evidence of the loss it had suffered a report by Price
Waterhouse Coopers. The Egyptian Holding Company for Airports and the Egyptian
Airports Company submitted a report in reply by an auditor. At the hearing Mrs… of Price
Waterhouse Coopers gave oral evidence and answered questions on behalf of the
Claimant, and Mrs… of KPMG (Accountants) gave oral evidence and answered questions on
behalf of the Egyptian Holding Company for Airports and the Egyptian Airports Company.
The Arbitral Tribunal has already decided that the general principle of compensation for
the Claimant in this case should be that stated in Article 142 of the Civil Code for cases of
annulment of a contract. Article 142 gives the Claimant right to be “reinstated in their
position prior to the contract,” and where such reinstatement is impossible, “damages
equivalent to the loss may be awarded.” The Claimant's major claim in monetary terms is
 for loss of profits, amounting to US$500,000,000. The elements and calculation of this
claim have been the subject of submissions and expert evidence. They include loss of
profits from the operation of the airport, loss of profits from the exploitation of the
airport site, and loss of profits relating to freehold land (including proposed projects such
as hotels, tourism, shopping centers and industrial agricultural centers). After a careful
review of the expert evidence, the Arbitral Tribunal has decided that the profits of the
Claimant, had the Concession Contract been performed, would not have exceeded
US$100 million. In this case, however, the Arbitral Tribunal has already found that the
Claimant should have realized that the Arab Republic of Egypt was entering into the
Concession Contract under the influence of an essential mistake. The Arbitral Tribunal
has already found that the responsibility of the Claimant for this mistake amounted to
ninety percent. Accordingly, the damages for lost profit must be reduced by this
percentage. The resulting figure of US$10 million is accordingly awarded by the Arbitral
Tribunal in the concept of lost profits.
The Claimant also seeks moral damages of US$1,000,000. Moral damages may be claimed
under Article 222 of the Civil Code, and here are based on the allegation that the purpose
of the Respondents' behavior was to defame and affect the Claimant's reputation. The
Tribunal does not accept that the purpose of the conduct of the Arab Republic of Egypt
justifies any award of moral damages, and notes in this regard its earlier finding the Arab
Republic of Egypt exercised its power to cancel the Concession Contract for economic
and security reasons. Accordingly, damages under this heading are refused.
P 26
As regards the claim for the return of the letters of guarantee (estimated by the
Claimant's expert witness as US$564,069.00 and by the Respondents' expert witness as
US$514,000.00), clearly fall within the principle of damages equivalent to reinstatement.
However, the Republic of Egypt relies upon Article 26 Law No. 89 of 1998 in connection
with Tenders and Bids which specifically authorizes the confiscation of performance
bonds in circumstances such as the present. Accordingly, Egypt has established a legal
right to retain this sum and the Claimant's claim under this heading is denied.
There remain the claims for the Claimant's expenses, invoices, and the salaries of
employees amounting to US$12,416,574.00 consisting of (i) a claim for general expenses
(US$1,704,370); (ii) expenses for four invoices (US$2,115,204); (iii) salaries (US$8,597,000).
As regards the first of these claims, the KPMG report submits, and the Arbitral Tribunal
accepts, that these expenses should only be calculated for the period of 1999 to 2001
(and not to 2004 as claimed) resulting in a figure of US$562,793. As regards the four
invoices totaling US$2,115,204, the Price Waterhouse Coopers report submitted by the
Claimant does not explain the nature of these expenses. It simply states, after discussing
the general expenses referred to above, that “additionally, copies of four invoices sum up
to an amount of US$2,115,204 were presented to us by Malicorp. Malicorp will provide the
original invoices on request.” The Respondents made no submissions in respect of these
invoices, its own expert report did not refer to them, and they were only raised in passing
during the searching cross-examination of Mrs… of Price Waterhouse Coopers by counsel
for the Respondents at the hearing. On the basis of the un-contradicted evidence of the
existence of four invoices to this amount, offered for review to the Respondents, the
Arbitral Tribunal considers that this element of the claim is proved. In contrast, the claim
for salaries was challenged by the Respondents in cross-examination. Mr. … (on behalf of
the State Law Suits Authority) questioned the reasonableness and coherence of the
alleged payments. Mrs… of Price Waterhouse Coopers referred to the assumptions
expressed in the report. The assumptions within the report show that such agreements
exist, but specifically disclaim any review of the “reasonableness” of these contracts. The
Arbitral Tribunal, applying the principle in Article 142,[ (5) ] finds that the Claimant
should only recover the costs for the period between the signing of the Heads of
Agreement and the termination of the Concession Contract (that is, approximately fifteen
months from May 2000 until August 2001), and not for a period up to sixty-five months as
presently claimed. Applying this standard to the monthly salary figures provided in the
Price Waterhouse Coopers report produces a figure of US$2,095,500. Accordingly, the
Arbitral Tribunal awards this sum under this heading. For these reasons, the Arbitral
Tribunal finds that the costs and expenses of the Claimant of US$562,793; US$2,115,204;
and US$2,095,500, as well as loss of profits of US$10,000,00 are established, and
consequently awards damages in lieu of reinstatement to their original position
amounting to US$14,753,497.
The Claimant has also sought interest. Article 226 of the Egyptian civil code provides:
P 27 “When the object of an obligation is the payment of a sum of money of which the
amount is known at the time when the claim is made, the debtor shall be bound, in case
of delay in payment, to pay to the creditor, as damages for the delay, interest at the rate
of four percent in civil matters and five percent in commercial matters. Such interest
shall run from the date of the claim in Court, unless the contract or the commercial usage
defines another date. This article shall apply unless otherwise provided in law.” The
Concession Contract provides that this is a civil law contract. Accordingly, the Tribunal
fixes interest in accordance with Article 226 on the damages in the rate of four percent
per annum from the date of filing the claim with the Cairo Regional Centre for
International Commercial Arbitration on April 28, 2004 until the date of payment.

Award
 In light of the above and having taken cognizance of all the claims and defenses of the
Parties, this Arbitral Tribunal finds that:
1. The Arbitral Tribunal has jurisdiction in respect of all claims arising from the
Concession Contract, and in particular the Claimant's claims in this arbitration
against the Arab Republic of Egypt, and the Egyptian Holding Company for Aviation
and the Egyptian Airports Company;
2. The Parties to the Concession Contract are the Claimant and the Arab Republic of
Egypt. Accordingly, the claims against the Egyptian Holding Company for Aviation
and the Egyptian Airports Company are dismissed;
3. The Concession Contract is an administrative contract in Egyptian domestic law. It is
also an international contract involving a State party, and is subject to the
principles applicable to such contracts;
4. The Concession Contract was void for mistake. The Arbitral Tribunal also recognizes
that Arab Republic of Egypt had the power to cancel the Concession Contract, and
did so on August 12, 2001;
5. In lieu of reinstatement to its original position prior to the Concession Contract, the
Arab Republic of Egypt shall pay to the Claimant the amount of US$14,773,497 by
way of damages;
6. The Claimant, on the one hand, and the Respondents, on the other, shall each bear
one half of the costs and expenses of the arbitration (which total US$366,000.00).
Accordingly, the Respondents are hereby ordered to pay to the Claimant the sum of
(US$147,050.00), being the part of the Respondent's half share of these costs and
expenses already paid by the Claimant. Each shall pay its own legal costs;
7. The Claimant is entitled to interest at the rate of four percent[ (6) ] per annum on
the damages from April 28, 2004 until the date of payment, and on the costs from
the date of this Final Award until the date of payment;
P 30
8. The Respondents' application for the suspension of the arbitration pursuant to
Article 6 of Arbitration Law No. 27 of 1994 is refused;
9. All other claims and requests are dismissed.
This Final Award was signed in Madrid and rendered in Cairo by The Arbitral Tribunal this
7th day of March 2006.
Place of Arbitration: Cairo, the Arab Republic of Egypt.
Note by the Tribunal: On the failure to sign this Final Award by Dr. Hatem Gabr Arbitrator,
the Arbitral Tribunal unanimously agreed to deliberate in Madrid on March 5 and 7, 2006
regarding this Final Award. Dr. Hatem suspended his participation in the deliberations of
the Arbitral Tribunal for the reasons set out in his letter to the Cairo Regional Centre for
International Commercial Arbitration dated February 27, 2006, a copy of which is
attached.

A Issues Subsequent to the Award of March 7, 2006

[translation from Arabic into English]
Regarding the Suspension of mandate by the Respondent's Arbitrator, Dr. Hatem Aly
Labib Gabr in the Arbitration case No. 382 of 2004
(Malicorp Ltd. v. the Government of the Arab Republic of Egypt and others)
With reference to the above mentioned Arbitration case, please note that the Judicial
Administrative Court of the Egyptian Council of State has rendered a judgment dated
February 19, 2006 in Case No. 18628 of the 59th judicial year brought by the Egyptian
Minister of Civil Aviation against Malicorp Ltd. Company, which stated on the substance
that the Arbitration clause in the Concession Agreement concluded with Malicorp Ltd. on
November 4, 2000 was null and void with the consequences resulting therefrom, including
in particular the suspension of the Arbitration procedures in the Arbitration Case No. 382
P 31 of 2004 brought by Malicorp Ltd. Company before the Cairo Regional Centre of
International Commercial Arbitration. As I am the Arbitrator chosen by the Respondents
in the Arbitration Case No. 382 of 2004, I have to give reasons for my position in the light
of this judgment, taking the following factors into consideration:
1. The authority of the Arbitral Tribunal in arbitrations derives exclusively from the
will of the parties to the dispute to be decided through arbitration, and not in the
normal way by the judicial courts.
2. The Parties in the above mentioned concession Agreement dated November 4, 2000
have agreed that the Laws of the Arab Republic of Egypt are the laws governing this
concession Agreement, and that Cairo, Egypt is the seat of the Arbitration relating
thereto.
3. Article 64 of the Egyptian Constitution provides that the sovereignty of the Law is
the basic rule in the State. Article 172 of the Constitution[ (7) ] provides that the
Council of State in an independent judicial organization that is competent to
decide upon administrative disputes. Article 50 of the Council of State's Law No. 47
of 1972 provides that the recourse against the judgments of the judicial
Administrative Court, before the Supreme Administrative Court, does not stay their
execution unless the Chamber of inspecting recourses of the supreme
 Administrative Court decides otherwise. Over and above Article 52 of the Council of
State Law provides that all its judgments enjoy the force of res judicata.
4. The case being so, my role as an Arbitrator is not to assess whether the judgments
rendered by the Egyptian Council of State are in my opinion right or wrong, but to
abide by the force of res judicata legally conferred upon them until they are either
stayed or revoked in accordance to the Egyptian Law.
5. The provisions of Articles 50 and 52 of the Council of State Law concerning the
enforceability of its judgments are so clear that there can be no latitude for
interpretation of their meaning by a law abiding person. Therefore deviating from
them and having recourse to provisions of alien legal systems and maxim, would be
a clear violation of the Egyptian Laws that govern the above mentioned Arbitral
Dispute.
6. Knowingly refusing at the international level to apply the above-stated clear legal
provisions of the Governing Law of the Agreement, constitutes a gross professional
fault that would engage my own liability and which I refuse to assume.
Taking all of the above into consideration, I have decided to suspend my perception as
Arbitrator in all the deliberations concerning the Arbitration Case No. 382 of 2004, until
the Judicial Administrative Court's judgment dated February 19, 2006 in Case No. 18628 of
the 59 judicial year is either stayed or revoked.
Kindly convey copies of this letter to my esteemed colleagues and to the Parties to the
Arbitration case no 382 of 2004 in order to inform them of my position.
[signed]: Hatem Aly Labib Gabr
P 32

B Challenges
[Summary by the Author]
This award has been preceded and followed by court cases and challenges:
1. Prior to the issuance of the arbitral award in Case No. 382/2004 dated March 7, 2006,
the judgment of the Judicial Administrative Court of the State Council has been
rendered on February 19, 2006 in Case No. 18628. The Claimant in this case was the
Minister of Aviation. The Court ruled that the arbitration agreement in the
Concession Contract was void.
2. Following the issuance of the arbitral award, a challenge was filed with the Cairo
Court of Appeal by the Minister of Aviation requesting to set aside this award.
3. A challenge was filed with the Council of State against the same award.
4. A challenge was filed with the Council of State against the judgment of February 19,
2006;
5. A challenge was brought before the Cairo Court of Appeal by Malicorp in its capacity
as defendant to accelerate the decision on the Case.
6. Each of the two jurisdictions claimed to be the court competent to settle these
challenges.
7. A challenge was brought before the Constitutional Supreme Court to solve the
positive conflict of jurisdiction.
8. The Supreme Constitutional Court found in favor of the Cairo Court of Appeal and
this court began to consider the challenge after the exclusion of the State Council.
9. The Cairo Court of Appeal found in favor of the Ministry of Aviation and said that a
truncated tribunal cannot, in accordance with the Egyptian law, give a valid award
by majority unless due deliberations have been conducted.
10. Malicorp challenged the judgment of the Cairo Court of Appeal before the Court of
Cassation on February 2, 2013 – Challenge No. 2047 of judicial year 83 (pending).
11. A new case for damages was brought before ICSID by Malicorp and was dismissed
because of mistake exerted against the ARE (Arab Republic of Egypt).
12. A new arbitration challenge has been lodged before the ICSID by Malicorp against
the ICSID award of February 2011 dismissing Malicorp's case for damages
[dismissed].
P 33

C Judgment of February 19, 2006

Case No. 18628 of the Year 59 before the Judicial Administrative Court
[Translated by the Author]
A few days before the issuance of the arbitral award, the Judicial Administrative Court
ruled on the nullity of the arbitration clause embedded in the Concession Contract of
Malicorp. As the said case has been initiated and settled by judgment two weeks before
the award, the Arbitral Tribunal discussed the reasons of this judgment and refused to
order the suspension of the proceedings (item 8 of the operative part of the award). For
the sake of completeness of the case study, below is a translation of the reasons of the
judgment of February 19, 2006, issued in the Case No. 18628 of the judicial year 59,
brought before the Court by the Minister of Civil Aviation against Malicorp Limited.
 Text of the Judgment of February 19, 2006
The Plaintiff [the Ministry of Civil Aviation] aims by these proceedings to suspend the
arbitral proceedings in the case No. 382 of 2004 brought before the Cairo Regional Centre
for International Commercial Arbitration, requesting that the Arbitral Tribunal say that
this case of challenge is permissible as to its form; and on the merits to say that the
arbitration clause included in the concession contract of November 4, 2000 is null and
void with all effects that may ensue.
The challenge of this Court's jurisdiction over this case necessitates the definition of the
nature of the contract under consideration, the determination of whether it is an
international trade contractor otherwise what its nature is. A contract is qualified in
comparative law as an international trade contract if it entails cross-border movement of
funds, goods, or services (the economic criterion), or if its conclusion, implementation, or
the legal status of its parties, or its subject matter relate to more than one legal system
(the legal criterion). The case under consideration relates to a BOT contract and, as such,
may not be considered as an international trade contract, but rather is qualified as an
administrative contract related to a public concession. This contract has a sui generis
nature relating to the administration of a public utility for a certain period, during which
the concessionaire bears the expenses of the project and its financial perils against a
consideration he gets therefrom in the form of fees obtained from the beneficiaries in
accordance with Law No. 2 of 1997 pertaining to granting public concessions for the
establishment, management, and exploitation of airports. Accordingly, the courts of the
State Council are exclusively competent to settle the disputes emanating from the
contract in line with Article 172 of the Constitution of Egypt.[ (8) ]
As a result of the above distinction, the plea of non-competence of this Court on the
grounds that Article 9 of the Arbitration Act No. 27 of 1994 has entrusted the Cairo Court of
Appeal with the competence to settle arbitration issues referred to it by the Arbitration
Act if the arbitration is commercial and international in nature, with a seat either in
P 34 Egypt or abroad, unless the Parties have agreed on another court of appeal in Egypt;
this plea may not be raised in an administrative contract which is different from
international commercial arbitration. The case at hand relates to an administrative
contract planted in the field of public law and under its umbrella, and which remains an
administrative contract regardless of its commercial character at the same time.[ (9) ]
It necessarily results from the above that the competence of the Cairo Court of Appeal
does not apply to a dispute involving an administrative contract where one of the parties
to the contract is a juristic person under public law, the contract pertains to the conduct
or regulation of a public utility, and it contains exorbitant clauses not found in private
law contracts. It was not possible in 1994 [the year of the enactment of the Arbitration
Act] to arbitrate in administrative contracts, but at the time of this judgment this became
possible thanks to an amendment to the Arbitration Act.[ (10) ] This resulting change in
law necessarily deprives the Cairo Court of Appeal of any competence with regard to
administrative contracts.
Since Article 13 of the Arbitration Act 27 of 1994 provides that “[a]court seized of a dispute
in regard of which there exists an arbitration agreement, shall consider the case to be
inadmissible if the respondent so requests before any other request or defense on the
merits.” The non-admissibility of such a case depends on the validity and enforceability
of the arbitration agreement. The arbitration agreement in the present case is neither
valid nor enforceable, because the competent minister[ (11) ] did not give his approval to
arbitrate in respect of the concession contract. This conclusion had been provided for in
Article 13/3 of the Arbitration Bill as follows: “If the court finally ruled the arbitration
agreement null and void, expired or non-enforceable before the issuance of the Arbitral
award; the Arbitral Tribunal shall order the termination of all proceedings.” This
paragraph was not enacted based on the grounds that it is implied by the general rules
and that it is not in need of a special provision. On the other hand, the principle of
competence-competence does not deprive the judge of his powers to consider such pleas
whenever they are raised before him in line with the rule: “the judge of the principal case
is the judge of matters branched therefrom.”
It is worth mentioning that the French Conseil d'État kept refusing any arbitration in
regard of administrative contracts in order to defend the sovereignty of the State; and so
has been the Egyptian State Council, until the amendment of article 1 of the arbitration
act by law No. 9 of 1997 which added paragraph 2 to article 1 of the law No. 27 of 1994
[allowing arbitration on administrative contracts].
The Court is interested to state a special declaration upon the various kinds of corruption
which vitiated the contractual operation in this case and which was duly noted by this
Court during its perusal of this case and the Court stresses upon the necessity for a more
effective choice of responsible persons who have great dignity for such public utilities.
P 35
For these reasons, the Court orders:
1. The challenge to jurisdiction is dismissed and the jurisdiction of this Court is
confirmed;
2. The plea of non-admissibility of the case is dismissed, and the case is accepted as
to the form; and on the substance decides that the arbitration clause stated in the
concession contract of November 4, 2000 is null and void and the proceedings with
 the Cairo Regional Centre for International Commercial Arbitration are hereby
suspended.

D Further Pending Cases

The above judgment has been submitted to the Arbitral Tribunal by the Egyptian
Government. The Government requested the Arbitral Tribunal to acknowledge it but the
Tribunal refused to suspend the proceedings as shown in No. 8 of the operative part of
the award of March 7, 2006.
A notice of lis pendens was filed because there was another concomitant challenge
brought before the Cairo Court of Appeal, in addition to that of the State Council. The
Cairo Court of Appeal was informed of that case and kept the challenge in abeyance until
further decision on the positive conflict on jurisdiction [i.e. two or more courts each
considering itself the sole competent one; by contrast to the negative case where all the
courts involved deny their jurisdiction] is rendered by the Supreme Constitutional Court.
Six years after the date of the award, on January 15, 2012, the Supreme Constitutional
Court (SCC) rendered a judgment on the “Conflict of jurisdiction,” deciding which of the
two courts is competent to consider the case of challenge against the above arbitral
award.
There is another judgment rendered by the Supreme Administrative Court (SAC) in Case
No. 17464 of the judicial year 52, and is distinct from the case of February 19, 2006, which
considered the arbitration clause a nullity. Case No. 17464 is discussed below in this
section.
[Judgment of the SCC]
[Translated by the Author]
In the Name of the People
The Supreme Constitutional Court [SCC]
In the public Hearing of Sunday, January 15, 2012, corresponding to Safar21, 1433 AH,
attended by:
Justice F. Sultan, President of the Supreme Constitutional Court;
and in the presence of Justices: A.A. Hassan; M.A. Elshenawi; E.A. Hashish; S.M. Amr; T.M.
Elgebali, and B.F. Iskandar; each of whom is Vice President of the Court;
and in the presence of Justice Dr. Mohamed Emad Alnajjar, Chief of the Commissioners'
Body of the Supreme Constitutional Court,
P 36
the Court rendered the following judgment in the case before the Supreme Constitutional
Court in Case No. 47, judicial year No. 31 “conflict of jurisdiction,” brought by The
Chairman of Malicorp Co. Ltd. against:
1. The Minister of Civil Aviation;
2. The Minister of Transport;
3. The Chairman of the Holding Co. for Airports and Air Navigation;
4. The Chairman of the Egyptian Co. for Airports.
Procedure
On July 20, 2009, the Claimant Company lodged the present case with the Clerk of this
Court, requesting that a competent judicial body be appointed to consider a challenge
against the award issued by the Cairo Regional Centre for International Commercial
Arbitration rendered on March 7, 2006 in the arbitration case No. 382/2004. The said
award was challenged by two cases: the first is Case No. 17464 of the judicial year 52
before the Supreme Administrative Court [SAC],[ (12) ] and the second is Case No. 48 of
the judicial year 123 before the Cairo Court of Appeal [CCA].
The State Lawsuit Authority (the “SLA”) [on behalf of the Respondents] filed with the Clerk
of the SCC a memo stating that the case was inadmissible. The case was scrutinized by
the Commissioners' Body which gave its opinion in the report deposited with the Clerk of
the Court.
The case was considered as shown in the minutes of the Hearing, and the Court decided
to render the judgment on this day.
THE COURT
Having reviewed the papers and deliberated, and having considered the facts of the case
taken from the introductory submissions and other documents, the court discovered that
the Plaintiff's Company has brought before CRCICA the case No. 382 of 2004 against the
Respondents, requesting damages for the dissolution of the concession contract
regarding the construction and exploitation of the Ras Sudr Airport Project, entered into
by the Plaintiff and the Egyptian Public Authority of Civil Aviation. On March 7, 2006 an
arbitral award was rendered ordering the First Respondent ‘the Minister of Civil Aviation’
to pay damages.
P 37
 Because the first and second Respondent did not find this award acceptable, they lodged
Case No. 17464 of judicial year 52 before the SAC, requesting the suspension of the
execution of the award, claiming that it is null and void.
On the Hearing of May 30, 2006, the Challenge Examination Chamber of the SAC ordered
the suspension of the challenged award and referred the case to the Commissioners'
Body of the State Council for opining and reporting.
On the other side, the first and second Respondents lodged another challenge of the
award before the CCA, Case No. 48 of judicial year 123, requesting that the
aforementioned award be urgently suspended, claiming that it is null and void and
arguing that, since the contract has an economic character, the CCA is the court
competent to peruse the nullification case.
This case of conflict of jurisdiction passed through two Hearings on August 5, 2006 and
August 5, 2006 [sic], and the Chairman of the Plaintiff Company contended that the case
was one of conflict of jurisdiction between the SAC and the CCA, revolving around the
question which of the two jurisdictions is the competent one to consider the challenge of
the aforementioned award, and this is why the Plaintiff Company has brought the case
No. 24 of the constitutional judicial year 28 before the SCC to request the appointment of
the competent court.
On June 10, 2007, the SCC rendered a judgment of inadmissibility of the case based on the
fact that the Plaintiff Company did not submit documents or proof that the CCA had
insisted upon its competence to settle the case.
The Plaintiff proceeded to re-activate the cases before the CCA and the SAC, and
reapplied to the SCC with the purpose of activation claiming that the former court (the
CCA) ordered its Clerk to attach the file of arbitration containing the challenged award to
the related documents; while the latter court (the SAC, Case No. 17464/52), has received
the report of the Commissioners' Body opining that the competent court is SAC. The
report relied on the fact that the underlying contract was a BOT contract, considered to
be an administrative contract. The SAC decided on the substance of the case that the
challenged award should be nullified and the case returned to CRCICA to form a new
Arbitral Tribunal that would render a new award on the merits of the case.[ (13) ]
The SCC, having viewed these documents, finds that the procedure continued before the
two judicial bodies (the SAC and the CCA) meant that there exists a conflict of jurisdiction.
The representatives of the third and fourth Respondents countered that the case is
inadmissible, as it was already settled by the SCC in Case No. 24/48 “conflict of
jurisdiction” as the dispute concerns the same merits and the same parties.
As this plea of inadmissibility is not correct, because the inadmissibility in the said case
was based on the absence of a procedure required by Articles 31 and 34 of the SCC Act
P 38 which constitutes a procedural breach due to the lack of justifying documents and is
not a substantive point in dispute or a matter that prevents a litigant from resubmitting
his case to the Court in a rectified form in line with the SCC Act.
It is current in the SCC jurisprudence, in accordance with Article 52/2 of its Act, that the
conflict of jurisdiction materializes if two judicial bodies, or bodies having the same
jurisdiction, receive cases on the same subject matter, and neither of them relinquishes
its case or both do relinquish them. A positive conflict of jurisdiction occurs where the
two judicial bodies (SAC and CCA) are simultaneously faced with a case in respect of
which a request for settlement of the conflict has been submitted to the SCC which is
charged with the task of designating which body has jurisdiction in the matter.
It is also current in the SCC jurisprudence to appoint a judicial body competent in cases
of positive as well as negative conflict of jurisdiction, in light of the rule regulating the
judicial distribution among the different judicial bodies in accordance with the function
entrusted to each of these bodies.
As the core of the present dispute stems from the legal nature of the arbitral award, is it a
commercial international arbitration, the challenge of which would been trusted to the
CCA, or rather an administrative contract to be entrusted to the SAC as the Court of
second instance considered to be primarily competent to settle the case?
As Articles 2, 3, 9, and 54.2 of the Arbitration Act No. 27/1994 (as amended), provide as
follows:
Article 2
“An arbitration is commercial within the scope of this Law if the dispute arose
over a legal relationship of an economic nature, whether contractual or
noncontractual. This comprises for example the supply of commodities or
services, commercial agencies, construction, engineering, technical know-how
contracts, the grant of industrial, touristic and other licenses, technology
transfer, investment and development contracts, banking, insurance and
transport operations, exploration and extraction of natural wealth, energy
supply, laying of gas or oil pipelines, building of roads and tunnels,
reclamation of agricultural land, protection of the environment and the
establishment of nuclear reactors.”
Article 3
“Arbitration is international within the scope of this law if the subject matter
 thereof relates to international trade, and in the following cases:
“First: If the respective head offices of the parties to the arbitration are
located in two different countries at the time the arbitral agreement is signed.
If either of the two parties has several business centers, the one most closely
linked to the subject matter of the arbitration agreement shall prevail. Should
either of the two parties not have a business center, then his usual place of
abode shall prevail.
“Second: If the parties to the arbitration agree to resort to a permanent
arbitration organization or to an arbitration center having its headquarters in
Egypt or abroad.
“Third: If the subject matter of the dispute falling within the scope of the
arbitration agreement is linked to more than one state.
P 39
“Fourth: If the respective head offices of the parties to arbitration is located in
the same country at the time the arbitration agreement is signed and one of
the places listed hereunder is located outside such country:
a. The place designated as the seat of arbitration in the arbitration
agreement, or whose manner of designation is referred to therein.
b. The place in which an essential part of the obligations arising from the
commercial relationship between the parties should be performed.
c. The place most closely linked to the subject matter of the dispute.”
Article 9
“1. Jurisdiction to review the Arbitral matters referred by the present Law to
the Egyptian judiciary lies with the court having original jurisdiction over
the dispute. However, in the case of international commercial
arbitration whether conducted in Egypt or abroad, jurisdiction lies with
the Cairo Court of Appeal unless the parties agree on the competence of
another appellate court in Egypt.
2. The court vested with jurisdiction in accordance with the preceding
paragraph shall continue to exercise exclusive jurisdiction until the
completion of all arbitral procedures.”
Article 54.2
“Jurisdiction over actions for the nullity of arbitral awards rendered in
international commercial arbitrations shall lie with the court referred to in
Article 9 of this Law. In other than international commercial arbitrations,
jurisdiction lies with the court of second instance to which are appealed the
decisions of the court of first instance.”
As it appears from the entirety of these provisions regulating the matters of commercial
international arbitration, an arbitration is considered to be commercial if it relates to a
legal relationship having an economic character – of which the legislator gave several
non-limitative examples in Article 2. However, it becomes an international arbitration if
the dispute relates to international trade in four cases defined limitatively by the
legislator in Article 3 of the Act No. 27/1994. Those cases include the presence of the
business headquarters of each of the parties to the arbitration in two different States at
the time the arbitration agreement has been entered into; or if the parties agree upon a
permanent arbitration organization or arbitration center with premises in Egypt or
abroad.
As is evident from the documentation, the concession agreement between the
Respondents and the Plaintiff (i.e. the concessionaire) relates to the construction,
commissioning, and exploitation of Ras Sudr Airport according to the BOT system, for a
defined period after which the project of the Airport shall devolve to the State.
Accordingly, despite the fact that the contract is a concession contract, belonging to the
category of administrative contracts, it possesses at the same time an economic
character. This feature has been invoked by both parties as they stated in article 29/1 of
their contract that this contract is a legal civil contract. Accordingly, it is not possible to
deviate with this arbitration, and it must be subject to Article 2 of Law No. 27/1994. The
P 40 aforementioned contract contained an arbitration clause (despite the difference
regarding its nature between the parties) providing for the settlement of any dispute that
may arise between the parties and could not be settled amicably. In virtue of this clause,
the parties may apply to CRCICA to render a binding decision.
Because the head offices of each party's business were located in two different States at
the time the contract was entered into, and as the parties agreed to resort to an
arbitration center with its premises in the ARE, the arbitration as such has an
international character, in conformity with Article 3 of Law No. 27/1994.
As a general principle, the administrative judiciary is competent to settle disputes
arising from contracts of concession, public works, procurement or any other
administrative contract, in line with Articles 10–11 of Law No. 47/1972 regulating the State
Council. Nevertheless, the legislator made an exception to this general principle in the
cases of challenge of arbitral awards rendered in implementation of the arbitration
 clause even if the latter is embedded in an administrative contract, so long as the
contract has a commercial international character as defined in Articles 2 and 3 of Law
No. 27/1994 which entrusts such cases to the CCA, in line with Articles 9.1, 53.1.a, and 54.2
of the said Law.
Accordingly, the Court competent to view the challenge of the arbitral award dated March
7, 2006 in the CRCICA Case No. 382/2004 is the CCA [the Cairo Court of Appeal].
For these reasons, the Court held that the CCA is the body competent to settle the
dispute.
PRESIDENT
SECRETARY

E Further Proceedings before the CCA

The case of annulment of the award No. 381/2004 began anew before the Cairo Court of
Appeal (the CCA) which considered whether or not the award was valid. The Cairo Court of
Appeal rendered its judgment on December 5, 2012 declaring that the CRCICA award in
favor of Malicorp be set aside. The following is a non-official translation of the Judgment
of the Cairo Court of Appeal made by the Author.
TRNSLATION OF THE JUDGMENT OF
The Cairo Court of Appeal,
Commercial Chamber No. 62 in Case No. 48 of the judicial year 123
Rendered on December 5, 2012
In the name of the People
Commercial Circuit No. 62
Judgment
In the public audience in the Palace of the Court existing in the HIGH JUDICIARY PALACE …
[address]
P 41
Presided by Chief Justice and … [… two other Chief Justices].[ (14) ]
and
In the presence of the Court Clerk …
Rendered the following Judgment in
The Challenge brought by:
Mr. Minister of Civil Aviation and Mr. Minister of Transport, each in his own capacity, and
both represented by the State Lawsuits Authority …
against:
1. Mr. Legal Representative of the Malicorp Co. Ltd. [address]
2. Mr. Chairman of the Board of the Egyptian Holding Co. for Airports and Air
Navigation in his capacity [address]
3. Mr. Chairman of the Egyptian Co. for Airports in his capacity [address]
in regard of
the arbitration Case No. 382 of 2004 award rendered in the hearing of March 7, 2006 by
CRCICA.
having heard the pleadings, examined the documents, and deliberated;
the file of the case, the documents of the parties, and their claims and counterclaims
have been stated in the judgment of January 5, 2011 whereby the Court ordered that the
case be suspended until the Judgment of the Constitutional Court (SCC) has been
rendered in Case No. 47 of judicial year 31 and pending the ruling upon costs of the case
at stake until the final judgment. As the judgment of January 5, 2011 contained a complete
statement on the facts of the case, the Court refers to the said judgment and gives
briefing as a link between the two judgments.
The two Plaintiffs brought the case aiming to urgently suspend the enforcement of the
award in Case No. 382/2004 pending final judgment regarding the setting aside of the
said award, including all consequent effects, and to order the first defendant to pay all
the costs. The claimants explained their case stating that the now dissolved Egyptian
Authority of Civil Aviation (before its dissolution), had launched a world tender for a BOT
project aiming to establish an airport in Ras Sudr, and invited local and foreign investors
to present their offers in accordance with Law No. 3/1997 which permits granting
concessions of public utilities for the establishment and exploitation of airports and
“pistes d'atterissage.” The invitation to tender had been decided in favor of Malicorp – the
first defendant having submitted the best offer. The agreement was signed on November
1, 2000 and required the concessionaire to establish an Egyptian joint stock company (to
serve as a link) during ninety days of the date of the agreement. The first defendant failed
to establish the said company despite of a summons it was served on May 30, 2001
P 42 warning it of the dissolution of the agreement. The Egyptian Authority of Civil Aviation
was replaced by the Egyptian Holding Company of Civil Aviation which served a summons
on the first defendant giving it a notice of the termination of its agreement. The reasons
for dissolution included: the referral of some of those responsible for civil aviation to the
Cairo Cour d'assises in case No. 14276/2005; it, also, included that the first defendant had
committed a misrepresentation that its capital amounted to £100 million, while it was in
fact two Pounds Sterling; and it committed a forgery of the sheet of commercial register
to support its misrepresentation, pretending that it had agreed with international
companies on the implementation of the project. The two Plaintiffs submitted that the
first defendant lodged the arbitration No. 382/2004 with CRCICA claiming the
compensation of US$513,980,643 and the legal interest thereupon, alleging that it
suffered losses and missed the opportunity of profit. The two Plaintiffs appointed an
arbitrator and submitted their statement of claims. The Arbitral Tribunal rendered the
following award:
1. The Arbitral Tribunal has jurisdiction in respect of all claims arising from the
Concession Contract, and in particular the Claimant's claims in this arbitration
against the Arab Republic of Egypt, and the Egyptian Holding Company for Aviation
and the Egyptian Airports Company;
2. The Parties to the Concession Contract are the Claimant and the Arab Republic of
Egypt. Accordingly, the claims against the Egyptian Holding Company for Aviation
and the Egyptian Airports Company are dismissed;
3. The Concession Contract is an administrative contract in Egyptian domestic law. It is
also an international contract involving a State party, and is subject to the
principles applicable to such contracts;
4. The Concession Contract was void for mistake. The Arbitral Tribunal also recognizes
that the Arab Republic of Egypt had the power to cancel the Concession Contract,
and did so on August 12, 2001;
5. In lieu of reinstatement of its original position prior to the Concession Contract, the
Arab Republic of Egypt shall pay to the Claimant the amount of US$14,773,497 by
way of damages;
6. The Claimant on the one hand and the Respondents on the other shall each bear
one half of the costs and expenses of the arbitration (which total US$366,000.00).
Accordingly, the Respondents are hereby ordered to pay to the Claimant the sum of
(US$147,050.00), being the part of the Respondent's half share of these costs and
expenses already paid by the Claimant. Each shall pay its own legal costs;
7. The Claimant is entitled to interest at the rate of four percent per annum on the
damages from April 28, 2004 until the date of payment, and on the costs from the
date of this Final Award until the date of payment;
8. The Respondents' application for the suspension of the arbitration pursuant to
Article 6 of Arbitration Law No. 27 of 1994 is refused;
9. All other claims and requests are dismissed.
P 43
As the two claimants filed the challenge to set aside this award, they alleged the
following aspects of annulment:
1. The challenge was brought with due process without any defect; that the Cairo Court
of Appeal is the court having jurisdiction to settle the case because the arbitration
under consideration is an international commercial arbitration.
2. The award must be set aside because it has been rendered by an incomplete
tribunal [truncated tribunal]. Article 15/1 of the Arbitration Act No. 27/1994
stipulates that the number of arbitrators must be odd, otherwise the arbitration is
void. Article 21 of the Act provides that if the mandate of an arbitrator ends by
recusal, removal, or withdrawal, or for any other cause, a substitute arbitrator shall
be appointed in accordance with the procedure followed for the previous
arbitrator. As the arbitrator appointed by the claimants withdrew from the Arbitral
Tribunal in the Case No. 382/2004, and advised the Tribunal on February 27, 2006 in
writing of the reasons for his withdrawal and informed it that he would not
participate in the deliberations of the arbitration case until the judgment of the
Court of Administrative Judiciary in Case No. 18628 of the judicial year No. 59
rendered in the hearing of February 19, 2006 has been suspended or set aside,
explaining that any contravention to that judgment would be considered a gross
professional default on his part. Accordingly, the Arbitral Tribunal ought to suspend
the proceedings and instruct the Plaintiffs to appoint another arbitrator. Thus, the
challenged arbitral award was rendered by two arbitrators and therefore must be
set aside.
3. The non-satisfaction of motivation from the Arbitral Tribunal and that it erred in
the applicable law. The concession contract subject to this arbitration, dated
November 1, 2000 was subject to forgery and the result of the corruption of the
public mandate, conspiracy, and assistance in the felony which were the matter of
Case No. 4276/2007 before Cairo Cour d'assises, and this case is still pending. The
owners of the first defendant company are accused in this felony. The subject
matter of the contract has been brought before the penal courts as a matter of
public policy and hence non-arbitrable. The challenged award dismissed the plea
to suspense the arbitral proceedings until the felony has been adjudged; claiming
 that such judgment was not necessary for the settlement of this arbitration. This
decision was an error in law and was non-motivated, as the requested
compensation for the dissolution of the concession contract is subject to a pending
penal case and, thus, there is a preliminary issue that lies outside the competence
of the Arbitral Tribunal.
4. Derogation from the provisions of the law. The competent minister(s) [the Plaintiffs]
did not give their approval to arbitrate, a matter which renders the award baseless.
Article 1 of the Arbitration Act No. 27/1994, as amended by Law No. 9/1997, provides
that in disputes relating to administrative contracts, the agreement to arbitrate
must be approved by the competent minister or by the person who exercises his
competence with regard to public juristic persons. This power may not be
P 44 delegated. Since the Minister of Transportation did not give his express written
approval[ (15) ] to arbitrate as provided in the contract, the arbitration clause is
null and void, and produces no effect with respect of the original competence of the
court which has jurisdiction over such case, i.e. the State Council. In addition, the
administrative judiciary rendered a judgment nullifying the arbitration clause
embedded in the concession contract. This emphasizes the non-competence of the
Arbitral Tribunal either to decide in the subject matter of the dispute, or to give a
valid award in the case, because of its conflict with the administrative judgment.
5. The Arbitral Tribunal did not apply the law agreed upon by the parties, i.e. the
Egyptian law, but, instead, applied the alleged principles and general rules, and it
alleged that the contract was an international contract drafted subject to rules
outside the Egyptian legal system.
6. The challenged arbitral award trespassed the arbitration agreement ad personem
and decided that the two claiming Ministers were among the parties to the
arbitration agreement despite the fact that they were not parties to the arbitration
or to the concession contract.
7. The challenged award was rendered after the term defined by the Egyptian law
(twelve months), in line with the Egyptian Arbitration Act, had lapsed.
8. The arbitral award is a nullity because the lawyer who represented the defendant
had not been admitted to the Egyptian Bar.
9. The challenged arbitral award was rendered in Spain, i.e. outside the seat of
arbitration which is CRCICA.
10. There is a contradiction in the Tribunal's reasoning as it sometimes relied upon
international rules and sometimes on the Egyptian law.
11. The challenged award did not include a copy of the arbitration clause as required
by Article 43/3 of the Arbitration Act.
The Court considered the case as recorded in the hearing minutes, and stayed the
proceedings on January 5, 2011 while awaiting the judgment of the Supreme
Constitutional Court in the Case No. 47 of the judicial year 31. The Supreme Constitutional
Court rendered its judgment in the Case No. 47 of the judicial year 31, regarding the
conflict of jurisdiction, on January 15, 2012, holding that “the court has appointed the
Cairo Court of Appeal to be the Court competent to decide the dispute”; based on the
following … [the Court of Appeal cited the reasoning of the SCC presented above].
The Plaintiffs contended that the arbitrator appointed by them had withdrawn from the
Arbitral Tribunal in the Case No. 382/2004 and sent a letter tithe said Tribunal on
February 27, 2006 stating the reasons for his stepping down, declaring his abstention from
P 45 sharing in the deliberations until the judgment of the Court of Administrative Judiciary
has been suspended or cancelled (Case No. 18628 of the judicial year 59, hearing of
February 19, 2006). The contravention of this judgment on the part of the arbitrator
constitutes a gross professional default. The said Arbitral Tribunal rendered the
challenged award while composed of an even number, rather than an odd number, in
contradiction with the Egyptian Arbitration Act.[ (16) ] The Tribunal also contravened
paragraphs (c) and (h) of article 53 of the Arbitration Law No. 27/1994 which provides that:
Article 53.1
“An action to procure the nullity of the arbitral award is admissible only in the
following cases:
…
(c) If one of the parties to the arbitration was unable to present his defense
because he was not properly notified of the appointment of an arbitrator
or of the arbitral proceedings, or for any other reason beyond its control.
…
(h) if nullity occurs in the arbitral award, or in the arbitral proceedings are
tainted by nullity affecting the award.”
Having said so and since the Egyptian Arbitration Law which is the procedural law
applicable in the case and it stipulates that the number of arbitrators shall be odd
(Article 15/2). The Arbitral Tribunal must not sit with an even number; if the award is
rendered by an even number of arbitrators, it will be tainted with absolute nullity
related to the public policy of the state as it concerns one of the main basic securities of
litigating and arbitrating. The provision remains the same whether the tribunal has been
originally formed of an even number of arbitrators, or was composed of an odd number
 and one of the arbitrators has withdrawn. In addition, Article 21 of the Arbitration Act
provides that, “if an arbitrator's mission is terminated by a decision for his recusal,
discharge or abstention or for any other reason, a substitute shall be appointed to
replace him in accordance with the procedure followed for the selection of the arbitrator
whose mission has been terminated.”
Whereas the arbitrator appointed by the Plaintiffs informed the CRCICA that he had
suspended his participation as arbitrator in all deliberations pertaining to the case at
hand until the judgment of the Court of Administrative Judiciary has been suspended or
cancelled. The Arbitral Tribunal ought to have ceased its deliberation in the case, but as
it did not do so, it violated the provisions of the Arbitration Law. The Court therefore
decided to set aside the challenged award of March 7, 2006 without searching the other
aspects of nullity referred to above. Regarding the expenses, the Court orders the
defendant to pay them in line with Article 184 of the procedural law.
P 46
For the reasons stated above: the Court upheld the challenge in the form; and in the
substance it upheld the nullification of the arbitral award in the CRCICA Case No.
382/2004, in the hearing of the March 7, 2006, and considered the said award to be non-
existent with all the consequences thereof, and ordered the defendant to pay all the
costs.
THE CHAIRMAN OF THE COURT
THE SECRETARY

F Commentary on the Constitutional Court Judgment of January 15, 2012

The former President of the Council of State and the former Chairman of the Supreme
Administrative Court, Chief Justice Dr. Mohamed Amin Abbas El-Mahdi, made a
commentary in the Arab Journal of Arbitration, issue No. 19, published in January 2013,
saying that:
“… Despite the fact that the administrative contracts have elements
acknowledged by the jurists and the jurisprudence, things are sometimes
complicated and lead to controversies as to the correct legal qualification of
such contracts. For example, there is the Supreme Constitutional Court
judgment regarding the conflict of jurisdiction of January 15, 2012. This Court
emphasized the civil character of the legal relationship between the parties
and settled the conflict of jurisdiction in favor of the Cairo Court of Appeal. The
criterion determining an administrative contract views it from a substantive
point of view and recognizes its administrative character if the contract
follows the methods and the means of public law by using clauses unfamiliar
in civil contracts, clauses which are exceptional and exorbitant in favor of the
administration. This Court might not be content with the words of the parties,
but it has the duty to apply the relevant provisions in light of the real
intention of the parties. Accordingly, the Malicorp case relates to a public
utility for the construction of an airport; it is also a “nominative administrative
contract.” [ (17) ]

G The ICSID Phase

In 2011, new developments have took place. The most important was the ICSID Award of
February 7, 2011, of which we highlight the following excerpts beginning with paragraph 45
of the said award [the Author]:
45. On May 31, 2004, the Arbitral Tribunal set up under the aegis of the CRCICA
(hereinafter the “CRCICA Arbitral Tribunal”) was constituted. It was made up of Dr. El
P 47 Ahdab, co-arbitrator appointed by the Claimant, Mr. Gabr, co-arbitrator jointly
appointed by the respondents and Maître Bernardo Cremades, as Chairman of the
Arbitral Tribunal appointed by the two co-arbitrators (Respond. 08.01.2010, No. 149;
Claim. 23.07.2009, No. III-4.1, p. 17; Claim. 23.10.2009, No. III-4.1, p. 19).
46. On July 15, 2004, the Minister of Civil Aviation applied for a stay of the arbitration
proceeding as a criminal complaint had been lodged with the Egyptian courts. The
Minister complained of fraudulent practices by the claimant and by civil servants with
the Egyptian Directorate General of Civil Aviation (Exhibit C-37, p. 9). On September 19,
2004, the CRCICA Arbitral Tribunal refused to stay the proceedings and decided to
continue with its examination of the case (reference in Exhibit C-37, p. 9; Claim.
23.07.2009, No. III-4.1.4, p. 19; Claim. 23.10.2009, No. III-4.1.4, p. 22).
47. On December 19, 2004 the first hearing in the CRCICA arbitration proceedings was held
(Respond. 08.01.2010, No. 150). The CRCICA Arbitral Tribunal set the timetable for the
proceedings in an order, which it modified on February 3, 2005.
48. On February 19, 2005, Malicorp filed its Statement of claim (reference in Exhibit C-37,
p. 24). It alleged that the respondents had wrongfully terminated the Contract thereby
entitling Malicorp to claim damages for the losses sustained (Respond. 08.01.2010, No.
152).
49. On May 21, 2005, the respondents filed their Statement of Defense. In it, they asserted
that Malicorp had breached its contractual obligations, that it had acted in bad faith and
 that the Contract was null and void due to the production of a falsified extract from the
Companies Register (Respond. 08.01.2010, No. 153).
50. On July 26, 2005, Malicorp filed its Reply (“Claimant's Reply regarding the claim,”
reference in Exhibit C-37, p. 24), reiterating its submissions and arguments with respect to
the liability of the respondents for the damage sustained (Respond. 08.01.2010, No. 154).
51. On September 21, 2005, the respondents filed their Rejoinder (“Rejoinder in Counter
Evidence of the Republic to the Claimant concerning the Claim”; reference in Exhibit C-37,
p. 10).
52. On February 11 and 12, 2006, the parties submitted their post-hearing submissions
(reference in Exhibit C-37, p. 10).
53. On February 19, 2006, the Council of State Administrative Court of Cairo held that the
arbitration clause contained in the Contract was void, and ordered the CRCICA Arbitral
Tribunal to suspend the arbitration proceedings (reference in Exhibit C-37, p. 12;
Respond. 08.01.2010, No. 156). That decision followed the filing by the Arab Republic of
Egypt of a claim for the arbitration clause to be ruled null and void (Claim. 23.07.2009, No.
III-4.1.1, p. 18; Claim. 23.10.2009, No. III-4.1.3, p. 21).
54. On November 15, 16, and 17, 2005, the CRCICA Arbitral Tribunal held a hearing with the
parties (reference in Exhibit C-37, p. 11).
55. On February 25, 2006, Malicorp filed its Post-Hearing Rejoinder (Respond. 08.01.2010,
No. 157); the respondents filed theirs on February 25 and 27, 2006 (Respond. 08.01.2010,
No. 157).
P 48
56. On February 27, 2006, Mr. Gabr, one of the co-arbitrators, gave notice by letter to Mr.
Mohamed Aboul Einein, Director of the CRCICA, that he had decided to suspend his
participation in the CRCICA proceedings because of the decision of the Council of State
Administrative Court of Cairo finding the arbitration clause null and void (cf. above, No.
53; Respond. 08.01.2010, No. 158).
57. Notwithstanding that resignation, the CRCICA Arbitral Tribunal went ahead with the
proceedings; it stated that it was doing so in reliance on (Egyptian) Arbitration Law No.
27/1994 (Claim. 23.07.2009, No. III-4.1.3, p. 19; Claim. 23.10.2009, No. III-4.1.3, p. 21).
58. On March 7, 2006, the CRCICA Arbitral Tribunal issued an arbitral award (Respond.
08.01.2010, No. 163; R-2, p. 474). It held first of all that the arbitration agreement in the
Contract was binding on the Republic (Exhibit C-37, Section 59). It went on to hold that the
Republic had been the victim of a fundamental error in signing the Contract in that it had
wrongly believed that the capital registered and paid by Malicorp was 100 million
pounds sterling and that for this reason the Contract was void. It therefore dismissed the
submissions of the Claimant claiming damages for the losses caused by the termination
of the Contract.
It nevertheless decided to order the respondents to reimburse Malicorp for costs,
invoices, and the salaries of its employees. In this regard, it ordered the respondents to
pay Malicorp the sum of 14,773,497 dollars,[ (18) ] with interest (Respond. 08.01.2010, No.
164; Exhibit C-37, sections 84 et seq.; Claim. 23.07.2009, No. III-4.1, p. 17; Claim. 23.10.2009,
No. III-4.1, p. 20). According to the Respondent, in doing so, it relied on a provision of the
Egyptian Civil Code to which the parties had made no reference during the proceedings
(Respond. 08.01.2010, No. 164).
59. The respondents have applied to have the CRCICA arbitral award set aside (Respond.
08.01.2010, No. 166). The Claimant has not applied for review and has not joined in the
application for review filed by the respondents. This Arbitral Tribunal has not been
informed of the outcome of this application to set aside, which appears to be still
pending.
3.1.2 The attachment and Enforcement Proceedings
60. On August 9, 2006, one of the Vice-Presidents of the Paris Tribunal de Grande Instance
issued an ex parte order for the exequatur of the CRCICA arbitral award on the
application of Malicorp (Claim. 23.07.2009, No. III-4.2.1, p. 21; Claim. 23.10.2009, No. III-
4.2.1, p. 23; Respond. 08.01.2010, No. 167). On October 9, 2006, the French enforcement
order was served on the Respondent's Embassy in Paris (Claim. 23.07.2009, No. III-4.2.1, p.
21; Claim. 23.10.2009, No. III-4.2.1, p. 23; Respond. 08.01.2010, No. 169).
61. On October 10, 12 and 13, 2006, assets of the Republic in the possession of Banque
P 49 Misr, UBAF and LCL were attached tithe application of Malicorp (Claim. 23.07.2009, No.
III-4.2.2, p. 21; Claim. 23.10.2009, No. III-4.2.2, p. 23; Respond. 08.01.2010, No. 168).
62. On October 16, 2006, the Republic appealed against the enforcement order issued on
9 August 2006 (Claim. 23.07.2009, No. III-4.2.1, p. 21; Claim. 23.10.2009, No. III-4.2.1, p. 23;
Respond. 08.01.2010, No. 170).
63. On October 20, 2006, the Republic applied to the enforcement judge of the Paris
Tribunal de Grande Instance to lift the attachment orders; it principally argued State
immunity from execution and the absence of risk with respect to its solvency (Claim.
23.07.2009, No. III-4.2.2, p. 21; Claim. 23.10.2009, No. III-4.2.2, pp. 23–24).
64. On October 31, 2007, the enforcement judge of the Paris Tribunal de Grande Instance
 held a hearing. The Republic through its various agencies and bodies proposed a
compromise solution to Malicorp: the delivery of a surety bond by Banque Misr in
exchange for Malicorp's agreement to lift the attachment orders and its undertaking not
to take any steps to enforce the CRCICA arbitral award (either in France or abroad) (Claim.
23.07.2009, No. III-4.2.2, p. 21; Claim. 23.10.2009, No. III-4.2.2, p. 24).
65. The agreement initiated at the hearing of October 31, 2007 was finalized on November
16, 2007 after Banque Misr proposed and delivered the original of the surety bond on
behalf of the Republic in favor of Malicorp. Malicorp thereafter went before the
enforcement judge to have the contested attachments lifted (Claim. 23.07.2009, No. III-
4.2.2, p. 21; Claim. 23.10.2009, No. III-4.2.2, p. 24).
66. On June 19, 2008, the Paris Court of Appeal granted the appeal filed by the Republic
against the decision of the enforcement judge and dismissed the application for
exequatur (Claim. 23.07.2009, No. III-4.4, p. 24; Claim. 23.10.2009, No. III-4.4, p. 27). It based
its decision on one of the four arguments of the Respondent: it ruled that the issuing of an
arbitral award by an arbitral tribunal on the basis of a provision that had not been
previously submitted to the parties amounted to a denial of justice. It accordingly found
that it was superfluous to examine the other arguments (Respond. 08.01.2010, No. 171).
67. On August 22, 2008, Malicorp lodged its first pourvoi en cassation against the decision
of the Paris Court of Appeal, arguing the lack of sufficient reasons for the decision of June
19, 2008 (Respond. 08.01.2010).
68. On September 16, 2008, the Respondent attempted to serve the judgment of the Paris
Court of Appeal at the address in England that Malicorp is and was using, but the English
authorities allegedly stated that it was not possible to do so at that address (Respond.
08.01.2010, No. 173). According to the Respondent, this attempted service amounted to
valid service. The Claimant disputes this (ibidem).
69. On March 11, 2009, the two Parties were informed that Malicorp's first pourvoi had
been held inadmissible because it was procedurally flawed (Respond. 08.01.2010, No.
174); Malicorp had, indeed, omitted to append to its pourvoi a copy of the judgment
appealed against (Respond. 08.01.2010, No. 172).
70. On March 13, 2009, Malicorp lodged a second pourvoi en cassation (Respond.
P 50 08.01.2010, No. 174). Following the main hearing held by the present Arbitral Tribunal,
it was informed by the Parties (see letters from Maître Yassin of July 3, 2010 and Maître
Webster of July 12, 2010) that the Cour de cassation had dismissed the pourvois in a
decision of June 23, 2010; it considered that the CRCICA Arbitral Tribunal had violated the
adversarial principle by basing its decision on provisions of the Egyptian Civil Code that
had not been pleaded by the parties. It found, accordingly, “que la sentence ne pouvait
être reconnue ni exécutée en France.”
3.2 The Criminal Proceedings before the Cairo Court of Assizes
71. In parallel to the CRCICA arbitration proceedings, criminal proceedings were
instituted against individuals directly or indirectly connected with Malicorp. The
information in the possession of this Arbitral Tribunal is based essentially on statements
made in the written and oral pleadings. Here, too, such information has only an indirect
bearing on these arbitration proceedings.
72. On August 17, 2005, the Public Prosecutor's office issued an order remanding the case
to the Cairo Court of Assizes (reference in Exhibit C-37, p. 25). The order referred to various
unlawful and fraudulent acts committed by individuals connected with the Claimant, as
well as certain Egyptian civil servants involved in examining the bid that the Claimant
had submitted (reference in Exhibit C-37, p. 25).
A total of ten individuals were remanded for trial (Respond. 08.01.2010, No. 141): five
Egyptian civil servants, in particular, were charged with unlawful taking of interest and
various unlawful acts in connection with the conclusion of the Contract. Five shareholders
or alleged shareholders of Malicorp were charged, in particular, with having falsified the
Companies Register with respect to Malicorp: they were Messrs. Mahmoud Chaker
Ibrahim, Azmi Mahmoud Al-Taraï, Assaed Mohamad Aboul Ela, Abdel Hamid Abdel Malek
and Abdel Khaleq Mersal.[ (19) ]
The Cairo Court of Assizes also tried the five accused on charges of forgery of private
documents (Article 215 of the Egyptian Penal Code) since that offence was connected to
the offences before the Court in the principal case, although the normal procedure would
have been to remand the matter to the Criminal Court (Claim. 23.07.2009, No. III-4.1.4, p.
19; Claim. 23.10.2009, No. III-4.1.4, p. 22).
73. On September 2, 2006, the Cairo Court of Assizes rendered its verdict: Messrs. Chabli
and Mercer were found guilty of forgery and fraud, and sentenced principally to three
years' imprisonment (Exhibit R-1, pp. 85–88, Exhibit C-40; Respond. 01.07.2009, No. 30;
Respond. 08.01.2010, No. 144). They appealed but were unsuccessful (Respond. 01.07.2009,
No. 32.).
…
95. For the Arbitral Tribunal, these submissions require it to examine the issues in the
following order:
– The jurisdiction of the Arbitral Tribunal (B below); and if it finds it has jurisdiction,
 – The alleged breaches of the Agreement (C below); and in any event,
P 51
– The determination and allocation of the costs and expenses of the arbitration (D
below).
B The Jurisdiction of the Arbitrl Tribunal
1 The Issue
96. According to the Respondent, the Arbitral Tribunal has no jurisdiction to decide this
case, but the Claimant disputes that.
97. To this end, the Respondent argues:
“The Respondent respectfully submits that that [denial of jurisdiction by
virtue of the principle of good faith] is the course of action that this Tribunal
should adopt.”
The Claimant, in turn, requests the Arbitral Tribunal to
“Déclarer recevable la société Malicorp Ltd en son action, et dire que le litige
soumis par la société Malicorp contre la République Arabe d'Egypte entre dans la
compétence du CIRDI.”
In order to decide this issue, the Arbitral Tribunal will analyze the conditions required for
the jurisdiction of the Arbitral Tribunal in general, and in particular whether this is a
dispute about a protected investment, a point on which the Parties' positions differ.
2 The Decision of the Arbitral Tribunal
98. It is not disputed that an arbitral tribunal seized of an objection to jurisdiction not
only has the right but the obligation to rule on its own jurisdiction (the “compétence-
compétence”). This is expressly confirmed in Article 41(1) of the ICSID Convention, which
provides that: “The Tribunal shall be the judge of its own competence.”
In this respect, the Parties, and the Respondent in particular, have centered all their
arguments around the issue of the alleged fraud and its influence on the jurisdiction of
the Arbitral Tribunal, without really discussing the other conditions on which such
jurisdiction depends. The Arbitral Tribunal must nevertheless satisfy itself that all the
conditions are in fact fulfilled. That jurisdiction depends on the instruments on which it is
based, making it necessary to begin with a presentation of these.
2.1 The Bases of the Tribunal's Jurisdiction
99. The Claimant bases its claim on two instruments: Article 8 of the Agreement and
Article 25 of the ICSID Convention.
It is true that the Contract also contains a special provision dealing with dispute
resolution (Article 21.3: “Resolution of Disputes”). This, however, covers only arbitration
under private international law to resolve strictly contractual actions. The Claimant
relied on this clause in order to bring an action under the auspices of the CRCICA before
the CRCICA Arbitral Tribunal. It is not directly in point here since that system does not
apply to these proceedings.
P 52
100. a) Article 8 of the Agreement. It is entitled “Reference to International Centre for
Settlement of International Disputes.” In the present context, only the first paragraph is
relevant. It is worded as follows:
“Article 8. Reference to International Centre for Settlement of Investment
Disputes
1.) Each Contracting Party hereby consents to submit to the International
Centre for the Settlement of Investment Disputes (hereinafter referred to as
‘the Centre’) for settlement by conciliation or arbitration under the Convention
on the Settlement of Investment Disputes between States and Nationals of
Other States opened for signature at Washington on March 18, 1965 any legal
dispute arising between that Contracting Party and a national or company of
the other Contracting Party concerning an investment of the latter in the
territory of the former. Such a company of one Contracting Party in which
before such a dispute arises the majority of shares are owned by nationals or
companies of the other Contracting Party shall in accordance with Article 25(2)
(b) of the Convention be treated for the purposes of the Convention as a
company of the other Contracting Party. If any such dispute should arise and
agreement cannot be reached within three months between the parties to this
dispute through pursuit of local remedies, through conciliation or otherwise,
then, if the national or company affected also consents in writing to submit
the dispute to the Centre for settlement by conciliation or arbitration under
the Convention, either party may institute proceedings by addressing a
request to that effect to the Secretary-General of the Centre as provided in
Articles 28 and 36 of the Convention. In the event of disagreement as to
whether conciliation or arbitration is the more appropriate procedure the
 national or company affected shall have the right to choose.
Article 8. Renvoi devant le Centre International pour le règlement des différends
relatifs aux investissements
1) Chaque Partie contractante accepte de soumettre au Centre international
pour le règlement des différends relatifs aux investissements (ci-après
dénommé ‘le Centre’) pour le règlement par voie de conciliation ou
d'arbitrage en vertu de la Convention pour le règlement des différends relatifs
aux investissements entre Etats et ressortissants d'autres Etats, ouverte à la
signature à Washington le 18 mars 1965 tout différend de caractère juridique
opposant cette Partie contractante à un ressortissant ou à une société de
l'autre Partie contractante au sujet d'un investissement de ce ressortissant ou
de cette société sur le territoire de la première Partie contractante. Une
société de l'une des Parties contractantes dans laquelle avant qu'un tel
différend ne se produise des ressortissants ou des sociétés de l'autre Etat
contractant détenaient la majorité des actions sera conformément à l'alinéa b
du paragraphe 2 de l'article 25 de la Convention assimilée aux fins de la
Convention à une société de l'autre Partie contractante. Dans le cas où un tel
différend se produit et ne peut être réglé d'un commun accord dans un délai
de trois mois par les Parties au différend par les voies de recours internes, par
la conciliation ou tout autre moyen, si le ressortissant ou la société en cause
consent également par écrit à soumettre le différend au Centre
P 53 international pour le règlement des différends relatifs aux investissements à
une conciliation ou à un arbitrage en application de la Convention, chaque
Partie peut engager une action en adressant une requête à cet effet au
Secrétaire général du Centre comme le prévoient les articles 28 et 36 de la
Convention. En cas de désaccord au sujet de la question de savoir si la
conciliation ou l'arbitrage constitue la procédure la plus appropriée, le
ressortissant ou la société en cause aura le droit de trancher.”
101. b) Article 25 of the ICSID Convention. Article 8(1) of the Agreement expressly makes
reference to the procedure established by the ICSID Convention for the resolution of
disputes concerning investments. The relevant provision is Article 25(1), which is worded
as follows:
“Article 25
(1) The jurisdiction of the Centre shall extend to any legal dispute arising
directly out of an investment, between a Contracting State (or any constituent
subdivision or agency of a Contracting State designated to the Centre by that
State) and a national of another Contracting State, which the parties to the
dispute consent in writing to submit to the Centre. When the parties have
given their consent, no party may withdraw its consent unilaterally.”
102. These two texts, which are clearly related, make the jurisdiction of an arbitral
tribunal subject to a certain number of conditions, most of which – with the exception of
one that will be discussed later – are not in dispute in the present case:
a) The consent of the other Contracting State. The respondent State must have
consented in writing to submit the dispute to the Centre. By the first sentence of
Article 8 of the Agreement, Egypt expressly and validly gave its consent to be
subject to such an arbitration proceeding.
b) The consent of the investor. The investor intending to take the action must also have
consented in writing. Malicorp gave its consent, at the latest, by instituting this
proceeding.
c) The nationality of the investor. The investor must be a “national of the other
Contracting State.” Malicorp is a company incorporated “under the law in force in
[a] part of the United Kingdom” (Article 1(d) of the Agreement) and therefore a
company of the other Contracting Party.
d) A legal dispute. The dispute must be one that is legal and not political or other. This
point is not in issue.
e) Relating to an investment. This point is not discussed by the Parties as such, but only
from the standpoint of its relationship to the requirements of good faith. The
Arbitral Tribunal will return to this later.
f) In the territory of the other Contracting State. The investment alleged to have been
made by the party bringing the action must have been made in the territory of the
other Contracting State. This is the case here with respect to the investments
Malicorp claims to have made, since they were intended for the construction and
operation of the Ras Sudr Airport in Egypt.
P 54
g) An alleged violation of the Treaty. The party bringing the action must allege that it
was the victim of a violation of the underlying Treaty. In the present case, Malicorp
alleges that Egypt breached the obligations prescribed in Articles 2 (“Promotion
and protection of investments”) and 5 (“Expropriation”) of the Agreement (Claim.
21.10.2008, pp. 8 et seq.; Claim. 23.10.2009, pp. 28 et seq.), an allegation that cannot
at this stage be rejected out of hand, subject to what will be said later with regard
to the investment.
 103. As to this, the Arbitral Tribunal nevertheless wishes to point out that the question
might seriously have been asked (1) whether this was not a purely contractual action, not
eligible for the special protection arising from the Agreement and above all, (2) whether
the decision given on that basis by the CRCICA Arbitral Tribunal is not an obstacle to
these proceedings.
a) The basis for the claims that the Claimant raises in these proceedings rests solely, in
the final analysis, on a breach of the Contract, which the Claimant alleges the
Respondent rescinded without cause. Although entered into with the State, that
Contract purports to be a purely civil law contract (Article 21.1. “…is deemed to be a
civil law contract”); it is subject to Egyptian civil law (“… governed by the civil laws
of the Republic of Egypt”) and contains an arbitration clause. It was, indeed, on that
basis that the Claimant took action against Egypt by instituting the CRCICA
arbitration proceedings as provided in the Contract and it was on that basis that
the CRCICA Arbitral Tribunal decided the case.
The claims raised by the Claimant in both proceedings are the same since, in both
cases, although for different reasons, it relies on what in its opinion constitutes an
unjustified rescission of the Contract. The reasons given by the Respondent for
deciding to rescind the Contract do not alter the fact that, for the Claimant, even in
such a case, there would be a breach of contract.
Throughout the hearings, Counsel for the Claimant furthermore expressly stated that
the amounts that it might obtain under the CRCICA Arbitral Tribunal award would be
deducted from those it was aiming to obtain in the present proceedings (Transcript
19/20.04.10, p. 68/8–15).
b) The commercial arbitration proceeding, in other words under private international
law, was completed by the CRCICA Arbitral Tribunal; the Claimant partially
succeeded since the Republic was ordered, jointly with the two other official bodies
sued, to pay it compensation of approximately 14 million dollars. By contrast with
the Respondent, it did not appeal that award, nor join in the appeal filed by the
Republic. It follows that, for the Claimant, that award was final. It moreover
undertook the necessary steps to have it enforced in at least one country.
The authority as res judicata of a decision given by another competent jurisdiction
between the same parties, concerning the same claims and based on the same
factual and legal bases, prohibits a party from reintroducing a new action that is
similar on all points.
P 55
c) The protection afforded by investment treaties does not necessarily cover purely
contractual claims where the parties to the contract have agreed on another clause
granting jurisdiction, provided the parties are the same (SGS Société Générale de
Surveillance SA v. Philippines (ICSID Case No. ARB/02/6, Decision on Jurisdictional
Objections of 29 January 2004 in 8 ICSID Rep. 518 (2005)); Joy Mining Machinery Ltd. v.
Egypt (ICSID Case No. ARB/03/11, Award of 6 August 2004 in 132 Journal du droit
international 163 (2005)); LESI S.p. A and Astaldi S.p. A v. Algeria (ICSID Case No.
ARB/05/03, Award of 12 July 2006 published on www.icsid.worlbank.org)). In
principle, it is up to the party claiming to have been injured by the breach of a
contract to pursue its contracting partner using the avenues laid down for this
purpose. So long as a procedure of this type exists for protecting investment, it is
not possible to resort to the special methods provided for by treaty if the
commercial route, be it arbitration or the local courts, enables all submissions and
arguments to be exhausted. It is hard to see how an investment treaty would be
breached by the mere fact of a breach of contract, as long as the control
mechanisms put in place by that contract are functioning normally. Investment
arbitration was not set up to provide a substitute for contracting partners who
refrain from following the ordinary procedure by which they have agreed to be
bound, nor as a means of appeal for those who have failed to obtain satisfaction (or
full satisfaction) by using that procedure. In order for a breach of contract to serve
as the basis for jurisdiction of a tribunal in an investment arbitration, such breach
must at the same time, and for reasons inherent in the investment protection treaty
itself, amount to a violation of that treaty, one that could not be resolved by using
the ordinary procedure. Among the matters falling within the scope of the
jurisdiction ratione materiae of an arbitral Tribunal in an investment case are acts
by the host State in the exercise of its public powers (“actes de puissance publique”)
that deprive the foreign investor of its rights in violation of the guarantees offered
by the Agreement. For example, a decision of the host State to which a commercial
arbitral Tribunal is bound to give effect, or a rule enacted by the host State which
that Tribunal must apply, can be brought before a Tribunal in an investment
arbitration as violating the substantive guarantees offered by the investment
treaty.
It is true that this statement must be qualified:
– The parties to a BIT may agree that all the disputes an investor might raise
against the host State must be submitted to the Tribunal (the “umbrella
clause”). Here, again, the claimant must make its choice at the outset; it
cannot first attempt a contractual procedure only to resort to the special
procedure if it is not satisfied with the result, which is precisely the situation
that has arisen in the present case.
In order to come within the jurisdiction of this Arbitral Tribunal, the claims the
 Claimant intends to derive from a breach of the Contract must be based on
the provisions of the Agreement. If and to the extent that such claims are
based on breach of the contractual obligations to which the host State agreed
P 56 within the meaning of the umbrella clause, such claims cannot invalidate
the operative conclusions of the CRCICA award (in particular as to the voiding
of the Contract). That Award decided the contractual claims of the parties to
the Contract, including the claims of and against the host State to the extent
that it was acting in its capacity as party to the Contract. By virtue of the
principle whereby a party may not contradict itself, and the authority of res
judicata, the Claimant cannot at the same time both invoke a breach of the
Contract on the basis of the Agreement and seek enforcement of the
commercial award on the basis of the arbitration clause.
– The reasoning would also be different if the investor pursued the host State on
grounds based not on breach of contract, but on other acts: refusal by the
State party to the contract to submit to the contractual procedure, the
conditions under which the commercial proceedings were conducted, or
obstacles placed by the host State in the way of enforcement of the
commercial decision. No such acts have been alleged by the Claimant in the
present case.
d) The question might have been one for serious discussion in the present case, but
the Arbitral Tribunal refrains from doing so for the following reasons:
– At no time has the Republic availed itself of this objection. Moreover, in the
CRCICA arbitration proceedings it firmly opposed arbitration as provided for
in the Contract, a procedure whose validity it disputed; it appealed the
decision of the CRCICA Arbitral Tribunal finding it had jurisdiction and won the
case before the Egyptian state courts on first appeal, though that is the
subject of a review currently (apparently) still pending before the Supreme
Court. The inevitable conclusion, therefore, is that by such attitude the
Respondent has rejected recourse to the avenues provided for in the Contract.
For the Arbitral Tribunal, this raises a degree of uncertainty concerning the
outcome of the commercial procedure, which makes it acceptable for the
party claiming to have been injured to use the remedies afforded by the
Agreement. There can be no question, on the other hand, of reopening the
commercial proceedings.
– It is not for this Arbitral Tribunal to rule on the validity of the CRCICA
arbitration award; it has not been asked to do so, and nor could the
Respondent be held liable for a decision made by an autonomous Tribunal.
The Claimant has raised no such argument. It has waived any attempt to have
the award set aside, but has accepted its conclusions and is seeking to have it
compulsorily enforced. The fact that, to date, it has not been successful before
a national court, does nothing to change that.
Nevertheless, to take account of the fact that the CRCICA award has been criticized
by the Respondent, this Tribunal shall later re-examine, in the context of the claim
based on the umbrella clause, the conclusions reached by the CRCICA Arbitral
Tribunal in its award.
P 57
104. Nor has the Respondent raised any objection concerning the procedure that was
followed, in particular in relation to the requirement in Article 8 of the Agreement for a
preliminary process of informal settlement. In the light of the proceedings that have
taken place, it is moreover hard to imagine that such a measure would have produced a
solution.
105. From this standpoint the only issues to be examined – but they are central – concern
the notion of an investment dispute (below, 2.2) and above all, the objection based on
breach of the principle of good faith (below, 2.3).
2.2 Is There a Dispute Arising out of an Investment?
106. The question whether there is an investment protected by the Agreement is one, in
principle, for the examination of the merits of the case. However, in order to determine
the scope of the jurisdiction ratione materiae of the Arbitral Tribunal, a determination
must be made as to whether the dispute, in particular as delimited by the Claimant's
submissions, relates to such an investment. The first question therefore depends on the
definition given to the “investment” that must be the subject of the dispute.
107. Even though the point is not undisputed, in order for a proceeding based on breach
of a treaty to be admissible, the investment to which the dispute relates must pass a
double test (also known as the “double keyhole approach” or “double-barrelled test”; see
in this regard C. Schreuer, The ICSID Convention, A Commentary, 2nd Ed., 2009, at Article
25 nos. 122 et seq. and the references). It must in practice correspond:
– on the one hand, to the meaning given to the term by the treaty, which defines the
framework of the consent given by the State, and also
– on the other, to the meaning given in the ICSID Convention, which determines the
jurisdiction of the Centre and the arbitral tribunals acting under its auspices.
108. a) Article 1(a) of the Agreement gives the following definition of an investment:
 “‘Investment’ means every kind of asset and in particular, though not
exclusively, includes:
i) movable and immovable property and any other property rights such as
mortgages, liens or pledges;
ii) shares, stock and debentures of companies or interests in the property of
such companies;
iii) claims to money or to any performance under contract having a financial
value;
iv) intellectual property rights and goodwill;
v) business concessions conferred by law or under contract, including
concessions to search for, cultivate, extract or exploit natural resources.”
This definition broadly corresponds to those found in numerous bilateral agreements, in
particular Article 1 of the United Kingdom's Model Agreement (cf. Schreuer, op. cit., No.
141).
P 58
This definition does not so much stress the contributions made by the party acting, as the
rights and assets that such contributions have generated for it. In reality, the wording of
other provisions of the Agreement clearly presupposes that there have been
contributions, in particular Article 2(1), which makes it an obligation for each Party (to the
Agreement) to “[encourage] and create favorable conditions for nationals or companies of
the other Contracting Party to invest capital in its territory…” The definition given by
Article 1 seems directly related to the measures a State can take to jeopardize them, in
particular by expropriation.
109. b) Article 25 of the ICSID Convention, on the other hand, contains no definition of the
notion. The drafters intentionally refrained from doing so in order to leave the maximum
freedom for its application in practice (see Schreuer, op. cit., nos. 113 et seq.).
A number of arbitral tribunals have suggested definitions, by reference, in particular, to
the criteria enumerated in the Salini v. Morocco decision (ICSID Case No. ARB/00/4,
Décision sur la compétence, 23 July 2011, para. 3 in 129 Journal du droit international 196
(2002); see, e.g., Schreuer, op. cit., nos. 152 et seq.). Consequently, in its widest, albeit
disputed, meaning, there must be (i) a contribution, (ii) of a certain duration, (iii) of a
nature such as to generate returns, (iv) presenting a particular risk, and (v) such as to
promote the economic development of the host country. Such criteria are not at all
absolute and must be regarded as attempts to pin down the notion.
110. At first blush, the two definitions do not overlap since they come from different
perspectives. In the opinion of the Arbitral Tribunal these two aspects are in reality
complementary. Indeed, the notion of investment must be understood from the
perspective of the objectives sought by the Agreement and the ICSID Convention. They
are there to “promote” investments, that is to say, to create the conditions that will
encourage foreign nationals to make contributions and provide services in the host
country, but also, and to that end, to “protect” the fruits of such contributions and
services. These objectives come from the Preamble to the ICSID Convention, which
acknowledges, on the one hand, “the role … of international private investments” in
“international cooperation for economic development,” but which in parallel enshrines
the need to develop appropriate mechanisms for dispute resolution. The objective of the
Agreement is also to pursue “the encouragement and reciprocal protection …of such
investments” for the “stimulation of business initiative” and to “increase prosperity in
both States” (preamble). The two aspects are thus complementary. There must be
“active” economic contributions, as is confirmed by the etymology of the word “invest,”
but such contributions must “passively” have generated the economic assets the
instruments are designed to protect.
Both aspects are reflected in the two underlying texts, but in a complementary manner.
Clearly Article 1(a) of the Agreement emphasizes the fruits and assets resulting from the
investment, which must be protected, whereas the definitions generally used in relation
to Article 25 of the ICSID Convention lay stress on the contributions that have created
such fruits and assets. It can be inferred from this that assets cannot be protected unless
they result from contributions, and contributions will not be protected unless they have
actually produced the assets of which the investor claims to have been deprived.
P 59
111. In the present case, both aspects exist, but in differing proportions:
– It is not disputed that under the Contract the Claimant benefited from a long-term
concession that could have generated significant returns, just as it is undisputed
that the Grantor prematurely ended that Contract, thereby depriving the Claimant
of the revenues it could have made. This is not the place to discuss whether that
contract was valid or whether the termination was justified; the Arbitral Tribunal
will return to that later. For the Claimant, the loss allegedly represented tens or
even hundreds of millions of dollars.
– It is also not disputed that the relations of the Parties ended very rapidly without
the Concessionaire having actually made any significant contributions.
Undoubtedly it incurred expenses in preparing its bid and negotiating the Contract;
 it is also possible that it took other steps thereafter. Neither the file nor the
pleadings mention this, but the decision of the CRCICA Arbitral Tribunal takes it into
account. Nevertheless, there is nothing per se to prevent the view that the long-term
contractual commitment of a party to thereafter perform services fulfilling
traditional criteria also amounts to a contribution. It was envisaged that the
construction alone would entail costs in excess of 200 million dollars, that the work
and most of all the operation of the airport would continue for several years, that
the investor would reap profits from it that it estimates in these proceedings at
several hundred million dollars, that the project involved risk and that by its nature
and size it would contribute to the development of the region's tourism and
economy.
In other words, if proved, the expropriation concerns the expectations from a contract
which, although signed, had not yet been performed in any way but which contained a
basic commitment.
112. If one keeps to the definition given in Article 1 of the Agreement, it appears that the
conditions of that definition are fulfilled. According to its statements, the Claimant is
indeed claiming “assets,” in particular “claims” or “any performance under contract
having a financial value” (iii), as well as asserting to have been deprived of a business
concession conferred on it by law or under contract and which would have contributed to
Egypt's economic development (v).
From that standpoint, the necessary inference is that the condition is fulfilled, in spite of
the fact that no mention is made of the underlying contributions.
113. The contribution aspect is, however, regularly mentioned in the definitions suggested
in relation to Article 25 of the ICSID Convention. There has to have been a contribution.
The requirement appears reasonable since the basic objective is, indeed, to encourage
the foreign national to take the risk of performing services in the host country. It is true
that the protection will thereafter extend to the assets thus created by the contribution
in the form of property, rights or claims. It will be admitted, therefore, that the host State
also intended to commit to arbitrate disputes involving the type of contribution it
wanted to encourage by entering into the Agreement.
In the case of a contract, it has been rightly held that the costs incurred during
P 60 negotiations with a view to concluding a contract do not constitute an investment if in
the end the State finally refuses to sign it (cf. Schreuer, op. cit., Article 25, nos. 175 et seq.).
The situation in the present case is different since the Contract was indeed signed (see in
support PSEG v. Turkey, ICSID Case No. ARB/02/5, Award of January 19, 2007, para. 304,
published on http://icsid.worldbank.org; and Schreuer, op. cit., ad. Article 25, No. 179). It
is true that Malicorp does not appear to have performed many services in connection
with it. Nonetheless, the fact of being bound by that Contract implied an obligation to
make major contributions in the future. That commitment constitutes the investment; it
entails the promise to make contributions in the future for the performance of which that
party is henceforth contractually bound. In other words, the protection here extends to
deprivation of the revenue the investor had a right to expect in consideration for
contributions that it had not yet made, but which it had contractually committed to
make subsequently.
114. For these reasons, the Arbitral Tribunal accepts that the dispute arises out of an
investment. Thus, at the stage of deciding on jurisdiction, there is no need to examine
whether the Contract that constitutes the investment was validly rescinded, with the
result that there was, ultimately, no actual investment; that issue belongs specifically to
the merits of the case.
2.3 The Question of the Alleged Breach of the Principle of Good Faith
115. The second issue in this context is linked, in part, to the statement just made. It
consists of verifying whether the Arbitral Tribunal would still have jurisdiction in the
event the investor were seeking protection in a manner that was contrary to the principle
of good faith.
The crux of the arguments put forward by the Respondent rests on this aspect. According
to the Respondent, compliance with good faith is an essential principle of international
law, which principle extends to the investment protection regime. It infers from this that
such protection excludes the protection of investments made in violation of this
principle. In the present case, it argues, the Respondent entered into the Contract on the
basis of a forgery. In support of its thesis, it cites two recent decisions (Respond. 01.01.09,
nos. 71 et seq., referring to Inceysa v. El Salvador, reference in Exhibit R-Lex, pp. 10–11 and
to Phoenix Action v. Czech Republic, reference in Exhibit R-Lex, pp. 20–21). The Claimant
for its part mainly contests the facts alleged, in particular that the Contract was obtained
on the basis of a forgery.
116. It is indisputable, and this Arbitral Tribunal can do no more than confirm it, that the
safeguarding of good faith is one of the fundamental principles of international law and
the law of investments. As in domestic law, the principle fulfills a complementary
function; it allows for lacunae in the applicable laws to be filled, and for that law to be
clarified by the specific application of existing principles.
For the Arbitral Tribunal, this can occur in at least two contexts:
– Where protection is requested in conditions that are contrary to the principle of
 good faith. It does not seem to be open to challenge that the protection afforded by
investment treaties does not extend to cases in which an investor has created the
P 61 conditions therefor in a manner contrary to the principle of good faith, in particular
by resorting to a veritable abuse of the law: for example, when one party, usually
aware of the restrictive measures that a State can take, has artificially created the
conditions for protection, alone or with the complicity of third parties. This would
be the case where a party uses stratagems to give the impression that it has
acquired or is acquiring the nationality of a contracting country, with the sole aim of
benefiting from the protection afforded by a treaty (see Cementownia v. Turkey,
ICSID Case ARB(AF)/06/2, Award of September 17, 2009; Phoenix Action v. Czech
Republic, ICSID Case No. ARB/06/5, Award of April 15, 2009 published on
http://icsid.worldbank.org). In such hypotheses, the defect not only undermines the
rights of the investor on the merits, but also, a priori, his right to an arbitration of
the related dispute. There is no need to examine these cases further in the present
context, since the situation here does not fall within those hypotheses.
– Where protection is requested for an investment alleged to have been made under
conditions contrary to the principle of good faith. This is the case when the
“investment” is the result of corruption, or has been obtained by deception or fraud.
In such cases, the defect undermines not only the right to invoke the protection of
an agreement, but also the investment alleged to have been made by the party
seeking protection. The hypothesis central to the present decision falls within this
context.
117. With respect to this latter hypothesis, arbitral tribunals that have had occasion to
examine issues of this nature have addressed them from different angles. To simplify,
they have mainly opted for one of the two following approaches (see Abby Cohen-Smutny
and Petr Polasek, “Unlawful or Bad Faith Conduct as a Bar to Claims in Investment
Arbitration” in A Liber Amicorum: Thomas Wälde (2009)):
– Some have addressed the issue at the outset of the case, from the standpoint of
jurisdiction. In order for the jurisdiction of an ICSID arbitral tribunal to be
established, the State against which proceedings are brought must have validly
given its consent. In such proceedings, this presupposes that the party bringing the
claim has made an investment that meets the requirements the State may have
laid down, as well as the general conditions of validity (Saba Fakes v. Turkey , ICSID
Case No. ARB/07/20, Award of 14 July 2010, paragraph 108; denying however that
good faith constitutes a precondition for jurisdiction, see paragraph 112). That is why
questions of the possible application of the principle of good faith are approached
from the standpoint of Article 25 of the ICSID Convention, as part of the examination
of jurisdiction (in particular, Phoenix Action v. Czech Republic, op. cit.).
– Other tribunals have examined the issue at the second stage, from the standpoint of
the merits, in relation to the validity of the investment. In order for an ICSID arbitral
tribunal to be able to render an award against a State for breach of obligations
concerning the protection of an investment, such investment must be valid. That is
why the issue of the possible application of the principle of good faith is then
considered as part of the issues on the merits.
P 62
118. The distinction between the two approaches is not of merely theoretical significance,
if only because of the remedies available against the decision. Undoubtedly, there are
good reasons for choosing one or the other approach, and it is possible that the
circumstances in which the issue arises can justify different solutions. It is not the
intention of this Arbitral Tribunal to provide a general answer to the question.
119. In the present case, there are strong arguments in favor of the second solution, which
consists in examining the issue of the validity of the investment at the merits stage.
a) The solution derives, first, from the principle of autonomy of the arbitration
agreement, a principle so fundamental that it also has its place in investment
arbitration. According to that principle, defects undermining the validity of the
substantive legal relationship, which is the subject of the dispute on the merits, do
not automatically undermine the validity of the arbitration agreement. Thus, an
arbitral tribunal is competent to decide on the merits even if the main contract was
entered into as a result of misrepresentation or corruption. Only defects that go to
the consent to arbitrate itself can deprive the Tribunal of jurisdiction. In the
present case, there is nothing to indicate that the consent to arbitrate, as distinct
from the consent to the substantive guarantees in the bilateral Agreement, was
obtained by misrepresentation or corruption or even by mistake. The allegations of
the Respondent relate to the granting of the Concession. However, it is not the
Contract that provides the basis for the right to arbitrate, but the State's offer to
arbitrate contained in the Agreement and the investor's acceptance of that offer.
The offer to arbitrate thereby covers all disputes that might arise in relation to that
investment, including its validity.
b) The hypotheses described relate, in a general sense, to the possible grounds for
invalidity of an investment. But such grounds are extremely numerous and varied: it
is hard to find a basis for drawing distinctions between them in order to determine
how and at what point they must be examined. All of them could be encompassed,
per se, by the notion that the consent of the State applies only to valid investments.
Undoubtedly certain grounds, in particular those that might be inferred from
 breach of the principle of good faith with regard to the investment, have a
particular value but that does not justify creating a special category calling for
priority treatment. There is even less justification in that, in the jurisdictional
phase, it is often difficult to determine whether the ground derives from an act
contrary to good faith, in relation to the conclusion of a contract, for example, from
a threat or misrepresentation, or another related cause not involving bad faith, for
example mistake. In those circumstances, it seems more appropriate to defer the
examination until the merits phase.
This is surely so in the present case, where the Parties' opinions differ on whether or
not the Contract was entered into as the result of fraud, misrepresentation or
mistake.
c) The factual analyses of these hypotheses most often requires an in-depth
examination, which is difficult to separate out as the facts may be closely
interwoven. The existence, nature and value of the investment are in large part
P 63 verified through the same process of inquiry, thus it is preferable to examine and
deal with all aspects simultaneously. It was, moreover, for these reasons that, at the
start of the proceedings, this Arbitral Tribunal rejected the Respondent's request to
deal separately with issues of jurisdiction (see above, No. 80 b)) and that its
examination of the case has also covered the merits
2.4 First Conclusion
120. On the basis of the foregoing reasoning, it shall be decided that:
“(1) The Arbitral Tribunal has jurisdiction to rule on the claims of the
Claimant.”
C The Alleged Breaches of the Agreement
1 The Issue
121. On the question of the Respondent's breaches of its obligations to the Claimant, the
two Parties also make opposing submissions:
In this regard, the Claimant submits as follows:
“Constater la violation par la République Arabe d'Egypte de ses obligations selon
les articles 2(2) et 5 du Traité TBI du 11 juin 1975 au préjudice de la société
Malicorp Ltd.”
While the Respondent submits as follows:
“ The Respondent respectfully submits that Malicorp's claim should be
rejected, promptly as an improper attempt to use BIT rights to profit from its
own fraud and negligence and its own failure to perform the Concession
Contract.”
It will be recalled (see above, No. 80(b)) that the Arbitral Tribunal has decided in this
phase of the proceedings to decide only the question whether there was a violation of the
obligations under the Agreement, and, if it finds in the affirmative, to examine at a later
stage the amount to which the Claimant might be entitled as a result.
122. The starting point must be an examination of the bases for the Claimant's claim
(below, 2.), followed by an analysis of the reasons relied upon by the Respondent in
support of its decision to end the Contract, as they relate to the conclusion of the
Contract, on the one hand (below, 3.) and its performance, on the other (below, 4.).
2 The Bases of the Claim
123. The Claimant relies on Article 2 and Article 5 of the Agreement (Claim. 21.10.08, p. 10;
Claim. 05.02.10, p. 23).
a) Article 2 of the Agreement is entitled “Promotion and protection of investment.” The
first paragraph deals with promotion; the second, the only one of interest to us in
this context, is worded as follows (for the sake of clarity, the Arbitral Tribunal has
added the references in brackets):
“[sentence 1] Investments of nationals or companies of either Contracting
P 64 Party shall at all times be accorded fair and equitable treatment and
shall enjoy full protection and security in the territory of the other
Contracting Party. [sentence 2] Each Contracting Party shall ensure that
the management, maintenance, use, enjoyment or disposal of
investments in its territory of nationals or companies of the other
Contracting Party is not in any way impaired by unreasonable or
discriminatory measures. [sentence 3] Each Contracting Party shall
observe any obligation it may have entered into with regard to
investments of nationals or companies of the other Contracting Party.”
b) Article 5 of the Agreement is entitled “Expropriation.” The second paragraph is not
relevant to the present situation; the first is worded as follows (for the sake of
clarity, the Arbitral Tribunal has added the references in brackets):
 “[sentence 1] Investments of nationals or companies of either Contracting
Party shall not be nationalized, expropriated or subjected to measures
having effect equivalent to nationalization or expropriation (hereinafter
referred to as ‘expropriation’) in the territory of the other Contracting
Party except for a public purpose related to the internal needs of that
Party and against prompt, adequate and effective compensation.
[sentence 2] Such compensation shall amount to the market value of the
investment expropriated immediately before the expropriation itself or
before there was an official government announcement that
expropriation would be effected in the future, whichever is the earlier,
shall be made without delay, be effectively realizable and be freely
transferable. [sentence 3] The national or company affected shall have a
right, under the law of the Contracting Party making the expropriation, to
prompt review, by a judicial or other independent authority of that
Party, of whether the expropriation is in conformity with domestic law
and of the valuation of his or its investment in accordance with the
principles set out in this paragraph.”
124. The Claimant takes the view that in the present case the Respondent breached each
of the two provisions concurrently.
The Arbitral Tribunal accepts that there is no reason per se why a State cannot both
breach the prohibitions enumerated in Article 2 and take expropriatory measures within
the meaning of Article 5. Nevertheless, when an investor bases its action principally on
the fact that it has been the victim of an expropriation, that measure necessarily implies
treatment that was, precisely, neither fair nor equitable. In order to rely on both
provisions, the investor must be able to establish that it has also been the victim of other
measures, different from expropriation.
This condition has not been fulfilled in the present case since the Claimant's sole but
essential complaint concerns the rescission of the Contract. Nowhere in its pleadings
does it explain in what way it was also the victim of unfair or inequitable treatment,
giving rise to additional consequences.
125. For the Claimant, the Republic breached these obligations by unilaterally deciding
to rescind or terminate the Concession Contract without compensation, for reasons it says
were connected to public security; in so doing, it breached its contractual obligations
P 65 and took a measure formally amounting to an expropriation (Claim. 23.10.2009, p. 29).
In this regard, the Claimant refers, among others, to the case of WaguihElie George Siag
and ClorindaVecchi v. Egypt (Claim. 23.10.2009, pp. 32 et seq.). The signature of the
Contract conferred on the Claimant the right to operate the airport to be built for 41
years, to use the 30 square kilometers of allocated lands around the construction, and
benefit from the transfer, free of charge, of ownership of 300 square kilometers of land
around the area under concession (Claim. 23.10.2009, p. 32). By ending the Contract
without just cause, the Defendant is consequently said to have breached Article 5 of the
Agreement (ibidem).
The Respondent, for its part, considers that it was entitled to rescind the Contract, and
that therefore there was no breach of its obligations or, consequently, any measure of
expropriation. In order to benefit from Article 5 of the Agreement, an investment must be
made in good faith and must be within the scope of application of the Agreement
(Respond. 01.07.09, No. 97).
126. The first question, therefore, is whether the Republic had the right to discharge itself
from the Contract pursuant to the private law rules governing it (see above, No. 93). If that
is the case, it is unnecessary to examine whether the Respondent also took a measure
under its public powers (“mesures de puissance publique”), not as a party to the Contract
but as a State, the effectiveness and conformity with the Agreement of which would have
to be examined. Indeed, the rescission of the Contract would not leave any subsisting
breach of the umbrella clause nor, moreover, in the absence of a protected investment,
of other clauses of the Agreement.
127. In order to decide whether the Contract was validly rescinded by the Respondent,
the Arbitral Tribunal must first turn to the letter that the Ministry of Transport sent to the
Respondent on August 12, 2001, by which the Respondent discharged itself from the
Concession Contract. That letter, sent in Arabic in its original version and in English, is
worded as follows (The Arbitral Tribunal has added the numbers in brackets for ease of
reference):
“Gentlemen,
With reference to the concluded contract with your company for the
construction, operation and transfer of the Ras Sudr Airport (BOT concession)
and regardless of the repeated warnings to you on the dates of December
2000, January 2001 and the ultimatum on 18/2/2001 to complete the
establishment papers of the Egyptian company according to law No. 8 for 1997
and to send the project's plan of work and amendment of the letters of
guarantee to be final then giving you another grace period until 28/2/2001,
nothing has been accomplished;
[1] And whereas the company has submitted to the Authority doubtful
papers, a matter that forced the Authority to send you a letter on
 30/5/2001 asking you to bring the authentic and real documents and
gave you a grace period until 30/6/2001 then extended to 31/7/2001;
[2] And whereas the company submitted invalid papers to the security
departments about the names of the partners in the English company
‘Malicorp Ltd.’;
P 66
[3] And whereas the company has forsaken in establishing and founding the
Egyptian company according to the Egyptian law and whose date
according to the contracting was fixed until 3/2/2001 and in addition to
other breaches committed by the company;
[4] And whereas it has been proven that you are not serious in executing the
contracting provisions which has been concluded on 4/11/2001 and until
this very date which led to non-starting of the project until this very date
and has not exceeded nine months;
THEREUPON the above mentioned it has been decided to terminate the
contract signed with your company and to confiscate the amount of the letter
of guarantee, with preserving the right to revert to you by the indemnification
for the resulting damages which are borne by our company and the Egyptian
Government due to the non-starting of the execution of one of the vital and
important projects included in the State's plan for economic development.
Very truly yours,
The Chairman of the board of directors
Abdel Fattah M. Kato.”
128. It will be seen from reading the letter that the Respondent invokes two types of
grounds, which the Arbitral Tribunal will examine in turn:
– The first (numbers 1 and 2) are based on reasons having to do with the conclusion of
the Contract, above all the fact that the Respondent allegedly submitted “doubtful
papers” and “invalid papers about …the English company.” This goes to the validity
of the Contract itself.
– The others (numbers 3 and 4) relate to the fact that after signature of the Concession
Contract, the Claimant breached certain of its obligations, primarily the provision of
certain required documents, its slowness in setting up a company under Egyptian
law, its lack of commitment and failure to carry out the first steps as expected. This
goes to the performance of the Contract.
129. It is true that the Claimant takes the view that these grounds are mere pretexts, and
that the real reason lies in a change of government policy concerning the development of
the airports network. Evidence of that, allegedly, is that no other airport has been built
since, and that another project suffered the same fate as that of Ras Sudr, with the Arab
Republic of Egypt agreeing in that case to indemnify the Concessionaire.
It is possible that the Government did later modify its policy. It was entitled to do that,
but, in so doing, it breached obligations it had validly undertaken: it was bound to
respect them or, if it did not, to fully indemnify the other party. That still presupposes,
however, that those obligations were valid. A contracting party cannot be prohibited from
discharging itself from a contract where it has legitimate reasons for doing so, even if,
indirectly, the measure suits its convenience and enables it to go back on choices made
earlier. Put another way, the first question to ask is whether the reasons given by the
Respondent in its letter of termination justify the termination.
P 67

3 The Reasons Relating to the Conclusion of the Contract

130. The first question with respect to the first two grounds is whether the Contract was
validly entered into, whether it was void from the outset because the circumstances in
which it was concluded contravened the principle of good faith, or whether it was
capable of being rescinded because of a defect in consent, namely misrepresentation or
mistake. The answer depends, in the first place, on the rules applicable to it, in this case
Egyptian civil law.
As has been seen (see above, nos. 44 et seq.), these issues have already been examined
and decided in the CRCICA arbitration proceedings instituted by the Claimant pursuant
to the arbitration clause in the Contract. In its award of March 7, 2006, the CRCICA Arbitral
Tribunal held, in particular, that there was no proof of forgery or fraud, but that it had, on
the other hand, been established that the Respondent had entered into the Contract
while laboring under a mistake, and that, therefore, it had the right to discharge itself
from it. That said, since it bore part of the responsibility for that mistake, it was only fair
that it should be made to bear part of the costs incurred by the Claimant.
Having decided not to re-examine that decision, this Arbitral Tribunal could have limited
itself to basing its ruling on the said decision. However, as has been seen (see above, No.
59) the Respondent refuses to submit to that decision or to accept its conclusions. The
uncertainty that persists, therefore, justifies the Arbitral Tribunal in verifying, as a matter
ancillary to the guarantees offered by the Agreement, that, even if that award were to be
set aside, the conclusions arrived at by this Arbitral Tribunal would be no different from
 those of the CRCICA Arbitral Tribunal. The fact is that, if the only conclusion to be drawn is
that there were sufficient grounds for rescinding the Contract, there would be nothing left
to protect.
131. The first reason given by the Respondent for discharging itself from the Contract was
that it had allegedly been misled by the submission of inaccurate documents concerning
the Claimant's financial capacities.
132. a) In the call for tender documents (see above, No. 4), the Respondent had clearly
indicated the importance it attached to the financial capacities of the company to be
selected, as under a B.O.T. contract, that company would have to bear all the costs of
construction (Exhibit R-2, p. 46, item 2: “Investor must bear all the costs of studies,
design, construction and preparations of all the constituent to operation, services,
security requirements and others under the supervision of the Authority”). That was why
each bidder was obliged to clarify, in its bid, the legal form of the company that would be
responsible for performing the Contract, and in particular “its own and its company's
financial capability and the sources of financing “ (Exhibit R-2, p. 48, item 11). That was
the reason for the specific requirement that documents be included stating the
“qualitative of finance and the issued capital” (Exhibit R-2, p. 48, item 15; emphasis by
the Arbitral Tribunal).
That requirement is easy to understand, because this was not a straightforward
construction contract, financed by the project owner, but a B.O.T. contract in which it was
the contracting partner who, initially, bore the entire burden of financing.
133. b) In its bid, the Claimant submitted its Memorandum of Association, which showed
P 68 that it had a capital of 1000 pounds sterling divided into 1,000 shares of one pound
sterling each (see above, No. 7; Exhibit R-2, p. 23, No. 5: “ The Company's share capital is
£1000 divided into 1000 shares of £1 each”). It is true that Malicorp decided on 15
September 1999 to increase its capital to 100 million pounds sterling, but that was not
subscribed capital, but authorized capital (see above, No. 6). The difference is
substantial, because in the first case there are shareholders who have made a firm
commitment to pay it, while in the second, there is only a power given to the company's
organs to decide when they will look for shareholders willing to commit.
The bid apparently contained agreements entered into with three companies which had
expressed an interest, in principle, in being part of the project, but none of them clearly
stated that they agreed to be responsible for all or part of the financing (Exhibit R-2, pp.
49 et seq.). What is clear, on the other hand, from the Claimant's statements is that the
estimated cost of the construction according to J&P was 232,000,000 dollars.
Briefly put, this meant that Malicorp had to be in a position to finance at least that
amount itself, or to secure financing; furthermore, that sum covered only the
construction, but not the first years of operation, which no one could sensibly expect to
be profitable from the start. However, in the light of the evidence on the record, none of
the founding members of Malicorp could produce such large sums of money, either from
their own resources or from partners prepared to take a risk of that magnitude.
134. c) At a date that is not established, the representatives of Malicorp were summoned
to a meeting with the representatives of the Respondent (see above, No. 8). According to
the invitation (Exhibit R-2, p. 82), the purpose was to answer certain questions and
provide certain clarifications. The first (see above, No. 1) specifically concerned “the
details of the capital (issued and licensed).” As can be seen, this did not refer merely to
the authorized capital, but also the issued and paid-up capital.
The meeting took place on January 3, 2000 (see above, No. 8). Those attending on the
Claimant's side were: Messrs. El Sayed Mohamed Abu El Ela, Mahmoud Shakir Ibraim,
Azmi Mohamed El Teraee and Kateen Beshara. A minute was drawn up, which states that
Mr. Mahmoud Shakir Ibrahim began by producing written authority from Malicorp to
answer questions at that meeting. That written authority (or “assignment”) was annexed
to the minutes of the committee. On the question concerning Malicorp's capital, the
minutes state the following:
“Upon their question [that of the Respondent's representatives] concerning
the first point details of the capital he responded by the following ‘The
Original Company with which the contracting shall be concluded and which
submitted the offer is the British Company Malicorp Ltd, a company
established under the British law and its residence is in London with its
capital of one hundred million Sterling pounds according to the attached
commercial register which was reviewed by the committee's members.”
The statement would have been correct if it had made it clear that it referred not to the
issued and paid-up capital as stated in the question, but to the authorized capital, which
is obviously meaningless as long as the sources of financing of this capital are not given.
Given its decisive importance, it would have been consistent with the principle of good
faith and the reasonable expectations of the contracting partner for Malicorp's
representatives to make that clear. In practice, it could be said that in business dealings,
P 69 the mention of “capital” refers at the least to capital that is subscribed if not paid-up,
and not merely to authorized capital, this being only a measure prior to subscription.
135. d) Annexed to the minutes of the meeting was an official statement concerning
Malicorp Ltd. This was allegedly an extract made on 15 September 1999 of the “Register of
 companies for England and Wales,” certifying that the company had been incorporated
on 6 August 1997 (Exhibit R-2, pp. 90 et seq.). The item numbered 5 in that document
states: “The Company's share capital is £100 million divided into one million shares of
£100 each” (Exhibit R-2, p. 94). Nowhere does the text make it clear which type of capital
this is.
This is the document that lies at the root of most of the proceedings and disputes that
have taken place:
– The Cairo Court of Assizes took the view, based among other things on the pre-
hearing interrogatories, that this was in fact a forgery. It nonetheless finally
acquitted most of those charged with that offence, with the exception of two
persons tried in their absence, against whom the judgment appears not to be final.
– The CRCICA Arbitral Tribunal left undecided the question whether or not it was a
forgery; it deemed it sufficient to find that the Respondent had been led to enter
into the Contract while laboring under an essential mistake, since the civil law
consequences of an inaccurate and fraudulent statement under the Egyptian Civil
Code are the same as those for a mistake.
– The pleadings before the present Arbitral Tribunal have not enabled it to reach a
clear conclusion, especially since it was not possible for the Respondent to produce
the original of the suspect document, but only a photocopy taken from a fax. Even
though serious indications do exist, they are not enough to support a clear
conclusion on a matter of such capital importance.
136. It is neither the intention of the present Arbitral Tribunal, nor within its terms of
reference, to conduct a detailed investigation into the authenticity of the suspect
document. It suffices to find that the nature and content of the information supplied to
the Respondent by Malicorp's representatives was such as to give rise to an essential
mistake; for a project as monumental as that of the Ras Sudr airport, knowing whether the
company awarded the project is an empty shell or a company with exceptional resources
is obviously fundamental, and any error on that point justifies calling the Contract into
question. That, moreover, as has been seen (see above, No. 58), is the conclusion reached
by the CRCICA Arbitral Tribunal.
137. In these circumstances, the present Arbitral Tribunal concludes that the principal
reason given by the Respondent in its letter rescinding the Contract was sufficiently well
founded, and gave the Respondent the right to withdraw from the Contract. It follows that
the rescission of the Contract cannot be considered as a form of expropriation under
international law. That same letter alludes, moreover, to other circumstances
surrounding the conclusion of the Contract, notably in relation to the composition of the
company. Without wishing, or needing, to enter into a detailed discussion, the Arbitral
P 70 Tribunal notes that, in fact, the entire legal, financial and even technical set-up leaves
a sense of insecurity and vagueness, incompatible with the dimensions of the project at
stake. In this regard it is enough to point to the existence and content of the letter from
Mr. El Ala (Exhibit R-2, p. 336 et seq.); whatever the veracity of the accusations it contains,
it is evidence in itself of a pernicious climate among the people who were to bear
responsibility for the project. This can only be an aggravating factor.
4 The Reasons Relating to Performance of the Contract
138. Quite different is the question whether, as the Respondent has contended, Malicorp
failed, after signature of the Contract, to comply with the obligations it had agreed to
carry out at once, namely the steps necessary to put the project into practice. Even if the
answer to the previous question is enough in itself to enable it to rule on the submissions
before it, the Arbitral Tribunal deems it appropriate, out of an excess of caution, to
briefly review these.
139. It seems in fact that, very shortly after the signing of the Contract, the Respondent
issued a formal notice to the Claimant to comply with its obligations. It seems doubtful to
the Arbitral Tribunal whether, just a few weeks after signing a contract of such magnitude,
the Egyptian authorities would have been able to set in motion a process designed to
free themselves from the Contract for reasons that had nothing to do with the project –
unless it accepts that in the space of just a few weeks there was a radical turnaround in
security policy, though there is nothing in the record to support that theory. After that,
several other formal notices were issued (see above, nos. 18, 20, 22).
140. The first obligation concerned the setting up of the Egyptian company. It is not
disputed that the incorporation did not take place in the time allowed. One primary
reason is that the Claimant delayed in taking the necessary steps to set it up. Admittedly,
for the Respondent, the incorporation of that company was critical. First, because the
Contract had also been entered into in the name of the company to be formed (see
above, No. 15); next, and most of all, because it had to show sufficient financial capacity
to guarantee the solidity and reliability of the operation. The capital was subscribed by
Malicorp, which, however, had not yet significantly increased its own capital. It is
possible that the application was delayed by the Respondent's own procrastination, but
that situation, while clearly the case, arose only later during the process of termination,
by which time the project was already faltering.
The Claimant has criticized the Respondent for not having made available to it the
additional land promised in the Contract for its own use. That criticism is correct, but
bears no direct relation to the breach of the obligation to set up the company, unless, as
 has been suggested, that land could have served as security for the company's founders
to obtain loans for funds they did not have.
141. The second criticism set out in the letter of rescission relates to the performance of
the Contract. True, the Arbitral Tribunal has indeed decided that the issue of damages
and thus, indirectly, of lost investments would be dealt with in a second phase, in the
event it found initially in the Claimant's favor. The fact remains, though, that at no time
has the Claimant attempted to persuade the Arbitral Tribunal that it actually did, at the
outset, take the significant legal, financial and most of all technical steps required to
launch such a project. The delays in taking the first steps and the absence of any
P 71 practical progress, especially where the potential partners were concerned, could well
have added to the doubts and concerns of the Egyptian authorities. At no time, in fact,
has the Claimant attempted to show that this last criticism was unfounded. Such a
situation could have been explained by internal problems and the dissent that surfaced
within the group of promoters, as is shown by the letter from Mr. El Ala, among other
things. Briefly put, the project never got off the ground, or if it did, it got off to a bad start.
The Arbitral Tribunal cannot simply disregard this criticism. While it is true, as it has
accepted (see above, No. 114), that the mere conclusion of a contract of the same type as
the one that was signed can of itself amount to an investment, there must still be a
realistic prospect that its beneficiary can perform it. The conditions surrounding the
initial performance of this Contract give rise to serious doubts.
142. It follows that, to the Arbitral Tribunal, the criticisms leveled by the Respondent in
its letter of rescission concerning the performance of the Contract appear sufficiently
plausible for it to reject the complaint that they were merely a pretext designed to
conceal a purely expropriatory measure.
5 Second Conclusion
143. It follows from the foregoing analysis that, to the Arbitral Tribunal, the reasons on
which the Respondent relied in order to bring the Contract to an end appear serious and
adequate; the termination, justified in fact and in law, could not be interpreted as an
expropriatory measure.
Consequently, the Arbitral Tribunal will decide that:
“(2) The Claimant's submissions based on the principle of compensation for
expropriation are rejected.”
This conclusion calls for an additional comment. The CRCICA Arbitral Tribunal decided
(see above, No. 58) that, even though it was entitled to discharge itself from the Contract,
the Respondent must bear part of the costs and damages its decision generated for the
Claimant. In so doing, it accepted that the representatives of the Arab Republic of Egypt
were indeed mistaken, but that they bore some share of the responsibility, in that they
had not made adequate inquiries into the position. Even if that argument does not seem
unreasonable, it is outside the scope of these proceedings, as the Claimant has not
formally made any additional submissions on the subject.
D Determination and Allocation of the costs and expenses of the Arbitrtion
1 The Parties' Submissions
144. Each of the Parties has submitted that the other should be ordered to bear all the
costs of the arbitration and reimburse the amounts incurred for its representation in this
case.
145. When invited by the Arbitral Tribunal to submit a list of their expenses (see above,
No. 88):
– The Claimant submitted that it had expended a total of 239,734.14 euro;
P 72
– The Respondent submitted that it had expended 489,773.60 dollars.
The Arbitral Tribunal must make a final determination, since the claim is dismissed.
2 The Arbitral Tribunal's Position
146. The principle is that the Arbitral Tribunal has broad discretion in this regard.
147. The outcome of the proceedings is undoubtedly the first factor the Arbitral Tribunal
can and must take into account. In the present case, the outcome is shared, since the
Respondent's objection to jurisdiction is rejected, but the Claimant's claim is dismissed
on the merits. There are good reasons, therefore, to decide that the costs and expenses
should be shared.
148. The decision on the merits seems to support this conclusion, in the light of the facts.
True, the Claimant's attitude in the way it presented, and later embarked on, the project
has carried particular weight in the outcome of the proceedings. Nonetheless – and in
this respect it concurs with the assessment of the CRCICA Arbitral Tribunal – this Arbitral
Tribunal considers that the Respondent was not itself completely beyond reproach in the
phase leading to the conclusion of the Contract.
3 Third and Fourth Conclusions
 In the light of the foregoing arguments, the Tribunal will decide that
“(3) Each Party shall bear one half of the costs of the arbitration proceedings,
including the fees and expenses of the members of the Tribunal and the
fees of ICSID, as subsequently determined and notified to the Parties by
the Centre;
(4) Each Party shall bear its own costs and legal fees and expenses of
representation incurred in the present proceedings.”
E Decision
For these reasons, it is decided that:
1. The Arbitral Tribunal has jurisdiction to rule on the claims of the Claimant;
2. The prayer for relief of the Claimant aimed at the principle of a compensation for
expropriation is rejected;
3. The costs of the arbitration, including the fees and expenses of the members of the
Tribunal and the costs of ICSID, as subsequently determined and notified to the
Parties by the Centre, shall be borne by both Parties in equal shares;
4. Each Party shall bear its own costs and legal fees and expenses of representation
incurred in the present proceedings;
5. All other submissions made by the Parties are rejected.
P 72

References
1) Sui generis. [Author's note]
2) In this case there was no request for appointment of multi-party arbitration panel.
[Author's note.]
3) Sui generis. [Author's note]
4) These laws are specific to certain kinds of public utilities; but the Civil Code of 1948
included a general chapter of all kinds of public utilities as follows:
Concessions of public utility services:
Articl
e
668. A concession of a public utility service is a contract whose object is the
management of a public utility service of an economic nature. Such a contract
is concluded between the administrative authority in charge of the organization
of such a service and a private person or company to whom the exploitation of
the service is entrusted for a fixed period.
Articl
e
669. The concessionaire of a public utility service undertakes, by the contract
concluded between him and the customer, to provide the latter in a normal
manner with the conditions stipulated in the contract of concession and its
annexes and also with the conditions which the nature of the work and the laws
applicable thereto demand.
Articl
e
670. When the concessionaire of the public utility service enjoys a de jure or de facto
monopoly service, he is bound to observe strict equality among customers both
as regards the services rendered and the rates charged.
This principle of equality does not exclude special treatment involving the
reduction or remittance of rates, provided such treatment is granted to all
persons who apply therefor and who fulfill the general conditions laid down by
the concessionaire, the principle of equality entails, however, the prohibition of
the concessionaire from granting to some customers advantages which he
refuses to grant to others.
Any discrimination granted contrary to the provisions of the preceding
paragraph renders the concessionaire liable to compensation for the loss which
may be caused as a result of such discrimination to third parties, by the
disturbance of the natural balance of fair competition.
Articl
e 671.The rates laid down by a public authority will have force of law with regard to
contracts entered into between the concessionaire and customers; the parties
shall not have the right to depart therefrom by agreement.
The rates may be revised or modified. If the rates are modified and such
modification is ratified, the new rate becomes applicable, but without
retroactive effect, from the date fixed for its coming into force by the act of
ratification. Any contracts running (abonnements) at the time of the
modification of the rates will be subject to the increase in or reduction of
charges for the period of the contract unexpired at the date of coming into force
of the new rates.
Articl
e
672. Any irregularity or mistake in the application of the rates to individual contracts
is subject to rectification.
If the irregularity or mistake operates to the detriment of the consumer, he shall
be entitled to recover the amount paid in excess of the authorized charge. If
such an irregularity or mistake operates to the detriment of the concessionaire
of the public utility service, he shall be entitled to collect an amount to make
up the authorized charge. Any agreement to the contrary is void. The right of
recovery in either case is barred by prescription after one year from the date
when the collection of the incorrect charge took place.
Articl
e
673. Consumers, in the case of concessions for the distribution of water, gas,
electricity, power or other similar commodities, must support interruptions or
irregularities for a short time to which installations of such services are
normally subject, such as the time necessary for the upkeep of the installation
with which the service is maintained.
The concessionaire of these services may repudiate responsibility in respect of
interruptions or irregularities of abnormal length or gravity, by proving that they
are caused by ‘force majeure’ not imputable to the operation of the service, or
by a fortuitous event which could not have been foreseen, or whose
consequences could not have been avoided by any vigilant management acting
without due regard to economy. A strike constitutes a fortuitous event if the
concessionaire establishes that it took place without any fault on his part and
that it was not possible for him to replace the strikers by other workmen or too
avoid the consequences of their strike by any other means.”
These provisions form the general rules for all kinds of public utilities where no
different provisions are found in the special laws. [Author's note]
5) Article 142/1 of the Egyptian Civil Code provides that: “When a contract is annulled or
declared void the parties are reinstated to their position prior to the contract. If such
reinstatement is impossible damages may be accorded.” [Author's note]
6) The interest rate issue in this case: The Tribunal accorded a rate of interest of 4
percent per annum on the sums in USD although this rate is fixed for the sums in local
currency, i.e., for the sums in Egyptian Pound. The matter is disputed as to whether
the amounts due in USD bear the local interest rates on the local currency, or other
international rates? This award ordered the Respondent to pay 4 percent in
accordance with Article 226 of the Egyptian Civil Code which is considered as a rule of
public order. The International Arbitration bodies such as ICSID have another point of
view as follows:
1. Trade in the main currencies of the World, is effected through international
financial markets and interest rates as well as rates of exchange are inspired by
these markets including the United States Dollar. Central banks may interfere to
protect the currency of their countries abroad.
2. In these international financial markets there are indicators for dealing,
including the bonds and securities issued by governmental bodies and
international financial institutions; other relevant methods exist such as the
Libor [London Interbank Offering Rate] specially in bank facilities agreements.
Each currency belongs to one or more States, and has policies for its issuance
and protection including the interest credit and debit rates.
3. The international public policy is, sometimes, different from the local public
policy.
4. In the case of Wena Hotels against Egypt in ICSID, the Arbitral Tribunal ordered
Egypt to pay interest on amounts awarded in USD. The Tribunal discussed the
rate of interest and decided it to be 9 percent per annum, compounded every
three months. The rate is much higher than the 4 percent which the Tribunal
considered in this case as public policy rule. Meanwhile, the ICSID Tribunal
motivated its decision by the fact that in the year 2000 Egypt has launched
through its Ministry of Finance, in the international capital markets securities in
USD bearing interest of 10 percent payable per annum until the maturity date
in 2011. If the ICSID's rate of interest is valued by Egypt to be 10 percent, the
ICSID Tribunal has, a fortiori, good reasons to award compounded interest of 9
percent.
5. Mostly, the international interest rates in the capital markets on the USD do not
exceed 3 percent.
6. In another case: The Middle East Cement Company v. Egypt, the ICSID also
awarded interest of 6 percent per annum, which is higher than the public policy
rate of Article 226 of the Egyptian Civil Code. The ICSID Award motivated its
ruling as follows:
“173. Claimant seeks compound interest from the time of taking of its
investments. Respondent argues that only simple interest of not
more than 4% per annum running from the date of the award should
be granted. The Tribunal considers that the provision in Egyptian law
on which Respondent relies is not applicable to claims based on the
BIT, i.e., public international law. The BIT provides (art. 4.c) that the
compensation in case of expropriation ‘shall include interest until
the date of payment.’ Regarding such claims for expropriation,
international jurisprudence and literature have recently, after
detailed consideration, concluded that interest is an integral part of
the compensation due after the award and that compound (as
opposed to simple) interest is at present deemed appropriate as the
standard of international law in such expropriation cases. (See the
distinguished ICSID Tribunals in Wena v. Egypt (Award of December
8, 2000, paragraphs 128 to 136); the award rendered on December 8,
2000 in the Wena Hotels Ltd. v. Arab Republic of Egypt case (ICSID
Case No. ARB/98/4), is available as Exhibit A to the Declaration of
Henry Weisburg attached to the pending case of Wena Hotels, Ltd. v.
The Arab Republic of Egypt, No. M-19-42, Southern District of New
York, filed on January 10, 2001. Metalclad v. Mexico (Award of 30
August 30, 2000, paragraphs 128 to 129); The award of August 30, 2000
in the Metalclad Corporation v. United Mexican States case (ICSID
Case No. ARB(AF)/97/1), was published in 16 ICSID Rev. – FILJ 168 et
seq. (2001). Santa Elena v. Costa Rica (Award of February 17, 2000,
paragraphs 96 to 107). The award of February 17, 2000 in the
Compañía del Dearrollo de Santa Elena S.A. v. Republic of Costa Rica
case (ICSID Case No. ARB/96/1), was published in 15 ICSID, all with
further references. This Tribunal sees no reason to repeat the
detailed reasoning of or depart from this practice. In particular, the
Tribunal concludes that, to make the compensation “adequate and
effective” pursuant to Art. 4(c) of the BIT, it is appropriate that the
interest pursuant to the last sentence of Art. 4(c) of the BIT be
awarded as compound interest. As to the question regarding the rate
and frequency of compounding of the interest, on which some
disagreement is seen in the above jurisprudence, this Tribunal
 concludes that in this case annually compounded interest and, in
view of the rates in financial markets during the relevant period, a
rate of 6% p.a. is appropriate. Regarding the starting of the interest
period, the Tribunal takes January 1, 1990 as the average time of
taking for the second Petra and Kalkis contracts by the Decree of May
28, 1989 for the amount of US$ 1,712,712.00. As the Poseidon was taken
on November 28, 1999, from January 1, 2000, the interest is calculated
for the total amounts of compensation due. Accordingly, up to the
payment date (30 days after the date of this Award), the Tribunal
determines that an amount of US$ 1,558,970.00 shall be added to the
compensation due. Thereafter, the same interest shall be paid until
the award is paid.”
7. The Wena Hotels Award is motivated as follows in regard of the interest rate
issue raised in annulment proceedings based on Article 52(1)(e) by the ARE:
“The Applicant [Egypt] complains that the Tribunal failed to give
reasons for its decision to adopt a rate of interest at 9%, the Award
specifies that this rate was 1% below long term government bonds in
Egypt (para. 128, note 289). The Applicant's view is that such
reasoning is not sufficient and does not meet the requirement of
‘reasons stated’ under Article 52(1)(e). As an extended practice
shows, international tribunals and arbitration panels usually dispose
of a large margin of discretion when fixing interest. It is normal,
therefore, that very limited reasons are given for a decision which is
left almost entirely to the discretion of the Tribunal. When fixing a
rate of interest 1% below long term government bonds in Egypt, the
Tribunal concluded that Wena should be granted interest close to
but still below such bonds. It must be assumed that it took such
decision in order to award damages corresponding to an ‘adequate
and effective compensation’ as provided for in Article 5 of the IPPA.
The reasons underlying the Tribunal's decision in this respect are
thus stated sufficiently.
The requirement to state the reasons supporting the allocation of
interests appears particularly weak, when, like in these proceedings,
as mentioned in paragraph 69 above, both Parties were not more
determinative than referring to the allocation of appropriate
interest, thus conferring to the Tribunal a wide discretionary power
to assess interest. Under such circumstances, the Tribunal need not
be more explicit than the Parties were in their respective positions
taken on this particular matter. In addition, this committee does not
have to entertain arguments and submissions a party has not
developed before the Tribunal.
The Applicant further objects that the Award does not allow to know
the date from which interest accrues (the ‘dies a quo’). It is true that
no such date is specified expressly in the Tribunal's decision. The
Applicant accepts that such date might be determined by an
appropriate mathematical calculation, based on the total amount of
accrued interest and the interest rate awarded. The Applicant did
not undertake any such calculation, nor did it demonstrate that the
Tribunal had chosen a wrong ‘dies a quo.’ In the light of such a lack of
support given to the Applicant's own contention, this committee
need not inquire on its own initiative whether the Tribunal's
calculation is based on April 1, 1991 as the ‘dies a quo,’ as this
appears implicitly from the Tribunal's statement with respect to the
day when the expropriation of Wena's right occurred. Although this is
outside the scope of examination as required in a proceeding under
Article 52(1), the committee has anyhow made its own calculation. In
this respect, the committee concludes that, when taking into account
the payment of the amount awarded in the Nile Hotel arbitration on
June 14, 1997 and the amounts respectively owed to Wena, before and
after this date, together with the respective amounts of interest
accrued as stated in the Award, the resulting amount is very close to
the total amount as set forth in the Award. The committee is satisfied
that April 1, 1991 is discernible from the Award as the ‘dies a quo.’
The Applicant further argues that if the relevant date would appear
to be April 1, 1991, it would be wrong, because a substantial portion
of Wena's investment had been invested long after that date. This
argument cannot be heard as a ground for annulment based on
Article 52(1)(e) because it invites this committee to proceed to a
reexamination of the merits of the Award.” [Author's note].
7) The Constitution referred to above is that of 1971 which was abrogated by a new
Constitution. [Author's note]
8) The constitution referred to here is the Constitution of 1971, which has been replaced.
[Author's note]
9) Please see below the judgment of the Supreme Constitutional Court of January 2012,
where the Cairo Court of Appeal became the competent Court. [Author's note]
 10) By virtue of Law No. 9 of 1997.
11) The approval to arbitrate in administrative contracts by the competent minister, in
the arbitral awards of this Centre (CRCICA) is not necessary to be initiated in writing,
but may be verbal, or may be deduced from the events of the case, and the
contractor is not bound to provide evidence of it. The lack of approval does not form
an aspect of nullity but rather it is a contravention from an official to be sanctioned
by disciplinary measures. [Author's note].
12) This case was brought before the Supreme Administrative Court by the Minister of
Civil Aviation v. Malicorp, the Airports Holding Company and the Egyptian Company
for Airports. In the Hearing of April 2, 2007 the said court ruled on the suspension of
this challenge until the case of conflict of jurisdiction has been settled by the
Supreme Constitutional Court. This ruling was motivated by the fact that
documentation showed that Malicorp had initiated a case of conflict of jurisdiction
No. 24 of the judicial year 28 before the Supreme Constitutional Court on August 27,
2006; the same case was brought before the Cairo Court of Appeal as Case No. 48 of
the judicial year 123. The reasons for the said ruling continued to state that Article 32
of Law No. 48 of 1979 concerning the establishment of the Supreme Constitutional
Court required that such cases be held in suspense until the case of conflict of
jurisdiction has been decided. The Supreme Administrative Court therefore
unanimously decided to hold the said challenge in suspense until a decision on the
conflict is rendered. [Author's note]
13) This suggested recourse is not correct. The Court is not entitled to return the case to
CRCICA to form a new arbitral tribunal; the parties, rather, have their own free choice
as to which jurisdiction they wish to apply. The previous Tribunal is functus officio,
and a new arbitral tribunal cannot be constituted without submissions and without
new party autonomy. [Author's note].
14) It is possible in the Egyptian legal system to form a Chamber with three Chiefs.
[Author's note].
15) The Plaintiffs erroneously believe that the approval of the competent minister should
be express and written. The arbitral tribunals in this Centre (CRCICA) give a different
opinion. It has been decided before and after this case that the minister's approval
can be express, tacit or implied, and may be non-written. [Author's note]
16) This statement lacks precision as Article 40 of the Egyptian Arbitration Act provides
that: “in an arbitral tribunal composed of more than one arbitrator, the Arbitral
award shall be rendered by majority after a due deliberation as directed by the
arbitral tribunal unless the parties agree otherwise.” The odd number's award is right
provided that due deliberations have occurred. [Author's note].
17) See Article of Counsel Mohamed Amin El-Mahdi, former President of the Council of
State: Journal of Arab Arbitration, pages 25–40 in Arabic; the above is an excerpt
translated by the Author.
18) US Dollars [Author's note].
19) Names were rectified in their Arabic form by the Author.

© 2020 Kluwer Law International, a Wolters Kluwer Company. All rights reserved.

Kluwer Arbitration is made available for personal use only. All content is protected by copyright and other intellectual property
laws. No part of this service or the information contained herein may be reproduced or transmitted in any form or by any means, or
used for advertising or promotional purposes, general distribution, creating new collective works, or for resale, without prior
written permission of the publisher.

If you would like to know more about this service, visit www.kluwerarbitration.com or contact our Sales staff at lrs-
sales@wolterskluwer.com or call +31 (0)172 64 1562.

KluwerArbitration