International ruling lifts curse for Egypt investors

Lawyers are predicting an influx of UK investment into Egypt after the country's government has been forced by an international body to recognise treaty rules on contracts for the first time.

The International Centre for the Settlement of Investment Disputes (ICSID), affiliated to the World Bank, pushed a $60m claim by British hotel group Wena Hotels against the Egyptian government into an international arbitration.

A bilateral investment treaty was cited by ICSID to force the Egyptian government into arbitration.

Hundreds of these agreements exist across the world, and lawyers say this shows investors they can be used to make Egypt honour its contracts.

Jeremy Winter, head of construction and arbitration at Baker & McKenzie in London, says: "This decision is very significant."

"It not only affects construction contracts but contracts across the board.

"It is a significant factor for businesses deciding whether to do things in Egypt. It improves the reputation of Egypt as a place to do business.

"In the past Egypt has always been a problem place for foreign investment because there is difficulty in getting the government boards to stick to arbitration clauses in contracts. This has forced foreign investors into Egyptian courts, which is not a popular option.

"This decision has moved things to an inter-country level."

Managing partner in Shearman & Sterling's Paris office Emanuel Guillard acted for Wena Hotels.

Guillard says: "UK investors now know they have a device to obtain justice."

Partner in Freshfields' Paris office Eric Schwartz represented the Egyptian government. Schwartz was unavailable for comment.

The decision of the arbitration has yet to be announced.