October 24, 2019
Unfortunately, the Egyptian Minister of Education issued a new Decree under No. 183 of 2019 on August 26, 2019 (the “Decree”), which Decree was also published today in the Official Gazette on October 24, 2019, restricting the foreign ownership in international private schools in Egypt to only twenty (20%) of the share capital in any company owning any international private school in Egypt (the “Restriction”). This Restriction is applied also to any person having dual or multiple nationality.
The new Decree introduces a number of new conditions and restrictions that were not required under the provisions of the Education Law No. 139 of 1981 (the “Education Law”) governing issuance of licenses to open any private or international schools in Egypt.
According to Article 170 of the Constitution, the Prime Minister or any person designated by the relevant law shall have the right to issue any regulation that is required for the implementation of such law (the “Executive Regulation”), which Executive Regulation shall not, in any case, (i) contradict the provisions of the relevant law, and/or (i) introduce any new provisions that were not included in the relevant law otherwise stipulated by such law.
According to Articles 2 and 58 of the Education Law, the Minister of Education is empowered to issue the Executive Regulation of the Education Law and determine all requirements for obtaining private and international schools licenses. However, this power shall always be subject to the competent court’s review and should always be within the limits governed by the Education Law. For example, the said Executive Regulation shall not, under any whatsoever circumstance, introduce any new restrictions that are not imposed by the Education Law, otherwise the competent court may declare the said restrictions null and void. This principle is supported by several judgements including, inter alia, the Judgement No. 3 of 19 Judicial Year (“JY”) issued by the Constitutional Court.
The new Decree may be challenged for the following main reasons
A) Exceeding the Minister of Education’s authority by virtue of the Education Law:
According to Article 58 of the Education Law, the owner of any private or international schools shall:
– take the form of an Egyptian company; and
– be capable of fulfilling financial obligations of the schools in accordance with any other requirement as determined by the Minister of Education.
In light of the above, the Education Law requires only the Egyptian nationality in the company applying for a school license, which condition shall be deemed satisfied by any company incorporated in Egypt. However, the Education Law itself does not impose any restrictions on the nationality of any shareholder owning interest in any international private school. This being said that the Minister of Education has exceeded his authority that is empowered by the Education Law by introducing new restrictions that were not imposed by the Education Law.
A very similar violation was made before by the Minister of Housing by issuing an Executive Regulation for the Egyptian Federation for Construction and Building Contractors Law No. 104 of 1992 (the “EFCBC Law”), whereby a new foreign ownership restriction was introduced and imposed on the shareholders of any company in order to be qualified for registration with the Egyptian Federation for Construction and Building Contractors (“EFCBC”) and, therefore, the Constitutional Court rendered its Judgment No. 68 of 25 JY declaring the said restriction unconstitutional for the following reasons:
– According to Article 5 of EFCBC Law, the Executive Regulation shall determine the requirements for registration of any person, whether juristic or individual, with EFCBC.
– However, Article 8 of the Executive Regulation of the EFCBC Law introduced a new restriction on the nationality of shareholders holding interests in any company applying for EFCBC’s membership, which restriction was not required under EFCBC Law.
B) Contradiction with a higher legislation:
Generally, there are three (3) ranks for legislations in Egypt as follows:
(i) The Constitution, which ranks as the highest legislation;
(ii) The laws, which rank below the Constitution noting that international treaties entered into force in Egypt (such as the BIT) shall have the same power level of the laws; and
(iii) regulations, including, inter alia, Executive Regulation, which ranks below the Constitution and laws.
In light of the Judgement No. 30342 of 70 JY issued by the Court of Cassation, the provisions of any legislation shall not contradict the provisions of any other legislation that are ranked at a level higher than the first legislation. That being said that Executive Regulation shall not contradict the provisions of the Constitution and/or any other applicable law such as the case of the Education Law.
Other than the main reasons above, the new Decree may also be challenged for the following:
C) State Council Law:
According to Article 63 of the State Council Law, any Executive Regulation and/or any amendment made thereto shall be reviewed by the Legislative Department of the State Council before the issuance thereof in order to make sure that the said Executive Regulation does not contradict the Constitution or any applicable law. Failing so, the said Executive Regulation shall be deemed null and void in light of the Judgement No. 589 of 4 JY that was issued by the Administrative Court.
In this regard, we understand from the preamble of the New Decree that the said New Decree was not reviewed by the Legislative Department of the State Council as required by law and, therefore, the New Decree should be declared, by the competent court, null and void.
D) Investment Law and BIT:
The education sector is one of the major sectors that are covered by a number of investment incentives and guarantees under the Egyptian Investment Law No. 72 of 2017 (the “Investment Law”).
According to Article 3 of the Investment Law, non-Egyptian investors shall be treated at the same level of treatment of Egyptian investors with respect to all sectors covered under the Investment Law including, inter alia, education sector.
The Investment Law requires that foreign investment shall not be subject to any arbitrary procedures or discriminatory resolutions noting that his protection is adopted also under most of the Bilateral Investment Treaties made with Egypt and, therefore, each relevant Bilateral Investment Treaty should also be taken into consideration during the legal assessment of this new Decree.