Wednesday, October 31, 2012

Egypt's Disastrous Courts

The current state of Egypt's court system is an unmitigated disaster.  A toxic blend of populism, Islamism, corruption and outright idiocy is steadily chipping away at what little credibility remains in a post-January 2011 Egypt.  Though the Muslim Brotherhood and their Salafi cohorts, as well as the military establishment and its systemic oppression, represent clear and present dangers at the constitutional, presidential, parliamentary and administrative levels, those risks are checked by at least of modicum of transparency and opposition that is entirely lacking with the self-serving, activist judiciary.  

Impossibly wide claims, fabricated evidence and reversals of the burden of proof leave defendants with virtually no chance of success.  In one recent, high-profile decision against a foreign gold mining company, Centamin, an administrative court ordered the cancellation of  a concession (which was once cited as a case study of Egypt's economic successes), because the revenue-share allocation to the state was deemed insufficient.  In proclaiming victory after the decision, the lead prosecutor noted that
[t]he government has pumped about 200,000 litres of diesel each day to help the company's operations over the last 10 years, that alone is worth $800 million.
Golden no more
Even taking the unlikely assumption that the fuel inputs were offered free of consideration, that would implausibly price government procured diesel at over $4 per gallon. Other high-profile decisions have ordered re-nationalizations of publicly-traded companies, voided billion dollar investments stretching over the course of a decade in a cement plant employing 3,000 people, plus taking various actions against property developers based on a repricing of once barren and undeveloped lands at current market, post-development values.  And these are just the headline cases.  Dozens upon dozens of other dossiers are in the dockets, with the overwhelming presumption of guilt driving away precious capital and even more precious brainpower.    

Egypt never had the best of investment climates, but at least it had a reasonably good record of respecting the integrity of contracts.  Half measures of government-driven settlements or delaying implementation of court decisions will not suffice.  The country's yahoo justice system must be overhauled.

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