Successful Regional Investment Negotiations as a Tool for IIA Reform: A multi-identity perspective

Egypt is considered a prime model of a historically multi-identity country that has always tried to attain balance and consistency in its foreign policy, including its economic pillar, between different but interdependent circles. These circles comprise the Arab, Islamic, African, and Mediterranean spheres. This fact has been reflected in Egypt’s international economic relations with those spheres, including through economic and investment diplomacy tools.

However, those tools have not always been effective or efficient in attaining their goals. The obvious manifestation of this is found in a pivotal element of those tools represented in Egypt’s IIAs, a bilateral, regional, and multilateral network with around 72 BITs in force, placing Egypt among the top 10 signatories. In addition, several regional economic agreements of investment-related provisions, including investment promotion and protection agreements, FTAs, association agreements, and economic cooperation agreements have been signed with Arab, Islamic, African, European, Asian, and Latin American countries. In addition, Egypt is a party to several multilateral conventions and agreements relating to investment and ISDS, including the ICSID Convention, New York Convention, and Multilateral Investment Guarantee Agency Convention.

Unfortunately, as in most developing countries’ IIAs, the old generation of bilateral and regional networks suffers from an inherent syndrome of inconsistency on the substantive, procedural, and drafting levels for many historical reasons. These reasons include a lack of economic considerations and the prevalence of those of political nature behind their conclusion, in addition to other deficiencies, such as the imbalance between investor rights and obligations in favour of the former. 

These persistent shortcomings rendered Egypt’s IIA network easily manipulated by foreign investors, claiming violations by governmental measures or decisions that sought to restore the state’s regulatory power or protect national interests.

Realizing the severity of this situation, Egypt has since 2006 adopted a national reform program to deal with this and other deficiencies. The cornerstone of this program was the 2007 Model BIT, which was substantially updated in 2022 after extensive consultations with all relevant stakeholders to respond to the modern developments in investment regulations and policies at national, regional, and international levels.

However, there was always one avenue that was neglected despite being effective and efficient in attaining the reform objectives—the regional approach that represents the “off the shelf” solution to deal with the syndrome at the bilateral, regional, and subregional levels.

Despite the disappointment resulting from the unsuccessful regional negotiations in 2012–2013 to amend the Unified Arab Agreement of Arab Capital Investment in Arab States of 1980 (which Egypt, as well as other Arab countries, never ratified due to the imbalanced approach of the amendment), Egypt became involved in the negotiations on the Investment Protocol of the African Continental Free Trade Agreement (AfCFTA). This was adopted in February 2023 and represented a real starting point in demonstrating the feasibility and effectiveness of the regional approach to reforming IIAs. The negotiation of this protocol can be considered a success story that represents an important pillar in serving the Egyptian IIAs reform program through achieving multiple objectives, including:

1. Replacing the old-generation BITs through a new regional framework: Despite the small number of BITs (11) in force between Egypt and African states, most of them belong to the older generation that did not have links to sustainable development and balancing investor rights and obligations. The AfCFTA Investment Protocol thus represented a golden opportunity for Egypt to replace and revamp those old BITs in one move, within a 5-year transitional period, while establishing a modern legal framework with the rest of African states.
2. Attaining consistency between the subregional investment agreements:   The AfCFTA Investment Protocol represents a practical and reasonable solution to attain consistency between all subregional investment agreements and models on different African subregional levels—including the COMESA Common Investment Area Agreement adopted in November 2017 with Egypt as a party. The AfCFTA Investment Protocol invites its parties to align their investment instruments with the protocol within a transitional period, and as such, it represents a single continental legal umbrella.

In this context (and inspired by the example of the protocol), Egypt, as a multi-identity country, aims to use the example of the AfCFTA Investment Protocol, an expression of Egypt´s African identity, and apply it to the other identities it enjoys including in the Arab, Islamic, and Mediterranean spheres.

Thus, the involvement of Egypt in regional negotiations on IIAs within these spheres could help it meet its consistency goals, including by

• revamping the outdated regional investment agreements,
• replacing old-generation BITs with a new regional framework,
• aligning subregional investment agreements with unified regional agreements, and
• attaining consistency between regional investment agreements themselves as far as possible.

This could be done through elaborating regional frameworks that target the promotion of sustainable investment, attain the right balance between investor rights and obligations, maintain limited and detailed standards of treatment and facilitation granted to investors while stipulating clear investors’ responsibilities in the context of promoting responsible business conduct, that address global crises including climate change and pandemics, and, finally, lay down principles for effective and flexible dispute prevention and settlement mechanisms.   

In this context, on the Arab level, Egypt needs to reflect the African success experience on the investment frameworks linking it to Arab states by revamping the outdated 1980 Arab Unified Investment Agreement through active involvement and endorsement of the current negotiations on the New Arab Investment Agreement under the umbrella of the League of Arab States (LAS) that would replace not only the old regional agreement but also the 18 BITs in force linking it to Arab states beside creating a modern framework with the rest of the 22 members of the LAS.

Furthermore, on the Islamic level, there is a need to call for negotiations under the umbrella of The Organization of Islamic Cooperation (OIC) to modernize the Investment Promotion, Protection and Guarantee Agreement signed in 1981 through a new framework that would also substitute the 24 BITs in force between Egypt and the members of OIC. These negotiations would complement the current negotiations on the establishment of a dispute-settlement organ and mechanism for disputes emanating from the agreement by correcting the course of the latter negotiations by starting with revamping the substantive rules side by side with the procedural ones.

In addition, on the Euro-Mediterranean level, Egypt is expected to encourage the EU to establish a new comprehensive partnership, FTA, or economic cooperation agreement that would replace the Association Agreement signed in 2001, including an investment chapter, following the Deep and Comprehensive Free Trade Agreement approach, the Sustainable Investment Facilitation Agreement approach, or another suitable model. This initiative should aim to replace the 23 outdated BITs in force between Egypt and the EU member states with a balanced and sustainable investment framework.

This multi-identity approach in reforming the Egyptian IIAs network using regional instruments and guided as much as possible by a successful model of the AfCFTA’s Investment Protocol, besides the updated model BITs, taking into account the peculiarities of each forum, would promote consistency between the bilateral, subregional, and regional instruments themselves, taking into account the existence of overlapping state parties in these instruments that necessitates avoiding conflicting rules regulating investments under these agreements.

Author

Moataz M. Hussein, PhD, is an Egyptian senior international investment agreements and policies specialist.