March 2012

This update is intended for general guidance only. It should not be relied upon as legal advice.

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March 2012

LEGAL UPDATES…….1

MARKET UPDATES…...2

I&D NEWS……...5

newsletter E GY PT ’S SO URCE FO R LEGA L UP DAT ES

The Minister of Tourism issued Decree

no. 121/2012 obligating all tourism

transportation companies to install

tracking devices in all tourism buses,

which should be in accordance with the

standards specified by the General Ad-

ministration for Touristic Transporta-

tion in the Ministry of Tourism.

Track ing devices in Tour ism Transpor tat ion

Any tourism bus that is found without

the tracking device will have its license

cancelled. The license shall not be re-

turned prior to establishing the reasons

why the license should not be cancelled.

Tourism transportation companies are

given a year to implement the decree.

Ban on Establishment of Tourism Companies

The temporary prohibition on the

establishment of tourism

companies in all various degrees

has been extended for a further

year in accordance with ministerial

decree no. 151/2012.

A decree was issued by the chairman of the board of directors of EFSA

amending the rules for the listing, continuation, and the delisting of finan-

cial instruments from the Egyptian stock exchange. A new section (f) has

been added to article 3 of the rules referred to. The new section states

that the companies listed on the stock exchange should have an elec-

tronic website for the publication of the annual and periodical financial statements along with an explanatory guide,

auditor’s report, and all other information requested by the administration of the stock exchange. Companies listed on

the Egyptian stock exchange are expected to start implementing this decree on the date it comes into effect.

Taxes The Minister of Finance issued Decree no.68/2012 stat-

ing the replacement of selected templates used by income earners and

business owners when filing their tax returns. The replaced templates

include templates no. (27) and (28) used by small enterprises and phar-

macists as well as for the activities involving compulsorily valued goods.

Additionally, banks, companies, the public sector units, public business

sector, and public juridical personalities are to present their final tax re-

turns in accordance with section 3 of article 87 of the income tax law re-

ferred to in template no. (29).

The Egyptian Financial Supervisory Authority (EFSA)

ADVICE…...3


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After decades of unstable relations between Egypt and Iran, the Egyptian government and the General of the Iran Garment Holding Company in the ME have finally agreed on Iranian Investments worth $5 billion. The investment is expected to create about 6,000 job opportunities and is to allow the purchase of some Egyptian assets by the Investors who are prepared to settle the debts of some of the Egyptian companies. Approvals have already been issued by the government for projects in Upper Egypt, which include the establishment of an automobile assembly, manufacturing companies, and flourmills. [Business Today Egypt, March 2012].

The revenues gener-ated by the Suez Ca-nal have risen to $445.8 million from $416.6 million in January 2011. The change reflects a 7% increase which ac-cording to the infor-mation portal website is a percentage recog-nized year on year. [The Business Monthly, Amcham, March 2012]

Telecommunication companies are lined to receive financial aid from the govern-ment, which has de-cided to lend LE130 Million to assist in the current situation. The Minister of Communi-cations and Informa-tion Technology specified that LE30 Million of the total amount would go into assisting SME’s. [The

Business Monthl,March 2012]

The Egyptian govern-ment has prospect for raising $2 billion (LE12.07 billion) through an Islamic bond as a means of raising the necessary finances for develop-ment projects and to bridge the gap in for-eign currency re-serves. [Business Today

Egypt, March 2012]

Egyptian exports to the EU have increased over the past year and have reached $8.9 billion reflecting an increase of 20%. The increase indicates that export to the EU accounted for 32% of Egypt’s total exports for the same period. [Al Hayat, p.13]

Investments The World Bank has approved a loan of $240 for the Giza North Power Project. With the funding for the project, Egypt will be able to secure efficient and sustainable power supply for its citizens. Although the project was initially approved in 2010, building is yet to begin soon. The Giza North Power Project involve the building of a plant which will be comprised of a 1,500-MW combining cycle gas turbine (CCGT). Like all major infrastructure projects, the plant will be owned and operated by the Egyptian Electricity Holding Company. [The Business Monthly, Amcham, March 2012].

The Minister of Petroleum recently announced that the Egyptian government has reached an agreement with the US oil and gas corporation “Apache” expanding the projects aimed at oil and gas exploration and production in the territory. The improvement should reflect an increase of $1 billion in 2013 (LE 6.04 billion). The revenues generated by the government from Apache’s projects over the past decade have amounted to $10 million a day. [ Business Today Egypt, March 2012]

News had been spiraling over the past period about France Telecom’s potential purchase deal of Mobinil’s shares. This was confirmed when the board of directors of Orascom Telecom Media and Technology met on February 13 and responded to France Telecom’s wish by selling their holdings in Mobinil Telecom and Mobinil to the latter. The deal includes the sale of 28.75% stake in Mobinil Telecom and 15% stake in Mobinil, totaling 29% of Mobinil shares with the value of each share currently being LE 202.5. [The Business Monthly, Amcham, March 2012]


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Termination v. Dismissal

from the Employer Perspective

The provisions of the Egyptian Labor Law distinguish between dismissal of an em-

ployee and termination of an employment contract. While dismissal is one of the disci-

plinary sanctions imposed on a defaulting employee, termination of an employment

contract is a unilateral act undertaken either by the employer or the employee to

bring their contractual relationship to an end.

1.Dismissal 1.1 The current Egyptian Labor Law no. 12 of 2003 (ELL) restricts the employer’s right to dismiss an employee in terms of its conditions and procedures. An employer may not dismiss an employee on its own free will; dismissal may only be imposed through court (Art. 68, ELL). In the meantime, an employee may not be dismissed unless he/she com-mitted one of the following misconduct cases as defined in Article 69 of the ELL: 1)Impersonating another person or providing false information; 2)Perpetrating a mistake/default that causes gross losses to the employer. Provided that the employer notifies the competent authorities of the conduct that resulted in the losses within 24 hours of its occurrence; 3)Repeatedly failing to abide by the instructions relating to the safety of the employees and the establishment, pro-vided that these instructions are written and published publicly, and provided that the employee has been warned in writing of the need to abide by these instructions after failing to do so; 4)Absence without reasonable cause for more than 20 days within a year or ten consecutive days, provided that the employer notifies the employee by registered mail after the employee’s absence for ten days in the first case and for five days in the second; 5)Leaking the secrets of the establishment resulting in gross damages to the establishment; 6)Competing with the employer by undertaking the same activity; 7)Being under the influence of alcohol and/or drugs during working hours; 8)Assault against the employer or the general manager, or assault against one of the employee’s managers during work or because of it; or 9)Failure to abide by the provisions governing strikes as laid out in Article 192 to 194 of the Labor Law. 1.2 Dismissal, as a disciplinary sanction, may not be imposed unless the employee is notified in writing with the violations attributed to it, hearing its statements, investigating its defense and recording this in a report to be attached to the employee’s file (Article 64, ELL). No sanction shall be imposed without undertaking such investigation proce-dures, which must take place within 7 days at most from the date of discovering the employee’s violation. 1.3 If the employee committed one of the misconducts listed in Article 69 above, the employer must follow one of the following two routes: (a) Submit a request to the tripartite committee The first route is to submit a request to the tripartite committee mentioned in Article 70 (the “Committee”) in order to resolve the dispute amicably. The employer may request - within 10 days from the date of the dispute - to settle it ami-cably. “The date of dispute” could be the date in which the violation by the employee was committed, the date in which the employer found out, or the date in which the dispute has arisen between the employer and the employee. Defining the dispute date is usually left to the court to decide on, in light of the surrounding circumstances of every case.


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If a settlement is not reached within 21 days from the date of submitting the request, the employer may do one of the fol-lowing: 1)Request the competent administrative authority (labor office) to transfer the issue to the Labor Court; or 2)Submit the dispute to the Labor Court directly within 45 days from the end of the period specified for settling the dispute – 31 days from the date of the dispute. (b)Reverting to the Labor Court directly The second route is to submit the matter directly to the Labor Court within 76 days (31 days + 45 days) from the date of the dispute without reverting to the Committee first. The Labor Court makes its decision within 15 days from the date of the first court hearing. If the court refuses the dismissal request, it announces the return of the employee to the work and obliges the employer to pay the employee its unpaid dues. According to Article 71, if the employer refuses to accept the employee back at work, it is considered abusive dismissal giving rise to compensation according to Article 122 (minimum two months of the aggre-gate salary for each year of service). 2.Termination 2.1 Limited-period employment contract is terminated by the expiry of its duration (Art. 104, ELL). To the contrary, Ar-ticle 110 of the ELL provides that unlimited-period employment contract may not be terminated by the employer except for one of the following reasons: (1)The employee commits a serious misconduct as defined in Article 69, or (2)The employee is evidenced to be inefficient according to the employer’s approved internal regulations. 2.2 Evidencing the inefficiency of an employee according to Article 110 requires that the employee breaches objective norms endorsed by the employer’s internal regulations. An example of an objective norm would be the employee’s failure to achieve the minimum productivity of specified units per day while other employees generally achieve it. The evaluation of the employee against objective norms is rare and challenging. Ordinarily, the failures of employees are failure to meet subjective norms during an evaluation. Such failure would not be sanctioned under Art. 110, i.e., would not justify termina-tion of the contract. In conclusion, a court would not uphold terminating an employment relationship for failure in leader-ship style and organizational ability. 2.3 In all cases, termination must be undertaken at an appropriate time. Additionally, a two/three month prior written notice - depending on the duration of the contract – must be served to the employee in accordance with Article 111 of the ELL. 2.4 If the employer terminates the employment relationship for reasons other than the two stipulated above, the em-ployee can resort to the court requesting a compensation for the unjustifiable termination. If the court upholds the em-ployee’s request, it enforces a compensation of a minimum of two months for each year of service.

Disciplinary sanctions are listed in Art. 60 of the ELL to include: (1) warning; (2) deduction from salary; (3) postponement of the date in which the annual raise will be granted for a period not to exceed 3 months; (4) deduction of part of the annual raise not to exceed half thereof; (5) post-ponement of the promotion for a period not to exceed one year; (6) reduction of the salary for an amount of one annual raise maximally; (7) de-motion to the direct lower position without deduction of the salary; and (8) dismissal according to the provisions of the law.


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International taxation principles seminar, by WTS Egypt LLC

WTS, the first global network of independent tax firms founded in 2003, held a seminar on March 25th discussing the international taxation principles, cross-country business, and permanent establish-ments. I&D’s partner Dr. Fatma Salah was one of the invitees who benefited from the seminar’s tackled points and discussion forums addressing issues such as: taxes applied on amounts paid to foreign companies in return for their services and profit allocation in accordance to OECD’s latest developments.

3.Conclusion 3.1 Both dismissal and termination lead to the same conclusion: the termination of the employment relationship with a possibility of a compensation to the employee in case the court found that the dismissal or the termination is unjustifi-able. 3.2 As detailed above, dismissal procedures are lengthy and complicated and the employer would be the one responsi-ble for initiating the procedures and approaching the Committee/Labor Court. To the contrary, in case of termination, the employer would unilaterally terminate the contract with a mere prior written notice to the employee, who ends up being burdened with having to request compensation from the court. 3.3 Dismissal request is restricted by a specific time limitation, i.e., the lapse of 76 days from the date of the dispute. While termination may occur unilaterally anytime the employer perceives that a justifiable reason for termination is estab-lished.

March 2012

Documents

Transcript of March 2012