Egypt at a crossroad

Egypt is at a crossroad following the introduction of a Constitutional Declaration and a draft Constitution seeking to establish the structure and sources of legal authority in Egypt.

The phrase 'principles of Islamic sharia' has been causing much debate and speculation these days but what does it really mean and why is this relevant to Western parties interested in doing business in or investing in Egypt?

The purpose of this article is to provide a scholarly answer to this question through an examination of the Constitutional Decree, the proposed Egyptian Constitution and a summary of the strengths of the unique business and legal climate that give great cause for the recent investor confidence in the Egyptian Bourse.

The upcoming vote on December 15^th on the Constitutional referendum has been such a source of debate that it has led to responses from specific groups such as the Judges Club and Morsi supporters in the Muslim Brotherhood party. Notwithstanding that the Judges Club and several prosecutors' offices (mainly in the Nile Delta) have gone on strike, the Supreme Judicial Council (SJC) is still operating and professors, lawyers and other qualified groups can oversee the Constitutional Referendum, together with a significant proportion of the judiciary.

Islamist supporters of the President, through sheer force of numbers protesting outside the courts, have last week physically prevented judges from meetings with the bicameral parliament. Given that in the past the National Democratic Party of Mubarak (followed by SCAF) violently suppressed all forms of protest and encroached on the independence of the judiciary, this vigorous democratic activity signals a society that is in its nascent beginnings toward healthy pluralism and active democratic campaigning.

The sources of the debate are the Constitutional Declaration (or "Decree") and the proposed changes to the Egyptian Constitution. An examination of four of the seven articles of the Decree are with serious implications and ramifications.

Article 2, states: 'All Constitutional declarations, laws and decrees made since Morsi assumed power on 30 June 2012 cannot be appealed or cancelled by any individual, or political or governmental body until a new Constitution has been ratified and a new parliament has been elected. All pending law suits against them are void.' The implication here is that the judiciary, as a governmental body, is what is essentially targeted.

Article 4 is an extension of Article 6 of the previous Constitutional Declaration in which the timeline for drafting the new Constitution was extended. Article 5 reads: 'No judicial authority can dissolve the Constituent Assembly or the Shura Concil.' The purpose of this article is for executive protection of these two bodies which are predominately composed of members of the Muslim Brotherhood. This has created tension between much of the judiciary on one hand and a coalition formed by the executive and legislative branches centering on their shared loyalty to the Muslim Brotherhood, even though the President has officially stepped down from that party after election.

Article 6 solidifies the implications of the preceding articles: 'The president is authorised to take any measures he sees fit in order to preserve and safeguard the revolution, national unity or national security.' This final article may imply an implicit emergency law given the fact that 'the revolution' can be interpreted according to a specific party.

Fortunately this Decree is superseded by the Constitution. Article 6 of the draft Constitution contains several fundamental principles: 'The political system is based on the principles of democracy and shura (consultation), citizenship (under which all citizens are equal in rights and duties), multi-party pluralism, peaceful transfer of power, separation of powers and the balance between them, the rule of law, and respect for human rights and freedoms' all as elaborated in the Constitution. No political party shall be formed that discriminates on the basis of gender, origin or religion.'

This article, in my view, is the most important article in the draft Constitution and any article that may either implicitly or explicitly or by implication contradict with this article should be rescinded.

Article 179 provides for an independent judicial body named "State Affairs" which is entrusted with 'the drafting of contracts and the settling of disputes to which the State is a party, in the manner regulated by law.' Article 180 provides for the "Administrative Prosecution", also an independent judicial body endowed with powers such that it 'investigates financial and administrative irregularities, raises disciplinary proceedings before the courts of the State Council and follows up on them, and takes legal action to address deficiencies in public facilities.

Other competencies shall be defined by law. Its members share immunities, securities, rights and duties assigned to other members of the judiciary.' Although this institution is related to the judicial branch of government, on the face it, it has the characteristics of the independent institution of the Ombudsman, so necessary for administrative governance and the rule of law in a nascent democracy.

Article 219 enters into the heart of the matters that have been debated recently: 'The principles of Islamic sharia include general evidence, foundational rules, rules of jurisprudence, and credible sources accepted in Sunni doctrines and by the larger community.' The Constitutional view of what constitutes principles of Islamic sharia is a broad, all encompassing and inclusive one. Article 4 clearly states who the legal authorities are to be: ' Al-Azhar Senior Scholars are to be consulted in matters pertaining to Islamic law.'

Both of these articles have implications for Article 2: 'principles of Islamic sharia are the principle source of legislation'. The implications of placing the judiciary and legislative branches on reliance of a third institution for matters of consultation and/or interpretation are yet to unfold.

From a scholarly perspective sharia are technically definitive ordinances of the Quran which are expounded in positive legal terms, whereas Islamic law is far broader and includes rules and laws that have been derived using sources and methodologies for deriving law as sanctioned by classical Islamic jurisprudence, combined with quasi-Islamic laws in existence. The Constitutional definition thus fuses both the terms "Islamic law" and "sharia". The term principle itself is still relatively vague. The Constitutional references to Al-Azhar scholars are important for another reason.

As the seat of traditional Islamic discourse through Al-Azhar university and an exporter of legal codes through the joint work of Professors Lambert and Sanhuri, as well as an exporter of judges and lawyers throughout the MENA, Egyptian interpretations of legal matters and the impact of sharia on legal interpretation have an impact on the region as a whole. Thus, the combination of all of these changes with the terms "principles of Islamic sharia" is intended to be all encompassing on one hand by combining all recognised sources of Islamic jurisprudence, but also restrictive by limiting it to Egyptian sources of authority in terms of scholars from Al-Azhar. In the past, with respect to the matter of interest, or riba, Egypt has had one of the most liberal policies in comparison to other MENA countries, with the Grand Mufti of Egypt (1899–1905) stating the interest is allowed; it is not prohibited if the money is borrowed for production and not consumption.

This liberal view has bearing on international commercial arbitrations entered into by Egypt which are of a commercial nature and thus fall under the realm of production. Egypt's liberal policy goes one step further in recognising interest as a legal right.

What needs to be strongly emphasised here is that the concept of an independent judiciary is not alien to Islamic jurisprudence, it is in fact, a requirement. According to Islamic philosophy, the sharia is independent of political control and ought to be that way. In the past, the Caliph was accountable to the sharia and proscribed to obey and protect it. The implication of this is technically, no modern executive can act against the sharia, and this means that they are prohibited by Islamic law to encroach upon the judiciary in any manner whatsoever. In fact, the implication of this argument is that Islamic law has an inherently built in system of checks and balances, much like that of the United States. Accordingly, the judiciary was originally intended to be and by its nature is separate from the executive and legislative powers.

The concept of an independent and powerful judiciary emerged in classical Islam under the reign of Harun al Rashid who formalised their political station. This political role of the qadi gained in importance under the Mu'tazilite caliphs. Qadi is the Arabic word for judge. Even in the Middle Ages, which are outside of the period examined here, it was the chief qadi, and not the vizier, who defined the ideological norms of the Islamic polity. In these definitions, he served both as an independent tool of the administration and an independent ideological power- the only lawful representative of the sharia.

Historically, the qadi was also the head of the office of caliph's guard, which is the police force. Interestingly, in early stages of Islam, it was the qadi who was the representative of the law, not the executive or the 'legislative' elements of government. Thus, if Al-Azhar scholars follow these precedents, the independence of the judiciary will have further protection. An independent judiciary is absolutely crucial to the rule of law, and a democratic system based on pluralism.

On a more modern note, the Japan International Cooperation Agency (JICA) has agreed to support Egypt's energy sector with $300 million for a new electricity network project and a $100 million loan for sustainable energy projects; including the development of low-voltage solar cells technology, and an additional $50 million loan to expand the Dairut aquaduct station. Egypt as an emerging economy has signed a deal with Algeria's General Petroleum Corporation involving four agreements to increase butane and liquefied gas to 1 million metric tonnes currently and 1.5 in 2014.

The Investment Act was amended to allow adjustment of old contracts so that they are not affected by changes since the revolution. Egypt intends to decrease its budget deficit from the current 11% of the GDP to 8.5% by June 2014 through more efficient subsidies and a broader tax base. These, and similar cross-border agreements and improvements to the commercial framework will attract international trade and interest far into future decades.

The overall, long-term implications of all of these changes and movements will help to stabilise and embed Egypt's legal and business climate within longstanding principles of an independent judiciary, healthy pluralism, the rule of law, democratic processes, attractive investment packages, an ethos of commerce and a stronger and more stable legal climate and economy.

This has positive ramifications for international trade and international arbitration, which depends on the friendly support and general non-interference of courts and a stable environment conducive to long-standing cross-border contracts. Certainly investor confidence as reflected in the stock market increases of LE 8 billion in profit following the news of the judges supervising the referendum is justified and rightly so.