CASES 40 1

International Centre for 3. The overall approach seems, in the present case, to be mandatory since
Settlement of Investment Disputes a major allegation advanced by the Respondent and maintained throughout
the proceedings before this Tribunal consists in that the Claimants had re-
course for their introduction to the Respondent, the obtaining of the approv-
SOUTHERN PACIFIC PROPERTIES al for their project and during their activities for its implementation to
irregular contacts and corruption. To overlook the significance of the se-
(MIDDLE EAST) LIMITED quences of the relationship that developed between the parties, and how that
relationship evolved, inter alia by vitiated administrative acts as alleged by the
Respondent, seems not to be in consistence with the due legal protection of
the Respondent's inherent right ofdefense. In this case, the a prion' dismissal
of the Respondent's contentions as regards the irregularities and/or the nul-
lity of several administrative acts related to and issued for the benefit of the
ARAB REPUBLIC OF EGYPT Claimants' project on the ground that "the principle of international law :

CASE No. ARB/84/3 which the Tribunal is bound to apply is that which establishes the intema- :
tional responsibilities of States when unauthorized or ultra vires acts of officials
have been performed by State agents under cover of their oficial characters"
A Dissenting Opinion (the Majority Award p. 32 [p. 352 of this issue]), seems to be, in this specific
case where allegations of corruption are advanced, contrary to the Tribunal's ,
obligation to see to it that the exercise of the right of defense is fully protected
to the benefit of the parties in dispute.
INTRODUCTION 4. Where dissent is as extensive as I fear it is, in this extremely complex
case, an issue of method is to be found. I do not think that the problem can
1. To dissent from the award agreed upon and masterly written by such best be solved by following the steps of the Majority Award indicating, point
Eminent Jurists constituting the Majority of the present Tribunal is not a de- after point, where and why there is dissent. Rather, I propose, to deal with
cision that can be lightly taken. It is not made easier by the fact that the dis- the case in the following order:
sent is not limited to the evaluation of a particular fact or the interpretation I . Preliminary Observations :
of this or that particular rule of law. Indeed the diversions cover altogether the 1. The Jurisdiction of ICSID and the Tribunal's competence
perception of the facts of the present dispute and the evaluation of the whole over the present dispute.
relationship that tied the Claimants and the Respondent, as well as, necessar- 2. Guidelines to the settlement of the present dispute:
ily and as a result, the identification and the application of the appropriate rule a. The Washington Convention.
of the law. b. The standard of morality to which the Tribunal expressed
2. The starting point of the dissent consists in the perception of the facts. its adherence by its procedural order of February 13, 1991.
This is due, in my opinion, to the method of approach to these facts; to con- c. The notion of World Cultural Heritage and its
ceive and evaluate each and every fact as such, in isolation of other facts of implications.
the case, as opted for by the Majority Award, or rather evaluate the whole re- 11. A Summary of Pertinent Facts :
lationship that developed between the parties in the light of the multiplicity 1. The change of site.
of facts forming sequences of their overall relationship. The method of ap- 2. The housing activities.
proaching the facts does not constitute, fiom my point of view, an academic 3. The critical date May-June 1978:
speculation since it is the only overall review of the intricate facts of the case a. A review of certain facts that harked the parties'
that can best reveal the reality about the effective conduct of the parties dur- relationship.
ing their relationship that took place over the years.
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

b. The events that occurred around the critical date; May- appealed to the Court of Cassation, which will pronounce the final answer of
June 1978: the French judiciary on the matter."
i. The debates in the People's Assembly and the world wide As it was not until January 6, 1987 that the French Court of Cassation is-
adverse campaign. sued a decision the effect ofwhich was to finally determine that Egypt had not
ii. The measures taken by the Respondent. consented to submit the dispute to the jurisdiction of the ICC, the Claimants
iii. The subsequent conduct. did, only on January 29, 1987, file a request with the Present Tribunal asking
4. The allegations related to irregular contacts and corruption. that the proceedings be resumed. The Present Tribunal admitting, in the above
111. The Law : mentioned decision, that "while the concurrent pursuit of a remedy in different
1. The basis of the Tribunal's competence and the scope of the jurisdictions might be justified to protect legitimate interests of a claimant," the
present dispute. Tribunal was nevertheless aware of the eventual consequences thereupon since
2. The parties to the dispute and the receivability of SPP (ME)'s it stated that that entails certain practical problems of international judicial ad-
claim. ministration "since it invites a clash between competing exercises of jurisdic-
3. The applicable law. tion9'(thefint Preliminary Decision p. 36). Therefore, three kcts and dates are
4. The application of the law: the juris dictio. to be borne in mind to wit: that the alleged cancellation of the Claimants'
project at the Pyramids occurred on May-June 1978, and that the present re-
quest for arbitration was received by the International Center for the Settle-
I . Preliminary Observations
ment of Investment Disputes (hereinafter called the Center or ICSID) on
I
1. The jurisdiction of ICSID and the competence of the Tribunal over the I
August 24, 1984 and that it was due to the Claimants' concurrent recourse to
present case (a reminder): both the French Courts and to the Center that the Present Tribunal decided to
The present Tribunal dealt with the objections, raised by the Arab Repub- I stay the proceedings which were not continued till afier the French Court of
lic of Egypt (hereinafter called the Respondent), to the jurisdiction of ICSID i Cassation rejected the request of the Claimants on January 6, 1987.
b. In its first Preliminary Decision, the Tribunal did not find it neces-
and to the Tribunal's competence, over the present dispute, in two decisions;
of November 27, 1985 and of April 14, 1988. The Tribunal finally decided, in sary to answer the objection raised by Egypt to the effect that Article 8 of Law
the Decision of April 14, 1988 to reject the objections to its jurisdiction and No. 43, upon which the Claimants rely to establish jurisdiction, is not applica-
hence decided to proceed to the examination of the subject matter of the case, ble to the present dispute since the claim is based upon the non-performance
I
however, the arguments and findings of the Tribunal in these decisions should of obligations under a contract. In fact, the Tribunal stated that "it is not nec-
be taken into due consideration when dealing with the subject matter of the essary, for the purpose of the present decision, to address this question, since
case. Amongst thew findings and arguments which are pertinent to the final
adjudication of the present case, I may point out the following:
1I Egypt's objection may be simply answered by a recapitulation of certain
hcts.. ." (the first Preliminary Decision p. 27). As a result, the objection re-
l mained unanswered by the two preliminary decisions.
a. In the decision of November 27, 1985 (hereinafter called the first
preliminary decision) the Tribunal decided "A. to stay the present proceedings 2. Guidelines to the Settlement ofthe Resent Dispute
on the Respondent's remaining objections to the Center's jurisdiction until the a. The Convention on the Settlement of Investment Disputes between
proceedings in the French Courts have f d y resolved the question ofwhether States and Nationals of other States ( h e r e a e r called the Washington Con-
the Parties agreed to submit their dispute to the jurisdiction of the International vention or the Convention) is in hct and in law the prime legal instrument
Chamber of Commerce." This Tnbunal founded its decision to stay the pro- which the Present ICSID Tribunal is to observe and implement, in its letter and
ceedings upon the hct that "... the same question is also sub judice in another spirit. It suffices, for the purpose of this preliminary observation to point out
forum, where the proceedings involve the same Parties and the same dispute. that the consideration upon which the Convention was elaborated, as rnen-
The ICC Tribunal has already answered this question in the af?irmative, tioned in the Preamble of the Convention, is "the need for international c o o p
holding that Egypt and the Claimants agreed to resolve any disputes by ICC eration for economic development and the mle of private international
arbitration. The Paris Court of Appeals disagreed, but its decision has been investment therein." The Report of the Executive Directors on the Convention
404 lCSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

(hereinafter called the Report) in its turn explains that the raison d'ttre of the both the Convention and the Egyptian Law No. 43 of 1974. In the present
creation of an institution designed to facilitate the settlement of bputes case, the application presented to the Competent Authority in Egypt; the Gen-
between States and foreign investors "can be a major step toward promoting eral Investment Authority, (herein called GIA) under item A: contains infor-
an atmosphere of mutual confidence and thw stimulating a largerjow ofprivate mation that the "estimated capital expenditures: imported in foreign currency:
international capital into those countries which wish to attract it" (the Report para 9. 550,000,000.- dollars." Under the same item it was written that "the total es-
Emphasis added). And that the Executive Directors believe that ". .. adherence timated expenses for the various constructions on the site amount to five hun-
to the Convention by a country would provide additional inducement and stimulate a dred and fif?y million dollars during ten years.. . include (sic) the constructions
largerjlow of international investment into its temtories, which is the primary purpose of of hotels providing 15,000 beds." (Resp. annex F 17). Then on May 19, 1975,
the Convention" (the Report para 12. Emphasis added). less than one month after the presentation of the application to the GIA, Mr.
These statements militate for a specific understanding of the notion of in- Gilrnour, the Representative of the Claimants sent a letter directly to the Pres-
vestment and the qualification of an investor, in the h e w o r k of the Conven- ident of the Republic of Egypt demanding the approval that the usufiuct right
tion. The main characteristic dserentiating investors from developers or be accorded for a duration of 99 years, instead of 50 years, and as justification
promoters or the U e , seems to reside in the fict of the flow of invested capital, for that request he stated that that duration "is a must for such a big sized
as instrument for economic development, that brings the investor into the host project which will need a capital of 770 million dollars" (Resp. annex F 23, p.
State. It is to be noticed that the scope rationae materiae ofthe jurisdiction of the 25). Consequently on July 20, 1975, the Board of Directors issued Decree No.
Center is limited to legal disputes arising directly out of an investment between 50/14 - 75 approving the establishment of thejoint venture Company between
a Contracting State and a national of another Contracting State (Amcle 25 of SPP and EGOTH for a period of 99 yean"on condition that this matter should
the Convention). Reference to "investment" anywhere in the Convention conform with the regulations of Law No. 129 of 1947 concerning the obliga-
should be accorded the same sigNficance, which consists, as above mentioned, tion of the public utilities... " (Claimants exh: 105). Needless to state in this
in the flow of international capital to the host State. In the same vein the Egyp- context that the advantages that may be accorded to an investment project are
tian law concerning Arab and foreign investments and free zones, enacted by always related to the investment's importance to the host State's economy and
law No. 43 of 1974, states in article (2) that "the term 'invested capital' in the needs. (Ph. Leboulanger, Les contrats entre Etats et entreprises itrang&res,
application of this law shall be deemed to mean the following: i- Free foreign 1985, p. 195). In this respect, I may only point out, for the time being, that am-
currency duly transferred to the Arab Republic of Egypt through a Bank reg- ple consideration and serious reflection should be accorded to the realities of the
istered at the Central Bank of Egypt for utilization and execution or expansion present case, and to their due legal sigdicance and qualification in the frame-
of a project.. . " (G. Delaume, le Centre international pour le rtglement des work of both the Washington Convention and the Egyptian Law No. 43 since I
difftrends relats aux investissements (CIRDI), Clunet 1982, p. 802-803, a major argument and serious allegations, concerning the proper legal qua& i
where the author states that "En revanche, d'autres ltgislations proctdent h une cation to be accorded to the activities of the Claimants, are at the core of the
plus ou moins longue CnumCration des contributions considtries comme en- present case. In this respect I may quote the Eminent Professor Reuter com-
trant dans le concept d'investissement" and cites Law No. 43 of Egypt as an ex- menting the Washington Convention as saying "Toute convention repond i un
ample of the legislations he refers to). besoin et la question se pose de savoir quelles sont les sources exactes des in-
For the purpose ofthis preliminary observation, it suffices to point out that quiktudes et des refus qui paralysent le dCveloppement des investissements in-
"investment" means primarily and mainly whether in the framework of the ternationaux. Si c'est vraiment l'absence d'un tiers impartial.. . mais dans la
Convention or under the Egyptian Law No. 43 of 1974 the flow of interna- mesure o c il n'en serait pas ainsi son mCrite n'en serait qu'indirect, elle vaudrait
tional capital to the host country. The Present Tribunal established in the two aloa, si l'on peut dire, surtout par son fonaionnement, c'est-i-dire par l'occa-
preliminary decisions upon jurisdiction that the Claimants applied to the Egyp- sion qu'elle donnerait 2 une jurisprudence d'ilaborer et de pdciser les r2gles de fond
tian Government as investors in the framework of Law No. 43, and that Egypt, sur lesquelles ellegarde un silence refahif:La question ainsi poste nefait que souligner
as a contracting State to the Washington Convention, embodied in article 8 of toute la d f m qu'il peut y awir 2 re point entre f'ahitrage cornmenial international
the above mentioned Law a standing offer of consent to the jurisdiction of et le contentieux de l'investissement". However, Professor Reuter adds "Ce n'est
ICSID. Under these circumstances, it appears legitimate to scrutinize the exact pas que dans son indttennination la notion d'investissement ne puisse rejoindre
effective qualification of the Claimants in the light of the letter and spirit of celle d'optation comrnerciale" (Investissements Ctrangers et arbitrage entre
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES
406

Etas et personnes privkes, 1969, p. 10-1 1. Emphasis added). As has been ex- they presented in Exhibit 170 a letter &om Coopers and Lybrand dated January
plained, the difticulty to find a legal definition to the notion of investment em- 19, 1981 with a summary of SPP (ME)'s development costs for the years 1975-
anates &om thc fact that it is, by its origin, an economic notion, nevertheless it 1979 broken down by categories of expenses. The Respondent for its part
is relatively easier to recognize a specific case of investment which is the duty stated in its annex F-49 that the investigation of these expenses sheds doubt over
of a Tribunal, than to define the notion itself which is of the domain of the doc- the components of the unjustifiable developing costs which were not charged
trine. In this vein, it has been remarked that ". . . avant d'stre une notion ju- to ETDC and formally requested that the Tribunal order "une expertise pour
ridique, l'investissement est une notion economique et peut en conskquence verifier la realit6 de ces coiits et 1es destinataires reels des paiements intervenus."
prendre les formes les plus diverses. I1 en rtsulte que s'il est relativement facile Therefore, the Tribunal ordered that "the Claimants shall submit, within one
de reconnaitre un investissement, il est plus dficile, voire impossible d'en don- month, a document indicating the nature, date and amount ofthe above referenced de-
ner une definition exacte susceptible ila fois de couvrir ses multiples aspects et velopment costs, including the names of the recipients 4 payment in excers of
de s'adapter i une realitt economique en evolution constante" U.D. Roulet: la USSZ0,OOO and a confirmation that these sums were legitimately and actually
Convention du 18 mars 1965, annuaire suisse de droit international, 1965 p. expended for the project." (The Procedural Order, para 6-a. Emphasis added).
43). From a legal point of view, the Tribunal had all grounds to rehse a request for
Before concluding on this issue, I wish only to draw the attention to the payment of sums unless supported by pertinent and conclusive documents on
rules of international development law, the genesis of which may be traced to the basis of the well established principle concerning onus probandi. As the Tri-
the First United Nations Development Decade (Resolution 1710 (XVI) ofDe- bunal is not empowered to order an injunction to any party to present a proof
cember 19. 1961, whereby the General Assembly proclaimed the ten years of any of its contested allegations, this matter being a burden which rests upon
Gom 1960 to 1970 to be the first United Nations Development Decade). the claiming party, the Procedural Order unveils the fact that the Tribunal ac-
Whether considered as soft or hard law, the fact remains that the economical quiesced to go forward with, and to scrutinize, the evidence advanced by the
philosophy underlying international development law has changed the climate Respondent to the effect that the Claimants had recourse, during their activi-
of investment in the developing countries where new ideas and rules are replac- ties in Egypt, to irregular contacts and corruption and that the evidence to these
ing old certainties. An example of this change can be easily detected in the Res- allegations resides in what the Claimants call development costs. That is to say
olution 1803 (XVII) of the General Assembly where "appropriate" that the Procedural Order, requesting the Claimants to produce supporting
compensation in case of nationalization replaced the once established rule of documents related to the development costs and, especially to unveil the names
"prompt, adequate, and effective" compensation (A. Redfem and M. Hunter, of recipients of sums exceeding a certain amount, indicates that in the Tribu-
Law and Practice of International Commercial Arbitration, London 1986, pp. nal's conviction, the existence of the facts, about illegal expenses alleged by the
81 to 84 and Ph. Leboulanger, Les contrats entre Erats et entreprises ttrangkres, Respondent, is more probable than their non-existence. Thus, the burden of
p. 168 et s.,) going forward with the evidence, concerning the allegations of corruptive
practices was shifted back to the Claimants with all the legal consequences that
b. The standard of morality to which the Present Honorable Tribunal
that engenders. It remains thus, for the Tribunal, to evaluate the issue in the
expressed its adherence in conformity with its legal obligation: Reference here
light of the j ~ s ~ c a t i o and
n s comments advanced by both parties.
is made to the Procedural Order issued by the Honorable Tribunal on February
13, 1991. In my opinion this Order represents a landmark in the international The Claimants stated that "as explained in that affidavit (of Mr. Birchall)
jurisprudence concerning settlement of investment disputes. Although quali- it was impossible, due to the loss or destruction of accounting documents dat-
fied as a Procedural Order, it has its own inherent logic that radiates, by its legal ing back 15 y e m to account for every expenditure per category. However, the
consequences beyond the strict sphere of procedure. As it would be dealt with, documents available do c o n f i the nature of the expenditures beyond any
at length infia, I may only point out that the Claimants in their final conclusions doubt and that they were legitimately made for the investment project."
and prayer for relief requested, secondarily, the value of their investment in (Claimants' note dated April 20, 1991). To which explanation the Respondent
ETDC on the basis of their out-of-pocket expenses and an additional amount commented that "En effet, la question des development costs, dont SPP ne de-
to compensate for loss of the chance on opportunity of making a commercial rnande pas le remboursement en tant que tels, a ttt soulevte par la R.A.E. i
success of the project. Under item (4) they indicated the sum of 2,254,000.- l'appui de son moyen tirt de la conuption" and that "Or I'on est oblige de con-
dollars as "development costs pre-cancellation" and as supporting document stater qu'il n'a pas t t t dpondu par SPP cornrne cela lui a C t t dernandt par le
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL
408

Tribunal: en effet 1. Les rkponses sont gravement insufisantes. 2. Elles contien- In fact, the Claimants themselves pointed out that on September 7, 1977,
nent de graves contradictions ou meme contrevkrit&s.3. Et enfm les explica- representatives of the Archeological Authority and of ETDC met and came co
tions sont inacceptables." The Respondent points out that "on imagine ma1 an ageement with respect to various procedures to be followed to funher co-
comment clans une affiire aussi importante ... SPP aurait pris le risque de ordinate and cooperate with each other (Cls Memorial p. 48 and the minutes
dttruire les ilPmen& de preuve relatifs 1 une question dkji contestee i of the meeting. Cls. exh. 137). The minutes of that meeting, (the Respondent
I'kpoque.. ." (Respondent's note dated June 20, 1991, emphasis reproduced) contests nevertheless the correct representation of the Antiquities P.uthority at
The Respondent in the above mentioned note affirms, moreover, that starting that meeting) indicate that it was agreed upon inter alia that "in the case where-
from May 1979 the question of the development costs was under debate and as fixed antiquities are present, such as a complete archeological village or tem-
discussion with representatives of Egypt and that at that time Mr. McLellan, a ples.. . which could not be removed, the Company is bound to leave the area
Claimants' representative, f i ~ r m e dthe existence of the supporting documents and to eliminate it fiom the project." It seems, therefore, that the Claimants'
as regards the development costs. That fact seems to be later confirmed by Mr. explanations in this respect formally confirm the notion du risque inherent to
Blainlay fiom the firm Coopers and Lybrand, who explained in his testimony their option as regards the site of the project on the Pyramids Plateau proper,
before this Tribunal that the documents related to the development costs were and reveal their readiness to comply with any eventual consequence.
examined by his firm in preparation to its letter dated January 19, 1981. In this The Antiquities argument will be dealt with later, however, it seems ap-
context, for the sake, and in the limits, of this preliminary observation, I express propriate fiom the outset to state the following:
my conviction that the Tribunal should be considered bound by the letter and - That the Claimants trespassed upon the Antiquities zone of the
spirit of its own Procedural Order, in any further determination of the related monuments proper. This hct is revealed by the statement of the Minister of
legal consequences. Tourism before the People's Assembly (that same statement was relied upon by
c. The notion of World Cultural Heritage and its implication: The the Claimants, however in another context. Claimants' exh. 74 p. 45) where
uniqueness of the site on which the Claimants' project was finally intended to the Minister was quoted saying". .. when I took over the Ministry, I found out
be implemented, on the Pyrarmds' Plateau proper, and its final registration on that the construction is being carried out at a distance of 1.250 metea from the
the list of properties included in the World Heritage on October 26, 1979 Pyramids, immediately I have issued my order for the cancellation of village
(Resp. annex D 29), mandate to take into consideration this element of "public No. 24 ... "
international interest or need" as regards the issue of the present dispute. - That the Claimants' project, as they conceived and had the intention
In this context, I may draw the attention to that it was revealed, during the to implement, would have endangered the existing monuments. This fsct is
proceedings before this Tribunal, that the maps attached to the only formal founded upon uncontested technical reports entitled "Engineering Hazards
agreement entered b t o with the Claimants by an authorized representative of and Deleterious Effects of the Pyramids Oasis Project on the Existing Monu-
the Egyptian Government, which is the Agreement of September 23,1974 en- ments." (Resp. Annex F. 32). "The Cairo Pyramids site: Anticipated Problems
titled "Heads of Agreement," indicate the site of the project situated mainly of Site Construction h m the Geological Point of View" and "Ground Water
around the Pyrarmds Plateau. The avatars that occurred later about the change and Seepage conditions after the Erection of Pyramids Oasis" (Appendix 1-1
of the site will be explained below in detail, however it seems that the two Par- and 1-2 to the said technical report, Resp. Annex F. 33 and F. 34).
ties in dispute do not underestimate the obligation to preserve all and any ves- - That it had been established that antiquities were discovered within
tige of the Ancient Civilization on the Pyramids Plateau. By choosing the site the Claimants' zone of activities. The hct which is evidenced by the "Memo-
of the project on the Pyramids Plateau proper and in the vicinity of the Mon- randum sur les Monuments de la Region de Gizeh", (Resp. Annex F. 35 p. 21)
uments themselves, those who opted for that choice, instead of the site pro- and corroborated by the video tape projected by the Respondent during the
posed by the Respondent as shown on the maps attached to the September Tribunal's hearings in September 1990.
Heads of Agreement, were necessarily aware of the high risks undertaken. It - That the whole area &om the Pyramids of Giza to Dahshur was reg-
was in fact and in law a "contrat i grand risque", with all the consequences that
istered on the list ofproperties included in the World Heritage on October 26,
emanate &om that qual@tion juridique.
1979, in the framework of the Convention concerning the protection of the
World Cultural and Natural Heritage (hereinafter called the UNESCO
 410 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

Convention). In fact, Egypt submitted, in February 1979 to the UNESCO its international obligation in the making. Orignally built into the face of a cli&
nomination of "Memphis and its Necropolis - The Pyramids Fields from Giza the temple was moved to safety 200 meters in land from its original position,
to Dahshur" to be registered on the list of the World Heritage Properties. (Cls. the project completed by an international team cut the temple into pieces,
exh. 198). It seems unconceivable, in the framework of the UNESCO Con- carved the entire temple out of the c m a n d reconstmctcd both cliff and temple
vention to endanger vestiges of an Ancient Civilization, already and uncontest- nearby. The project took 5 years and 40 Million dollars to complete, one of the
edly considered part of the Human Civilization till the site or the monuments most ambitious relocation projects, to my knowledge, in history. (Noteworthy
in jeopardy be formally listed on the World Heritage List. In the same vein, in this respect to mention that the Temple of Abu Simbel was, in turn, regis-
even the scientific high probability of discovery of ancient vestiges mandates, in tered on the list of World Heritage at the same date of the registration of the
the spirit of the Unesco Convention the appropriate measures ofprotection by site of the Pyramids Plateau - R a p . Annex D 29, Unesco, Le patrimoine mon-
the National State acting on behalf of the International Community. dial). Afortiori, in case a signatory State to the Unesco Convention identifies a
To conclude on this point, I may express my adherence to Professor's property that responds to the quaM~cationsof the World Heritage Properties,
Kahn statement to the effect that "I'inttrZt de la Convention de I'UNESCO, it should be bound to act in accordance to and in compliance with, its obliga-
outre la reconnaissance de l'existence d'un Patrimoine mondial en tant que tions emanating from the imperative rule of international law codified by the
catigorie juridique, est de ne pas se contenter d'une dtclaration &intention said Convention. That is to say that it is not by the act of enlistment that a site
mais de mettre en oeuvre un ensemble d'obligations et un systeme de gestion or a monument acquires its qualification as part of the world heritage.
qui repose sur trois volets... " (Resp. annex D 22 p. 14). And for Professor The enlistment has in law a declarative nature which does not affect the
Kahn to conclude that "actuellement, e n dehors de nombreuses conventions nature propre of the site or monument but formally triggers the qual+tion ju-
sur les atteintes aux droits de l'homme seul exemple certain de jus cogem, on ne ridique only under the convention to the said site or monument. The needs and
voit que peu de regles qui puissent btntficier d'une teUe hauteur clans la hikrar- interests of the international community to the preservation of the site from the
chie des sources. Aussi est-ce sans hksitation que j'&rme que le respect du pat- Pyramids to Dahshur, the actual discoveries of antiquities on that site coupled
rimoine ~LIkUrelmondial constitue une regle imptrative". (Fksp. Annex D 22 with the high probability of more discoveries and the Claimants' apparent en-
p. 16-17). croachment upon antiquities area are, in my opinion, pertinent elements that
I Professor Kahn while expressing reserves as to consider the obligation to should be borne in mind. Moreover, as already explained and as will be dem-
preserve the properties belonging to the World Heritage as part of the jus cogens onstrated later, the option for the site on the Pyramids Plateau instead of the one
' affirms however that this obligation constitutes elements of international public initially proposed by the Egyptian administration around the Plateau seems to
order "Mais s'agit-il d'obligations d'ordre public international? Sans aller jus- be impregnated, Gom the outset by the acceptance of an evident high risk.
qu'd faire appel 4 une notion aussi controverste et floue que celle du jus cogens,
il me parait clair que les rhgles impostes aux Etats sont des rkgles impkratives
11. A Summary ofpertinent Facts:
, auxquelles on ne saurait dkroger: Elles constituent des tlkments de l'ordre pub-
lic de la cornmunautt internationale... " (Resp. Annex D 22 p. 16). In my The Gcts related to the present dispute were mentioned in the two Pre-
opinion, I consider that the interest of the International Community as regards liminary Decisions of this Tribunal, however, in the limits necessitated to pro-
its Human Cultural Heritage implied a non codified international obligation nounce upon ICSIDi jurisdiction and the Tribunal's competence over the
binding upon both the International Community and the States even before present dispute.
the entry into force of the Unesco Convention. I may just refer here, in this Hence, facts represented, and/or developed by the two parties during the
context, to the fact that when Egypt, in the early sixties, had no alternative but proceedings concerning the subject-matter of the dispute, mandate a more de-
to take the hard and painfid decision to sacrifice certain monuments, inter alia veloped and extensive review.
the temple of Abu Simbel, as an inevitable consequence to the construction of The main kcts presented during the present proceedings relate 1- to the
the Aswan Dam, the international community saw to it, financially and tech- change of the site upon which the Claimants' project was finally being imple-
nically, that these monuments be protected and preserved. This action, that mented, 2- to the Claimants' non-compliance with their obligations in the
dates thirty years ago, yet reveals un Ctat d'esprit of the International Community h e w o r k of the rules governing their project (the housing argument), 3- the
behind its strive to preserve its own Cultural Heritage and for the least an
412 lCSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 413

cntical date May-June 1978 and the subsequent conduct of the parties, and 4- of the fidavit of Mr. Gilmour presented before the ICC tribunal (Cls. exh.
facts concerning irregular contacts and corruption allegedly imputed to the 89) in which he explained the background to the September Heads of Agree-
Claimants. In the review of these facts, I would nevertheless, state some per- ment. The Respondent quotes Mr. Gilmour giving an account of his visit to
sonal reflections and observations necessitated by the context, without however Cairo, accompanied by Mr. Munk during the third week of September 1974,
going through the discussion of the legal consequences thereupon which will as stating that "apparently in response to SPPS concerns about the suitability of
be dealt with in the next chapter. the Pyrarmds Plateau as a development site, General Zalu had encouraged the
1. The change ofsite: SPP to consider a development scheme to comprise tourist facilities not only
on the Plateau, but also in the area of Mena House Hotel and the 'Gateway' to
a. The Respondent's contentions: the Pyrarmds themselves. Mr. Thomson reported gaining the impression that
I. The Respondent advances (Counter Memorial Vol I, p. 90) that it General Zaki was soliciting SPP to undertake general planning responsibilities
was assumed, as a matter of fact, that the site of the project at the Pyrarmds, as for development of major parts of the area entirely surrounding the Pyramids."
shown in the attached map to the November 23, 1975 contract of incorpora- And that "we abandoned the Egyptian plan, in favor of the fully-integrated,
tion of ETDC (between SPP (ME) and EGOTH, Cls. exh. 113) upon which high quality destination resort which we felt uniquely qualdled to conceive and
the master plan report and the other drawings were later prepared, is the one implement. The general concept plan we devised for the Pyramids, in contrast,
and the same agreed upon with the Government as shown in the attached maps proposed higher density housing on the Plateau grouped in discrete 'desert vil-
to the Heads of Agreement dated September 23, 1974. The reproductions of lages'; and in deference to General Zaki's wishes as we then understood them,
the maps attached to the said agreement presented by the Claimants in exhibit we also incorporated plans for tourist development in the area of the Mena
(90) states the Respondent, were misleading since the reproduction consisted House and at the entrance to the Pyramids &om Fayoum Road." (Counter
of two parts each one containing beside itselfa mirror image of the other half Memorial, Vol I, pp. 95, 96).
of the map superimposed on it. Dissipating any hint of the allegation that the
IV. Respondent explains that, whatever existing divergences between
conhsion was contrived, the Respondent, however, ascertains that the compar- the two parties, it was the site proposed by the Government that had been
ison between these two maps: the one attached to the Heads of Agreement as agreed upon as shown in the attached map to the September Agreement. To
Annex 'A' delineating the "sites" upon which the government undertook to
the conclusion that the approval of the project by the President of the Republic
secure title of u s u h c t to the projected joint venture, and the other map at- of Egypt in the meeting held on September 22, 1974 necessarily and logically
tached to the November 1975 contract of incorporation of the joint venture on
should be undentood in this context, as an approval of the site as demonstrated
which the site of the project was delineated, illustrates the fact that the two sites and delineated in the attached map to the September 23, 1974 agreement.
do not coincide.
V. The Respondent, also, points out that the December Contract ex-
11. Respondent explains (Counter Memorial, pp. 92-93) that the site
plicitly stipulates in its amcle 4 that "ETDC will undertake the development
delineated in the map attached to the September Agreement is in fact com-
and management of both projects within thegeneral limits described in the map at-
posed of four sites mainly outside the Pyramids Plateau and below it, one of
tached to the Heads $Agreement.. . " (emphasis reproduced), and that article 5 of
which is situated to the south west of the area, bisected by the Fayoum Road
the same contract provides as follows "... EGOTH will use its best effort to
(near what has become the new 6th of October city), Respondent adds that
acquire the titles of property and possession of the land comprising the sites of
even fiom the most cursory look at the annexed map to the September Heads
each project within the limits refemd to in article 4 . . . " (emphasis reproduced).
of Agreement, it appears "that the main development sites agreed upon Ed1
The same article provides that . provided that they are developed in accor-
'I..

outside, and below the Plateau, and only a minute site, and possibly one half dance with approved plans, but excluding the monument areas and those which are
of another one, very far removed fi-orn it, can be said to be at the edge of the
designated for public use within the project sites." (emphasis added)
Plateau" (Counter Memorial Vol I, p. 98).
VI. The Respondent explains that, the attached map to the confidential
111. The Respondent alleges that the Claimants' intentions concerning report which is referred to in the December Contract, shows that the sites des-
the site of the project, and as fir back as at the time of signing the Heads of
ignated on the map correspond largely to the sites designated in the map at-
m e e m e n t , departed fiom the terms of that Agreement they accepted and
tached to September Heads of Agreement. Respondent adds that "the only
entered into. As proof to this allegation, the Respondent refers to the content
414 lCSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL

divergence.. . is that the unlawful activity of urban development for wealthy 1975, the Claimants, however, explain the change of the site as a change agreed
locals ... began to show its head in the report ... " (Respondents' Counter upon by the two parties.
Memorial, Vol I, p. 109) 111. The Claimants advance that the precise location of the Pyramds
VII. Respondent concluded that "we also know that it was this unlawll project was "under discussion prior to the formal signing of the Heads of Agree-
change of site to a doubted forbidden area (because it was already partially pro- ment, and discussions continued thereafter" (Cls. Reply, p. 24. Emphasis repro-
tected by existing legislation and because that protection had to be re&rmed duced). The Claimants quote the Minister of Tourism as stating, before the
and extended as the result of new discoveries and of local and world public People's Assembly, describing SPP's visit to the Plateau in July 1974, that ". ..
opinion pressure) that formally brought the Pyramids Plateau project to an to encourage tourist projects in Egypt thus by creating two tourist regions with
end." (Counter-Memorial,Vol I, p. 112) their complete resort in the Pyramids Plateau.. . " (Emphasis reproduced).
VIII. Commenting an inter-offlce memorandum sent &om Mr. Munk, on IV. Claimants also suggest, on the fruth of testimonies of Mr. Grienon
October 2, 1974 (Cls. exhibit 78) which contained that "in the light of the before the ICC Tribunal and of the written statement by Mr. Walker, PPA's
above, two unique development areas have been identified by the SPP project Chief Planner from mid 1974 to early 1975 that all allegations advanced by the
team in cooperation with the Egyptian Authorities. The first ... consists of Respondent in this respect should be dismissed. In that written statement, the
some 20.000 acres and is on the immediate outskirts of Cairo.. . located on the Clairnants point out, Mr. Walker explains that "The suggestion that the site of
G i z a Plateau and includes the three Pyramids and the Sphinx ... " (emphasis the project was changed surreptitiously is completely wrong and quite ridicu-
added.), the Respondent explains that that memorandum dated October 2, lous." (Cls. exh. 175)
1974, gives more evidence as to the strife of the Claimants to implement their
V. Claimants explain that on the same day, the December 12, 1974
project on the Plateau, -in full contradiction to the agreed upon Heads of
contract. was executed, the Ministry of Tourism issued a decree (No. 356)
Agreement and also to the Contract of December 1974 they entered into later
forming a committee, one of the functions of which was "to specialize in the
on December 12, 1974. (Respondent Counter-Memorial. Vol I, p. 115).
study of the propositions submitted by SPP in connection with the construc-
b. The Claimants' explanations: The Claimants explain the facts in a tion of a tourist city in the Pyramids area." (Cls. Reply, p. 30). The Claimants
different way, to the conclusion that the Respondent's allegations concerning also point out that the above mentioned Committee called itself "The Pyramid
the site are unfounded. Their presentation is essentially based upon the assertion Plateau Committee." (Cls exh. 126, concerning the "Report of the Pyramids
that "... The Egyptian Government suggested the Plateau area, that the parties Plateau Project Committee")
proceeded to discuss and define the area together, and that by January 1975 (at
VI. Claimants, however, rely mainly upon the issuance of Presidential
the latest) Egypt had established and all parties were agreed on the location.
Decree No. 475 of May 22, 1975 and also upon the memorandum preceding
Details of the location were then refined, discussed, approved, and reapproved
that decree and presented by the Minister of Tourism. Claimants point out that
in numerous decrees and other oacial documents." (Cls. Reply p. 21)
the memorandum contains reference that the site to be allocated to touristic use
I. Claimants point out that the fact that the attached maps to both the in the hmework of the September Agreement lays on private land and on the
Heads of Agreement and to the Confidential Report to the December Con- Pyram~dsPlateau (Cls. Reply, p. 35), and that the Presidential Decree provides
tract, show Werent sites to the one where the project was finally imple- in article (1) the allocation of the land "on each of the Plateau of the P y r m d s
mented, should be considered in the light ofanother fact which is that the final and Ras el Hekma.. . " to touristic use. Consequently the Claimants assert that
site, on top of the Plateau, was clearly shown in the map attached to the Con- the choice ofthe site on the Plateau was mutually agreed upon by the Parties.
tract of November 23, 1975, entered into by EGOTH and SPP (ME), and
VII. As additional proof the Claimants refer to the letter and the attached
aiming to the Constitution of the joint venture ETDC. Claimants add that not
map sent on February 2, 1976 to the Chairman ofEGOTH, by the Vice-Min-
only the Head of EGOTH signed the above mentioned contract but that the
ister in charge of Survey Services and Expropriation, the comment, in Arabic,
Minister of Tourism himselfaf5ied his signature to the contract.
written on the map reads as follows "(1) that encircled in red on the plan is the
11. Denying any sigmf~canceto the fact of the change of the site of the Pyramids Plateau site, object of the Presidential Decree of 1975 a t t r i b u ~ this
g
project as there do exist several approvals given by the Government to that ul- Plateau to EGOTH (Ministry of Tourism) for touristic exploitation. Area:
timate site, inter alia, the contract of incorporation of ETDC on November 23, 10.000 feddans. (2) That part encircled in blue on the plan and represented by
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL
416

the letter C is the site reserved for ETDC in implementation of Decree No. of the Heads of Agreement it was stated that "... drafi decree was prepared by
212 of 1975 of the Ministry of Economics and Economic Cooperation. Area: the Organization (i.e. EGOTH) and was sent to the Ministry of Tourism on
4.000 feddans" (Cls Reply, p. 39 and exh: 187). That map, as Claimants point March 15, 1975 in the form of two separate draft decrees, each project being
out was transmitted by the Chairman of EGOTH to Mr. D. Gilmour on Feb- the subject of an autonomous decree and each accompanied by an explanatory
ruary 1976 with a note saying that "these 4.000 acres form a part of the overall memorandum where it was stated that the areas of the two projects lay in the
10.000 acres area transferred to EGOTH under Presidential Decree 475- land which was part ofthe public domain of the state." (Resp. exh: F.23, p. 21, The
1975." (Cls. exh: 108) Report of the Experts Committee Charged With the Study of the Pyramids
VIII. In execution of the December Contract, as the Claimants assert, Plateau Project. Emphasis added). O n the other hand, the memorandum pre-
four committees, representing EGOTH, the Pyramids Plateau Committee, sented by the Minister of Tourism to the President of the Republic for the is-
ETDC and the Giza Survey Department, visited the area between February 16 suance of a decree to the effect of allocating the lands to the project, in
and 21, 1976 and physically marked it, preparatory to its formal delivery to appliance to the Heads of Agreement, states that the lands affected to both the
ETDC &om EGOTH: "owner of the said site pursuant to the Presidential projects, at the Pyramids and Ras el Hekma lay in the private domain of the
Decree No. 475/1975 ... " (Cls. Reply, p. 39 and exh: 188). state. (Resp. exh: F.14. in Arabic). This remark is corroborated by the report of
the Expert Committee. @. 22 of the Report).
IX. Finally the Claimants refer to the answer of the Minister of Tourism I
before the People's Assembly where the Minister said that "... The project is It is noteworthy that, besides the fact that while the Memorandum pre-
situated south of the Pyramids of Giza.. . The Antiquities Authority partici- !
pared by EGOTH mentioned that the lands requested to be allocated to the
pated in the joint committees which studied the Project located in the Gover- I project lay in the public domain (Antiquities), the Memorandum prepared by
norate of Giza (Pyramids Plateau). The Antiquities Authority approved use of the Minister of Tourism and presented for the issuance of the necessary Presi-
this Tourist site and transferred the site to EGOTH in accordance with Presi- dential ~ e c r e kstated that the lands lay in the private domain of the state.
dential Decree 475 for the year 1975, authorizing the allocation of the lands sit- Neither memorandum mentioned or alluded to any change of the site
uated on the Plateau for the purpose of tourist development." (Cls. Reply, p. shown on the maps entitled "Master Plan" attached to the September Agree-
4 1 and exh: 87) ment to which the Government of Egypt, duly represented by the Minister of
Tourism, formally entered into with SPF? The question remains unanswered
c. Personal observations:
about the reason of the discrepancy existing between the two memorandum,
I. There is no doubt, as well as it is not argued by the Parties, that the of EGOTH and of the Minister of Tourism, the former stating that the lands
ultimate site of the project, on the Plateau proper, differs &om the site shown lay in the public domain (Antiquities) and the latter stating thatthe lands lay in
in both the attached map to the September Heads ofAgreement and to the at- the private domain of the state. The fact remains that nowhere there was any
tached map to the confidential Report referred to in the December Contract. allusion to the change of the site as shown in the "Master Plan" map attached
11. The attached maps to the Presidential Decree No. 475 of 1975, on to the September Heads of Agreement. It seems also important to point out
I
which the lands allocated to EGOTH for touristic use were to be shown had I
that the Minister of Tourism stated in his written submission to the People's As-
not been published with the said Decree as testified by the competent authority sembly ofSeptember 10, 1977, that "the Antiquities Authorities approved use
(Respondent exh: F14). The Presidential Decree however, does not contain of this tourist site, and transferred the site to EGOTH in accordance with pres-
explicit, indications as to the precise site allocated to EGOTH since it simply idential decree 475 for the year 1975... " (Cls. exh. 87, p. 20). This statement
refers to the contours shown in the attached maps. Claimants assert, however, gives ample evidence to the effect that the memorandum of the Minister of
that these maps existed. They say that "These maps were apparently in exist- Tourism for the issuance of Presidential Decree 475 was incorrect and mislead-
ence. They are mentioned here, in the Decree itself and by SPP's lawyer in a ing since it contained information that the lands were part of the private do-
telex at the time." (Cls. Reply, p. 35 and exh: 100). main of the state in contradiction to what he later stated in the above
111. However, doubt emanates &om the bct that in the two memoran- mentioned written submission in which he f i r m e d that the land was under
dums executed by EGOTH for the demand for the issuance of a Presidential the authority of Antiquities, and as such is considered part of the public do-
Decree allocating lands to touristic exploitation in execution of the provisions main, and was transferred from that authority to EGOTH.
41 8 ICSlD REVIEW-FOREIGN INVESTMENT LAWJOURNAL

IV. The two parties presented translations in the English and the French may be corroborated by the fact that a new Minister of Tourism later stated
languages to the Presidential Decree No. 475 of 1975: The Claimants pre- before the People's Assembly that ". .. When I took over the Ministry I found
sented, in this arbitration, a translation in Enghsh of the said Decree which out that the construction is being camed out at a distance of 1.250 meters &om
reads as follows "Artlcle (1):To specify the use of the land on the Pyramids site the Pyramids, immediately I have Issued my order for the cancellation of village
and Ras el Hekma site which are clearly defined as regards boundaries in the No. 24 and made the construction to be at a distance of two kilometers of the
two maps and the attached memorandum for tourist purposes.. . " (Cls. exh: Pyramids." (Cls. exh: 74, the Transcript of Proceedings of the People's Assem-
25 and exh: 106). The Respondent also presented a French translation of the bly of February 7, 1978, p. 45)
same Decree which reads as follows "D'effectuer usage touristique les terrains VIII. Nevertheless, it seems surprising that the Claimants, with all their in-
situts sur le site des Pyramrdes.. . " ternational business experience, did neglect, to point out in the basic document
V. The fact is that the Arabic text of the Presidential Decree No. 475 of agreement they entered into with the Egyptian Government (the September
of 1975 provides, in a more accurate translation, that "The allocation of the Heads of Agreement), specifically and clearly, that the attached maps to the
lands situated on both: the Pyramids Plateau (In Arabic: 'A1 Wakia ala kol min Agreement do but indicate a location which is a preliminary one according to
Hadabat a1 ahram.. . ') (Resp. exh: F.14, page 437 of the official journal: No. their contentions in this respect. In the early stages of the proceedings before
23 ofJune 5, 1975, and Resp. exh: 16) this Tribunal, the change of the site was not brought to the Tribunal's attention.
VI. The text of the Presidential Decree No. 475 of 1975, thus, may be Moreover, the Claimants were not reluctant to stress upon the fact that all high
argued to be evidence suggesting that the Egyptian Administration has ap- officials of Egypt approved the project and that even the President Sadat gave
proved the implementation of the project on the Plateau, however, as will be on September 22, 1974 his "unqualified approval" to the project when pre-
explained later in this opinion, the Decree by itself does but allocate the land sented to him, at that date, by the representative of SPP. From the unveiled facts
to EGOTH and cannot therefore legally confer per se a right to the Claimants it became certain that, at least at that date, President Sadat could have never
nor be construed as evidence to the effect of a departure from or a modification agreed upon the location of site on the Plateau since the Maps attached to the
to the September Heads of Agreement by the Egyptian Government. September Heads of Agreement, signed the very next day, show the site mainly
around and not on the Plateau. It is also intriguing that the December Contract
The Claimants on their part assert that the maps attached to the above
refers to the site shown in the attached maps to the Heads of Agreement. And
mentioned Decree existed, nevertheless these maps were never presented by ei-
then, the December Contract refers also to a Confidential Report which con-
ther party. It is established that the registration of the rights of the use of'the
tains reference to an attached map which in turn shows the site on a different
lands to EGOTH was effectuated without any indication, whether in the Pres-
location. And later on, the site is shown in a complete different conception on
idential Decree or in any other document, as to the precise location and con-
the maps attached to the act of incorporation of the ETDC, dated November
tours of the lands subject to that registration. (Resp. Annex: F16). In the
23, 1975.
registration act it was thus precised that the accuracy of the description of the
lands and their contours rests upon EGOTH without any responsibility engag- This fact, put together with the manifest derogation by the administration
ing the Registration Authority. (In Arabic: Doon mas' ouliat al Shahr a1 Akary to the established rules mainly in not publishing the maps, if they ever existed,
haliyan aw moustakbalan). It is noteworthy in this respect, to point out that the and the registration of the right of usufiuct upon a determined site with specific
registration act, explicitly mentions that the identification of the lands was ef- contours without any available indication, whatsoever, as to their correctness or
fectuated by EGOTH, and under its responsibility. Had the maps been pre- exactitude, shades doubts about the whole process of the determination of the
sented, the Registration Authority would have been obliged to verifjr by itself site of the project on the Plateau Proper. In this context, I may point out that
the exact location of the land and its contours. (Resp. Annex: E16, p. 5) the statement of the Minister of Tourism before the People's Assembly (Relied
However, the multiplicity of the misfortune of the Egyptian Adrninistra- upon by the Claimants: Cls. exh: 74, p. 45) contained information that "This
tion may require a careful attention in later developments. is what it concerns the region (A). Refemng to the region (73) of which the
VII. It can be argued that the Egyptian Administration for the least did member has said, that the construction is canied out in it without asking the
opinion of the Antiquities Authorities, infact this had happened before I have taken
not react to that fait accompli concerning the implementation of the project in
the determined site on which it was finally undertaken; a conclusion which over the Ministry." (Emphasis added). The above mentioned statement of the
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURI'IAL

new Minister of Tourism, relied upon by the Claimants, reveals at least two representatives ... in this meeting, a number of principles was agreed upon as
facts: follows:
- That the Claimants in region (B) did not comply with their obliga- a) A joint venture shall be incorporated.. . The first of the company's
tions to first ask permission of the Antiquities Authority beforr begnning the business shall be the construction of a touristic area at Ras el Hekma.. . and
works. The requirement to obtain permission confirms the Claimants' cogni- another area around the Pyramids Phteau in G i z a . . .
zance of the nature of the site and reveal their acceptance of any inherent risks
b) The company shall prepare the general plan of the projects and
tied to the specific nature of the site. present it to the state authorities to be certified. The company shall execute the
- That the new minister was in his statement trying to evade the re- whole project at its own expenses." (The Report, p. 11. Emphasis added). From
sponsibility incumbent upon himself as Minister of Tourism, and by the same, the facts, one may safely conclude that the framework of the Claimants' prop-
simultaneously asserted the non-compliance of the Claimants with their obli- ositions consisted in the possibility ofinvestment up to one billion dollan (in a
gations, in this respect, as regards the preservation of Antiquities, and the developing country just emerging from a state of war and trying to find its path
default incumbent the Mtnistry of Tourism in the exercise of its administrative &om a socialist, controlled economy to a free market economy, encouraging,
duties as regards the enforcement of rules binding the Claimants. among other methods, foreign investments) and that the location agreed upon,
It is noteworthy to point out that the memorandum presented by the said with the highest officials, was around the Pyramids Plateau. In fact, the at-
former Minister of Tourism to the President of the Republic with the draft of tached map to the Heads of Agreement of September 23, 1974 confirm this
the Decree (which was issued finally under No. 475/1975) contained mislead- conclusion. It is noteworthy to mention that the attached map to the Heads of
ing information: ascertaining, contrary to the memorandum prepared by Agreement bears the tide of "Master Plan", and that the same Heads of Agree-
EGOTH, that the lands on the Plateau are in the private domain of the state. ment contains a provision to the effect that "each complex will be developed
IX. If the Claimants cannot be held, in principle, responsible for the according to a detailed Matter Plan.. . " (Article 3). It can therefore be assumed
malfunction of the Egyptian Administration and its manifest aberrant attitude, that the detailed Master Plan concerning the development of the complexes
their own attitude, being the experienced world-wide business organizations as should be in the location already determined in the "Master Plan" attached to
they affirm and as it appears from the documents they presented to that effect, the Heads of Agreement. In this context, the arguments presented by the
put together with the Administration's manifest failure to abide by the basic Claimants to the effect that the Minister of Tourism approved the Master Plan
provisions of its elementary obligations as regards the Claimants activities, need by April 1976, and that a certain committee was formed by Decree of the Min-
more than careful attention and thorough consideration. ister of Tourism consecutive to the contract of December, which called itself
the Pyramids Plateau Committee, necessitates a certain reflection: The map at-
X. In this context, 1 suggest a carehl reading of the report of the expert tached to the Confidential Report, which was itself attached to the Contract
committee (Resp. exh: F23). The report, in fact, contains a review of the stages of December shows that the lands proposed to the implementation of the
of negotiations between the two parties. project do not lay squarely and mainly on top of the Plateau. The appellation
Concerning the issue of the site I may only point out the following telling of the Committee formed by the Minister of Tourism's Decree No. 356 of
facts: 1974 (issued December 12, 1974, the same day the Contract between
- "On March 8, 1974, a number of responsible personnel from the EGOTH and SPP was entered into. Cls. exh:96) the Pyrarmds Plateau Com-
Egyptian General Organization for Tourism and Hotels met with representa- mittee, if happened, is not evidence that the site was not determined by the
tives of a foreign investment group, who declared that the said group wishes to Parties to that Contract. In hct, a review of that Decree reveals that article (1)
invest big amounfi ofmoney in Egypt in thefield oftourism and Hotels which could provides for that the Committee was entrusted with "the study of the propo-
a h up to 1000 milliom dollars." (The Report, p. 8. Emphasis added) sition submitted by SPP in connection with the construction of a tourist city in
- "On September 22,1974 the first Deputy ofthe Prime Minister met the Pyramids area.. . " (emphasis added). So it is evident that the Committee was
with the representatives of the said company.. . on the same date the President entrusted to study the proposition "submitted" and in "the Pyramids area". O n
of the Republic, who was the Prime Minister in the same time, met the SPP the other hand what was attributed to the Minister of Tourism, on the faith of
the September Agreement, which he signed in his capacity as the Government
 422 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

Representative, was to supervise implementation of the Heads of Agreement, an acquiescence to the change of the site. As apparent from the Heads of
article (3) of whch provides that "Each complex will be developed according Agreement the provision concerning the site as shown on the attached maps
to a detailed Master Plan prepared and submitted by SPP.. . In acrordance with would have had necessitated, for its amendment or modification a post act of the
and as shoum in the attached maps.. . " (Cls. exh: 3. Emphasis added). The Master same strength and authority, to wit an agreement entered into by a represen-
Plan of the whole project is in fact and in law the map attached to the Septem- tative of the Egyptian Govemment.
ber Heads of Agreement which bean the title "Master Plan." Any corrective Yet, if afait accompli consisting in the implementation of the project on the
Plans or other detailed Master Plans were to be respectful of the, I may say, Plateau was established, the process is not clear, and the Claimants are, in my
"The Master Plan," agreed upon by a representative of the Egyptian Govem- opinion, at least partially, if not mainly, responsible: How can they enter into a
ment and the Claimants. It would have not escaped the Claimants, experienced binding agreement (the September Heads of Agreement) and affut their signa-
as they are, to indicate, if they had any doubt, that the site was not yet finally ture on a map (the Master Plan) at a time they allege that discussions were un-
determined by the Parties. More, if it happened that the change of the site was derway as regards the location of the site? And how it happened that the exact
agreed upon in later stages, no agreement was entered into to this effect by a location, once determined, was not clearly embodied in a document amending
representative of the Egyptian Government. Both the December Contract and the September Heads of Agreement?And finally why the change, or more pre-
the Act of Incorporation of the joint venture ETDC was entered into by the cisely the changes, of the site were not clearly embodied in agreements with
Claimants and EGOTH. Any equivocal language in their provisions, departing the officials they already treated with? That is to say by authorized representa-
from the clear language of the Heads of Agreement entered into by an autho- tives of the Egyptian Government? It is noteworthy that all the changes in the
rized representative of the Egyptian Government, seems to be, from the outset, site happened to be incorporated in annexed documents; to the Confidential
the responsibility of those who entered into these agreements. In this context, Report (which was itself annexed to the December Contract) and to the act of
I may add that the allocation of the lands on the Pyramids Plateau to EGOTH incorporation of ETDC. The two above mentioned documents were entered
by Presidential Decree No. 475 of 1975, does not indicate by itselfthe formal into by EGOTH, and the government was not a party to either. Consequently,
approval of the Egyptian Govemment to the effect that the project be imple- a special attention should be focused upon the fact that even the act of incor-
mented on the plateau proper: because the referred to Presidential Decree did poration of ETDC itself, does not provide for any reference to the effect that
not contain any indication as to the delineation ofthe contours of the land, and the site lays on top of the Plateau: article (3) of that act provides as follows "The
because the allocation the lands on the Pyrarmds Plateau, to EGOTH does not objects of the Company: 1- to develop international tourism in the Pyramids and
indicate per se the departure &om the site already agreed upon and delineated Ras el Hekma sites within the limits ofthe approved Master Plan.. . " (Cls. exh: 5.
on the maps attached to the Heads of Agreement agreed upon by the Egyptian Emphasis added). No doubt that the plain clear language of that article speaks
Government. The Gct is that the said Decree did not contain any mention or about.
allusion to the effect that the allocation of the land to EGOTH for touristic a. A site in the Pyramids
purposes was to benefit the Claimants of a right exceeding what had been
and b. That the site is within the limits ofthe approved Master Plan
agreed upon in the Heads of Agreement. This may be corroborated by the fact
To the date of incorporation of ETDC, the only approved Master Plan
that the Memorandum presented by the Minister of tourism to the President
was the map attached to the September Heads of Agreement. Thus, legally and
of the Republic for the issuance of the necessary decree allocating the land to
logically speaking, that reference cannot be construed but as reference to that
EGOTH did not contain any hint or allusion to the change of the site other
approved Master Plan, or at the least to the map attached to the Confidential
than the one as shown in the attached maps to the Heads of Agreement. Had
Report which was attached, in turn, to the December Contract. However, the
the change of the site arguendo been intentionally agreed upon, in later stages,
map attached to the said act of incorporation of ETDC shows a radically dif-
by the Minister ofTourism, it would not have escaped the Ministry ofTourism
ferent site. In these circumstances, I may only express my perplexity as to the
to mention this important modification to the Heads of Agreement to the Pres-
standard of law, logic or ethics by which one can evaluate the fact of stating
ident of the Republic, since as above mentioned, he had been involved, in his
something in the text of an agreement in clear and unequivocal language, and
capacity as Prime Minister, in the making of the Heads of Agreement. Lacking
to annex a map, showing a completely different location, to the same agree-
any intention to the effect of the modification of the provisions of the Heads of
ment. The discrepancies between the clear language of an agreement and the
Agreement, the Presidential Decree 475 of 1975 could not have the effect of
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 425

maps attached to the one and same agreement raise questions of law, especially implement. Thegeneral concept plan we devisedfar the Pyramids, in contrast, proposed
in public international law, where the weight to be accorded to maps are de- higher density housing on the Plateau grouped in discreet “desert-villages;" and in
bated. However, without going through the issue of law as regards the facts of deference to General Zaki's wishes as we then understood them, we also incorporated
the present case,it would have been the propice time for the Claimants, and for plansfor tourist development in the area of the Mena House at the entrance to the Pyr-
EGOTH, to include in the text of the act of incorporation of ETDC and in a amidsjom Fayoum Road." (Cls. exh. 89, Emphasis Added)
clear language, their mutual consent, and/or eventually any approval ernanat- In the light of the above mentioned hcts, even the act of incorporation of
ing from the authorized representatives, to the effect of the change of the site. ETDC does not reveal the Government's approval of the change of the site,
O n the contrary the two Parties to that act of incorporation refer blatantly to and contradicts by its clear terms the allegation that the authorized representa-
the approved Master Plan (which is, as explained, the map attached to the Sep- tives of the Government of Egypt participated in the process of that change. It
tember Heads of Agreement) and the Parties to that act of incorporation reaf- is worth noting that the Claimants, throughout the proceedings before this Tri-
firmed their adherence to its limits. The following question may rise: why the bunal, did not explain why the act of incorporation of ETDC refers to the "ap-
Parties to the act of incorporation of ETDC were intentionally referring to the proved Master Plan" since the parties to that act departed, allegedly with the
approved Master Plan, while afEing their signature upon a map which shows consent of the Government, from the same "approved Master Plan" ?
the site on a Werent location? Another question may also need an answer: It is clear that a "$it accompli" was later established lacking due conformity
were the Claimam and EGOTH so badly legally advised as to sign a document with the terms and provisions of the September Heads of Agreement with the
containing so manifest contradiction? One should, however, notice that the Government, and also with manifest deviation from the locations delineated on
Claimants are experienced international developers, always advised and second- the attached map to that agreement. The subsequent alleged approval of a de-
ed, as evidenced in the present case, by eminent Jurists. Beyond any legal con- tailed, so called, Master Plan by the Minister of Tourism by April 1976 cannot
sideration, it seems that the parties to both the Contract of December 1974 and retroactive validate that 'yait accompl?' or cure the vice ofthe lack of respect of
the Act of Incorporation ofETDC, by their conduct, took the risk of engaging the provisions of the September Heads of Agreement taking into consideration
themselves to obligations, as regards the site of the Project, falling outside the that the Minister of Tourism, in his ministerial capacities, was to be entrusted
framework of the September Heads of Agreement within which the Egyptian with the duty of the implementation of the Heads of Agreement. In this respect
Government, duly represented, engaged itself only to it. any legal consequence thereupon shall be dealt with later.
In this context, I may only refer, without any comment, to the content of Noteworthy in this respect, that in their request for arbitration to ICSID
two documents: dated August 20, 1984, the Claimants stated "September 1974 - the SPPgroup
a- The inter-office memoranda dated August 28, 1975, that is before submitted a project proposal to develop the Pyramids Plateau, to include Hotels,
the incorporation of ETDC which occurred in November 1975. (Resp. Annex Tourist villages.. . " (Claimants' request for arbitration, p. 9, emphasis added).
E10) sent to the SPP executive committee by Mr. Munk, a representative of As in September 1974 the Heads of Agreement was concluded, with the
the Claimants in which he states "in the line with the above stated priorities, Claimants, indicating the site of the project, as shown in the attached maps to
we should forgo any current effort to obtain project financing... the deal that Agreement, around the Plateau, and not on the Plateau, this may corrobo-
appears so attractive that these potential prospects may go back to the Egyptians rate the fact that the clear intention of the Egyptian Government was not to ac-
and try to get the deal for themselves,! by ofiring suitable incenh'ves to someone like cept the "Project proposal to develop the 'Pyramids Plateau,"' as regards the site,
Zaki (iuhich would still be cheaper to them than having to buy into SPP'J deal). . . " hence it was agreed between the parties to implement the projct around the Pla-
(Resp. Annex F.10, p. 4. Emphasis added). The Mr. X referred to in that mem- teau and not on the Plateau.
oranda happened to be the Head of EGOTH, who entered into, by his capac- It seerns,howeverthat, vis-li-visthatfait m m p l i the Administration was ob-
ity, the act of incorporation of ETDC with the Claimants. viously under the pressure of severe critics, internally i.e. culminating in the in-
b- The M ~ d a v i oft Mr. Gilrnour, the representatives of the Claimants, terpellation before the People's Assembly, as well as internationally by a world
presented during the ICC proceedings and referred in the present case, where wide campaign against the project as will be demonstrated later.
he stated that "we abandoned the Egyptian plan, in favor of the hliy-integrated XI. Moreover, the application presented by Mr. El Bably, the attorney to
high quality destination resort which we felt uniquely qualified to conceive and the Claimants, on behalf of both EGOTH and SPP to the GIA on April 22,
426 ICSLD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 427

1975 contains in annex I under item (6) "the chosen site" the following infor- 11. Respondent also points out that in appendix No. (2) to the applica-
mation: "HADABAT EL AHRAM WA RAS EL HEKMA," which can be tion it is stated, concerning the annual operational requirement of the project,
translated as follows "The Plateau of the Pyramids and Ras el Hekma." that "the imported in foreign currency and equivalent in Egyptian currency ac-
However, in annex 11 to the same application in front of item (2) "the chosen cording to otficial rate " was estimated as follows: First year: invested amount:
location: The indication of the precise location.. . ," it is mentioned "The area 22,500,000 US dollars plus loans amounting to 16,000,000 US dollars etc.. . ,
south to the Pyramids Plateau of Giza" and in Arabic: "MANTIKAT and that the proposed steps to implement the project were indicated as follows
GANOUB HADABAT A H M A T EL GIZA.. . " (Resp. annex F. 17). "the implementation will be by phases starting with leveling the Pyramids
The contradiction in the information given in the two annexes to the same plateau and constructing a touristic hotel, thereafter a touristic complex and
application is puzzling. More, in Appendix No. (2) written in Enghsh the con- sport clubs, establishing the villas area and the commercial market and the con-
tradiction also appears: under the item "For establishinga tourist project having ference hall." (Resp. annex 17. Appendix (2) to the application, p. 11)
an objective" it is written: "Developing world tourism in the Plateau area." But 111. The touristic nature of the project was also evident in the terms of
on the same page @. 4) and in front of the item: "The location proposed to es- the act of incorporation of ETDC of November 23, 1975, asserts the Respon-
tablish the project.. . " it is written that it is "The area south ofthe Giza Pyramids dent. Attention was drawn to the provision of article (3) of the above men-
Plateau.. . " (emphasis added. Resp. annex: F.17). it is then "the area south of tioned act by which it appears that the project was essentially and mainly a
the Giza Pyramids Plateau" and not as finally implemented on the south area touristic project aiming to develop international tourism, consequently any
of the Giza Pyramids Plateau. other allowed activity mentioned as "a clause de style" in the act of incorpora-
2- The Housing Activities: "or the alleged Claimants' departure" from tion should be construed as necessarily falling under the fi-amework of the tour-
their legal and contractual obligations istic activity accorded to the Company.
The housing argument advanced by the respondent is based upon the al- IV. Respondent also draws the attention to the provisions of Law No. 43
legation that the claimants, in the implementation of their project, departed which bar non-Arab foreign capital from investment in housing and urban de-
from the framework of the approval for their project. In this respect, Respon- velopment project and to the provisions of Law No. 52 of 1940 which impose
dent alleges that: restrictions concerning land division. In this context Respondent also refers to
- The Egyptian side insisted all along on a Tourist Development the provisions of Law No. 81 of 1976 which impose restrictions as regards the
project. acquisition by non-Egyptians of real estate property including rights of usufiuct
and leases which exceed fifty years. (Respondent Counter-Memorial, vol I, p.
And that
147). Moreover, Respondent contends that Law 43 itself explicitly forbids non-
- the Egyptian Law bars non-Arab foreign capital from entering into Arab foreign capital &om entering the field of housing and urban development,
housing activities. (Respondent Counter-Memorial vol. 135) a field the essence of which, as explains the Respondent, is the purchase, sale
A. The Respondent's Allegations: or leasing of built or unbuilt real estate.
I. The Respondent explains that the status of a project under the pro- V. Respondent alleges that, "the least that could be said is that the
visions of law 43 is conditioned by the approval of the project by the Board of Egyptian parties were the subject of an error (in fict were induced to fall into
Directors of the GIA, after going through certain procedures and the satisfac- an error) concerning the nature of the obligations assumed by the other party,
tion of certain formalities. The Respondent points out that the application pre- an error involving both the object of the contractual obligations of that party
sented to the GIA specifically states that it was a touristic project that will be and the essential motivation which led the Egyptian Parties to enter (each
implemented and that "the implementation of the project will result in the cre- within the limits of their role) into agreements with the Claimants." (Resp.
ation and development of touristic areas in the pyramids area, the re-planning Counter-Memorial vol I, p. 150. Emphasis added).
of the areas, supplying it with the required infi-astructures like roads lighting VI. Respondent also points out that the undue haste in selling, unlaw-
and sewage, and the establishment of touristic hotels and villages, markets and fully, vacant building lots confirms the view that SPP's venture in Egypt was es-
sporting clubs, etc." (Resp. annex F.17) sentially an urban land speculation venture. In this respect, Respondent
contends that notwithstanding the hct that ETDC did not receive the title of
 428 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL
CASES 429

usufiuct upon the land at the Pyramids until December 12, 1976 it did in fact matter of fact, that, in case of the decease of the purchaser, the seller covenants
begin making plans, afier only two weeks of its incorporation on December 4, to transfer the right of usufruct to the purchaser's successors for the unexpired
1975, to sell vacant lots (Board minutes dated December 12, 1975 Resp. period of 99 years.
Counter-Memorial vol I, p. 165) and made &om that operation its major pre-
occupation (Resp. Counter-Memorial vol I p. 164). As evidence to that con- X. Respondent also contends that since the claimants and ETDC, the
tention Respondent reproduces a list of extracts from ETDCS Board minutes. Company they managed, did violate Law 43 in intention and in deed, the
(Resp. Counter-Memorial vol I, p. 165). An example is produced to the effect Heads of Agreement is to be considered null and void on the grounds of the
that by February 21,1976 the Board approved the budget with "income of1.5 illegahty of both the object and cause, in accordance with articles 136, 137 and
million from 250 sales contracts." The Respondent also points out that the 141 of the Civil Code of Egypt. Moreover, Respondent advances that the
Claimants themselves admitted in their memorial to this Tribunal that the out- Heads of Agreement is to be considered null and void on another ground; the
lining of site was determined in the letter to that effect sent by EGOTH on illegitimacy ofits cause i.e. the illegitimacy of the Claimants' demonstrated in-
February the 3rd 1976 to ETDC and that the site was delivered only on Feb- tention to embark on a project, the main content of which is a real estate op-
ruary 21, 1976 (Resp. Counter-Memorial vol I, p. 166). eration involving the division of land, without respect to the provisions of Law
No. 52 of1940 concerning the division ofland for the purpose of building.
VII. Respondent thus concludes that, apart from the sale of SPP shares to
Mr. Khashoggi in 1976 and of SPP (ME) shares to the Saudi princes in the XI. Respondent explains that it cannot be argued that the Egyptian
Government, as such, connived in all the above mentioned irregularities attrib-
same year, the sale of drawings of vacant plots on maps was the only serious op-
uted to ETDC or to the Claimants, as they were its actual managers, since:
eration that the Claimants were engaged in. Respondent refers to the joint
report of Peat Manvick Mclintock and Hazem Hassan Co., which comes to - N o recognition, acceptance or connivance of an official can trans-
the conclusion that the net revenue from the sales agreed up to June 18, 1978 form an illegal act into a legal one.
amounts to 7,428,000.- US dollars (Resp. Counter-Memorial vol I, pp. 167, - With the "caducitt" of the September Heads of Agreement, their
168, and annex F. 50 p. 15). Egyptian partner became exclusively EGOTH whose actions do not bind the
VIII. Moreover, the Respondent points out that no system of Law can Egyptian Government.
uphold a deal which a country enters into, by the admission of all parties, to - That it is not true that the Egyptian partners accepted without
obtain needed foreign currencies in the form of initial investment and contin- protest what ETDC did. Among other examples, Respondent contends that
uous revenue fiorn tourism, but which the other party turns into, not even a even the decree of the Minister of Tourism No. 96 of 1977 (Cls exh: 132) was
housing project, but a land speculation project and in which the money comes meant among other things to reaffirm the inalienable power of the adrninistra-
&om the nationals of those countries (and moreover is potentially transferable tion to control the purposes for which the lots of land may be used.
abroad). B. The Claimants' response:
IX. The Respondent also contends that there are two additional reasons The Claimants, however, give a totally different presentation to this issue.
which render the sales contracts, the main activity of ETDC under the man- They assert that the project was not a housing project in which foreign invest-
agement ofthe Claimants, illegal. These reasons, in view of the hct that the ment was banned. (Cls. Reply, pp. 41-54).
September Heads of Agreement was not implemented, are:
I. Claimants explain that the sale of villa lots by ETDC was an integral
a. That all the acts through which the Egyptian Govemment gave or part ofthe entire tourist destination concept which was at the base ofthe pro-
recognized the right ofEGOTH to use and exploit the Pymn~dssite could but posals SPP made to the Egyptian Govemment since 1974. In this respect,
be considered administration permits upon public domain. Such permits, in Claimants point out that the nature of their project as a "tourist destination
Egyptian Law, could never establish a right ofusufiuct. resort" was understood and admitted by the Parties starting h m the negotia-
b. That since the usufiuct rights are extinguished in all events, under tions of the Heads of Agreement which refer to "tourist destination com-
Egyptian Law, by the death of the beneficiary, the attempt made in the con- plexes." Moreover, the Claimants refer to the answer of the Minister of
tracts of sale (article 5) to get around the provision of the Law should be con- Economy before the People's Assembly which contained a clear acknowledg-
sidered illegal. The above mentioned clause (5) of the contract stipulates, as a ment of the concept. (Cls. exh: 74 p. 50). Claimants also assert that
430 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

"representatives of the Government were l l l y advised of, and approved of, the V. Besides rehance upon legal opinlons by experts in Egyptian Law,
concept." (Cls Reply p. 45). The Claimants explain that that knowledge and particularly the opinlon of Dr. Oteifi, (cls. exh: 82), the Claimants rely upon
understanding of the concept "was brought home to Respondent representa- the answer of the Minister of Tourism on February 7, 1978 before the People's
tives in early 1975 by the visit to SPP's Pacific Harbor Resort in Fiji." There, Assembly, and they quote the said Minister as stating "the Pyramds Plateau
as Claimants point out, those representatives were shown a sales' program project is a tourist development project and not a construction project and
which existed fiom the time the resort was founded in 1969 and the sales were family habitation - as it was raised up - depending on what was said in Article
used to finance the infrastructures of the resort on which were founded a 3 of the Company objectives which state what follows: To carry out interna-
Hotel, golf course and other tourist amenities. tional tourist development in both the Pyrarmds and.. . in the limit of the
11. Claimants also assert that the basic accords establishing the project adopted Master Plan by building hotels, cinemas, restaurants, night clubs.. .
were clear: The sale of u s u h c t of land, on the fmt tourist villages, is considered only as
The Heads of Agreement spoke of the plan to develop "residential the first basic step on the way to completion of the project's fmt phase. This
a.
and tourist destination complexes" and provided that the Joint Company "will could not be considered as a partitioning of land because it is within a com-
be 6ee to rent, lease, manage or assign any site... in both local and foreign pleted plan.. . " (cls. exh: 74, p. 38)
markets.. . " (Cls exh:90). C. Personal Considerations:
b. The contract of December 1974 also provided that "ETDC shall be The issue of the housing argument is to be appreciated, from a legal point
ftee to assign its rights of usufiuct and to rent, lease, manage, promote or assign of view, in the light of the whole contractual operations entered into and
any site ... in both local and foreign markets, provided that they are developed agreed upon by the Claimants and also by the Respondent and in the light of
and utilized in accordance with approved plans." (Cls exh: 94). In this respect, the pertinent provisions of Egyptian law mainly law No. 43 of 1974 and No.
the Claimants draw the attention to the provisions of article 12 of contract 1 of 1973 concerning Tourist establishments.This will be discussed in the next
which stated that ETDCS profits derive fiom inter alia "the assigning [and] chapter of this opinion.
leasing of.. . development sites." However, I would like to point out, in this respect, that Law 43 was en-
The November 23, 1975 act of incorporation ofETDC pointed out acted on the basis of a certain philosophy which is clearly mentioned, as well
c.
as obviously apparent in its provisions. Article (3) of Law 43 reads as follows
that it "may buy, sell right of usufiuct, lease, re-rent the desert lands in the Pyr-
"the investment of Arab and foreign capital in the Arab Republic of Egypt shall
amids and Ras El Hekma sites.. . for touristic purposes." (Cls exh: 113)
be for the purpose of realizing the objectives of economic and social develop-
111. Claimants assert that knowledge and approval of the villa site rnar- ment within the framework of the State's general policy and national plan pro-
keting site program is evidenced by Respondent acceptance of three reports vided that the investment is made in projects in need of international expertise
which contained the site sales plan: in the sphere of modem development or in projects requiring foreign capital.. .
a. The economic feasibility study submitted to the GIA for approval of " From the face of it "This statement refers to the need for both foreign capital
project on April 14, 1975 (cis. exh: 104) and foreign technology." (M.H. Davis, Business Law in Egypt, Kluwer 1984,
b. The summary economic analysis of March 1975 by Economics Re- p. 50). Article (1) of the same law gives a definition to the term "project," it
search Associates (cls. exh: 102) reads as follows "the term project in the application of the provisions of this law
shall mean any activity included within any ofthe spheres therein specified and ap-
c. The marketing report of February 1975, for the Cairo Pyramids De-
velopment, prepared by SPP (CIS.exh: 101)
proved by the Board of Directors of the General Authority for Investment and Free
Zones" (emphasis added). Therefore, two prerequisites are necessarily to be jus-
IV. The Claimants also point out that the resolution taken by the Board tified for a project to enjoy the advantages of the said law: that the activity be
of EGOTH to the effect of the transfer of the usufiuct rights over the site to within one of the spheres of activities specified by the law and that it receives
ETDC contained clear provisions concerning ETDCS right to transfer, sell or the approval of the GIA. Special attention should be focused upon the last para-
lease the right of u s u h c t (cis. exh: 132). Moreover, as pointed out by the graph of Article (3) of Law No. 43. It reads as follows "Special priority shall be
Claimants, ETDCS program for sales was unanimously approved by its Board given to those projects which are designed to generate exports, encourage
of Directors which included representatives of EGOTH.
432 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

tourism, or reduce the need to import basic commodities.. . " Also it is of im- 11. The application presented to the GIA on Apnl22, 1975 by the then
portance to review thoroughly the provisions of article (2) of Law 43 which Legal Advisor and Consultant to SPP, on behalf of SPP and EGOTH, con&
states that "the term <invested capital> in application of the provisions of this two information:
law shall be deemed to mean the following:. .. " then follow the different as- a. Under the item "Capital expenditures of the project," it was stated:
pects that are considered invested capital with a manifest stress upon the Get Imported in foreign currency and equivalent in Egyptian currency:
that the invested capital consists mainly in the foreign currency transferred to 550,000,000.- US dollars. Under the same item it was written: "The total es-
the Arab Republic of Egypt. timated expenses for the various constructions on the site amount to five
I. It was clearly stated and hence logically and legally understood that hundred and fifty million dollars during ten years.. . include (sic) the construc-
the nature of the project was intended to be a touristic project. A cursory look tion of hotels providing 15000 beds."
to the provisions of the Heads of Agreement reveals that in the preamble of that b. That the proposed steps to implement the project are "the imple-
Agreement it was stated that "this Agreement is issued in accordance with law mentation will be by phases starting with leveling the Pyramids plateau and
No. 1 for the year 1973 relating to hotels, Installations and Tourism, and law constructing a touristic hotel, thereafter a touristic complex and. .. " (emphasis
No. 2 for the year 1973 relating to the supervision by the Ministry of Tourism added. Resp. annex F 17, p. 11).
on touristic sites and the development of such areas, and law 43.. . " (Cls exh. 3) 111. It can but be observed that the Claimants rely upon that application,
Also the first of the joint venture's objectives was "to develop international I concerning the issue of the site, but seem to overlook the obligations they had
tourism in the Pyramds and Ras-El-Hekma sites within the limits of the ap- engaged themselves to, by the same document. They clearly estimated the im-
proved Master Plan by establishing, constructing, developing, hrnishing, ported foreign currency amounting to 550 d o n dollae over ten years, with
equipping and managing hotels, casinos, restaurants.. . (Art. 3 of the Act of In- , the solemn obligation to begin the implementation of the project by the con-
corporation of ETDC, Cls, exh. 5). This fact is also corroborated by the lan- struction of a hotel.
guage of the request presented to the GIA for the approval of the project (Resp.
Annex F.17). Any other way of development that may have been practiced by
the Claimants in other projects elsewhere does not by itself indicate that the
! IV. Admitting, arguendo, that they had the discretion of selling lots of
bare lands, the Claimants' obligation remains to be fulfilled: that is to say, the
importation of the foreign currency and the construction of at least a hotel on
Egyptian Administration acquiesced to that method. As regards the Egyptian the site. The argument of auto financing, which is advanced, should be con-
venture, it was clearly stated that "the implementation will be by phases starting strued, however, in the light of the clear language of the application to the effect
with leveling the Pyramids Plateau and constructing a touristic hotel, thereafier that the investments will take the form of imported foreign currency. Whether
a touristic complex..." (The application to GIA. Resp. Annex F17, p. 11) or not the Claimants had the financial capacities at the time of the presentation
In this context, I may draw the attention to that the Chairman of ETDC of that application, seems irrelevant, since the fact is that they did not honour
on the meeting of the board ofJanuary 26, 1978 "pointed out that he had talks their obligation in this respect. It seems to me opportune, in these circum-
with the Minister of Tourism on the question of the 4000 beds to become stances, to point out that on May 19, 1975, Mr. Gilrnour, the representative of
available.. . The Minister sent a letter.. . askingfbr confirmation by the company the Claimants, sent a letter directly to the President of the Republic concerning
of this obligation. This answer was necessatyfor the Minister to convince the Assembly the demand for approval that the usufruct rights be accorded to a duration of
ofthe touristic nature ofthe project.. . " (Resp. Annex F20, p. 9 emphasis added) 99 years, which letter contained that the justification for that demand rests upon
This may suggest that up to January 1978, the activities of ETDC did not the fact that this duration "is a must for such a big sized project which will need
reveal adherence to, and conformity with, the "nature" of the project as un- a capital of 770 million dollars.. . (Resp. annex F 23, p. 25). So it appears that
"
derstood by the parties, or at least by the Respondent in a legal logical expec- the estimation given by the Claimants, concerning the total investment in the
tation. The Administration, in order to defend itself before the People's end of April 1975 amounting to 550 million dollars, escalated in mid-May
Assembly, seemed begging the Claimants, not even to abide by their obliga- 1975, not even one month later, to 770 million dollars, the difference being
tions, but just to declare their intentions to this effect. only the trifle amount of 220 million dollars.
One may consider that the presentation of the application to GIA was mis-
leading since the claimants advocate that they had all the way the intention that
 434 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

the project be auto-financed, and at the same time they present an application, above mentioned article. Selling bare lands to the high accepting purchaser,
which in fact and in law, embodies their obligations in the fkmework of the without any discrimination seems to be more in harmony with activities relat-
legal status of law 43, in which they explain that the nature of the project is ing to urban development rather than to activities of investment in operations
tourism and that "the irnportedforeign cunency" amounts to 550 million dollars. serving touristic purpose, and necessarily confined to it inter alia in compliance
In this vein, another document may also be considered of importance. with the raison sociale of the joint venture ETDC.
Reference is made here to the December 12, 1974 contract concluded be- V. To begin its activities by selling bare lots of land on the site, and to
tween EGOTH and SPP. Article 11 of the said contract reads in pertinent parts continue these activities over the period fiom November 1975 to the date of
as follows: "The profits will be derived from the operation and management of cancellation of the project in May 1978, may indicate that ETDC under the
hotels, casinos, conferences and convention centers, sporting clubs, shopping management of the Claimants departed, at least, fiom the obligation concern-
complexes and other tourist facilities, and fiom the assigning, leasing and man- ing the phases they clearly were engaged to respect, as stated in their application
agement of, and the provisions of services to, villas, apartments and develop- to GIA dated April 22, 1975. Therefore, it seems of minor importance what
ment sites.. . " (cls, exh:4). If the above mentioned article states that profits may Claimants advance concerning approvals, by officials: inter alia the Minister of
be engendered by assigning or leasing of development sites, it does not however Tourism by decree No. 96 of 1977, of the selling of lots of land. Approvals to
make of that activity the main one of the projected Company. This evident fact the selling should be construed in the h e w o r k of the joint ventures legal ca-
is confirmed by the language of article (1) of the contract entered into by pacity and cannot alter the obligation the Claimants were under, on the faith
EGOTH and SPP (ME) dated November 23, 1975 which reads as follows I
of the act of incorporation of ETDC. The selling operations were legally con-
"The undersigned have agreed to found a joint stock Egyptian Company with ditioned and determined by the purpose of this activity, that is to say, to serve
a license &om the Government of the Arab Republic of Egypt conforming touristic purposes. In fict this condition is to be considered a clause related to
with Law No. 1 of 1973 concerning tourist establishments.. . ". So the Com- the legal validity of the operation. It is by respecting this clause that touristic
pany (ETDC) is constituted as a tourist Company falling under the provisions projects differ &om urban development projects. To conclude otherwise is to
of Law No. 1 of 1973 concerning tourist establishments. The objectives of the
said Company, as determined in Article (3) of the above mentioned contract, II render the provisio infine of paragraph 2 of article 3, meaningless and supedu-
ous. It may also be reminded that the issue was raised at a meeting of the Board

i1
are: "1. to develop international tourism.. . by establishing, constructing, de- 1
of Directors of ETDC where "Mr. Lo@ discussed the paper handed to him
veloping, furnishing, equipping and managing hotels.. . The Company has the by Mr. Birchall after the last meeting and said the figure was shown under the
right to manage, operate, lease, sell and in every way dispose of the above men- assumption that the whole concept of the paper proposed for principal Company
tioned establishments. 2. To create and develop touristic sites by employing the policy was only on the real estate and not on the development oftourism.. . " (minutes
most up to date method for developing tourist industries and replanning them 'I of the meeting dated March 14, 1978 Resp. annex 20, emphasis added). It may
and provide them with infrastructures, roads and services. To achieve this it
may buy, sell right of usuhct, lease, rent the desert lands in the Pyramids and
Ras El Hekrna sites (on the Mediterranean Coast) for touristicpurposes. 3. ... "
I also be reminded that the calculation of compensation requested by the Claim-
ants as their principal submission, rests mainly upon the same concept: the price
of the selling of lots of bare land.
(emphasis added). Without going through the whole enumeration of the com-
pany's objectives, it may be appropriate to comment upon the language of I VI. Moreover, in any event, the selling of bare lots of land appears, &om
i the whole contractual documents, as a ficulty that may be recoursed to, but
paragraphs 1 and 2 of article 3 of the contract. It goes without saying that para-
does not constitute the main or even a main objective of the project. It is note-
graph 1 speaks about the selling or leasing of establishments. However, if para- ii worthy, in this respect, to draw the attention to item 7 and 14 of the Board of
graph 2 gives ETDC the right to sell or lease the right of usufruct over the lands i
of the sites, it specifies that that right of selling or leasing is permitted provided ETDC meeting on January 26, 1978. (Resp. annex F-20 p. 9). As a matter of
it be "JOYtouristicpurposes." This provision should have an effet utile so to say to fact, the following was written "a) exchanged letters with the Minister of
have a meaning and a significance. The transaction, any transaction, must then
I Tourism: Dr. Salah (the Chairman of ETDC) pointed out that he had talks
comply with that obligation. However, it did not occur to the Claimants to ! with the Minister of Tourism on the question of the 4000 beds to become
I available in the Pyramids Oasis project. The Minirter then sent a letter signed by
present indications to this Tribunal to the effect that their selling operations of i
lots of bare lands obeyed to any touristic purpose criteria in the meaning of the thefirst Undersecretary of Tourism, askingfor conamation by the Company of this
i
i
i
436 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

obligation. This answer was necessaryfor the minister to convince the Assembly a t h e By first proceeding with its large campaign of selling bare lots of land, for
tourist nature ofthe project." (emphasis added). This citation tells much by itself the purchasers, eventually, to construct villas indifferently to what the use may
about the weight which may be given to the answers of the Minister of be whether touristic or not, on both the outside and mainly the local markets,
Tourism before the People's Assembly. before any approval of an agreed detailed Master Plan, in addition to its non-
VI. The minutes of ETDC Board of October 4, 1976 are, perhaps more observance and non-compliance with the sequential phases of the implemen-
relevant as regards the housing issue. Under item 76/53 Marketing Report, it tation of the project as stated in the application presented to the GIA, ETDC
is written "Mr. Raouf presented a recommendation for the sale of 350 villa sites was consequently in a precarious legal situation subject to the provisions of Ar-
from October 1976 which was approved. It was also agreed that the principal ticle 27 of Law 43 which provides in pertinent parts that "the Board of Direc-
objective will be to maximize cash sales. Any shorifall ofcash sales to non-Egyptian tors of the Authority shall have the authority to approve applications for
purchasen will be allocated to house sales for Egyptian cash punhasers.. . " (Emphasis investment submitted. Such approval shall lapse if the investor fails to take se-
added) rious steps to cany out the project within six months of approval." It is note-
worthy to point out that in the application to the GIA, it was mentioned that
VII. Without going through the examination of whether or not ETDCS
the invested amount, in foreign imported currency, totals 38 million dollars for
activities in selling bare lots of land contravened certain Egyptian Laws, it is
the first year of implementation of the project then accruing during the follow-
evident that those activities were not to be considered valid unless they serve
ing years (resp. annex F 20, 17), always in imported foreign currency. This en-
touristic purposes. Otherwise they are considered activities exceeding the legal
gagement necessarily was binding, and should be taken into consideration by
capacity of the Company. The interpretation of the clause infine of paragraph
this Tribunal in its impartial evaluation of the nature of the project, the Claim-
2, reveals the harmony existing between the provisions of both paragraphs 1
ants were intended to implement, mainly in the light of their effective contri-
and 2 of the said article 3. ETDC was empowered to transact either touristic
bution in the capital of the joint venture ETDC and of the loan agreement they
constructed establishments, or bare land to serve touristic purposes. Conse-
concluded between themselves and the joint venture ETDC under their man-
quently, ETDC was bound to act in accordance with its "raison sociale" and had
agement, even before the payment of the 111 amount of their agreed upon con-
no legal capacity to exceed it. The argument advanced by the Claimants to the
tribution in the capital of ETDC, all of these amounts totaling the sum of
effect that the project they were implementing was based on the same concept
3.360.000 U.S. Dollars compared to the revenue from the sale of bare lots of
of their project in Fiji, and that representatives of EGOTH were shown the
land agreed up to June 18, 1978, which amounts to 7.428.000 U.S. Dollars.
destination resort they were implementing in Fiji cannot have relevance, since
(Respondent annex F.50 p. 15). However, the Majority Award even stated, as
the concept of their Egyptian venture was essentially based upon the touristic
a matter of uncontested Gct that ". .. ETDC sold 386 lots.. . for a total of U.S.
nature; which is clearly mentioned in the application presented to the GIA for
Dollars 10,211,000." (The Majority Award p. 25 [p. 348 of this issue]), and lat-
approval on April 22, 1975, and also embodied in the act of incorporating
er took its findings, in this respect, into consideration as regards the evaluation
ETDC as mentioned above.
of ". .. the value to be ascribed to the opportunity to make a commercial suc-
VIII. In a brief conclusion, which will be developed later, it is certain that cess of the project" (the Majority Award, p. 85 [p. 389 of this issue]).
the Claimants departed &om the foIlowing. To conclude on this issue, I may only draw attention to the Gct that the
a. Their declared obligation to start implementing the project by Claimants rely as regards their argument of auto-financing to the content of the
phases with the priority of the construction of a hotel (see the application to the feasibility study presented to the GIA, nevertheless they seem to consider the
GIA dated April 22, 1975). same and one feasibility study as not binding when it comes to embody their
b. Their commitments as regards the objectives of ETDC which man- obligations: in this vein, I may refer to the memoranda prepared by the Claim-
dates that all and any transaction be permitted only in the limits, and provided ants' lawyer stating that "the indications included in the feasibility smdy initially
that, it serves touristic purposes. In this respect, whatever their intention was, submitted reflect the financial and economic concept of the project but the wm-
concerning the implementation of a tourist destination resort, the Claimants pany is not bound by it in its activities $this w u l d affect said objedues.. . (Resp. An-
were obligated to be respectful of the stated objectives of ETDC which nex D l 4 p. 4 Emphasis added). This memoranda was prepared in response to
mandate that all transactions be justified by the condition of serving touristic the letter of EGOTH dated April 4, 1977 to ETDC, containing reference to
purposes.
438 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL

the serious diversions of ETDC's activities fiom its basic obligations under the 3. The Critical date May-June 1978, and the Subsequent Conduct ofthe Parties
provision of its act of incorporation and of the approval of GIA.
In this context, I may add that due attention should be drawn to the con- In spite of that this section is mainly consacrated to the review of the Lets that
tent of the inner-office memorandum dated August 28, 1975 in which Mr. occurred around the critical date of May-June 1978 and the subsequent con-
Munk addressing the SPP's executive committee explained that the objectives duct of the Parties; however, it seems appropriate to review rapidly, in the
of the Egyptian program were inter alia "to create a new significant and saleable first place, some facts that occurred before that date, which facts may enlight-
asset to enable the SPP if so wishes, to eliminate the current indebtedness.. . ", en the evaluation of the whole relationship between the Claimants and the
and that among the required actions figures "toget E T D C operational (i.e, to stari Respondent.
land sales etc.)" and that one of the priorities is "to make ETDC operational with A. A review of some Gct that marked the relationship between the two
the prime objertive to start selling land." (Resp. Annex F 56 Emphasis Added) parties:
Then the "prime objective" as mentioned in that memorandum was "to I. In April 1974, the Claimants present themselves as developers. (Cls.
statt selling." This prime objective the Claimants were intended to achieve does exh. 81). In April 1974, SPP submitted a "proposal on the development
not by any standard coincide with their solemn obligations, whether under the program of an international tourist destination - Resort complex for the Arab
legal status of investors in the Gamework of law 43, or their obligations erna- Republic of Egypt." In the preface to that document, the Claimants explain
nating horn their contractual agreements. In all events it is a fact, that the that the proposal was "prepared by Southern Pacific Properties Limited (SPP)
Claimants expressed in a letter to the Prime Minister, dated May 12, 1978that at the kind encouragement of H.E. Osman Ahmed Osrnan," and that "SPP is
"in spite of these encouraging initial indications of success, the protracted debates a tourism vehicle of a group of major international cooperatives with combined
in the People's Assembly, the various committee hearings and the adverse world wide assets in excess of US$ two billion." Under the title "the program" it was stated
publin'ty have now seriously impaired our eJort to create the required mdibility to attract that "the Developers (SPP) will undertake to:... (Emphasis added). The proposal
the increasingly needed overseasfinancefor the project." (rap Annex F.38, p. 2, Em- did not contain any hint to a specific location for the project to be implemented
phasis Added). As the above mentioned reasons fall beyond the administrations on. Under title "the site" it was only stated that " A preliminary study has iden-
authority and were out of its reach, one can assume that the Claimants were tified a number of potentially suitable sites. Factors which will influence the
trying to justify their incapacity to honour their obligations, in part, due to the final choice are:. .."
adverse worldwide publicity which impaired their credibility to attract the iri-
creasing needed overseasfinancefor the project. Lacking that credibility the Claim- 11. EGOTH informed SPP on June 6, 1974 of its interest to the pro-
ants, at least, from that date seem to have had no other alternative, but to posal, in principle, provided the submission of a preliminary feasibility study.
concentrate their activities in the selling of bare lots of land, which manifestly (Cls exh 83). By telex dated June 17, 1974, the Claimants advised EGOTH
would have extracted definitely their activity not only &om the domain of that they would proceed on June 21, with press release (Cls. exh.: 84). The
tourism but altogether from the scope of investment under both the Washing- press release contained information about the announcement in Cairo "that the
ton convention and the Law No. 43. The real nature of the Claimants' project Egyptian Government has invited Southern Pacitic Properties Limited, the
as they had the intention to implement may be better demonstrated by a quo- Hotel and Resort Development group to start on the development of the major
tation of Mr. Gilmour's Affidavit presented both before the ICC and this Tri- tourist complex in Egypt." (Cls. exh: 85)
bunal "we abandoned the Egyptian plan in hvor of the fully integrated high 111. No feasibility study was submitted. However, the Heads of Agree-
quality destination resort, which we felt uniquely qualified to conceive and im- ment was concluded on September 23, 1974, and the Claimants explained that
plement. The general concept plan we devised for the Pyramids, in contrast. "the SPP group submitted a project proposal to develop the Pyramids Plateau,
proposed higher density housing on the Plateau grouped in discreet 'desert villag- to include hotels, tourist villages.. . " (Claimants' request for Arbitration, p. 9).
es' and in deference to General Zaki's wishes as we then understood them, we In Claimants' exhibit 174, they state that on September 1974 "after several
also incorporated planfor tourist development in the area of the Mena House at the months of meetings with Government representatives, visits to pre-selected
entrance to the Pyrarmds &om Fayoum Road." (Cls. exh 89, emphasis added) sites (at which time Government representatives urged consideration be given
to Pyramids site) and internal discussions, SPP finalizes field studies and submits
general concept project proposal for inter alia future Pyramids Oasis sites."
 440 ICSIDREVIEW-FOREIGN INVESTMENT LAW JOURNAL

Then h e Claimants explain that the "project proposal is presented to the Yres- Hekma (Cls. exh. 90). Subsequent disctrssions concerning the re-siting of the Pyra-
ident Sadat by David Gilmour and Peter Munk (Chairman of SPP). The Pres- mids Project: see Cls. exh. 175 and 177. (Emphasis added). These two exhibits
ident gives his unqualified approval." In this respect, Claimants refer to their contain statements of Mr. Gerald Walker and Mr. Ralph M. Grierson both
exhibits 902 and 91. From the outset, it should be pointed out that the docu- dated November 30, 1989. Without going through the content of these state-
ments presented to this Tribunal do not reveal any indication to the effect that ments, it is noteworthy to point out that if arguendo as stated by Mr. Walker
before the Heads of Agreement of September 23, 1974 was concluded, any "very rough maps of the Pyramids and Ras El Hekma project areas were
other proposal or feasibility stud~eswere presented to the Government of Egypt annexed to that agreemment" (Reference is made to the September Heads of
other than the proposal of April 1974 which in turn, did not contain any in&- Agreement, Cls, exh. 175). The fact remains that even the maps, attached to
cation to a specific site. It seems noteworthy to stress upon the fact that what is the confidential report annexed to the December 12, 1974, show the site
quaMied by the Claimants as the "unqual$ed approval" given by the President located in a different zone firom that where the project was finally being im-
Sadat to their project proposal for "future Pyramids Oasis site" (Claimants plemented. It is to be noted that the December 12, 1974 Contract was con-
exhibit 174, 901 and 902) is necessarily erroneous, since the maps attached to cluded between the Claimants and EGOTH. Thus, the Egyptian Government,
the Heads of Agreement signed the next day to the presentation of the project contrary to the Heads ofAgreement, was not party to that contract. The Con-
to President Sadat (acting in his capacity of Prime Minister at that time), show tract provides adherence to the September Heads of Agreement and more spe-
the site of a project on a totally different location, that is mainly around the Pyr- cifically to the maps attached to the September Agreement. Article (4) of the
amids Plateau and not on top of it as the project was finally being implemented. contract provides that "ETDC will undertake the development and manage-
The avatars that occurred as regards the site of the project are already treated ment of both projects within the general limits desnibed in the maps attached to the
above and need not be repeated here. However, the Claimants reiterated con- Heads of Agreement and in general accord with the confidential report, and as
tentions as regards the f d l unqualified endorsement of President Sadat to the detailed in the Master Plans to be prepared ..." (Cls. exh. 4. Emphasis added).
project, implying his approval, at least by that time, to the specific site of the From the outset, it is evident by the clear language of the December Contract
project where it was finally being implemented, all the way before other Juris- that:
dictions (see the Midavit of Mr. Gilmour before the ICC, presented in the - The contract was concluded "following execution of the Heads of
ICSID proceedings, Cls exh: 89) and even during long stages of the present Agreement dated 23rd September 1974"
proceedings before this Tribunal where, presumably, all conclusive and perti-
' - The contract refers in an unequivocal language to the fact that
nent documents are to be submitted and subjected to the Tribunal's impartial
ETDC will undertake the development of both projects within thegeneral limits
consideration. This fact may suggest answers to the somehow aberrant conduct
of some administrative authorities vis-a-vis the Claimants, and ETDC, under
of the maps attached to the September Heads of Agreement.
their management, during their activities in Egypt. Whether or not ofany legal - The contract bean no mention to any other maps attached to it, but
significance before this Tribunal in the outcome of the present dispute, that er- refers only to a so-called confidential report. Then it was to that report, which
roneous contention raises questions to be answered: why did the Claimants to my humble knowledge does not contain any confidentiality, that was at-
allege the "unqualified approval" of their project by President Sadat when it tached maps that showed the site in a different location than that shown in the
was materially proven that that allegation was not correct, and what eventual attached maps to the September Heads of Agreement.
consequences that allegation may have produced in the process of the imple- In the light of these considerations, it is evident that the parties to the con-
mentation of their project. tract of December declared their intention to execute the Heads of Agreement
IV. In the Claimants' exhibit 174 consacrated to the review of the chro- and not to amend it, and, in fact and in law, they reiterated their obligation to
nology of the events. be respectfid to implement their projected activity "within the general limits."
- They state that "September 23: Heads ofAgreement for project con- The word within means : Inside, internally, inwardly (The Oxford Illustrated
cluded and signed by the Egyptian Government, General Zaki (representing Dictionary p. 972) and D a m - en dedans de - dans l'espace de (Grand Dictionnaire
EGOTH), and SPP, the Heads of Ageement provide for SPP and EGOTH to Gamier, p. 596). In both Enghsh and French languages, the word indicates the
establish two complexes, one on the Pyramids Plateau, the other near Ras el same meaning which is inside. So the sites should have been inside the general
limits as shown in the attached maps to the September Heads of Agreement.
 442 ICSID REVIEW-FOKEIGN INVESTMENT LAW JOURNAL

Contrary to that clear language, it was annexed to the Contract a "Confidential without any duly amendment to the September Heads of Agreement. More-
Report", then attached to that report a map showing a different site not within over, construction was intended to be only about one kilometer distant &om
but outside the general limits of those indicated in the maps attached to the the Pyramids proper as revealed by the statement mentioned above and relied
Heads ofAgreement of September. It is noteworthy in this respect, to point out upon by the Claimants, of a new Minister of Tourism who explained that he
that the December Contract did not mention any reference to any attached ordered that construction should be at a distance of at least two kilometers.
maps. It is a matter of Law to decide the legal consequences emanating from Thus, it seems that the administration was not only trapped by thefait uompli
this contradiction. However, in the impartial evaluation of all the aspects of the consisting in the implementation of the project on the Plateau proper, but also
relationship between the Claimants and their Egyptian counterparts, such con- was confronted with the critical issue of the safeguard of the monuments them-
duct, with or without the connivance of those who entered into the December selves (the Pyramids).
Contract may be relevant. The fact that the clear language of the Contract con- VI. Without going through the legal weight of the information about
tradicts manifestly with what was shown on " u n - r e e d to maps" which were the "invested capital" the Claimants stated in their application to the GIA, and
only annexed to the Confidential Report, which in tum was annexed to the the commitment they undertook to comply with the requirements emanating
Contract, along with other incidents of the like, may be appropriate elements horn the touristic nature of the project, the inter ofice memorandum prepared
in the evaluation of the overall relationship between the parties. This may be on August 28, 1975 by Mr. Munk to SPP executive committee indicates, con-
an element in the forming of a conviction to the effect that certain Egyptian cerning the priorities, "that since company resources to attain the objectives are
administrative authorities may have acted, subsequently, on the faith of a prima limited, it is vital to focus action on proper priorities.. . b. Make ETDC oper-
fm'a assumption as to the correctness of that statement, thus taking the exacti- 1 ational with the prime objective to start selling land (showing pmjts~"(Resp. annex
!
tude of the site as shown in the annexed maps to the attached report to the De- F.10), then the memorandum continues as follows "to complete plan and
I I
cember Contract as a fait accompli as regards its concordance with the one and . I I models.. . " Thus it is the sale of land that have prime priority in the Claimants'
same site as shown on the maps attached to the September Heads of Agreement point of view, even before the completion of any plan or models. It is in the
which were granted the unqualijied approval, as the Claimants repeatedly ex- light of such unveiled intention of the Claimants that the housing argument
plain, of President Sadat. should be considered. The fact that the Claimants later prepared designs avail-
V. The incorporation of the joint venture ETDC and the Decree of the able for the use of eventual purchasers of bare lots of land, cannot be relevant,
Minister of Economy. as such, to accord to the project the nature and essence of a tourist project, in
The act of incorporation of ETDC of November 23, 1975 (Cls. exh. 5) compliance with the declared intention of the pames embodied in several doc-
provides in article (3) that "the objects ofthe company: 1. to develop intema- uments. It is noteworthy to mention that it is common practice by developers
tional tourism in the Pyramids and Ras El Hekma.. . " No mention was made to arrange hcilities to purchasers of bare lots of land inter alia to make available
to any deviation or, I may say, derogation from the September Heads of Agree- architectural designs or even propose the construction of buildings for the
ment as regards the site of the Project. However, a map was annexed to that act account of eventual purchasers. However, these activities cannot coder by
of incorporation, on which a different site was indicated than the one shown themselves to a project the nature and essence of a touristic project.
on all previous maps. Then occurred the issuance of the Decree of the Minister VII. It should also be pointed out that the act of incorporation of the joint
of Economy according approval for the incorporation of the joint venture. (De- venture ETDC of November 23, 1975 was entered into by the Claimants not
cree No. 212 of1975. Cls. exh. 114). Article (2) of the said Decree is translated as representatives of SPP but of another company SPP (ME). Thls latter
as follows "the object of the company is to develop tourism in the Pyramids and company had been, as revealed by documents presented before this Tribunal,
Ras El Hekma sites in the limits of the approved Master Plan as indicated in initially incorporated in Hong Kong on October 18,1974 under the name of
the relevant statute attached here to" the same exhibit contains the Arabic of- "Molins Investments Limited" and then changed its name to SPP (ME) on
ficial version of that Decree which is best translated to Enghsh as follows "the November 12, 1974 (that is before the signature ofthe December 12, 1974
object of the company is to develop tourism in the region ofthe Pyramids and contract with EGOTH, the Claimants' Egyptian partner). Its capital amounted
Ras El Hekma.. . " in Arabic "BI MANTIKAT AL AHRAMAT WA RAS I to 1000 Hong Kong Dollars, roughly less than 200 U.S. Dollars. The Claim-
ants explained that this fact was acknowledged by the Egyptian partner since
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

article (17) of the December contract reads as follows "it is understood that SPP zone was received, but consideration was deferred until the next meeting of the
will be incorporating a holding company to own its shareholding in ETDC Board." (emphasis added)
and it is agreed that SPP shall have the right to assign its rights, privileges, duties - In the meeting dated December 17, 1975, it was "agreed that reim-
and obligations under this agreement to this company ... provided the bunement ofpre-incorporation expenses to SPP (ME) to the extent of U.S. Dollars
company satisfies EGOTH.. . " (Cls. exh. 4). The assignment of rights to SPP 252,860.- and the short term interest f?ee loan totaling US Dollars 57,157.71
(ME) was never legally notified to EGOTH more as it was proved before this be paid immediately." (Item 75/28. Emphasis added), even though the minutes
Tribunal never an act of assignment did occur. However, the question rises do not reveal the presentation to andlor the study of any supporting documents
about the legal signif~canceof the provisio in that amcle (17) of the contract of in this respect by the Board of Directors. It was also agreed in the meeting
December, necessitating a hndamental requirqment to any eventual assign- dated February 21, 1976, to reimburse SPP (ME) for its expenditures incurred
ment of rights by SPP to a third party which consists in "provided the Company by it and charged to ETDC on the approval of the Director of the London
satisjies EGOTH." No act of assignment was ever effectuated to SPP (ME) and office who was to be reminded once more the same Mr. S.S. Raouf, the SPP
EGOTH was never formally notified about the statut juridique of SPP (ME). (ME)'s representative at the Board of Directors.
The obvious resemblance between the insignia of the two companies managed, - O n the next meeting dated April 27, 1976 under item (76/25) it was
as it seems, by the same people may have misled any unaware administrative mentioned: "Approval of Master Plan: resolved that the Master Plan be for-
authority. Even the Chairman of ETDC, who was a Claimants' representative mally approved by the Company. General Zaki advised that the Minister of
seems not to differentiate between SPP and SPP (ME) since he was quoted Tourism had approved the Master Plan." From the outset, it seems puzzling
stating before the Board of Directors on January 24-25 1977 that the statutes that the Minister would have approved a Master Plan which was not yet ap-
of the Company embodied in the Ministerial Decree No. 212 of 1975, "are proved by ETDC itself. Moreover, the same minutes of the same meeting con-
based on the agreement signed by the two shareholders namely SPP and tained information that General Zaki himself "stated that EGOTH would
EGOTH" (without any mention to SPP (ME)). However, the provisio in present its remarks and comments on the Master Plan within 7-10 days. He
article (17) mandates the necessity to obtain the acceptance of EGOTH as to also stated that the Minister of Tourism had approved the Maiter Plan, but that gov-
any act of assignment nevertheless it was just SPP (ME) replacing SPP as one ernment agem'ec had some remarks to make on the question ofhousing. All this can be
morefait aaompli that multiplied in the present case. ratijed when preparing the detailed remarks on the injastructures andjom a touristic
VIII. The conduct of the Claimants during the period of implementation point ofview." (Emphasis added). It seems, in all events, that any alleged ap-
of their project; a view from the inside: The minutes of the Board of Directors proval of a Master Plan was clearly conditional upon "remarks to make on the
of ETDC (Respondent annex F.20) may be self telling and more evidence question of housing." It seems noteworthy to point out the contradictory lan-
about the intentions and conduct of the Claimants: guage attributed to General Zaki, the Head ofEGOTH, quoting him as stating
- In the meeting held on November 29, 1975, during the week that that the Minister of Tourism approved the Master Plan while reporting in clear
followed the signature of the act of incorporation of ETDC dated November language that government agencies had at least some reserves as regards the
23, 1975, was present Mr. Gilrnour in his capacity as "Deputy Chairman of question of the housing and that EGOTH itself had yet to study the Master
Southern Pacific Properties 'Limited" who presided the meeting. In that Plan. In any case, it is obvious, from the above statements, that the nature of
meeting representatives of the Claimants were nominated, among others, the project as a touristic project was o f a main concern to the administrative
figures Mr. S.S. Raouf an Egyptian official who introduced the Claimants in agencies in Egypt. However, it seems that the joint venture under the Claim-
his capacity as Chief of the Ofice of Tourism in London. H e was appointed as ants' management embarked on the sale of bare lots of land. In the meeting
a representative of the Claimants in that meeting member of the Board for in- dated October 4, 1976, "Mr. Raouf presented a recommendation for the sale
ternational marketing and accorded a salary of 9000 U.S. Dollars plus expenses, of 350 villa sites firom October 1976 which was approved. It was also agreed hat
9000 U.S. Dollars as well as a special allowance of 4000 U.S. Dollars plus 8000 the principal objective will be to maximize cash sales. Any w h sales to non-Egyptian
U.S. Dollars as expenses. Under item 75/117 it was stated "the forms of agree- purchasen will be allocated to house salesfor Egyptian cash purchasen." (Item 76/53.
mentfor sale and purchase for cash on terms, of underdeveloped lots in the Pyramids Emphasis added). This statement by itself needs no comment as regards the
concept of the project that the Claimants were adopting and implementing. It
446 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

is noteworthy howwer that a representative ofEGOTH on the Board helplessly pointed ment un projet touristique et les ttapes de sa constitution et ses dtlais. 2. L'infor-
out at that meeting". .. 2. no map of the lots to be sold had been presented, 3 . t h sales mation du financement du projet (volume de l'investissement soit en ce qui
contracts had not yet been presented to the Board." The minutes ofthe same meeting concerne le capital ou les emprunts). . . " (Kesp. Annex F.60, p. 2 Emphasis
contained information that "General Zaki on behalf of EGOTH agreed to added).
obtain any hrther governmental documentation or approvals required to im- - At the next meeting held on May 15, 1977, an EGOTH represen-
plement sales." (item 76/54). Thus, it seems that Mr. Zaki engaged himselfun- tative pointed out that after the last meeting "the Minister of Tourism sent a
conditionally to obtain any hrther governmental approval required to letter to the company which we received a copy of advising the company to stop
implement sales and that, obviously, was in contradiction with his previous de- s a h and everything concerning the exploitation within the limits ofthe project.. . " (The
clared attitude as regards the question of housing without any explanation in Minutes, item 77/20, p. 6. Emphasis added). The Chairman of ETDC con-
justification for this radical change of attitude. However, in the meeting on firmed that information and did precise that the referred to letter reached the
January 24-25, 1977, Mr. Zaki pointed out that 'tfor the good image of the company on April 12, 1977.
company we should start this year the implementationfor one hotel at least and perhaps This fact indicates the concern of the authorities in the Claimants compli-
one holiday village." (The Minutes, p. 6, emphasis added). What was meant by ance with the touristic nature of the project. It is in the light of such facts that
the good image of the company is, in my humble understanding, the adher- should be considered and appropriately evaluated statements emanating from
ence to the company's objectives which aim to the enhancement of tourism officials, whether to the press or before the People's Assembly in answer to
and the investment of the necessary capital to that effect, that is to say to questions and/or interpellations, the contradictory attitudes of certain oficials
comply with the obligations undertaken by the Claimants as investors in a revealed fiom documents presented before this Tribunal give weight to the Re-
tourist project under laws 1 and 2 of 1973 concerning tourist activities as well spondent's contention to the effect that certain oficials, while defending or be-
as under law 43 of 1974 concerning foreign investments. ing forced to defend the Claimants in public, were, however, trying to make
- At the same meeting Mr. Zaki also stated "that the budget is based on the Claimants act in accordance to the agreed upon nature ofthe project as tour-
a cemin concept and that is sales and loans.. . " his proposal was to submit "the istic.
budget to the financial committee for the following reasons: it may be that sales I may refer, as an example, to the reply of the Minister of Tourism before
are now not legal or that some legal procedures need to be fulfilled." (The the People's Assembly to the challenging question of Dr. Oteifi, where the
Minutes p. 10. Emphasis added). As the motion on the budget was approved Minister afEiied that "the objects for which the company was established (a)
by a majority rule (that is to say by the Claimants) Mr. Zaki said that qthe Board to develop international tourism in the Pyramids and Ras El Hekma regions ac-
did iwt agree on theprimples ofthe budget and the concept how it was done and without cording to the approved Master Plan and this by building hotels, cinemas, restau-
time to study it, he and the other EGOTH representatives would have to with- rants, parks, tourist mmmodations and villages, clubs, cafes and other tourist
draw from the meeting, the action they effectively undertook. fan'lities.. . " (Cls. exh. 87, p. 3. Emphasis added). Indeed the reply never hinted
It seerns that it was a matter of a tour deforce that the Claimants had re- to the serious diversions as regards the nature of the project between the Claim-
course to on the basis of their majority on the Board of Directors. Beyond that ants and their Egyptian partner.
fact, it seerns appropriate to indicate that the Claimants were obviously intent - At the meeting of the Board of June 7, 1977, all representatives of
and determined to maintain their own concept of the project as well as the re- EGOTH were replaced. No reason was advanced, however, one couldn't but
ality about themselves: the concept being mainly an urban development project notice that during the meeting before, one representative of EGOTH was
and the reality being developers and not investors as they claimed to be to the quoted as saying "we are now building a State inside the &me of Egypt" (the
Egyptian Government, and specifically to the GIA. In this context, I may refer referred to Minutes, p. 19).
to the letter dated April 4, 1977 sent by the Chairman of EGOTH to the - In the Board Meeting of November 13, 1977, Mr. Munk, the rep-
Chainnan of ETDC in which the former points out the discrepancies between resentative of the Claimants, stated that "the hotel financing was proving to be
what was decided during the Board meetings of January 24 and February 9, more difficult than had been anticipated" (Resp. Annex F.20, p. 9). This state-
1977, and what was contained in the application to the GIA, the discrepancies ment unequivocally indicates that until November 1977, the investors, I mean
consisted, as explained in the letter, in that "les buts duprojet en tant qu'essentielle- the Claimants, had difficulties to arrange finance for a single hotel. It may be
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 449
448

in these circumstances understandable that the Claimants had no other altema- series of articles written by Dr. N. Fouad criticizing the project. The Minister's
tive but to continue in their activities of selling bare lots of land to any willing letter specifically stated that "the archaeological Board took part in the joint
purchaser. In this context, I may also point out that it was put on the record committees studying the project in the [Giza] Directorate. The Board ap-
that the Minister of Tourism, kindly, requested the Claimants to declare their proved plans to exploit the area in the tourist trade and arrangements to assign
intentions to the construction of a hotel in order to be in a position to defend certain areas for [EGOTH] in accordance with a special presidential Act." (Cls.
the Claimants and convince the People's Assembly of a touristic nature of the Memorial p. 48 and exh: 136 bis)
project. (Meeting dated January 26, 1978, item 78/4). - O n September 10, 1977 the Minister of Tourism submitted to the
IX. By a letter dated May 12, 1978, Mr. Munk, the Claimants' repre- i People's Assembly a written answer to a series of questions &om Members of
I
sentative, addressed the Prime Minister informing him that "in spite of these I the said Assembly (Cls. Memorial p. 47 and exh: 87)
encouraging initial Indications of success, the protracted debates in the People's As- - O n February 7, 1978 during a debate in the People's Assembly, the
sembly, the various committee hearings and the adverse world wide publicity have sen- Ministers of Tourism and of Economy unreservedly endorsed the project
ously impaired our efforts to create the required credibility to attract the increasingly "stating that the project is in the national interest of Egypt, that no danger to an-
I
needed oerseasfinaruefor the project" mespondent's Annex F.38, p. 3), and he I tiquity areas existed, and that all laws relating to antiquities were being closely adhered
came to the conclusion that "wejind it impossible under the present conditions to to." (Cls Memorial p. 50. Emphasis reproduced, and Cls. exh: 74)
proceed rationally or economically with the planned implementation ojthe project.'"he
above mentioned Annex, p. 4, Emphasis added)
- In an interview given to the magazine "sixth of October", and pub-
lished on April 23, 1978, President Sadat confirmed that the project had
already been studied and approved and that it was "a grave mistake" for the As-
B. The events that occurred around the critical date May-June 1978 sembly to take up the question again, and he &med that doubts should not
be permitted about the "open-door" policy of which the project was an
Under this item, I intend first to review the two main events that were re- example. (Cls Memorial pp. 50-51 and exh: 141).
ferred to in the letter of the Claimants to the Prime Minister dated May 12,
It is noteworthy to point out that the project was subject to multiple ques-
1978 to wit: tions and interpellations before the People's Assembly.
- The debates in the People's Assembly The documents reveal that the Minister of Tourism was first questioned
and - The adverse world wide publicity I by a member of the People's Assembly about the terms of the agreements con-
to the effect, as stated in the letter, that these events "seriously impaired our cluded with the Claimants, and the Minister answered to that question in writ-
effort to create the required credibility to attract the increasingly needed over- ing in September 1977.
seas finance for the project." Nevertheless, "interpellations" were again addressed to both the Minister
After that, it will be dealt with (ii) the measures taken by the Egyptian au- of Tourism and the Minister of Economy. Debates about these interpellations
thorities in May-June 1978 and the reaction of the Claimants to these mea- took place, before the People's Assembly, on February 7, 1978. It is to be noted
sures, and finally, I will indicate, in brief (iii) the subsequent conduct ofthe two that interpellations constitue in the Egyptian Constitutional Law a means of
parties during the stage of negotiation. control by the Assembly over the Executive, eventually resulting in the engage-
i. a- The debates in the People's Assembly: The Claimants admit that ment of its responsibility. As noted "les interpellations constituent un moyen de
during 1977, opposition to the project developed in Egypt (Cis. Memorial p. mettre en jeu la responsabilitt du gouvemement devant le Parlement." (Insti-
47). However, they explain that that opposition was part of a general political tution politique et droit constitutionnel, M. Duverger, p. 172, Themis, P.U.F.).
campaign directed less at the project than against the Government. The Under the Egyptian Constitution, the questions and the interpellations are gov-
Claimants concede that the Government came to the defense of the project erned by the provisions of articles 125 and 126. Article 125/2 provides as fol-
on several occasions: lows "Debate on an interpellaaon shall take place at least seven days after its
submission, except in the case of emergency as decided by the Assembly and
- O n September 4, 1977 a letter &om the Minister of Tourism was with the Government's consent."
published in the Newspaper A1 Akhbar by which the Minister responded to a
 450 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

As pointed out by the Eminent Professor Duverger, the fundamental dif- Annex F.23) d be dealt with later, as they have their weight in the consider-
ference between questions and interpellations consists in the fact that the As- ation of points of facts and of Egyptian law brought to the attention of this
sembly, aher the debate about the interpellation, must vote either in favor or Honorable Tribunal.
against, hence eventually engaging the responsibility of the competent Minis- In this vein the Respondent argues that, even if the "Antiquities" reason
ter, the Prime Minister or eventually the whole cabinet. "Mais une difference had not arisen, the Respondent would have had the right and the obligation,
fondamentale subsiste; les questions ne donnent lieu A aucun vote; au contraire, on more than one ground, to terminate the project as then implemented by the
les interpellations se terminent par un vote exprimant la satishction de 1'Assem- Claimants (resp. Counter Reply Vol I, pp. 86-87). The Respondent also points
blCe pour les explications fournies par le gouvernement, ou son mtcontente- out that if it would have failed to exercise that right or to hlfi that duty, Egyp-
ment." (Duverger, op-cit, p. 172, and in the same vein, G . Burdeau, Droit tian Courts would have seen to it that this was done, at the initiative of inter-
constitutionnel et institutionspolitiques, p. 320, L.G.D.J. 1966). As for the out- ested citizens. As a matter of fact, the Respondent explained that a demand for
come of the interpellations concerning the Claimants' project, the Assembly the nullification of the project has been brought to the court on the 1st of De-
approved remitting the question, interpellations and the discussions to the cember 1977, (the Conseil d'Etat), before the 1978 Minister of Culture's Angti
"Cultural information and touristic committee with the participation of both No. 90 of 1978 was issued (Resp. Annex F 64), in request for a summary stay
offices, the economical committee and the legislative committee to study the of execution of the Arrgtt No. 212 of 1975 and as principal demand to abrogate
subject and present a report about it to the Assembly.. . " (Summary of the the said decree and consequently to rule to nul* or rescind the said Com-
minutes of the Assembly's session on February 7, 1978, Cls. exh: 74) pany's articles of incorporation. The decision of the Court concluded that
O n March 12, 1978, the speaker of the People's Assembly, by a letter to "whereas the result of these violations is to render null and void ETDCh articles
the head of the above mentioned committees, suggested that the matter be of incorporation as well as Decree No. 212 for 1975.. . in consequence where-
studied in all its aspects by highly qualified technical experts. (Annex I to the of the legal base of the company ceases to exist.. . " (p. 50 of the Decision).
report. Resp. annexes F 22 I3 and F 23). The experts committee was formed These facts put together, may answer by themselves the argument present-
and began its assigned mission by April 5, 1978. @. 1 of the report). The ex- ed by the Claimants to the effect that "it must again be stressed that these alle-
perts Committee finalized its findings in a "Report," (Resp. annex F 23). That gations did not appear until Respondent's representatives were given the task
report deserves special attention since it treats about the different aspects of the. of constructing a defense, first in ICC proceedings and now again in the cur-
project, and its elaborated by independent qualified technicians in different do- rent forum" (Cls. Reply. Footnote 18, p. 13).
mains; inter alia the domains of law, economy and antiquities. i. b- The worldwide adversepublicity: The Respondent acquiesced that
The question of whether or not the campaign against the project in the the Pyramids Plateau project generated contrary reactions and protests (Resp.
People's Assembly, was of a political nature may have a conclusive answer since Counter Memorial Vol I p. 205). However, it points out that that was due to
the Central Auditory Agency (which as explained, is an independent body the conduct and behavior of the Claimants in the implementation of the
headed by an independent high official of the rank of Deputy Prime Minister project mainly on the Plateau proper. The documents of the case reveal that
and which reports directly to Parliament) independently prepared a report dat- the Claimants reacted to the so-called adverse worldwide adverse publicity.
ed September 17, 1977 which was sent to the People's Assembly (Resp. Annex They, in fact, presented a request en defamation against the French newspaper
F19). The said report contained information about the defects and illegahty that Le Monde before the Court of Paris. The Claimant at that case was Mr. Munk
affected the project both at the negotiation and at the implementation stages. and he was attacking the Newspaper and the editor of an amcle entitled
Consequently the said report is enough evidence, in my opinion, to exclude "Promoteun contre Pharaons: osera-t-on de construire au pied des Pyra-
any doubt about the real scope of the actions emanating from members of the mides?" published on March 25, 1978. The Court by a decision of February
People's Assembly. Moreover any unfounded political campaign would have by 5, 1979 dismissed the case (Resp. Annex F.39).
the time lost momentum. In this respect the campaign in the People's Assem- The Respondent presented certain documents which revealed: the con-
bly resulted in a resolution to the effect of the formation of a specialized com- cern of the international community as to the safeguard of the World Heritage
mittee entrusted with the study of the subject under all its aspects (called here and the worldwide reaction against the implementation of the project as con-
in after the expem committee). Both reports, the one prepared by the Experts ceived by the Claimants. In this respect the Respondent presented as samples:
Committee and the other, elaborated by the central Auditory Agency (Resp.
 452 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 453

- The letter dated April 6, 1981 from the then Director General of All these ficts put together may reveal ample confirmation as to the real
UNESCO in which he reiterated the worldwide concern about the risks to concept the Claimants had for the project and the red nature of activities they
which Memphis and its necropolis - and the zone of the Pyramids from Giza were practicing. However, it has been demonstrated that the Claimants applied
to Dahshour would have been exposed and the profound the relief that the under law 43 as investors in a touristic project and, as such, committed them-
Egyptian Government has taken active measures to protect that site". .. ayant selves to the compliance with the provisions of the law as well as with their own
cette valeur universelle exctptionnelle... " (Resp. Annex F.25, p. 2, Emphasis consented obligations as stated in the application to the GIA. As to the financial
Added) capabilities for investment, it may be noteworthy to point out that the Claim-
- The article dated March 7,1978, published in the London times en- ants presented themselves to the GIA by "the proposal on the development
titled "Save the Pyramds Gom the Jet Set Appeal." (Resp. Annex F.26) program" (Cls. exh. 81).
- The article dated March 25, 1978, published in Le Monde entitled The proposal indicated reference to Appendix (A) which is entitled "Cor-
porate summary of Southern Pacific propemes." When the Respondent ques-
"Promoteun contre Pharaons: Osera-t-on constmire au pied des Pyramides"
tioned the financial capabilities of SPP and asked formally that the Claimants
(Resp. Annex E27)
produce that Appendix, the Claimants answered by a letter dated January 20,
- The letter dated October 10, 1978 &om the Director General of 1990 that "we have confirmed with our clients that, like the Respondent, they
UNESCO to the Director of Le Monde thanking him for the energy and de- cannot locate the Annexes attached to the April 1974 submission" (Resp. An-
votion with which the Newspaper defended the world's cultural heritage in nex D.18). Whatever their investment capabilities for investment had been at
connection with the Pyramids Plateau Project (Resp. Annex 28). In hct, the that time, the 6ct remains that till May 1978 they seem to have failed to invest
letter contained that "aussi est-ce avec un vhitable soulagernent que j'ai appric que or to arrange finance for a single hotel and therefore were perhaps necessarily
I'environnement des Pyramides sera pleinement resped." It is noteworthy to point obliged to embark in and hrther commit themselves into the questionable ac-
out that the letter was dated before the formal registration of the site on the list tivity of selling bare lots of land on the site. Moreover, the events that occurred
of the World Heritage. later, but before the critical date, "impaired seriously" their credibility to ar-
- The article dated January 9, 1979 published in the French "Libera- range the needed fiance as the Claimants themselves admitted in their letter
tion" entitled "Le monde, les Pyramides et les promoteurs." (Resp. Annex F.30) dated May 12, 1978. This may suggest that at least from the date of that letter
- The article entitled "Egyptian concern over plush city project by the the Claimants were cognizant of the fact that they were in a situation d'impos-
Pyramids-Antiquities threat fear" (Resp. Annex F.31) sibilite materielle dlexJcutionof the titanic project they committed themselves to.
In the presentation oftheir case, the Claimants seem to give the impression
ii. Ihe measures taken by the Egyptian authorities at the critical date May-June
to the effect that the Egyptian Authorities were conscious about the concept
1978
and nature oftheir activities, as developers. They repeatedly refer to the visit of
As a preliminary observation, I may refer again to the letter of Mr. Munk a certain delegation to their project at Fiji, upon their invitation, and come to
dated May 12, 1978 to the Prime Minister in which he explained the dificul- the conclusion that this fact reveals the acknowledgment and acquiescence of
ties "to attract the increasingly needed overseas finance for the project (Resp. Egypt to the concept and nature of their activities in the Egyptian venture. The
Annex F.38), due to the debates before the People's Assembly and the world- only worthy comment is that the legal appraisal of their activities in Egypt,
wide adverse publicity which "have seriously impaired our efforts to create the should be effectuated in the light of their obligations under the rules of law No.
required credibility." (Emphasis Added). 43, and the provisions of the engagements they obligated themselves with.
In this context, I may refer also to the Minutes ofthe second meeting of - By a letter dated May 17, 1978, the Vice Minister of Tourism in-
negotiations held during 24 and 26 ofJanuary 1979, where Mr. Mcgee and Mr.
formed the Manager of SPP (ME) Mr. McLellan that "we warn the company
Zedis insisted upon the housing activities advancing the argument that 75% of
that ifit does not carry out what had been agreed.. . if not we will take the steps
the Claimants' capital is held by the Khashoshgy interests and as they had been
which will compel the company to respect the regulations which are: 1. An
answered that under the provisions of law No. 43, SPP (ME) cannot be con- Agreement should be made.. . on the form of the contract which will be made
sidered as Arab investors, they asked "can we reincorporate and become all between the company and those who are going to exploit... 2. The stop
Arab" (Resp. Annex F.65, p. 3).
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES
454

immediately of any construction works within the monumental zone which is and it was agreed unanimously to convene an extraordinary meeting of the
to be marked by the Land Survey Department" (Resp. Annex F.37). General Assembly of the company just after the ordinary meeting ofJune 20,
-
1978.
O n May 27, 1978 a memoranda was prepared by the President of
the Egyptian Antiquities Authority (Cls. Exh. 144) in which he informed the At the Board Meeting, Mr. Gilrnour explained that the events of the past
Minister of Information and Culture of the recommendation by the Board of weeks were a great schock. He also pointed out that "the attitude we felt always
E.A.A. to consider the region of A1 Giza Pyramids as a Public properry (An- a very close mutual agreement of purpose and aim." He however stated that
tiquity). The memoranda contained justifications to the recommendation "due to the events of a week ago it was important that our attitude be clearly
which consist in: 1. that "the presence of Antiquities was confirmed in the understood as over the last year many misunderstandings had taken and SPP
Western side of A1 Giza Pyramids region which represents the Eastern part of sufired a mdibilitygap due to the press which did not always illustrate the attitude
the const~ctionoperation carried out ... " 2. "The scientific evidence men- in which we came to Egypt." (The Minutes p. 3). A representative of EGOTH
tions the probability of Antiquities present in this important Antiquities was quoted saying "that the Government intends to keep ETDC going for Ras
region.. . " 3. "The Antiquity and Cultural study of the nature of this ancient El Hekrna or any other place. The Government is very keen upon the rights
region imposes the need of a large and wide prohibited space at the A1 Giza of its investors."
Pyramids region.. . " As to the temporary measures, the Chrurrnan explained that EGOTH
- O n the same day, the Minister of Information and Culture issued brought a case before the Court of temporary injunctions of Giza, for a judicial
sequestration and the nomination of a receiver, but during the hearings of Sat-
Decree No. 90 of 1978 stating in Article (1) that "the land surrounding the
urday, 3rd of June, EGOTH modified its demand in sequestration and asked
Pyramids which its boundaries and signs are shown in the attached memoran-
for the appointment of two receivers, one neutral and the other being the
dum and two maps, is considered of public property (Antiquity)."
Chairman of ETDC (who, to be reminded, is the representative of the Claim-
- O n May 28, 1978, the GIA informed the Chairman of ETDC that ants) "HavingfitNfinamial powers to safeguard thefitnds and property ofETDC and
the Board of Directors of GIA decided on May 28, 1978 to drop the GIAS the rights ofthe shareholders andpurchasm" (the Minutes, p. 5). This request was
former approval dated July 20, 1975 concerning the Pyramids Plateau, for the to render an injunction "to appoint these tm reca'vm until the meeting ofthe Gen-
impossibility of the execution of the project as a result of the issuance of Decree eral Assembly on 20th June." (the Minutes. Item 78/23. p. 5)
No. 90 of 1978 of the Minister of Information and Culture. (Cls. Exh. 146). Noteworthy is the bct that during the meeting it was unanimously agreed
- By telex dated May 29, 1978, Chase National Bank informed to appoint a committee of three persons: one representative of both EGOTH
ETDC that the Bank received instructions f?om the Central Bank of Egypt to and SPP and an impartial third. In answer to questions by Mr. Gilmour and
block ETDC's accounts and deposits pending further instructions. (Cls. exh. Mr. Birchall, the representatives of EGOTH afirmed that the appointment of
147). the committee "would be in place of the sequestration and the blocking would
- O n May 29, 1978, EGOTH informed ETDC to stop work on the be lified." And that "the request to the Court will be dropped after the forma-
project. The letter stated that "please be informed that because of the issuing of tion of the Committee and naturally it means that the claim of 10m. will be
the GI* Decree, thus dropping the agreement on the Pyramids Plateau dropped." Also in answer to Mr. Gilmour's question about the rationale of
project.. . I decided to write to you in order to take the suitable procedures to EGOTHS claim, a representative of EGOTH stated that "it was only precau-
safeguard our interests and the rights of the investors and shareholders.. ." (Cls. tionary, temporary measure." (The Minutes, p. 7)
Exh. 148). - O n June 19, 1978, Presidential Decree No. 267 of 1978 was issued.
- O n May 30. 1978, EGOTH filed a request for sequestration of O n the basis of the Decree of the Minister of Information and Culture No. 90
ETDCS assets before the Court of Giza. The Court accepted EGOTHS of 1978, the Presidential Decree provided in article (1) that "the Presidential
request and made a provisional order for sequestration "on all the money put Decree 475/1975 to be cancelled regarding the assignment of the lands on the
in the banks and at the Company" (Cls. exh. 150). Pyramids Plateau in Giza for Touristic exploitation" (Cls. exh. 151)
- At the Board of Directors' meeting on June 6, 1978, the Chainnan - Contrary to what had been agreed upon, Mr. McGee, in his capacity
of ETDC reviewed the administrative and judicial measures that took place, as the authorized representative of SPP (ME) sent a memoranda dated June 20,
456 ICSlD REVIEW-FOREIGN lNVESTMENT LAW JOURNAL CASES

1978 in which he stated "we concur that a Court order should be immediately 1. It appears from the procis verbal of the first meeting that the meetings
sought. 1. Confirrmng the power of the receiver to instruct him to call General was held at the initiative of the Minister of Tourism since Mr. McLellan ex-
Assemblies at the request of either shareholders and to attend General Assem- pressed that "He is gratefd that the Ministry of Tourism had invited this dele-
blies in lieu of Board. And that upon the issuance of such order all members of gation to Egypt." The Claimants point of view can be summarized as follows:
the existlng Board should be discharged." (Resp. Annex E44) - That the problem may be solved in a manner to ensure Egypt's rep-
The Respondent explained, while the Claimants kept silent, that when the utation as a host country for foreign investments.
Giza Court decided on June 19, 1978 to appoint, the two proposed persons as - That the cancellation of the project caused SPP serious financial
co-custodians to act jointly, the Chairman of ETDC who was also the repre- losses and damages.
sentative of the Claimants declined to serve as co-custodian (Resp. Counter - That the Press attack harmed the reputation of the Claimants, there-
Memorial Vol I, p. 236), instead, the representative of SPP (ME) in Court re- fore, as explained by Mr. McGee "Any settlement must include a statement by the
quested a court order confirming the power of the EGOTH designee to serve Egvtian Government to heal his clients' damaged reputafion."
as sole receiver.
- That SPP prefers not to continue as a partner in ETDC, since the
- O n July 12, 1978, the judicial custodian issued resolution No. 1 of
combination ETDC and SPP lost its credibility.
1978 (Cls. Exh. 150). That resolution referred to "the resolution of the trio
committee appointed by resolution No. 23 for the year 1978 of the Board of
- That replacing the land does not put ETDC on its feet since it spent
ETDC to manage the &rs of the company prior to the appointment of the 9.5 m. U.S. Dollars in preliminary engineering.
judicial custodian, and for organizing the work of ETDC during the period of - That the estimated damage amounts to 35 m. U.S. Dollars.
the custodianship." In this respect, the Respondent explains that after opting - That a settlement be reached in a short period of time.
for cooperation, the Claimants shifted their attitude to a ''refus de toute - That the basis for compensation is Egypt's breach of contracted ob-
cooperation avec les autoritks Egyptiennes" (Resp. Mkmoire en Rkponse. Vol liwons.
I1 p. 115)
On the other hand, the representatives of the Respondent pointed out:
This statement may have ground upon the bct, later revealed during the
first meeting of negotiation between the two parties where Mr. McGee, rep-
- That Egypt and EGOTH did not violate any contracted obligations
resenting the Claimants, was quoted as saying "E7'DC can be success&l, but the or Egyptian law.
combination ofETDC and SPP has lost its credibility" Resp. Annex F.56 p. 2. Em- - That the Minister of Culture did not break the law by issuing
phasis added). Decree No. 90 of 1978.
iii. Tile Subsequent conduct ofthe two parties during the stage ofnegotiations: - That the contract of ETDC is governed by Egyptian law and that the
The Respondent presented in the present case documents relating to sub- said law should be applied concerning compensation.
sequent contacts with the Claimants. The contents of these documents were - That ETDC will be compensated according to Law No. 215 to
subject of discussions and explanations by both pames during the hearings be- 1951 concerning monuments.
fore this Tribunal in September 1990. However, the veracity of the contents of - That Egypt and EGOTH have the right for compensation because
these documents seem not to be challenged or surmised. the foreign partner violated the contract and laws in force. The violations being
In Annex F.65, the Respondent presented a document entitled "Minutes established in both the report of the Central Authority for Auditing, and that
of Five Meetings of GIA representatives and the Egyptian 'Legal Group' with of the Experts Committee.
representatives of SPP, dated 24-28 January 1979." Present to the meetings - However, the Egyptian side expressed willingness to find a settle-
were, beside the representatives of Egypt, the representatives of SPP (ME), and ment provided the whole contract and statutes of ETDC are revised in com-
as such represented "their shareholders who are Prince Nawaf and Prince
pliance with the provisions of the Law No. 1 of 1973 concerning touristic
Fawaz and Mr. Khashoshgy." establishments and law No. 43.
458 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

2. At the second meeting, the Egyptian side pointed out the violations 5. The negotiations seem to have been resumed on May 16, 1979
committed by the Claimants in their housing activities. In response to a state- (Resp. Annex F.69).
ment by the Egyptian side to the effect that the concept for the hture would The pr&s verbal of the meeang reveals that two subjects were under dis-
necessarily drop the housing activities, Mr. McGee the representative of the cussion: the compensation and/or the means of cooperation in ETDC's activ-
Claimants was quoted as saying "The law says that Arab Capital can do some- ities. A substitute land was offered to ETDC in case the foreign partner
thing with housing and 75% of our capital is held by the Khashoshgy interests. intended to cooperate. Was also discussed the contents of two documents each
O r we would like to go to the house and have a special law." Mr. Za& also prepared by a party and communicated to the other for the study and com-
asked about the possibility of reincorporation and becoming aU Arab. To all ment.
that the Egyptian side reaffirmed that both partners EGOTH and SPP do not Mr. McLellan, the Claimants' representative, pointed out that the losses
have the right to exercise housing activities in Egypt, EGOTH being a tourist incurred by SPP amount to 7.3 million Dollars, however the Claimants accept
company and as such is forbidden to exercise housing activities. to limit their compensation to 4 million, and the rest to be considered as their
In answer to the interrogation of the Egyptian side as regards what Claim- contribution in the company. And as the Egyptian side questioned some figures
ants meant by "residential tourism," Mr. McLellan answered that "It seems to included in the note prepared by the Claimants and asked that all supporting
me, there is no dispute about the commercial viability of what was done." At documents be presented, in response, Mr. McLellan advanced that the value of
that meeting the project of Ras-El-Hekma was discussed, and the Egyptian SPP (ME) was estimated at 35 m. and subject to increase, and that was the
side objected to a suggestion that 95% of the cost of construction of a hotel at amount of losses.
that site be financed by loans. The Egyptian side pointed out that "it is unac- The Egyptian side raised questions about the figures advanced by the
ceptable that ETDC work as an intermediary between Egypt and international Claimants and asked that certain sums be excluded. These sums were:
financial institutions, so it should be a venture where the investors do some parts offi- - 1.333.244 Dollars representing "leur quote part dans les dkpenses de
nancing." (Emphasis added). constitution de la socittk."
In answer to a question about the alternative site of the project, the Egyp-
tian representatives stated that "we will apply law 215 of 1951 according to this
- 3.555.285 Dollars "qui reprtsentent des depenses de dtveloppement
law the Ministry of Culture is studying the land which will be given to qui ne concernent pas ETDC."
ETDC." The proces-verbal contains that in response Mr. McLellan had said that "il
3. At the third meeting, Mr. Z e h , representative of the Claimants, n'est pas pr2t ientrer dans une discussion concemant ce qui a kt6 effectivement
pointed out that they "will be responding to a general of concepts and prob- dkpensk, ni i entrer dans des nigociations les concemant." (Procb Verbal, p.
lems to make ETDC work under Egyptian law;" 7). However, it seems that, the Egyptian side offered to pay 1.5 million Dollars
against the invested capital "comrne contre partie des capitaux investis, ce dans
- ETDC should be a touristic company, he was quoted as saying "we
le cas de la continuation de la socittt." (Procb verbal, p. 11) and that "la com-
finally agree that this should be the mission of ETDC." pensation principale i ETDC sera un terrain alternatif... " (Procts verbal, p.
- An economic plan for the carrying out of activities of ETDC is vital. 12).
- A feasibility for a financial plan. 6. The issue of the proposed land of substitute has been debated in the
He also pointed out that the Claimants need: written submission, and during the hearings before this Tribunal in September
- Indemnification for ETDC. 1990. The Claimants asserted that the proposed site was unappealing, located
twenty kilometers remote &om the Pyramids Plateau. The Claimants pointed
- Consider the site location. out that neither the offer nor the site was defined with precision. They refer to
- Make a master plan to fit the site. a visit that took place by the Arbitrators of the ICC Tribunal, during which
4. At the fifth meeting the Claimants' representatives asked for time to they "were shown a location in the sixth of October city (which covered a very
consult with the shareholders, and to make a f dlplan of feasibility study. large territory) more than 20 kilometers &om the Pyramids Plateau site and
with characteristics entirely inappropriate for the tourist destination concept."
(Cls. Reply, p. 88).
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

O n the other hand, the Respondent presented maps indicating the loca- g-atuitous argument to the eEect that the subsequent non implementation of
tion of the proposed site, as well as technical studies which contain evaluation touristic projects on the proposed site of substitute is evidence for its unsuitabil-
of that site and a comparison with the site of the Plateau (Resp. Annex, F.51). ity. Otherwise, it could have been argued that the site on the Pyramds Plateau
The Respondent also pointed out that the proposed site "corresponds closely proper, where the Claimants were implementing their project, is to be consid-
to the one of the four sites (the site on the Fayoum Road) to which the Claim- ered by its turn unsuitable since from times immemorial it has never been ex-
ants had agreed upon in the Heads of Agreement of September 1974." (Re- ploited whether in touristic or other activities.
spondent Counter Memorial, Vol I, p. 243). 9. To conclude upon the issue concerning the critical date and the sub-
The Respondent explained that its offer for a land of substitute is relevant sequent conduct of the parties, I may refer to two documents:
as regards both the legal issue and the factual considerations. The Respondent - The SPP (ME) memorandum dated June 20, 1978, prepared by its
advances that it had the legal right to modify the contract in the sake of public
authorized representative, Mr. James MacGee which stated the following: "we
interest on the basis of an established principle of administrative law. And that
concur that a court order should be immediately sought 1. confirming the
on the other hand the offer reveals the goodwill for hrther cooperation with
power of EGOTH designed to serve as sole receiver in view of the fict that the
the Claimants who, alleges the Respondent, declined the offer without even
co-receiver has declined to serve. 2. Expanding the power of the Receiver to
giving it serious consideration.
instruct him to call General Assemblies at the request of either shareholder.. .
7. Without going through any legal considerations, as regards the and that upon issuance of such order all members of the existing Board should
nature of any eventual contract that may have been concluded between the two be discharged." (Resp. Annex F.44)
parties to the present dispute, I may only point out that the criteria of admin- - The telex dated January 8, 1982, from the Chairman of SPP (ME)
istrative contract should be seeked in the Egyptian administrative law, and that
to the Judicial Custodian oFETDC, in which SPP (ME) asked that "ETDC
under Egyptnn administrative law, for a contract to be qualified as administra-
and shareholder's meeting be put ofT pending the Arbitrator's decision." The
tive, it should satisfy, as a general rule, three elements: the administration being
allusion was made to the case before the ICC, and in the telex SPP (ME) ex-
a party to it, related to a public service, and containing exorbitant clauses
pressed its view that since the ICC Tribunal may make its award conditional
"Clauses Exhorbitnntes." (S. El Tarnawy. General Principles of Administrative
on SPP (ME)'s surrendering its shareholding in ETDC, therefore it would "be
Contracts, 1984, p. 54 in Arabic).
obvious that any decision taken on behalfof ETDC should await the pending
However, any contract related to the use of public domain, is by its nature, Decision of the Arbitration Tribunal" and that "the substitution of land at the
considered an administrative contract subject to the application of the rules Sixth of October site was proposed and rejected two years ago, and we cannot
governing administrative contracts. (The Supreme Administrative Court, case conceive of any reasons why it should now be urgent to reconsider it." (Resp.
1965 for the judicial year 6, 31.3.1962). Annex F.43).
8. As regards the factual consideration; it seems that the review of the 4. The allegations related to irregular contat6 and corruption
proc2x verbaux of the meetings may reveal the divergencies that separated the two
a. General preliminary considerations:
parties inter alia the reimbursement of the Claimants, the nature of the eventual
project and its financing. Therefore, the issue of the substitute site was not at 1. "... It cannot be contested that there exists a general principle of law
the core of the negotiations. recognized by civilized nations that contracts which seriously violate bones mores
or international public policy are invalid or least unenforceable and that they
It seems, moreover, that the proposed site was conditional upon agreement
cannot be sanctioned by courts or arbitrators."
about the activities that should be practiced in the fiamework of the touristic
nature of the project. By that statement of 1963, the honorable judge Largergren, acting as sole
However, if the suitability of the site of substitute is to be given weight in arbitrator, set the genesis of a basic rule to govern international transactions.
the impartial consideration of This Tribunal of the whole relationship between Such a rule was necessitated by the bct that "notwithstanding the efforts of na-
the Parties in dispute, before, during and after the critical date May-June 1978, tional laws and international agencies, financial and other inducements are an
the Tribunal should evaluate the issue of suitability in the light of the realities established part of the process of obtaining contracts in some parts of the
revealed by the documents and studies submitted to it, and hence to reject such world." (A. Redfem and M. Hunter, Law and Practice of International
462 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 463

Commercial Arbitration, p. 107-108. Also Kosheri and Leboulanger, L'Arbi- undertaking any private activity, directly or indirectly or through an interme-
trage face la Corruption et au trafic d'Influence, Rev. Arb. (1984), p. 3). diary, including consultant activities, if during the year prior to leaving office
International agencies were active in detecting and combating these prac- or employment, the Minister or public off~cialwas involved in licensing the es-
tices (for example OCED "Guidelines for Multinational Corporation," para 7; tablishment of those projects or supervising their activity. In the application of
The Drafi International Convention on Illicit Payments, UN doc. E/1979/ the provisions of this law, the term 'minister' shall refer to the Prime Minister,
104, May 25, 1979, and ICC document No. 315 "Extortion and Bribery in Deputy Prime Minister, Ministers and Deputy Ministers.
Business Transaction" and document No. 480/2 "Les Commissions illicites; The documents presented to this Tribunal reveal that, as far back as 1977,
Definition, Traitement Juridique et Fiscale.") Relevant concern seems to be competent authorities, mainly the independent Central Auditing Authority,
better demonstrated by reference to the "World Development Report for the had suspicions about circumstances surrounding the contractual process that
Year 1991" issued by the World Bank. The report indicates that corruption is occurred with the Claimants. In fact, by a letter dated November 10, 1977
an evil that undermines the administration's capacity and may even lead to its concerning the Claimants' project, the Head of the Central Auditing Authority
paralysis. The report also points out that the phenomenon is not confined to formally asked the Minister of Tourism to "prockder h une enquCte avec tous
the administration of developing c o u n ~ e showever
, low salaries may be detect- les responsables de cette afbre, et ce par quoi elle a aboutit cornme con-
ed as one of the reasons behind these practices (The report in its Arabic version, stquence contraire i I'inttrCt du pays, et qui ont dCtoumC les buts poursuivis
p. 165). par l'accord." (Resp. Annex F.63). That request was based upon the observa-
2. In this vein, it is noteworthy to point out that the international com- tions and conclusions contained in a report prepared by the said authority after
munity saw to it that, in its setting of codification of the rules governing treaties, reviewing the whole contractual relationship and the activities of the joint ven-
be embodied the basic principles relating to the issue of fraud and corruption ture under the Claimants' management.
and their consequences as regards the validity of the treaty. Amcle (49) of the Moreover, the Experts' Committee which was constituted under the aus-
"Convention de Vienne sur le Droit des Traitts" provides that "si un Ctat a Ctt pices of the People's Assembly and entrusted with the study of the various as-
ament h conclure un trait6 par la conduite huduleuse d'un autre t m ayant pects of the Claimants' project, came to conclusions which corroborate the
participt h la ntgociation, il peut invoquer le do1 come viciant son consente- findings of the Central Auditing Authority (Resp. Annex F.23). In this respect,
ment h Ztre lie par le traitt," and article (50) of the same convention reads as it is noteworthy to point out that the above mentioned Experts' Committee
follows "si I'expression du consentement d'un Ctat h Ctre lit5 par un traitt a kt6 submitted in its conclusions that "it would like to point out that the different
obtenu au moyen de la corruption de son reprtsentant par I'acte direct ou in- stages which this project went through.. . ~ P e c tmany gaps and excesses and im-
direct d'un autre ktat ayant participt ii la ntgociation, l'ttat peut invoquer cette pulsiveness which violated the rules of the law and the constitution besides the inacncracy
corruption comme viciant son consentement ii Ctre lit par le traitt." This aspect and the dishonesty ofthe display." (Resp. Annex F.23, p. 116).
of the convention has been q d ~ e as d "Moralisation du Droit" as explains the The findings of both the Central Auditing Authority, in 1977, and the Ex-
eminent professor Reuter who stated in this respect that "nu1 ne saurait s'y perts' Committee, in 1978, alongGde with an impartial evaluation of the se-
tromper: la partie progressive de la convention de Vienne est bien celle qui quence of facts may convey a preliminary answer to the question about
conceme les cas de nullitt des engagements internationaux, et qui expose la whether or not the Claimants were, in fict and in law, b o ~ f i d edevelopers
sanction modeme des vices du consentement et la notion de jus cogens." (Pr. whom the misfortune led to face a filtering, misfortunate and decadent
Reuter, La Convention de Vienne sur le Droit des TraitCs, Paris 1970, p. 22). administration.
3. Article (11) Bis of Law 43 of 1974 concerning investments of Arab 4. In case of evidence to corruption, a question arises about what would
and foreign capital reads as follows "the projects referred to in the first para- be the legal consequences thereupon. It is noteworthy, that concerning con-
graph of the previous article are subject to the restrictions pertaining to employ- tracts, the objects of which are illegal, i.e. related to illegal commissions or
ees of government and representative bodies set forth in article (95) to (98) of tr&c of influence, it is debated whether to consider the issue as related to the
Law No. 26 of 1954 and to the prohibitions set forth in article (28) of Law 38 arbitrability of the case or rather to assume jurisdiction yet refbse the claim on
of 1972 with regards to members of the People's Assembly. Prohibited activi- the basis of illegality (Yves Derains, Analyse de Sentences Arbitrales, les
ties in accordance with the provision referred to in the previous article include
464 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

Commissions Illicites, ICC publication NO. 480/2, p. 61 et s., and also Redfem 2. The Respondent advances that "hints of understandings and ar-
and Hunter opcit p. 108). rangements multiply even before the Claimants set foot in the country" in this
b. The Respondent's Allegations: context, the Respondent seems to rely upon the a6davit of Mr. Gilmour
before the ICC arbitration which contains information that Mr. Gilmour was
I. The Respondent consacrated a whole section of its Counter-Reply invited to visit Egypt during a "chance meeting" in London with the then
entitled "The Claimants' Corrupting Practices" the Respondent refers first to President Sadat's Secretary for Extemal Liaisons, and who received him in the
what it alleges was the general business practice of the Claimants outside Egypt presidential palace the following weekend. The Respondent explains that that
and quote a dominant representative of the Claimants stating on an official Secretary happened to be the one and same who transmitted the "oral" ap-
record that "if1 have a million and a half dollars applications pending, I am not proval of President Sadat as regards the extension of the duration of the usuhct
going to take a chance in not pleasing some political party" (Resp. Counter- rights to be accorded to the Claimants' joint venture to 99 years instead of 50,
Memorial, p. 46 and Counter-Reply p. 113 and Annex F.5 B, p. 91 which is a and that upon a letter of request to that effect from Mr. Gilmour, directly to
photocopy of the minutes of the standing committee of the Nova Scotia Leg- the President, dated May 19, 1975. (Resp. Annex F.54). In hct, it is on the
islation on Industry, March 18, 1969). The Respondent also points out that the record that by a letter dated May 20, 1975, that is the very next day to the
same Claimants' representative also admitted that a certain Mr. X, hnctionary above mentioned letter of Mr. Gilmour, dated May 19, the referred to Secre-
of Industrial Estate Limited (apparently a subsidiary or a public organization tary informed the Minister of Tourism that "veuillez bien Ctre inform6 qu'aprks
controlled by the Novia Scotia Government) was appointed director of the avoir soumis la question i M. le PrCsident, celui-ci a consenti A ce que I'usufiuit
private company controlled by the Claimants while they were negotiating with de ces terrains soit de 99 ans."
Industrial Estate Limited a business deal involving a loan of 1 Mfion to the
Claimants' company. The Respondent also presented in its exhibits a docu- In this respect, I may comment upon a fsct which is that the same above
mentation about the business background of the Claimants which reveals, as mentioned letter contained information about that "en ce qui conceme I'or-
the Respondent asserts, the critical financial situation the Claimants were suf- donnance prbsidentielle, elle a ttk adresske 1la prksidence du Conseil des Min-
fering at the time they entered into their agreement with the Respondent and istres et ce aprk signature." (Resp. Annex F.55, Emphasis added). It would be
engaged themselves to large investments. In this respect the Respondent asked noteworthy to point out that the above mentioned letter reveals the following:
that the Claimants produce the document containing their financial capabilities - That while the draft of a presidential decree concerning the alloca-
annexed to their first proposal submitted to the Egyptian Administration in tion of the use of the land to EGOTH was presented by the Minister of
April 1974. (Resp. Letter dated December 22, 1989, Annex D.17). The Tourism on March 30, 1975, it took but one day to obtain a "verbal" approval
Claimants answered by a letter datedJanuary 23,1990, that "we have conferred as regards the extension to 99 years instead of 50.
with our client that, like the Respondent, they cannot locate the annexures at- - That the "verbal" approval was accorded without presentation of
tached to the April 1974 submission." (Resp. Annex D.18). And the Respon- whatsoever supporting document nor any feasibility study that would have jus-
dent seems to rely upon that answer as a supplemental proof that the Claimants tified the request, contained in a letter, for that extension.
misintroduced themselves to the Egyptian administration. The Respondent - The l e a t y of that extension being questionable, the subsequent ap-
also stresses upon the critical financial situation of the Claimants, at the time proval of the project by the Board of Directors of the GIA did not fiilto speclf)
they introduced themselves to the Egyptian Administration, as demonstrated that its decision was conditional upon that it does not eventually contravene
by the "Report on the Financial History of Southern Pacific Propemes Group" Egyptian law.
prepared by Pete Marwik McLintock and Co. (Resp. Annex El). From that
report, the Respondent alleges that "SPP was debt ridden even as it was dan-
- That the above mentioned letter contained at least misinformation
&ng before Egyptian eyes visions of one billion, 700 million and 400 million about the signature by the President of the Decree allocating the use of the land
United States not Hong Kong Dollars in foreign investment. It also shows how to EGOTH for touristic purposes since it was proved on the record that that
the Egyptian venture was used and planned to be used, to get SPP out of its Decree had been effectively signed on May 22,1975, that is two days after the
desperate situation." (Resp. Counter-Memorial pp. 29-30) date of the Secretary's letter. (Resp. Annex F.14, The Official Gazette, p. 437).
 ICSID REVIEW-FOKEIGN INVESTMENT LAW JOURNAL CASES

- These bcts, with others, may have some relevance as to the appre- ants used their well known, well practiced talent for persuasion. Persuasion to
hension of related facts concerning the above mentioned Presidential Decree gain unmented advantages, to Violate with impunity a countless number of the
mainly the "mysterious vanishing" of the maps referred to in the Presidential laws of the land.. . and to set aside all the solemn engagements and promises
Decree that were never published or presented to any administrative agency. with which they paved their way to a project meant by the Egyptian Govem-
ment to contribute to economic development and willed by the Claimants to
3. The Respondent stresses specifically upon what it called the Claim-
pursue an unproductive land speculation path." (Resp. Counter-Reply, Vol I,
ants' pattern of doing business in Egypt, and presents as an example among
others the case of the Official of the Egyptian Tourist Bureau in London who p. 136)
was instrumental in introducing the Claimants to Egypt yet was later appointed c. The Claimants' explanations:
member of the Board of ETDC as a representative of the Claimants. The Re- 1. O n their part, the Claimants consider that the Respondent's presen-
spondent suggests that these examples, in which names as well as official hnc- tation that SPP introduced itselfinto Egypt in an irregular manner is &. In
tions are stated, should be significant in the evaluation of the whole relationship this context, the Claimants rely upon a letter from the Minister of Tourism
between the parties. published in A1 Akhbar newspaper (Cls. exh. 136) containing information that
In this respect, I may express my point of view that it would have been EGOTH entered into the contract with SPP after enquiring about the said
necessary for this Tribunal to study, scrutinize and evaluate the allegations pre- company through the Egyptian Embassy in London and the General Egyptian
sented by the Respondent in this context, had the issue not been sufficiently Consulate in Hong Kong as well as through the relevant security authorities
exposed by the explanations and statements by both parties concerning the de- and the banks (Cls. Reply, p. 60). Claimants also refer, in this respect, to both
velopment costs in response to the Tribunal's procedural order of February 13, the Minister of Tourism's written submission to the People's Assembly of Sep-
1991, as will be later explained in detail. tember 10, 1977 (Cls. exh. 87) and to the content of the answers given by the
said Minister to the interpellations before the People's Assembly on February
4. Moreover, the Respondent presents as a material proof for corrup-
7, 1978 (Cls. exh. 74), which are a. the Claimants explained, self telling evi-
tion what is denominated by the Claimants as development costs. The Respon-
dence to the conclusion that the allegations presented by the Respondent
dent explained:
before this Tribunal concerning irregular contacts are unfounded.
- That a meeting held on May 5, 1975, during the negotiation for a
2. The Claimants also assert that a full review of SPPS financial and
settlement between the parties, the Claimants advanced that they had spent an
corporate history can only be that SPP before it arrived in Egypt, as well as
amount of US Dollars 3,555,285 as development expenses and agreed that in
after, was a successhl tourism organization with a proven track record, headed
case the Egyptian Government accepts to pay compensation, the Claimants
by individuals skilled in corporate finance and with shareholders including
would provide it with the supporting documents.
some ofthe most important corporations involved in its line of business. In this
- However, the Claimants advanced before the Present Tribunal that vein, the Claimants pointed out that as regards the cash flows for the Egyptian
they incurred "pre expropriation development costs" amounting to 2,532,714 operations, a sum of 20 million Dollars was estimated as the required initial
US Dollars. And as supporting documents they presented a letter by Coopers funding for that program, and that SPP arranged the required financing
and Lybrand dated January 19. 1981 (Cls. a h . 170). Also Mr. Birchall in an through a 12 million treasury share issue to Triad Holding Corporation, and
undated affidavit (Cls. a h . 171) stated that after review of the relevant docu- through the 8.75 million sale of some 25% of SPP (ME) to two members of
ments and specifically of SPP (h4E)Sdevelopment costs had found that the total the Saudi Royal Family.
pre-cancellation development costs were of 2,532,714 US Dollan.
I may point out in this respect that the record does not reveal the raison
- That the discrepancy between the' above mentioned figures was soaale of the above mentioned Triad holding, however, it seems that that com-
never explained. pany acted as intermediary in an armament deal to the Saudi Arabia as revealed
- That "if the Claimants had really incurred such costs, the conclusion by the case Northrop Corp. Vs. Triad brought before the Court of Appeals of
must be drawn that for four years, the life span of the project, they were carefd California (1987) where the question of the legahty of the cornmissions paid to
to hide that" to the conclusion that "these development costs, or at least a major Triad, on the occasion of that deal, was at the core of the case. (P. Mayer, Loi
part of them, could not have been other than the means with which the Claim- Applicable et Respect des Lois de Police, ICC Publication 480/2, p. 54).
 i
468 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 469

d. The Tribunal's procedural order of February 13, 1991: porting their claim. Respondent also advances that the testimonies before this
This honorable Tribunal, after consideration of the submitted documents I Tribunal of Mr. McLellan and Mr. Blainey, &om Coopers and Lybrand, obvi-
I
and of the explanations and requests of the parties ordered that: "a- The Claim- i ously suggest that all documents concerning development costs were in exist-
ants shall submit to the Tribunal and to the Respondent, within one month, a ence at least till 1981. The Respondent also pointed out that the sum of
document indicating the nature, date and amount of the above referenced de- 1,545,338 US Dollan to which Mr. Birchall declared that he failed to find any
velopment costs, including the names of the recipients of payments in excess of supporting documents represents, in fact, about half of the amount of the claim
US Dollars 20,000 and a confinnation that these sums were legitimately and i concerning Development Costs. The Respondent concluded that "clans ces

I
actually expended for the project and were directly connected with it. The conditions, et eu bard ir toutes les a u k s considirations et moht que la RAE a
document shall also contain an explanation of why these costs were not rappel6 tant ci-dessus bar exempkpaiement ci Mr. Raouf) que dam ses irritures et ex-
charged to or were not directly recovered from ETDC." plications orales pricidentes concernant la conuption, la RAE ne peut qu'&er de
- The Claimants responded to the Tribunal's order and explained in a plus fort que des ilirnents de p m v e s graves, prick et concordanb existent quant i la
letter dated April 20, 1991 that in item B(4), of their final conclusions and i corruption active de la part de SPP dans le cadre du projet objet du present
prayer for relief of September 21, 1990, which relate to pre-cancellation devel- litige." (The above mentioned note p. 16, Emphasis reproduced).
opment costs amounting to 2,254,000 US Dollars, and that "arises as a result - In my opinion, it is noteworthy to point out that the letter of
of the expenditures by SPP (ME) pre-cancellation of 2,943,398 US Dollars of Coopers and Lybrand, dated January 19, 1981, suggests that it was necessarily
which it was reimbursed 689,377 US Dollars by ETDC leaving a balance of prepared upon supporting documents. The final explanation advanced by the
2,254,000 US Dollars," and that the amount claimed in B(5) arises firom "ex- Claimants, to the effect of the loss or destruction of supporting documents con-
penditures, post cancellation by SPP (ME) of 1,010,461 US Dollars with no cerning development costs in 1979 of a sum exceeding 1.5 million dollars,
'

reimbursement from ETDC (which honored no obligations post cancellation). raises at least one question: whether or not the letter by Coopers and Lybrand,
O f this amount, Claimants claim 623,000 US Dollars under item B(5) having prepared in January 1981, was supported by the necessary documentation then
eliminated h m this category legal fees in the amount of 387,015 US Dollars." the documents would have been in existence at least until 1981 that is to say
The Claimants annexed to their letter the a6davit of Mr. Birchall in which he afier the alleged loss or destruction of the documents in 1979. Moreover, it
explained that certain accounting documents were lost, and that was due to the seems for the least hazardous to found any conclusions upon the contents of the
fact'that before the incorporation of SPP (ME), most of the documents were affidavit of Mr. Birchall annexed to the Claimants' note dated April 20,1991,
spread between Fiji and Australia and that &om 1976 the accounting for SPP since Mr. Birchall himself honestly stated that "I am hrnishing this affidavit
(ME) was basically being carried out from the UK "so when the UK office was afier having reviewed the books and records now available to me, and based on
closed in 1979, what was considmd non-essential was destroyed to avoid the high cost m y knowledge and remembrance ofthose records to respond to paragraph 6 (a) of the
oftransportation to Canada" (M~davitp. 2, Emphasis added). However, Mr. Bir- Tribunal's procedural order of February 13, 1991." (Cls. submission dated
chall stated that "certain records werefound and permitted an extrapolation ofexpenses April 1991, Vol I, Emphasis added). In any event, no supporting documents
for thoseperiods when no such infoomtation was available." (The above mentioned af- were ever presented neither to this Tribunal nor to the Respondent for exam-
fidavit, Emphasis added). ination andlor eventual comment. The Respondent, in this respect, asked for-
- By a note dated June 20, 1991, the Respondent questioned the ex- mally from this Tribunal that the supporting documents related to every and
any amount of development costs be presented before this Tribunal for exam-
planations given by the Claimants in response to the Tribunal's procedural
order on the contention that they are: "insufiantes," "contiennent degraves con- ination either by itselfor by any expert it entrusts.
tradictions ou meme contr&tis" and "inacceptables" (note p.3). The Respondent e. Without going through the legal aspects of the issue related to the
in the first place pointed out that the Claimants brought their case, for indem- development costs, I may point out that whether or not the explanations ad-
nification against the Respondent, before the ICC Court of Arbitration on De- vanced by the Claimants are an appropriate and adequate response to the letter
cember 19, 1978 (that is before the closure of the Claimants' London office and spirit of the Tribunal's procedural order of February 13, 1991, the fact
which did not occur, as they stated, until 1979). The Respondent advances that remains that the Respondent on the one hand maintains and stresses upon its
it woud have not escaped the Claimants to keep the necessary documents sup- allegations concerning corruption, considering that the Claimants failed to
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

present the supporting documents concerning at least an amount of 1.5 million should assume the fact of the loss or destruction of supporting documents to a
dollars of the so-called development costs and on the other contends that in any claim?
case the Claimants have no standng to any part of the claim concerning devel- In any event, it seems that nothing in the Respondent's explanations and
opment costs since they failed to present any conclusive supporting document. the annexed report would justi5 an a priori dismissal of all Respondent's con-
It is noteworthy to point out that the report dated June 19, 1991, prepared by tentions even as regards the sums allegedly identified by payee. In this respect,
Mr. Renshall, annexed to the Respondent's note dated June 20, 1991, indicates I beg differ firom the Majority Award which contains a statement to the effect
that the "totalfar which Claimants are unable to supply the names ofrecipients amounts that "the report also points out that the information filed by the Claimants in
to 1,545,338 US Dollars." The said report, however, adds that "the remainder response to the Tribunal's procedud order of February 13, 1991, identified
of the expenses (excluding interest) which Mr. Birchall had identified by payee US$ 1,719,000 of the claimed cost by payee, but that the recipients of an ad-
amounts to 1,719,144 US Dollars. I have seen no document tb support thesepay- ditional US$1,545,000 of the claimed costs were not identified. In the Tribu-
ments and therefore no evidence that they were incurredfor the benefit ofthe Pyramids nal's view, it would not be appropriate to award development costs for which
Oasis Project." (The Report, p. 4, Emphasis added). Moreover, Mr. Renshall's the Claimants are unable to idenufy the payee. Accordingly, the Tribunal has
report discusses various items shown in the schedules attached to Mr. Birchall's decided to award development costs only in the amount of US$ 1,719,000."
affidavit commenting upon various items i.e. upon the item denominated (The Majority Award, pp. 79-80 [p. 385 of this issue]). To my humble knowl-
foreign exchange difference in the amount of 289.947 US Dollars which, as edge, a l l and any claimed sum should be supported by documents and that the
Mr. Renshall pointed out, lacks any explanation or necessary supporting infor- burden of proof rests upon the claiming party. Was it then rather required from
mation. Mr. Renshall's report also contained information that: the Respondent to prove that "the remainder claimed sums" were not actually
- The "letter from Coopers and Lybrand does not give a confirmation incurred nor directly connected to the benefit of the Pyramids Oasis Project?
that the costs were actually incurred and directly connected with the Pyramids Moreover, how can a defendant party legally and logically argue about the au-
Oasis Project." thenticity of claimed sums in the absence of any supporting document to the
- that "the signing of an unqualified audit report does not mean, in claim? And finally, can the information contained in Mr. Birchall's affidavit to
the effect that, at least in part, his presentation was based upon knowledge and
itselfthat the confirmation required by the Tribunal that the costs were 'legit-
imately and actually expended for the project and were directly connected remembrance be considered enough legal ground to accord payment of the
contested amount?
with it' has been given." (The Report, p. 6).
- and that "Mr. Birchall does not indicate what documents are avail- 2. That an impartial evaluation of the issue seems to necessitate recall-
able and in the absence of better information, I do not consider from an ac- ing the sequences of the relationship that took place bemeen the parties in the
light of the proper relevance of the Claimants' final explanations as regards the
counting point of view that the case has been made out that the payments were
question of the development costs. It seems of equal importance to establish,
incurred wholly or mainly for the benefit of the Pyramds Oasis Project". (The
scrutinize and, hence, evaluate, not only WHAT did happen in hct, but also
Report, p. 9) HOW it happened. It may be more relevant to the apprehension of the case to
t As regards the issue of the so-called development costs, it is worth pay careful attention to how the change of site occurred, how the duration of
noting, from the outset, that: the usufiuct rights was extended, how Presidential Decree 475 for the year
1. The issue in question raises two points of law; the one relating to the 1975 was issued, how come that the maps to that Decree were never published
legal weight that should be accorded to the Claimants' explanation in response yet the u s u h c t rights were registered upon the identification and the respon-
to the procedural order of February 13, 1991, as regards the allegations of cor- sibility of EGOTH, how the Claimants managed their activities through the
ruption, and the other relates to the legal ground upon which an amount, if joint venture, how they acted as regards the judicial claim that had been un-
any, may be accorded to the Claimants in the light of their explanations in this dertaken by their partner, EGOTH, and how they proceeded during the ne-
regard, that is without the presentation and/or eventual examination of sup- gotiations for an out of court settlement. And what finally was their attitude as
porting documents, neither by this Honorable Tribunal nor by the Respon- regards the development costs before this Tribunal in view of the f5ct of the
dent. A question of law necessarily needs an answer concerning which party "loss" or "destruction" of supporting documents, the bct that was never
472 ICSID REVIEW-FOFUIGN INVESTMENT LAW JOURNAL CASES

brought before the Tribunal's attention but in response to its procedural order present proceedings, occasioned by ARE'S wrongfLl refusal to honor the ICC
of February 13, 1991, that is after the final oral hearings of September 1990. award of February 16, 1983, or otherwise compensate SPP (ME), as well as in-
3. That the competent authorities in Egypt, as far back as 1977, had terest at commercial rate.
more than suspicions about the Claimants' project and the conduct of Egyptian 11. In its preliminary decision upon jurisdiction of November 27, 1985,
ofFicials connected to it. In this vein, I may point out to the letter of the Head this Tribunal did not find it necessary to pronounce upon the objection raised
of the Central Auditing Authority to the Minister of Tourism asking him to by the Respondent to the effect that axticle (8) of law 1974 upon which the
proceed in the necessary investigations concerning the determination of the re- alleged jurisdicnon of ICSID is based does not apply to the present case. The
sponsible or responsibles for the violations committed in relation to the Claim- Respondent based its objection upon the fact that the language of Article (8)
ants' project. (Resp. Annex F.63). That letter, as already explained, was based providing that "Investment disputes in respect of the implementation of the
upon the conclusions of the competent departments of the said authority as provisions of this law shall.. . " mandates to restrict its application to disputes
regards the various aspects that vitiated the process of both the agreement with concerning the non-performance of obligations under Law 43, as distinct from
the Claimants and its implementation. In this respect, it is noteworthy to point disputes involving non-performance of obligations under a contract. The Re-
out that the report of the Experts' Committee, constituted under the auspices spondent, in this context referred to the Decision of the Paris Court of Appeals
of the People's Assembly, finalized in 1978, corroborated the conclusions con- wherein the Court stated that Article (8) ". .. ne vise au surplus que les seules
tained in the Central Auditing Authority's report. These Gcts may be enough contestations ayant trait 1 l'investissement et concernant la mise en exkcution
evidence in reply to the Claimants' allegation to the effect that the Respondent des dispositions de la loi en cause, mais non celles de tel ou tel contract."
is presenting its argument about irregular contacts and cormption for the sole This Tribunal found, however, a prima facia ground for its competence
purpose of evading eventual condemnation for indemnification. since, as it stated, "the alleged breach by the Government ofEgypt of contrac-
tual obligations emanating 6om the Heads of Agreement constitutes at the
111. T H E LAW same time a breach of a legal provision enunciated in Article 7 of law No. 43"
and the Tribunal stated that "In this respect, it is quite clear that expropriation,
1. The legalgroundfor the Tribunal's competence and the scope of the present the legitimacy ofwhich is not being contested, if not accompanied by fair com-
dispute: pensation, amounts to confiscation which is prohibited by Law No. 43."
I. In its request for arbitration dated August 20, 1984, SPP (ME) re- It results from that decision:
quested the Tribunal to: - That the Tribunal did not decide upon the Respondent's objection
a. Determine that ARE has undertaken obligations and incurred duties concerning the limited scope of article (8) to the effect that it does not cover
in respect to SPP (ME) both according to terms of Law No. 43 and according disputes emanating &om breach of contracts.
to the Heads of Agreement of September 1974 specifically entered into by a - That even at that early stage of the proceedings the Tribunal was
member of its government, as well as by a supplemental Agreement "approved, convinced that the "legitimacy" of the measures taken by the Respondent
agreed and ratified" by the same Member ofits Government. were not contested.
b. Determine that ARE violated its obligations thereunder. 111. In later stages of the proceedings, before this Tribunal, the Claimants
c. Adopt and incorporate as its own the pertinent findings of bet made radically changed their cause of action and explained in their final submission
by the ICC arbitrary Tribunal concerning SPP (ME)'s performance of its obli- that the basis of the Respondent's liability resides in the provision of article (7)
gations under its agreements, the dismissal ofEGOTH's counter-claim therein, of Law 43 which reads as follows "Projects may not be nationalized or confis-
and the acts bringing about termination of the investment project. cated. The assets of such projects cannot be seized, blocked, confiscated or se-
questrated except by judicial procedures." (Cls. Reply, p. 115). It results from
d. Determine the liability of the ARE to compensate SPP (ME) for the that dear language that the present dispute is therefore based upon, and con-
termination of its investment agreements and to award the full measure of in- fined to, the scope of article (7) of Law 43 upon which this Tribunal already
demnification to SPP (ME) on account of the destruction of its investment, in- relied, in its findings concerning ICSID jurisdiction and its own competence.
creased by the additional costs, including all direct and indirect costs of the It may be noteworthy, in this respect, to point out that, while the Tribunal
474 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 475

decided that the basis of its competence rests upon the provisions of article (7) Tribunal did not resume until 1987. if it may be considered legitimate for the
of law 43 that is to say that the present dispute arises firom an administrative act Claimants to seek compensation before a competent forum, their mis-identifi-
of expropriation which amounted in the Tribunal's view to confiscation since cation of that forum and the time it took them to address the competent one
not accompanied by compensation, the Majority Award nevertheless inter aria while, at the same time, defending the validity of the ICC Award before other
accorded to the Claimants an interest of 5% rather than 4% on the ground that jurisdictions, however the consequences thereupon could not rest solely upon
"with respect to the rate of interest the Tribunal is of the view that it should be the Respondent. Moreover, it is evident from the record that the Claimants
5% rather than 4%. The argument that the Heads of Agreement was not a were reluctant, during the phase of negotiation for an out of court settlement
commercial contract is not conclusive because the present claim is not an action with the Respondent starting from 1979, to produce supportive documents to
for a breach of that contract but rather one seeking compensation for the ex- their evaluation of compensation mainly concerning sums under the item of
propriation of the rights of a commercial enterprise for the development of development costs.
tourism" (The Majority Award p. 87 [pp. 390-391 of this issue]). It seems to IV. The correct legal construction of article (8) of law 43 is that it "does
me however that any expropriation act is manifestly not of commercial nature not purport to cover contractual disputes between different investing parties,
and compensation due upon that act cannot be considered compensation but rather disputes between investors and a Government agency relating to the
related to commercial issue. Moreover, the Majority Award attributed the in- interpretation of the law itself." (M.H. Davis, Business Law in Egypt, p. 137).
terest starting &om May 28, 1978, o f a 5% rate in reference to article (226) of This interpretation is corroborated by the statement, contained in "the legal
the Civil Code of Egypt. In this respect, I may only refer to the language of guide to investment in Egypt" (Cls. exh. 77, p. 39), which reads as follows
the said article (226) which reads in pertinent parts as follows "if the subject of "Article (8) does not apply to all controversies in which the investor may be a
obligation constitutes a sum of money and such amount was defined at the time party; rather it applies only to investment disputes.. . the subject of the dispute
of the claim and the debtor delays the payment of the damages, he shall be must relate to the provision of the law, such as those relating to the interpreta-
bound to pay to the creditor by way of damages for the delay an interest of 4% tion of a tax exemption or approval issued by the authority, disputes which do
in civil cases and 5% in commercial cases. These interests shall apply from the not fill within the scope of article (8) are to be settled in the ordinary courts of
date they are claimed at court.. . " It is noteworthy that the Majority Award law or in administrative courts." Therefore, this Tribunal should decide that the
stated that it was according interests not as moratory but rather compensatory, Counter-Claim presented by the Respondent Mls beyond ICSIDS jurisdiction
however, it based its findings as regards the interest rate upon the provisions of and the Tribunal's competence. The Respondent based its counter-claim, as
article (226) of the Civil Code which rule the issue of moratory interests. In any explained in its Mkmoires en RCplique Vol I1 @p. 155-157) upon alleged de-
event, it seems that the Majority Award did overlook the fact that if the alleged faults imputed to the Claimants in execution, or rather non-execution of their
measures undertaken by the Respondent date back to May 28, 1978, upon obligations under the Heads of Agreements and subsequent contracts. The
which date it computed the compensatory interests together with the applica- Counter-Claim being based upon alleged breach of contractual obligations,
tion of the mechanism for monetary adjustment for currency devaluation, the should be considered out of the scope of ICSID jurisdiction and this Tribunal's
fact is that the Claimants did not bring their claim for compensation before competence. In any event, since the Tribunal did not reject the objection to its
ICSIDS Jurisdiction until August 24, 1984. The Claimants seeked compensa- competence raised by the Respondent as regards the scope of the said article
tion in the first place before the ICC Court of Arbitration in December 1978 (8), the Respondent would have been estopped fiom advancing in the same
and were apparently relying upon that court's competence over their claim dispute and before the same Tribunal two different constructions for the same
since, in their request for arbitration before ICSID, they asked for indemnifi- article (8) of law 43.
cation inter alia for "ARE'S w r o n e r e h a l to honor the ICC award of Febru-
ary 16, 1983." The issue about the finality of that award was pending before 2. The Parties to the present dispute and the receivability ofSPP (ME)'s claim:
the French Court of Appeals and subsequently before the French Court of Cas- I. It is to be recalled that the request for the present arbitration was pre-
sation which finally pronounced upon the invalidity of the ICC Award. This sented by SPP (ME) by a letter to the Secretary General of ICSID dated August
attitude was the determinant factor in this Tribunal's fist preliminary decision 20, 1984. The request contained information to the effect that the agreements
upon jurisdiction where it decided to stay the proceedings before it till the issue entered into by SPP i.e., the Heads of Agreement and the Contract of Decem-
of the validity of the ICC Award be finally settled. The proceedings before this ber 1974 "were thus subsequently assigned by Southern Pacific Properties
 476 lCSlD REVLEW-FOREIGN INVESTMENT LAW JOURNAL CASES

Limited to SPP (ME)." (The request for arbitration, p.4) and that SVP (IME) to the project activities, local participation and the nature of the capital invest-
informed the Minister of Tourism by a letter dated August 15, 1983, that it "in- ed, and on the other hand, the obtaining of the approval of the Board of Di-
tended to accept the opportunity of availing itself of the ICSID jurisdiction to rectors of the GIA. In the present dispute, the contract of December 1974 or
which the ARE had consented." Later, during the proceedings before this Tri- any of its provisions cannot be, as such, evidence to the effect that any assign-
bunal, SPP had been joined, subject to Egypt's reservation ofjurisdictional de- ment is to be ipsojure opposite to the GIA since it was not a party to that con-
fenses. In a dissenting opinion, joined to this Tribunal's decision of April 14, tract nor did it approve its provisions. Moreover, it results from the clear
1988, I explained my point ofview to the effect that the joinder of SPP did not language of Law No. 43 and its executive regulations that the approval of the
satisf) the requirements of the Washington Convention as well as the rules of Board of Directors of the GIA is based inter alia upon a subjective criterion re-
arbitration, and should be ruled, therefore, inadmissible. lating to the applicant, his eventual partners and their experience and refer-
11. The Respondent argues that SPP (ME) is not an "investor" in the ences, as well as detailed information about the capital to be invested in or con-
framework of law 43, since the request for the approval of the GIA concerning tributed to the project (for example article 19 of the executive regulations of
the project was submitted to the GIA on behalfof SPP and EGOTH, and that Law 43 which reads in pertinent parts as follows "An application... shall be
the subsequent approvals of the GIA were accorded to SPP. (Resp. Mtmoire submitted to the General Authority for Investment and free Zone on the form
en Rkponse, Vol 11, p. 9-11). The Respondent explains that the language of designated for this purpose and shall contain basically the following information:
article (1) of law 43 supporn its argument since the said article reads as follows a) information about the applicant, the applicant's partners.. . and their experi-
"The term 'project' in application of the provisions of this law shall mean any ences and references, b) ... c) detailed information about the capital to be in-
activity.. . and approved by the Board of Directors of the General Authority vested or contributed to the project ... ," and article 24 which provides that
for Investment and Free Zones." "projects approved by the Authority shall be implemented and conducted in accordatue
h basic conditions and objectives set forth in their respective applications as ap-
~ ' t the
The Respondent also points out the lack of proof to the effect that the
proved.. . ") Article 27 of Law 43 is conclusive, it reads in pertinent parts as fol-
GIA was ever informed of any assignment that would have occurred to the
lows ". .. The Board ofDirectors ofthe Authority shall have the Authority to approve
benefit of SPP (ME) or afortiori that the GIA had ever examined SPP (ME)'s
applications submitted for investment.. . " (Emphasis added). Thereupon, the
statut juridique or approved to convey to it the benefits of law 43. For their part,
Board of Directors of the GIA is the sole competent authority to accord ap-
the Claimants draw the attention to the fact that SPP (ME) was the company
provals for investment projects. Therefore, and under the provisions of law 43
that realized the investment, and that at least as early as December 1974, the
and its executive reguhons, any assignment or transfer of an approved project
Respondent was aware that SPP intended to carry out the foreign investment
should be submitted and approved by the Board of Directors of the GIA which
and to exercise its contractual rights and obligations, through an affiliated com-
would have full discretion in this context. It is noteworthy that no assignment
pany, since the December 12, 1974 contract contained a provision which reads
or transfer of rights did ever legally occur in favor of SPP (ME) by SPP. It was
as follows "it is understood that SPP will be incorporating a holding company
also brought to the attention of this Tribunal that the capital of SPP (ME)
to own its shareholdings in ETDC and it is agreed that SPP shall have the right
amounted to the equivalent of 200 U.S. Dollars (two hundred) the fict that was
to assign its rights.. . duties and obligations under this agreement to this com-
never proved to be brought to the knowledge of neither the Board of Directors
pany.. . " The Claimants also explain that f?om and afier that date the Respon-
of the GIA nor to EGOTH, the Claimants' Egyptian partner. Since no legal
dent accepted performance by SPP (ME) and accepted its expenditures, loans
assignment of rights did ever occur between SPP and SPP (ME)it is inconceiv-
and other activities for the benefit of the project. Moreover, as the Claimants
able to allege that the Board of Directors of the GIA approved an assignment
point out, legal recognition of this state took the form of the contracts entered
that never existed. Moreover, there is no evidence on the record that SPP (ME)
into by EGOTH and SPP (ME), and finally by the Ministerial Decree No. 212
ever applied to the GIA in due form as necessitated by law 43 and its executive
of 1975 (Cls. exh. 114) officially authorizing the formation of ETDC between
regulations, referred to above. Even the memorandum prepared by the Vice
SPP (ME) and EGOTH. The Claimants conclude that SPP (ME) had been
President of the GIA for the issuance of the Decree No. 212 of the Minister of
recognized in law and in fact as a foreign investor under law 43.
Economy refers explicitly to the approval of the Board of Directors of the GIA
In my opinion, qualification, as investor, under law 43 necessitates two
of July 20, 1975 which was accorded to SPP and not to SPP (ME). The ap-
prerequisites: on the one hand, the reunion of the three main criteria relating
proval of the Board ofDirectors of the GIA as regards the project and the in-
478 ICSID FGVIEW-FOREIGN INVESTMENT LAW JOURNAL

vestor is in fact and in law a fundamental legal requirement to the qualification it must be said that there is absence of agreement and consequently the second
under law 43. Any other act cannot, legally speaking, convey the qualification sentence of article 42 (1) would come into play." (The Majority Award, pp. 30-
of investor under law 43, be it the act of the Minister of Economy himselfor 31 @. 351 of this issue]). As a consequence, to that statement, the Majority
acts emanating &om any GIA department. The fact that SPP (ME) invested or Award afier stating that ". .. no provision of the Civil Code or other Legislation
participated with an Egyptian party in any project does not, as such, convey to concerning the dies a quo applies to compensatory interest for a yet to be deter-
it the qualification of investor under the specific law 43. mined amount of compensation arising out of an act of expropriation" comes
It results &om the above that SPP (ME) has no standing to avail itselfof a to the conclusion that "given this lacunae it is legitimate to apply the logical and
statut juridique under law 43. Consequently, SPP (ME)'s claim should be con- moral principles usually applied in the case of expropriation, namely that the
sidered out of the scope of ICSID jurisdiction. It is noteworthy to be recalled dies a quo is the date on which the dispossession effectively took place.. . " (The
that the alleged consent of the Respondent to ICSlD jurisdiction is presumably Majority Award, p. 90 [p. 393 of this issue]). From the outset that statement
embodied in article (8) of law 43 which provides in pertinent part that "invest- concerning a lacunae in "the Civil Code or other legislation" as regards the dies
ment disputes in respect of the implementation of the provisions of this law a quo seerns to be enough indication to the hct that the Majority Award, opted
shall be settled.. . or within the h e w o r k of the Convention for the Settle- for and effectively decided upon the issue of the choice of the applicable law in
ment of Investment Disputes.. . " the sense that the parties to the present dispute did not agree upon that choice,
In case of a conclusion to the contrary, par impossible, it seerns that an issue however without indicating to my humble knowledge the arguments to its
of law would have needed to be settled to wit; what would have been the out- findings in this respect. Otherwise, the Majority Award, in case it was reached
come as regards this Tribunal's competence over the present dispute in the light that there does not exist any legislative provision concerning the dies a quo for
of the provisions of article (25) of the Washington Convention concerning compensatory interests, would have had recourse to the application of the
ICSID's scope of jurisdiction rationae matetia as well as under the provisions of mechanism provided for, as will be later explained in some detail, in article (1)
law 43 which embody the alleged consent of the Host State, in consideration of the Civil Code which reads in pertinent parts as follows" ... 2. A dCGut
to the proper legal nature of Claimants' activities and whether or not they are d'une disposition 1Cgislative applicable, Ie juge statura d'aprks la coutume, et i
to be considered investors in the framework of both the Washington Conven- son dkhut, d'apr6s les principes du droit musulman. A dCfaut de ces principes,
tion and the Egyptian law 43. le juge aura recours au droit nature1 et aux r6gles de I'tquit-5." In view of the
However, and for the sake of argument, it will be dealt, in the next two clear language of the said article (1) of the Civil Code, I honestly could not
sections, with the issues related to the Applicable Law and the application of the conceive the possibility of a lacunae in the Egyptian Legal System which would
law to the Gcts of the case. have led to non liquet. My understanding of the Majority Award in this respect
3. The applicable law : is corroborated by the statement of the said award to the effect that "when mu-
I. In my opinion, it is mandatory to decide upon the issue of whether nicipal law contains a lacunae, or international law is violated by the exclusive
or not the parties to the present dispute agreed upon the choice of the Appli- application of municipal law, the Tribunal is bound in accordance with article
cable law. It seems however that the Majority Award was founded upon the as- (42) of the Washington Convention to apply directly the relevant principles and
sumption that there is no legal necessity to decide upon the fact of whether or rules of international law." (The Majority Award, p. 32 [p. 352 of this issue]).
not the parties had agreed upon the choice of the applicable law. The Majority Noteworthy, as will be explained later, that principles of international law
Award stated that "in the Tribunal's view the parties disagreement as to the should be construed, in the framework of article (42) of the Washington Con-
manner in which article (42) is to be applied has very little if any practical sig- vention, as meaning specific rules of international law. In any went, the plain
nificance.. . ,"and that "finally wen accepting the Respondent's view that the language of article (42/1) first sentence, does not give room but to the exclu-
parties have implicitly agreed to apply Egyptian law such an agreement cannot sive application of the law that the parties have chosen as the applicable law to
entirely exclude the direct applicability of internationallaw in certain situations. govern their relationship.
The law of ARE, like all municipal legal systems, is not complete or exhaus- 11. The issue of the applicable law is to be decided in the light of the
tive, and where a lacunae occurs it cannot be said that there is agreement as to provisions of article 42 of the Washington Convention, which provides in per-
the application of a rule of law which, ex hypothesi, does not exist. In such case, tinent parts that "(1) The Tribunal shall decide a dispute in accordance with
such rules of law as may be agreed by the parties. In the absence of such
480 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL

agreement, The Tribunal shall apply the law of the contracting State Party to defined by the law itself. This legal status consists on the one hand of the en-
the dispute (including its rules on the conflict of laws) and such rules of inter- joyment of rights as well as the submission to obligations emanating from the
national law as may be applicable. (2) The Tribunal may not bring in a finding provisions of law No. 43 to the extent established by their content, and on the
of non liquet on the ground of silence or obscurity of the law." other by the submission to all other rules in force in the land. The legal status
111. In the present case, the Claimants' arguments consist in saying that: of an "investor" and an "investment" under the provisions of law No. 43 is not
to be considered as a separate, remote, and isolate status from the whole legal
(a) there does not exist an agreement between the parties as to the national system. This conclusion is, in my opinion, an inevitable direct legal
choice of the law applicable to the dispute, consequence resulting from the provisions of article (2) of the decree enacting
(b) and that they are entitled to the application of certain rules of inter- law No. 43 referred to above, and corroborated by the provisions of article (9)
national law mainly concerning the principles and standards of indemnification which spec* that the "companies enjoying the provisions of this law shall be
due to SPP (ME) resulting from the respondent's action in "ARE'Sexercise of deemed to belong to the private sector of the economy.. . " and the provisions
its sovereign powers, which destroyed its property rights (including its contract of article (10) which reads as follows "project enjoying the provisions of this law
rights)'' (Cls. reply p. 140). shall not be subject to law No. 73 of 1973." Therefore, it seems evident that
However, the Claimants explain that "within its scope of application, law law No. 43 does but provide for certain rules to be applicable to approved
No. 43 is the specific statute providing a legal regime applicable to foreign in- projects. A review of the whole text of Law No. 43 confirms the conclusion
vestors" (Cls. Reply p. 140). It seems, therefore, obvious that the Claimants that the approved projects make part of the national economy and are subjected
base their claim for compensation upon their status as foreign investors under to the applicable legal system, wherever law No. 43 does not provide for a spe-
law No. 43 of the year 1974. This legal status results necessarily from the ap- cific treatment. This specific treatment is referred to, clearly in the text, as
plication of that law, and hence is subject to, conditioned and determined by, limited exceptions to the applicable laws of the 1and:All other matters not
the provisions of that law. A cursory review of the provisions of law No. 43 re- covered or governed, by an explicit provision of the law No. 43, are therefore
veals the following: governed by Egyptian laws and regulations in force. This aspect of law No. 43,
(a) Article (2) of the promulgating law states that "Matters not cov- as a limited exception to the laws and regulations is clearly explained in Egyp-
ered by this law are subject to the applicable laws and regula- tian jurisprudence. In fact the Supreme Administrative Court (The highest in-
tions." Laws and regulations referred to in this article, are stance of the 'Conseil d'Etat') had, in many occasions, confirmed this legal
uncontestedly, the Egyptian laws and regulations in force. nature of law No. 43, and hence concluded, in case of silence of Law No. 43,
(b) Article (6) of the law stipulates, in pertinent para, that "irrespec- to the applicability of all other Egyptian laws and regulations to the "project."
tive of the nationality or domicile of their owners, projects in the (Decision of February the lst, 1986 in the cases Nos. 1231 and 1235 of the ju-
Arab Republic of Egypt approved under the provision of this law dicial year No. 31). To assert, therefore that law No. 43 is by itselfa declared
shall enjoy the guarantees and privileges set forth in this law." intention of Egypt as to the law applicable to the investment in the h e w o r k
(c) Article (9) of the law reads as follows "Companies enjoying the pro- ofthe said law, seems to be an evident, logical conclusion. Article (8) oflaw No.
visions ofthis law shall be deemed to belong to the private sector ofecon- 43 which reads, in pertinent parts as follows "Investment disputes in respect of
omy, iwespective ofthe legal nature ofthe indigenous capital participating the implementation of the provisions of this law shall be settled in a manner to
therein.. . " (Emphasis Added). Moreover, investment brochures, be agreed upon.. . " (emphasis added) mandates an interpretation to the effect
emanating from the GIA, and relied upon by the claimants, espe- that all that can be agreed upon is the manner of settlement, i.e., the forum
cially in their pleadings concerning the issue of ICSID's jurisdic- qualified to adjudicate the dispute. This provision does not give room to a
tion over the present dispute, contain reference to some selected choice of the material rules governing a dispute. Noteworthy, in this respect,
Egyptian laws which may be directly or indirectly applicable to that provisions of treaties entered into by Egypt are considered part of the
foreign investment (legal guide to investment in Egypt, 1977, p. Egyptian law in appliance of the mechanism provided for in article (151) of the
54. Cls. exh: 15). constitution which reads as follows: "They [the treaties] shall have the force of
law afler their conclusion, ratification and publication according to the estab-
N. It results h m the provisions of Law 43, that the status of an "invest-
ment," of an "investor," and of a "project" under that law is a legal status lished procedure." The issue of the applicable law comes, therefore, to the
 482 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES

answer to the question whether or not the claimants agreed upon the choice of for a mandatory rule to be applied, that is "1. Legislative provisions are appli-
the law of the land as the applicable law to their contractual relationship and cable to all issues which are covered by these provisions, in text and content. 2.
their legal status as investors under law No. 43. In the absence of applicable legislative provisions the judge shall pronounce his
The answer to this question, in my opinion, is in the affirmative since the sentence in accordance with usage. In the absence of usage his sentence shall
Claimants expressed clearly their adherence and submission to the statut Itgal be issued according to principles of Islamic Legislation. And in the absence of
provided by Law No. 43. In fact, in the recital to the September Heads of Islamic Legislative provisions applicable thereto the judge shall rule in accor-
Agreement, which constitutes an integral part of the agreement as provided for dance with natural law provisions and rules ofjustice."
in article (1) of the said agreement, it is stated that "this agreement is issued in V. However, and admitting arguendo, that there does not exist an agree-
accordance with.. . and law No. 43 for the year 1974 relating to Arab and for- ment as to the choice of the applicable law by the parties to the present dispute,
eign hnds invested in the A.R.E.. . ." SPP also presented an application to the I may advance that the Tribunal, in conformity with article (42/1) second
Board of Directors of the GIA, to the effect of its qualification as a foreign in- phrase, should have the obligation to determine:
vestor under the provisions of law No. 43. In the light of these actes juridiques, a) How to apply international law rules (or principles as will be explained
it seems obviously clear that, the claimants (SPP and subsequently its defacto as- later), in compliance with the provisions of Article 42/1 second phrase of the
signee SPP (ME)) accepted to adhere to and benefit from the legal status pro- Convention, and,
vided for by the provisions of the Law No. 43, with the legal consequences that
emanate fiom that adherence which is the acceptance of law No. 43 and con- b) Which rules (or principles) of international law should be applied.
sequently of all the laws and regulations of the land as the applicable law to gov- In this respect, the commentators to the convention present different
e m their investment in Egypt. This acceptance reveals, in my opinion, a clear views as regards the application of the rules of international law in the case of
choice by the Claimants of the Egyptian Law as the applicable law in the mean- absence of agreement upon the applicable law. Mr. Delaume advances that "...
ing of article (42/1) of the Washington Convention. In this vein, I may refer to IYnonct de l'article 42 n'implique aucun ordre chronologique dans l'examen par le tri-
the explanation of Professor RenC David that "la soumission d'un 'tat A I'arbi- bunal du droit mathiel et des mrmes intimationam applicables. Le ttibunal peut
trage du CIRDI ne doit pas ntcessairement rksulter d'un contrat qui lie cet ttat procider ri cet examen defapn successive ou simultank." (Delaume, Le Centre In-
A un investisseur &ranger; elle peut rkulter d'une loi de cet ttat qui rtgit le contrat, ternational pour le Rhglement des Difftrends relatifi aux investissements
et conforrnkment A laquelle certains types de diff'rends seront ips0 jure justi- (CIRDI), Clunet, 1982, p. 829). To the contrary, Mr. Broches explains that
ciable de l'arbitrage du CIRDI." (Pr. R. David, L'Arbitrage dans le Commerce "My submission as to the relationship between the law of the host state and the
International, 1981, pp. 223-224. Emphasis added). international law in the second sentence of article (42/1) is as follows: The tri-
In a dissenting opinion to this Tribunal's second preliminary decision upon bunal will first look at the law of the host state and that law will in first instance
jurisdiction, I explained the nature juridique of the mechanism provided for in be applied to the merits of the dispute. Then the result will be tested against
Law 43 to the conclusion that the approval of an application for a project by international law.. . " (A. Broches, The Convention on the Settlement of In-
the Board of Directors of the GIA is qualified in law as un acte condition which vestment Disputes between States and Nationals of other States, Recueil des
triggers the application of the whole status accorded to the approved project Cours, 1972,II, p. 392). The doctrinal controversy seems to have received an-
that is the application of Law 43 as regards matters specified by its provisions as swer, in a recent decision emanating &om an ad hoc committee constituted un-
well as the application of all the laws of the land to any other matter not covered der the auspices of ICSID (the decision dated the 3rd of May 1985 over the
by the provisions of that Law. petition of Klockner Industries), where it has been stated that the arbitrators
As a result to that conclusion, there can be no legal ground, in my opinion, can have recourse to "the principles of the international law only after having
to apply amcle (42/1) second sentence of the Washington Convention to any researched and established the contents of the law of the state party to the dis-
issue of the present dispute, most importantly there is no ground to have re- pute.. . and after having applied the relevant rules of that law." However, the
course, in order to justify application of other rules than those provided for un- above mentioned decision explains that the provision of article (42/1) second
der the law of Egypt, to a presumed lacunae, neither under the provisions of phrase of the Convention endows the principles of international law with a
amcle (42/1) first sentence of the Convention nor under the provisions of ar- double role: either complementary (in the case of a lacuna in the law of the
ticle (1) of the Egyptian Civil Code enacted by law 131 of 1948 which provides state), or corrective (in the case where this law does not conform in all respects
484 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

to the principles of international law). As to the issue related to the identifica- 4. The Application d t h e Law: the juris dictio
tion of the international rules to be applied, arguendo in the present dispute, it Before proceeding with the legal arguments, it is noteworthy to point out
should be noted that the parties to this dispute refer to the provisions of the that a thorough apprehension of the intricate facts of the present dispute rnili-
Convention in the two authentic Enghsh and French versions. Article (42/1) tates for an overall appreciation based upon a comprehensive sumey of these
of the Convention in its Enghsh version speaks about "rules" of the interna- ficts and of the sequences of the whole relationship that developed, indeed al-
tional law as may be applicable, while the French version treats of "principes" ways to the Respondent's disadvantage. To cut the facts of the whole relation-
meaning principles of international law. Mr. Broches commenting the differ- ship into separate and compartimented incidents seems, in my opinion, to be
ence of language used in these two authentic versions explains that "it seems to misleading to the determination of the pertinentfaits juridiques the matter that
me in any event that principles cannot have been intended or have the effect of would, as a consequence, necessarily result in the misidentification of the prop-
excluding specific 'rules."' (Broches, opcit, p. 391) er rule of law that should be applied. This consideration is meant to be both an
VI. In any event, and in case par impossible that article 42/1 phrase two apology and a justification for the lengthy review consacrated to the ficts in this
of the Convention is to be applied in the present dispute, it should be first pro- opinion.
ceeded, with the identification of pertinent rules of Egyptian law. Recourse to O n the other hand, this section consacrated to the application of the law
international rules (or principles), in the case they do not form part of Egyptian is intended only to indicate, in brief, the basic legal arguments for the outcome
law by the effect of their integration in the legal Egyptian system in application of the present dispute and that, as may be recalled, in view of the fict explained
to the provision of article 151 of the constitution referred to above, cannot be above that I consider the whole case filling out of the scope of ICSID jurisdic-
recoursed to, or directly applied to the present case unless it is primarily proved tion and hence of the present Tribunal's competence.
that there does exist one or the other case permitting their application as already i. The Claimants base their claim for compensation upon the follow-
explained above i.e., in cases of a presumed lacuna in the national law and/or ing:
of non-conformity with imperative international rules. a- That the Respondent violated its promise not to deprive SPP (ME)
Without going through a doctrinal debate about the question of lacuna in of its project rights.
national laws, I may only point out that it should always be borne in mind to b- That the legal consequences of the violation by the Respondent of
differentiate between law and legislative provisions. Under the Egyptian legal its obligations not to take measures of or amounting to nationalization or con-
system, like the French system, the rules and principles of administrative law, fiscation are that the Respondent is liable for the loss resulting Gom the viola-
for example, emanate mainly fiom the jurisprudence of the Conreil D'Etat. tion of its promises and subsidiarily, that the Respondent is obliged to pay to
Moreover, the provisions of Article (1) of the Civil Code enacted by law No. SPP (ME) the compensation that it would have to pay at the time of the "ex-
131 of 1948 provides for that ".. . 2. A dkfaut d'une disposition ICgislative a p propriation."
plicable, le juge statura d ' a p ~ kla~coutume, et 9 son dkfiut, d'aprks les principes
du droit Musulman. A dkfaut de ces principes, le juge aura recours au droit na- c- That the proper measure of compensation, in the present case, is the
turel et aux rtgles de l'tquitk." (Code Civil, extrait du Journal Officiel No. 108 111, f%rvalue of the SPP (ME)'s assets it had lost. The Claimants also explained
du 29juiuet 1948). The legislative provisions are thus the main but not the only that the indernnif~cationinclude their rights as regards the Ras El Hekrna
source of law in Egypt. project, hence upon the award of indedcation SPP (ME)'s partner is to be
In any case, the mechanism provided for by Article 42/1 second phrase considered released Gom any obligation as regards that project.
does not, in my opinion, give room to a subjective appreciation and evaluation 11. The Respondent argues that the measures it took do not fall within
as regards the content of a national law. Otherwise, the whole mechanism the scope of article 7 of Law No. 43, since the issuance of the Decree No. 90
would result in a derogation to the letter and spirit of the Convention by drain- of 1978 of the Minister of Culture declaring the lands on the Pyramids Plateau
ing the reference to, I may even say the predominance of, the application of the of public utility "Antiquities," and the subequent Presidential Decree repealing
host state law enunciated in article 42/1 second phrase, off any siguficance. the Decree which allocated to EGOTH the use of the land on the Plateau for
touristic purposes, did not purport to nationalize or confiscate the Claimants
Project.
486 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

111. In fact, after review of article (7) of Law No. 43 which reads as the legality of the act of registration. However, later, the legahty of that act was
follows "Project may not be nationalized or confiscated. The assets of such challenged by the Respondent on the basis that the site subject to the registra-
project cannot be seized, blocked, confiscated or sequestrated except by judicial tion was part of the public domain (Antiquities), and that under Egyptian Ad-
procedures," this Tribunal stated in its first Preliminary Decision of November ministrative Law, public domain cannot be alienated, and that in case the
27, 1985 that "In this respect, it is quite clear that expropriation, the legitimacy administration decides to accord individuals, the possibility of the use of part of
of which is not being contested, if not accompanied by f5ir compensation, that domain, the administration's act is qualified as a permit which necessarily
amounts to a confiscation which is prohibited by Law No. 43." That Decision is temporary and can be revoked whenever public interest calls for that. More-
reveals the Tribunal's conviction to the effect that beyond the technical legal over, the Respondent alleged that the registration of the right of usufiuct to
qual&ation juridique of the act of the host State, expropriation for public utility EGOTH, which later transmitted this right to ETDC, took place without ref-
should always be accompanied by compensation, otherwise it, in fact and in erence to the necessary supporting maps which supposedly were attached to
law, rejoins by its effect confiscation. the Presidential Decree No. 475 of 1975, concerning the allocation of the right
IV. Under Egyptian Law, private property is safeguarded by the provi- of u s u h c t to EGOTH for touristic use is vitiated and should be considered
sions of the Constitution and the legislative provisions. void. Nevertheless, it seems that the outcome of the present dispute does not
- Article (34) of the Constitution states that "Private ownership shall necessitate a legal evaluation of the Respondent's arguments in this respect
be safeguarded and may not be placed under sequestration except in the cases since the dispute receives sufficient legal answers upon the arguments and con-
defined by law and in accordance with a judicial decision. It may not be ex- siderations explained below.
propriated except for the general good and against a fair compensation as VI. If theoretically it is legally correct that the expropriation act was di-
defined by Law. The right of inheritance shall be guaranteed in it." rected against ETDC, which would have had the quality and interest to be
- Article (805) of the Civil Code provides that "Nu1 ne peut etre privC compensated, the fart that neither the Administration did respect the funda-
de sa propriktk que dans le cas et de la manitre pdvue par la loi, et moyennant mental procedures in case of expropriation, nor did ETDC succeed in obtain-
une indemnitk equitable," and article 985 of the said Code reads as follows: "1. ing any compensation, neither in the hmework of the rules governing
Le droit d'usufiuit peut Ctre acquis par acte juridique, par prkemption ou par expropriation nor aguendo those governing the case of an eventual annulation
prescription." (Code civil, J.O. du 29 juillet 1948). of an administrative permit fixing a certain duration for a beneficiary (it does
not matter whether or not the Custodian had the quality and the capacity to
- Law No. 577 of 1954 concerning expropriation for public utility.
act in this respect), mandates for the conclusion to the effect that the Claimants,
and its executive regulations issued by Decree No. 19398 of 1961, contain as shareholders of ETDC, a joint venture presumably constituted in the frame-
general rules considered de droit commun, as regards the procedures to be re- work of Law 43, are to be considered, in law, qualified to claim for compen-
spected in case of expropriation for public utility which include the evaluation sation for the value of the eventual damage they suffered. This conclusion is
and the payment of compensation or la mise d disposition of the amount of com- confirmed by provisions of the Egyptian Law, in the first place, by the provi-
pensation to the proprietors and concemed parties. sions of article 34 of the Constitution, since expropriation for public interest,
V. From the outset, in the present dispute, it is not alleged by the Re- unless accompanied by compensation as provided for in that article, constitutes
spondent that it in fict proceeded vis-a-vis ETDC in compliance with the pro- a breach to the Constitution itsexand therefore qualify any eventual concerned
visions of the above mentioned Law No. 557 of 1954 which requires inter alia party to claim justice. (Court of Cassation, case 44 of the judicial year 35, of
the evaluation of the compensation by the administration itself, with the possi- 27/3/69). In this vein, the arguments advanced by the Respondent to the
bility accorded to the concemed parties to challenge this estimation before the effect that it offered compensation to the Claimants during the negotiations
Court. However, ETDC was recipient of the right of u s u h c t upon 4000 which took place starting 6om 1979, could not change the 6ce of the fact that
feddans from EGOTH by a registered act dated January 5, 1977 (Cls. exh: any eventual offer that would have been amicably presented, but yet not ac-
109). cepted, fill outside the h e w o r k of the provisions of Law No. 577 of 1954;
At least at the time of the issuance of the expropriatory act by Decree of moreover, there is no proof that any compensation was effectively paid neither
the Minister of Culture No. 90 of 1978, the Administration did not challenge to ETDC nor to the Claimants or had been mise d disposition of ETDC as the
law requires.
488 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL CASES 489

VII. The Claimants explained that their present claim for compensation receive legal and/or factualjustification. It seerns to me that there does not exist
covers altogether their share in the joint venture ETDC which was to imple- a necessary legal or factual correlation between the value of a share in a corn-
ment two projects; one at the Pyramids and the other at Ras El Hekma, on the pany and the eventual amount the shareholder spent or alleges to have spent.
basis that the expropriation act and the subsequent events that occurred, ren- However, it is worth noting that the Majority Award stated that "in a case such
dered hrther cooperation impossible. In fact, although the object of the alleged as the present one, where the measure of compensation is determined largely
act of 'expropriation' was the only site on the Pyramids Plateau, nevertheless it on the basis of the out of pocket expenses incurred by the Claimants.. . " (The
fiected the whole structure and economy of ETDC, the joint venture, since Majority Award, Para 207, p.81 [p. 386 of this issue]) and that "there is no
EGOTH, the Egyptian partner was contributing in that Company only by the question that considerable amounts of time and money were spent on negoti-
u s u h c t rights on the two sites. (4000 feddans for the Pyramids project and ating, planning, and implementing the project.. . In the Tribunal's opinion,
1100 feddans for Ras El Hekma). For ETDC to continue with the paaicipa- these amounts must be reimbursed as part of the fair compensation to which
tion of the Claimants it would have necessitated a new agreement to that effect. the Claimants are entitled." (The Majority Award, p. 77 [p. 384 of this issue]).
VIII. Under Egyptian Law, the hilure of the Administration to take the X. A basic element for any eventual evaluation of compensation consists
necessary procedures and measures for the evaluation of the compensation for in the determination of the Claimants' legal situation under the Law. That is to
expropriation as provided for by the provisions of Law No. 557 of 1954, results say that before, and in order to effectuate any eventual evaluation of a quantum
in that the judge is to be entrusted with this evaluation. (Court of Cassation, of compensation, it should first be properly established the situation jun'dique of
case 169 of the judicial year 47,9/3/1978, and case 436 of the judicial year 49, the Claimants. To qualify for compensation, the concerned party should justify
16/6/1982). of rights, recognized under the Law and, hence, protected by it. Consequently
It seerns noteworthy in this respect to point out that since the evaluation and upon the findings in this respect, the quantum of compensation should
of compensation is to be effectuated by the Tribunal, the mechanism of article necessarily be determined taking into consideration the situation defait ofthe
(226) of the Civil Code of Egypt, concerning moratory interests, in the case project.
specified by that article, where the claim consists in a determined sum of mon- XI. As regards the situation juridique and the situation de fait of the
ey, running from the date of the claim before the Tribunal, this mechanism Claimants' project, a cursory review of the pertinent facts of the case indicates
cannot come into play in the present dispute. The Egyptian Court of Cassation the following:
as far back as 1964 explained that under the provisions of article (226) which a- That the Claimants failed to produce justification, or supporting
reads as follows: "Lorsque l'objet de l'obliption consiste en une somme d'argent dont documents, for at least an amount of 1.5 million US$ included in their claim
le montant estjixi au moment de la demande en justice.. . " (Emphasis added), and for reimbursement of Development costs. As it was explained above, the Pro-
since the judge has discretionary competence in the evaluation of the compen- cedural Order of February 13, 1991, was issued in the famework of the Tri-
sation in case of expropriation, any moratory interests could not be accorded bunal's Competence to direct the burden of proof, as regards the critical issue
but &om the day of the judgment (Court of Cassation, Case 330 of the judicial concerning allegations of corruption.
year 29,25/6/1964). In this context, and without going through more ample developments, it
IX. Since, in the present case, the claim consists in the evaluation of the seerns to me that the justifications advanced by the Claimants seem not to be a
value of the Claimants' share in the joint venture, which represents the alleged satisfactoryresponse to that procedural order. By the clear language of that Pro-
damage they suffered, the issue comes to the answer of the question of what cedural Order, the Claimana were not asked to justiftr their claim for reim-
was the real value of the Claimants share at the time, the alleged measure of bursement but rather, and in the first place, to rehte allegations concerning
expropriation was taken. illegal practices. The Claimants' explanation that they "destroyed" some sup-
A request for that the evaluation of compensation be based upon a claim- porting documents and some others were lost in 1979 due to the closure of
ant's "out of pocket" expenses seems, from the outset, in need of a legal their office in London, seems however to be contradicted by the fact that there
ground. does exist enough proof that these documents were evidently, necessarily and
In my opinion, to base the evaluation of compensation basically upon logically in existence at least up to January 1981 when the firm Coopers and
what the Claimants had incurred or allege to have incurred seems in need to Lybrand prepared their letter concerning the development costs without any
 ICSlD REVIEW-FOREIGN INVESTMENT LAW JOURNAL

mention or allusion to any missing document necessary for the preparation of ndique as "investors" in the fiamework of Law 43 was precarious. Not to
their above mentioned letter. The existence of the above mentioned documents mention, the serious allegations about their contravention to the Law 43 as well
seems to be hrther corroborated by the Claimants' statements during the phase as other laws of the land, explained in detail in both reports of the Central Au-
of negotiation as well as their testimonies before this Tribunal during the hear- diting Authority and the Experts' Committee. These facts altogether indicate,
ings held in Paris in September 1990, as already indicated. As a consequence, if not c o n f i i , the precarious nature of the Claimants' situation juridique. It is
it seems inevitable that neither the Claimants could escape the consequences of noteworthy to point out that the review of the hcts does not fail to indicate that
their conduct in this respect, especially in view of all the facts that marked their not only the Claimants opted for the site on the Pyramids Plateau in close vi-
relationship, nor could this Tribunal have the discretion to overlook the legal cinity to the Monuments themselves, a site which seems to have been consid-
consequences thereupon, or retract the legal si@cance of its own Procedural ered most appealing and much easier for marketing than the sites proposed by
Order of February 13, 1991. the Egyptian Government around and below the Plateau, as shown on the at-
b- Moreover, and in all events, it is evident that the Claimants' situation tached maps to the September Heads of Agreement, the only agreement, to be
juridique was precarious as well as their situation defait was hazardous. reminded, entered into by a duly authorized representative of the Egyptian
Government, but they also were cognizant of the risks, inherent in their option,
b-1. As to their situationjuridique under law 43, and without going through
the arguments concerning the nature of the project and whether or not they due to the nature of the site and the high probability of discovery of Antiquities
were embarking in prohibited housing activities, the fact remains that they as well as the unquestionable legal must of preservation of the Monuments in
were under the obligation to conform with conditions and objectives set forth existence. Their acceptance of the risk and their readiness to comply with the
in their application to the GIA. Article (24) of the executive regulations to Law eventual consequences related to their risky option, may be demonstrated inter
alia by the agreement they entered into with "representatives" of the Antiqui-
43 provides for that "Projects approved by the Authority shall be implemented
and conducted in accordance with the basic wnditionr and objectives setfarth in their re-
ties Authority in September 1977 which contained clear obligations upon the
spective applications. Any Mure of a project to abide by the conditions and ob- Claimants, and especially their unconditional acceptance to leave any area on
jectives of its approval shall be submitted to the Board of Directors." (Emphasis the site, in case the works reveal the existence of immovable Antiquities, as well
added). It had already been explained that the application for approval pre- as their solemn obligation to first inform the Antiquities Authority before un-
sented by the Claimants to the Board of Directors of the GIA contained infor- dertaking any works. The apparent significance of that agreement as well as its
mation about the "invested capital" and the stages of implementation of the inherent logic seem to be relevant as regards the risks the Claimants were cog-
project. (Resp. annex F.17). The invested capital which meant to be "imported nizant of, as well as of the consequences thereupon, in the implementation of
in foreign currency," was of the amount of 22,5000,000.- US dollars for the the project on the Plateau Proper. As a legal consequence to that acceptance of
first year plus loans to the amount of 16 million. Also the stages of implemen- the risk I may refer to principles of Egyptian Law resulting &om the provisions
tation of the project were explained as giving fmt priority to the construction of articles 446 and 447 of the Civil Code. Article 446 reads as follows: "1.
of a hotel. In view of the facts of the case, the Claimants seem to have M e d to Nonobstant toute clause de non-garantie, le vendeur demeure responsable de
comply with their engagements. Noteworthy to point out that, the minutes of toute Cviction provenant de son Gt.. . 2. I1 est Cgalement tenu, en cas d'kvic-
the Board of Directors of ETDC reveal the difficulty the Claimants encoun- tion provenant du fait d'un tiers.. . 1 moins de prouver que l'acheteur connais-
tered to arrange finance for a single hotel, it does not matter, legally speaking, sait, lors de la vente, la cause de i'kviction, ou qu'il avait achetk ri ses risques et
p&k" (Emphasis added), Article 447 also provides in pemnent part for that ". ..
whether or not they had the financial capability (as they advance as a result to
the transactions they effectuated to Triad and later to two members of the 2. Toutefois, le vendeur ne +and pas des dqaug dont l'acheteur a eu connaissance au
moment de la vente ou dont il auraitpu s'apmevoir lui-m&e s'il avait exarnini la chose
Royal hmily of Saudi Arabia) since the fact remains that they were seeking that
finance and obviously fgiled to a m g e it as clearly indicated on the record by wmrne l'auraitfait unepersonne de diligence moyenne.. . " (Code CivilJ.O. No. 108
their representatives at the meetings of the Board of Directors of the joint du 29 juillet 1948, Emphasis added). Apart &om the discoveries of Antiquities
venture under their management. Moreover, the Claimants seem, in any case, on the site, Respondent presented technical studies c o n f d n g the high danger
to have M e d to comply with their engagement as regards the "invested that would have afEected the Monuments themselves (the Pyramds) due, inter
capital" to be transferred to Egypt. In these circumstances, their situation ju- alia, to the effect of the water drainage problems (The study upon "the Hydro-
logical Study of the Area of Giza Pyramids Plateau," prepared by Consultant
492 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

Engineer Dr. Aly Sabry which concluded that ... "3. There is nothing that can erence to the minutes of the Board of Directors of the joint venture, the
ensure against leakage of water in the archaeological zones of Antiquities spe- Claimants clearly and unequivocally explained the de fato situation, in which
cially in the beatification zone.. . ," (Resp. Annex F.23, p. 148, and annex F.32 they were, in their letter dated May 12, 1978 to the Prime Minister in which
concerning Engineering Hazards and Deleterious Effects of the Pyramids Oasis they expressed that ". .. the adverse worldwi'depubficity have now seriously impaired
Project on the Existing Monuments, with special reference to p. 28, and the our efirt to create the required credibility to attract the iweasingly needed overseas
Cairo Pyramds Site: Anticipated Problems of the Site Construction &om the jiname for the project." (Resp. Annex F.38, p. 2, Emphasis added)
Geological Point of View, Resp. Annex E33, and also Ground Water and It was already explained that the "cause" of the serious damage to the
Seepage Conditions afler the Erection of the Pyrarmds Oasis, Resp. Annex "credibility" of the Claimants, as explained in their letter, fills beyond the pow-
F.34). Needless to re-mention the proved encroachment by the Claimants in er and capacity of the Administration. To regain this credibility seems to re-
the implementation of their project upon the Monuments' zone itself. quire matters, and especially a certain image of the Claimants, that have
All these facts should be taken into consideration in the appreciation of not nothing to do with the administration which, all the way, seems to have up till
only the legitimacy but also the necessity and urgness of the measures under- the end, taken the defense of the Claimants, at least in public, as already men-
took both in respect to the rules of Egyptian law and the obligation to the safe- tioned. In these circumstances, would it not be fictually correct and hence le-
guard of the monuments site under international rules of law, specifically those gally founded to conclude that the Claimants were in fact in a situation of
codified in the UNESCO Convention concerning the World Heritage Prop- impossibiliti matitielle d'exhtion of their project? Could they have been able to
erties. abide with their obligations specifically as regards "the imported capital" con-
In this respect, it is noteworthy to refer to the contents of two letters from tained in their application to the Board of Directors of the GIA? These ques-
the General Director of the UNESCO, the first one dated April 6, 1981, in tions may best be answered in the light of what seems to be a fact that the
which he expresses that "j'ai tenu d souligner par des declarations 06cielles que Claimants were in sort of a "financial vehicle," or "intermediaries" between
j'ai faites en qualitt de Directeur Gtnkal de I'UNESCO, que le plateau de eventual investors in the international market and the host State. The capital of
Gizeh est un des hauts l i e u d'une des civilisations les plus brillantes de I'His- SPP (ME) to be recalled amounts to about 200 US$ (twohundred), and their
toire. A ce titre, les Pyrarnides et tout le site qui les entoure constituent un el&- contribution in the capital of ETDC, up to the date of termination of the
ment essentiel de ce patrimoine universe1 de monuments historiques dont la project, amounted to 1,310,000 US dollars, however the needed invested cap-
sauvegarde incombe 1la communautt internationale.. . En prenant la decision ital for the implementation of the project was estimated to be of 550.000.000
de respecter pleinement l'environnement des pyramides, les autoritks Cgypti- US dollars or even amounting to 770,000,000 US$ on the G t h of the infor-
ennes me semblent avoir pris une mesure conforme aux criteres de preservation mation contained in the Claimants letter to the President ofMay 19, 1975, in
et de rnise en valeur qui sont aujourd'hui reconnues." (Resp. Annex, F.25). support of their request for the extension of the duration of the usufiuct rights
And the other letter, addressed to the Director of the newspaper Le Monde, the &om 50 years to 99 years. The C~a~mants "credibility" seems to be the deter-
Director General of the UNESCO congratulated the above mentioned news- minant factor to continue activities in the implementation of their titanic
paper for its campaign against the Claimants' project on the Pyramids Plateau project.
and pointed out that "En soutenant l'effort international visant d sauvegarder et In the light of these facts, it seems be hazardous, in any event, to take into
d restaurer le patrimoine culture1 de I'humanite la presse et les autres grands consideration in the evaluation of an eventual quantum of compensation the loss
moyens d'information remplissent auprk de I'opinion publique une mission of chance to make profits and/or to take into consideration the presumed "rev-
capitale." (Resp. Annex F.28) enues" &om the sales of u s u h c t rights, upon bare lots of land, which were part
b-2. As to the d e f i o situation of the Claimants, it seems evident that they of the joint venture's capital. Had the proper legal qualification of the Claim-
stated on several occasions, during the time span of their activities in Egypt, ants, under the law, been that they were urban developers, the consideration of
before the Board of Directors of the joint venture that they encounter difficul- the so-called sales revenues might have been justified.
ties to arrange finance for the construction of a single hotel. Wlthout going XI. In my opinion, as a consequence to all of the above mentioned con-
through the whole review of the conduct of the Claimants during their activ- siderations, especially but not exclusively those related to the explanations to
ities in Egypt, which was already mentioned in detail above, specifically by ref- the Tribunal's Procedural Order of February 13,1991, and upon the provisions
of article 216 of the Civil Code of Egypt which reads as follows: "The judge
 ICSID REVIEW-FOREIGN INVESTMENT LAW JOURNAL

may reduce the amount of damages, or he may rule that damages be not paid
at all if the creditor, through his own mistake, took part in causing or increasing
the damages," and upon the determination of the Claimants situation de jure
and the review of their defacto situation, the claim for compensation should be
rejected.

/s/
Mohamed Arnin El Mahdi