jeudi, décembre 16, 2010

Egypt: Supreme Constitutional Court protects interests of technology importer

Supreme Constitutional Court protects interests of technology importer

Contributed by Nour & Partners Law Firm


In its ruling dated April 15 2007 the Supreme Constitutional Court confirmed the legislature's right to regulate and balance out a transfer of technology contract in favour of the interests of the technology importer.

Facts

In 2001 an Egyptian company entered into a contract with a Swiss garments company whereby the latter would transfer its know-how related to production processes, designs, drawings, specifications and technical standards to the Egyptian company.

The Egyptian company filed a claim before the court of first instance requesting the annulment of certain clauses of the contract based on their breach of the Trade Law.

The case was dismissed and the Egyptian company challenged the court's decision before the Court of Appeal, which was bound to withhold its decision until the Supreme Constitutional Court had reviewed the constitutionality of Article 87 of the Trade Law.

Article 87 provides as follows:

"The Egyptian courts shall have the jurisdiction of deciding the disputes arising from the technology transfer contract referred to in Article 72 of this Law. Agreement may be reached on settling the dispute amicably or through arbitration to be held in Egypt according to the provisions of Egyptian Law.

In all cases, deciding the subject matter of the dispute shall be according to the provisions of the Egyptian Law, and all agreement to the contrary shall be null."

Supreme Constitutional Court analysis

There have been claims that Article 87 is unconstitutional on two grounds.

The first claim is that the article deviates from the main purpose of the agreement to arbitrate by forcibly imposing on the addressees the law, language, venue and governing procedures resulting in "loading such agreement with restrictions to the extent of demolishing its structure", as well as violating Article 41 of the Constitution which protects personal freedom, which includes, but is not limited to, the freedom of contracting.

The second claim is that the article reflects negatively on national interests by not encouraging technology exporters that export their industrial and information know-how, which consequently results in losses to the nation and its citizens.

According to the Supreme Constitutional Court, the legislature is entitled, in respect of all contracts, to apply boundaries of a public order nature which may not be crossed. Thus, the legislature may require a certain form of a contract or an economic balance between its parties. The legislature may also intervene in certain contracts, such as employment contracts, to support the position of the weaker party. Accordingly, the freedom of a contracting party is not absolute, but rather regulated by certain limits.

Therefore, the public order concept is a defence line for the legal system against the unruly behaviour of an individual or group. In this respect, the Trade Law has observed national interests without crossing the borders of the technology exporter's legitimate interests. The law guarantees the technology importer (which is generally Egyptian) real reasons to help technology to become an instrument of development of the national economy. Moreover, it promotes the chance to compete in international trade markets. The article applies to all transfer of technology contracts, whether local or international, without referring to the nationality or domicile of the parties to the contracts. The protection of national interests is included within the discretionary power of the legislature on regulating rights.

In response to the second claim of unconstitutionality, the court held that the article is targeted at the protection of the weaker party to the contract, which is normally the national party in need of the technology in order to be able to compete with foreign goods and services. Therefore, the legislature has legitimately provided for the applicable law, venue and rules of arbitration.

Based on the above, the Supreme Constitutional Court ruled that Article 87 does not breach the Constitution in any manner and hence dismissed the case.

For further information on this topic please contact Ayman S Nour or Mennat-Allah A Talaat at Nour & Partners Law Firm by telephone (+20 2 3335 8091), fax (+20 2 3760 3373) or email (anour@nourpartners.com or mtalaat@nourpartners.com).