Compensation for Contracting and Supply Agreements

On December 26, 2022, Egyptian President Abdel Fattah El-Sisi approved Law No. 173 of 2022 concerning compensation for public contracting, supplies, and services agreements. This law addresses sustainable methods and mechanisms for providing legal compensation to parties contracting with the state if they are affected by economic decisions, during any period specified by a decision from the Cabinet of Ministers, that results in a financial imbalance in contracts involving the state or any of its subsidiary companies.

The law establishes a permanent committee called the “Supreme Compensation Committee,” headquartered in the Ministry of Housing, Utilities & Urban Communities, specializing in determining the criteria, regulations, and rate of compensation. Upon request from the affected contractor, the law stipulates that compensation shall be disbursed by the entity designated by the Cabinet of Ministers without resorting to litigation.

This legislation aims to address the consequences of successive economic changes and ensure the preservation of the rights of parties contracting with the state, which contributes to the stability of transactions, the protection of the national economy, and the effective implementation of national projects. 

The aforementioned law is considered a positive step toward providing confidence and stability in the Egyptian business environment and promoting transparency and fairness in economic dealings between contracting parties.

Furthermore, the law seeks to stimulate more long-term investment and economic development by offering a legal framework that protects contracting parties and contributes to the more efficient execution of national projects. The law works to improve the relationship between the private and public sectors, enhancing cooperation and ensuring the continuity of sustainable projects.

The law’s impact is expected to bolster the credibility of the Egyptian market and attract more foreign and local investments. Ultimately, this law contributes to fostering economic growth and sustainable development in Egypt, resulting in a positive impact on the population’s livelihood and improving the overall quality of life.

Should you have any further questions about this legislation, you can contact the lawyers at Andersen Egypt.

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