Protecting and Promoting Investments between Egypt and Saudi Arabia:

A step towards Regional Economic Integration

On April 23, 2025, in a significant legal and economic development, Egyptian Presidential Decree No. 607 of 2024, issued on December 31, 2024, was published in the Official Gazette. The decree approves the Agreement on the Promotion and Protection of Reciprocal Investments between the Arab Republic of Egypt and the Kingdom of Saudi Arabia. This agreement represents a cornerstone in modern bilateral investment relations, as it establishes a comprehensive legal framework aimed at providing a secure and attractive investment environment for capital and fostering sustainable development between the two countries.

1. Key Features of the Agreement

1.    Expanded and Evolving Definition of Investment

The agreement encompasses a broad range of assets and investments, such as shares, intellectual property rights, licenses, contracts, and financial claims of an economic nature. However, it explicitly excludes certain items like commercial claims of a simple nature and sovereign instruments such as government bonds or public loans.

2.   Exceptional and Robust Guarantees for Investors:

• Encouraging investment and facilitating its entry into the territory of the other state
• The agreement prohibits direct or indirect expropriation except under specific conditions, and only with fair and immediate compensation. This aims to create a secure investment climate by providing legal protection for investors.
• Granting “no less favorable” treatment than that offered to national investors or the most-favored nation (MFN).
• Guaranteeing the right to freely convert profits and returns from investments into convertible currencies.
• Adherence to environmental, social, and labor standards.

3.   Respect for Regulatory Sovereignty

The agreement affirms the sovereign right of both States and obligates the investor to establish, operate, and manage their investments in accordance with the legislation of the host contracting party to protect national security, public health, the environment, taxation, and standards related to corporate social responsibility, anti-corruption, and competition. This ensures that regulatory actions by either State shall not be considered a breach of the investor protection obligations, representing a rare and well-balanced articulation between investor protection and state sovereignty.

1. Denial of Agreement Benefits

One of the most crucial aspects of the agreement and a vital protection tool for the host state is ensuring that the agreement does not become a legal cover for investment circumvention by shell entities or legal facades that do not engage in real economic activity. It also grants the host state the authority to deny protection to entities linked to hostile parties or subject to sanctions. This means either contracting party may deny the investor of the other party the benefits of the agreement in specific cases, most notably:

1. The investor lacks substantive real economic activity in the state they claim allegiance.
2. The investor is directly or indirectly owned or controlled by a person affiliated with the host contracting party.
3. The investor is linked to non-contracting international parties subject to economic sanctions or boycotts.
4. If the investment is based on “Treaty shopping” — such as changing the nationality or legal form of the investment after a dispute arises.

   • Dispute Resolution Mechanisms

A key aspect of this agreement’s excellence is its adoption of progressive and transparent mechanisms for resolving investment disputes:

• Amicable settlement for a period of no less than 6 months.
• Mandatory prior notification to the disputing party before resorting to international arbitration.
• Multiple options for international arbitration.

  1. Legal and Economic Impact

     1. Enhanced Investment Confidence

The agreement provides a transparent legal umbrella that encourages long-term investors, which will lead to increased investment flows between the two countries, especially in vital sectors such as energy, infrastructure, technology, and tourism.

2. A Regional Legal Model

This agreement serves as an advanced model to be emulated in the Arab region, opening the door for the development of similar agreements between other Arab countries based on modern legal foundations that consider environmental, social, and developmental factors.

1. Conclusion

The Agreement on the Encouragement and Protection of Investments between Egypt and Saudi Arabia is not merely a legal text; it reflects a comprehensive strategic vision founded on the pillars of “investment protection” and “stimulating sustainable development.” Through precise legal analysis, we find that it embodies a unique balance between the economic interests of investors and the rights of states to manage their public policies.

With this agreement, the two nations establish a long-term economic partnership based on trust and the rule of law, representing a genuine step towards effective and sustainable Arab economic integration.

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