The signing, in 1980, of the Unified Agreement on the Investment of Arab Capital in the Arab States (the “Agreement”) was an attempt by MENA countries to set up a regional and enforceable investment regime that would encourage nationals in the wealthy Arab States to invest in the region’s poorer countries. The purpose behind such signing was to strengthen overall Arab development and Arab economic integration.
The Agreement was ratified by all member states of the Arab League with the exception of Algeria and the Comoros Islands. The Sultanate of Oman’s accession to the Agreement was promulgated by Royal Decree 29 of 1994. The Agreement begins with a provision in Article 2 permitting the States party to the Agreement “to transfer Arab capital freely [among themselves] … and to promote and facilitate its investment according to the economic development plans and programmes within the States Parties and in a manner beneficial to the host State and the investor.” There are also provisions on national treatment, free transfer and expropriation, albeit subject to exceptions.
Further, the Agreement established an Arab Investment Court, open to States and investors. The court was not actually created until 2003, and since then has considered very few cases. The first decision rendered by the court was Tanmiah for Management and Marketing Consultancy vs Tunisia (1/1 Q, IIC 238) on October 12, 2004, over 20 years after the Agreement was first signed. Currently there are seven cases before the Arab Investment Court in which Arab investors have filed complaints against other Arab States.
Amendments to the Agreement
In 2013 the Agreement was amended by the Arab Summit for Economic and Social Development, and it is these amendments that were ratified by Royal Decree 46 of 2014 (the “Amended Unified Agreement”). Among other things, the main amendments are:
- The expanded scope of investors covered by the Agreement. The definition of “Arab Investor” has been widened such that the investor is required only to own “Arab capital” which the investor “invests in the territory of a State Party of which it is not a national, provided that the Arab investor holds directly at least 51% of the share capital.”
- The introduction of a general fair and equitable treatment provision, and disposal of limitations on the free transfer of capital. A provision prohibiting investors from actions which might violate public order, morality or involve illegitimate gains has also been removed.
- The option of filing claims in the host country in accordance with its rules of jurisdiction in matters that fall within the jurisdiction of the Arab Investment Court, provided that, having filed a suit in one forum, the investor cannot then file the same suit in the other.