Egypt: Establishing The Russian Industrial Zone (RIZ) In The Suez Canal

Last Updated: 12 February 2019
Article by Youssry Saleh & Partners

Presidential Decree No. (420) of the year 2018

Approving the Convention concluded between the Government of the Arab Republic of Egypt and the Government of the Russian Federation signed in Moscow on 23/5/2018

On Establishing and operating the Russian Industrial Zone (RIZ) in the Suez Canal Economic Zone (SC Zone)

President of the Republic

After perusing the provision of Article No. (151) of the Constitution;

And after the approval of the Cabinet of Ministers;

Decreed

(Single Article)

Approving the convention concluded between the Government of the Arab Republic of Egypt and the Government of the Russian Federation signed in Moscow on 23/5/2018 regarding the establishment and operation of the Russian industrial zone (RIZ) in the Suez Canal Economic Zone (SC Zone), with a reservation concerning ratification.

Issued by the Presidency on the 3 Muharram 1440 H (13 September 2018)

President of the Republic

Abdel Fattah El-Sisi

The House of Representatives approved this Decree in the meeting convened on 3 Rabi' Al-Awwal 1440 H (11 November 2018)

Convention between the Governments of the Arab Republic of Egypt and the Russian Federation on establishing and operating the Russian Industrial Zone (RIZ) in the Suez Canal Economic Zone (SC Zone)

The Government of the Russian Federation and the Government of the Arab Republic of Egypt, hereinafter in the text referred to as the "Both Parties";

According to the convention of the Mutual Trade, Economic, Scientific and Technical Cooperation concluded between the Arab Republic of Egypt and the Russian Federation on May 14, 1992 and the protocol dated November 5, 1993 annexed thereto; the convention concluded between the Arab Republic of Egypt and the Russian Federation for the Avoidance of Double Taxation and the Prevention of Fiscal evasion with respect to taxes on income and capital dated September 23, 1997; and the convention concluded between the Arab Republic of Egypt and the Russian Federation for the Encouragement and Mutual protection of Capital Investments dated September 23, 1997;

Taking into consideration the huge improvement opportunities for developing and increasing the efficiency of the bilateral cooperation in the field of industry, and for boosting investment opportunities as well as ensuring the availability of the suitable circumstances to establish and improve the industrial, scientific and technical cooperation between the trade entities in both countries;

And affirming the arrangements mentioned in the Memorandum of Understanding between both the Egyptian Ministry of Trade and Industry and the Russian Ministry of Industry and Trade regarding enforcing the establishment of the Russian Industrial Zone (RIZ) in Egypt in February 2, 2016;

Have agreed on the following:

(Article One)

Definitions

For the purposes of the present convention, the applied definitions refer to the following:

  • The term, "Competent Authorities", shall refer to the governmental authorities determined by both parties, which are the General Authority for the Development of Suez Canal Economic Zone on behalf of the Egyptian party and the Russian Ministry of Industry and Trade on behalf of the Russian party.
  • The term, "Competent Organizations", shall refer to the organizations determined by both parties, which are the General Authority for the Development of Suez Canal Economic Zone on behalf of the Egyptian party and the Shareholding Company "The Russian Export Center" on behalf of the Russian party.
  • The term, "Action Plan", shall refer to the official documents prepared by the Managing Company of the Russian industrial zone and/or the projects existing therein approved by the General Authority for the Development of Suez Canal Economic Zone, including the business proposals, lands valuation, payment methods, feasibility studies, facilities requirements, the commercial terms relevant to the rights of usufruct and the rights of the end user, and the phased plan of the site of the Russian industrial zone.
  • The term, "Legislations Modifications", shall refer to any modification carried out by the competent regulatory authority or the legislative authority, after the date of signing this convention, in the regard of stipulating, amending or repealing any law or decree.
  • The term, "Confidential Information", shall refer to the information that comes to the knowledge of the competent parties, authorities and organizations regarding the commercial customers, business secrets, plans, and commercial secrets; and regarding the protection of intellectual property rights or any other information relevant, in any way, to establishing and operating the RIZ project. Such information shall be deemed confidential by the party who provides or receives such information. However, confidential information does not include the information available to the public without undertaking any procedure by the recipient party, and does not include the required information or documents to be submitted to any of the competent authorities by virtue of the applicable legislation.
  • The term, "Agreement(s)", shall refer to the agreement or, if necessary, the number of contractual agreements concluded between the General Authority for the development of Suez Canal Economic Zone and the Managing Company of the Russian industrial zone established by the Shareholding company "Russian Export Center", which determine the rights and obligations of establishing, operating, and developing the Russian industrial zone, including the rights of usufruct, the agreements of supporting the infrastructure, the agreements of customers, and the licenses and permits as well as the financial aspects.
  • The term, "Infrastructure", shall refer to a number of the basic infrastructure provided to ensure the access to the nearest main roads, water supplies, sewage, electricity, gas, and communication networks to reach the boundaries of the Russian industrial zone.
  • The term, "Shareholding Company" – "Russian Export Center", shall refer to a public Russian company incorporated according to the legislations of the Russian Federation.
  • The term "Managing Company of Russian Industrial Zone", shall refer to a legal entity (company) established by the shareholding company "Russian Export Center", as a developer of the Russian Industrial Zone, in the Suez Canal Economic Zone according to the Egyptian legislations and is subject to the approval of the General Authority for the Development of the Suez Canal Economic Zone to carry out administrative activities in the site of the Russian Industrial Zone.
  • The term, "Master plan of the RIZ project", shall refer to the official documents prepared by the Managing Company of the Russian industrial zone, which determine the conception and planning of the site of the Russian industrial zone and approved by the General Authority for the Development of the Suez Canal Economic Zone.
  • The term, "Projects existing in the Russian industrial zone", shall refer to any legal entity (or private entity) established in accordance with the Egyptian legislations and subject to the approval of the General Authority of the Suez Canal Economic Zone, which have concluded a sublease agreement with the Managing Company of the RIZ to rent a piece of land and/or the contract of lease or sale of the buildings located at the location of the Russian industrial zone according to the terms of the agreement(s) for the purpose of practicing the activities permitted by virtue of this convention.
  • The term, "Russian Industrial Zone (RIZ)", shall refer to the industrial zone established in the Suez Canal Economic Zone and managed by the Managing Company of the Russian industrial zone in the location allocated for it.
  • The term, "Suez Canal Economic Zone (SC Zone)", shall refer to the private economic zone established according to the laws of the Arabic Republic of Egypt and the amendments thereof.
  • The term, "General Authority for the Development of the Suez Canal Economic Zone", shall refer to the General Authority for the Management of the Suez Canal Economic Zone in the Arab Republic of Egypt that has been established according to the Egyptian provisions and legislations.

(Article Two)

Subject Matter of the Agreement

Both parties shall be liable to cooperate in establishing and in ensuring the availability of the conditions required for the effective operation of the Russian industrial zone as well as in providing assistance in the following matters:

  • Developing the activities of the projects existing in the Russian industrial zone.
  • Manufacturing competitive products within the Russian industrial zone to meet the Egyptian and other countries markets' demand for high-tech technological products; including the usage of the industrial assembly and manufacturing schemes in accordance with this Agreement.
  • Increasing the efficiency of the current infrastructure and production facilities that have been established in the Arab Republic of Egypt; and strengthening the possibilities for Egyptian-Russian industrial cooperation within the markets of the other countries.
  • Providing new employment opportunities within the Russian industrial zone, improving and implementing the specialized programs for training and retraining the experts within the different industrial sectors.
  • Exchanging expertise and specialists in the field of establishing and managing the industrial cities as well as exchanging information concerning the investment and industrial opportunities in both countries.
  • Accommodating any industrial or service-based companies working within the Russian industrial zone in the activities prescribed within the location of Russian industrial zone according to the RIZ's master plan; and ensuring the availability of the conditions required for the effective operation of the Russian industrial zone.

(Article Three)

The Location of the Russian Industrial Zone (RIZ) and Operation

According to the Agreement(s), the General Authority for the Development of Suez Canal Economic Zone (SC Zone) shall carry out the following:

  • Specifying, allocating and making available a piece of land within the Suez Canal Zone in the East of Port Said in the Arab Republic of Egypt, for the sake of the Managing Company of the Russian industrial zone, with an area of about 5250000 square meters according to the maps annexed to this agreement, and for a period equivalent to the period of the agreement starting from the agreement enforcement date, for the purpose of implementing any activities permitted by virtue of the usufruct right.
  • Granting the Managing Company of the Russian industrial zone (RIZ) complementary lease period, according to the terms and conditions provided in the Agreement(s). The payment schedule and the rates of the rental fees shall be subject to negotiations between the General Authority for the Development of Suez Canal Economic Zone (SC Zone) and the Managing Company of the Russian industrial zone (RIZ).
  • Providing the piece of land in accordance with the Articles of this agreement; ensuring the availability of the required infrastructure that offers unobstructed access to the roads, ports and, if possible, railways; extending the distribution networks of water, electricity and gas to the boundaries of the Russian industrial zone (RIZ) determined in the location according to the RIZ's master plan and the project's plan provided by the Managing Company of the RIZ, which has been submitted to and approved by the General Authority for the Development of Suez Canal Economic Zone (SC Zone). The terms of calculating the tariffs of gas, electricity, water, sewage and communication shall be determined in accordance with the agreement(s). The costs and schedules of the payment of the fees of general services specified in the agreement(s) are subject to negations between the General Authority for the Development of Suez Canal Economic Zone (SC Zone) and the Managing Company of the Russian industrial zone, provided that such negations shall be coordinated by the competent authorities.
  • Ensuring that the piece of land offered to the Managing Company of the Russian industrial zone, by virtue of this agreement, is discharged from any rights of and claims by any third party; and that the projects existing in the Russian industrial zone (RIZ) are free to practice all the activities as per this agreement. In case any of such rights and claims are raised, then the General Authority for the Development of Suez Canal Economic Zone (SC Zone) shall resolve them.

(Article Four)

Obligations

1- In the framework of implementation of the said convention, the Russian Party- represented by the competent authority is obliged to assist in the following:

(a) Preparing the project's plan and the master plan of the Russian Industrial Zone (RIZ), on condition that the General Authority for Development of the Suez Canal Economic Zone shall approve it. This shall include proposing the most effective alternatives for equipping the RIZ with the industrial infrastructure,; assessing the expenses relevant to constructing the infrastructure of the RIZ, in addition to planning the accommodation of the projects present in the RIZ and its infrastructure, as well as the potential utilization indices expected for the infrastructure of the RIZ by the present occupants (projects) in the Russian Industrial Zone.

(b) Carrying out a detailed examination of the soil and conducting the necessary geological studies to ensure that the RIZ site is suitable for establishing the Russian Industrial Zone.

(c) Attracting new projects to the RIZ and organizing their activity.

(d) Organizing the process of manufacturing the industrial products, achieving work and providing services within the RIZ site in accordance with the project and master plans of the RIZ, in addition to the development plans of Suez Canal Economic Zone.

(e) Utilizing the advanced Russian technologies, materials and equipment, in addition to the contribution of the Russian scientific, research, developmental and constructional organizations to the processes of establishing and operating the RIZ according to the laws and regulations set by Suez Canal Economic Zone.

2– In the framework of the implementation of the said convention, and according to the action plan of the RIZ and the master plan submitted to the General Authority for the Development of Suez Canal Economic Zone, the Egyptian party- represented by the General Authority for the Development of Suez Canal Economic Zone is obliged to assist in the following:

(a)- Providing full geological and geographical information (relevant to the land measurements) of the RIZ site in order to assess the suitability of the site for the construction and establishment of the industrial facilities and the infrastructure there.

(b) Providing the "one- stop shop" services relevant to the issuance of permissions and licenses, as well as providing consultations with regard to the laws and regulations applicable in the Arab Republic of Egypt.

(c) Affording for a residential area for the Russian experts and/ or the expatriates, which should be equipped with the facilities permitted as per the master plan of the RIZ as approved by the General Authority for the development of Suez Canal Economic Zone.

(d) Guaranteeing a safe environment for the operation of the RIZ project, including providing support with regard to the reduction of the potential security risks for the RIZ.

3- The competent authorities shall coordinate and monitor the implementation of the said Convention.

4- The competent organizations shall be responsible for the implementation of this Convention including, but not limited to, the establishment, development and operation of the Russian Industrial Zone under this Convention.

(Article Five)

The Applicable law

All activities under this Convention shall be subject to the Egyptian law, unless the Convention provides otherwise.

(Article Six)

Taxation

The activities of the Russian Industrial Zone Managing Company and the existing projects in the RIZ shall be subject to the applied taxation system of the Arab Republic of Egypt as of the date of signing this Convention.

(Article Seven)

Conflict Resolution

Any dispute that may arise between the Parties concerning the application or interpretation of this Convention shall be settled through negotiations between the Parties.

(Article Eight)

Maintaining the stability of the Convention

  1. Under this article, the laws and regulations of the Arab Republic of Egypt relevant to the implementation of this convention shall apply to the Managing Company of the Russian Industrial Zone in accordance with this convention provided that they shall not contradict with the laws, regulations, amendments or interpretations that come into force in the Arab Republic of Egypt at a date later than the date of signing the said convention.
  2. If new laws or regulations come into force in the Arab Republic of Egypt at a date later than the date of signing the convention, and which might impede the implementation of this convention or adversely affect the activities of the Management Company of the RIZ, including imposing additional financial burdens, such law or regulation shall not be applicable to the said convention.

(Article Nine)

Intellectual Property

Regulations for the protection of intellectual property rights under this convention shall be determined in accordance with the national legislation of the Parties and the provisions of the international treaties to which the states of the Convention Parties are parties to it.

(Article Ten)

Confidentiality of the Information

No competent party, authority or organization may disclose any confidential information under this Convention during its implementation without the prior written consent of the other party, entity, or the competent organization that provides such information.

(Article Eleven)

Amendments

This convention may be amended under a written agreement of both parties.

(Article Twelve)

Convention Comes into Force

This Convention shall come into force as of the date of receiving the Parties, through diplomatic channels, of the last written notice by the Parties on the completion of the domestic procedures necessary for the commencement of the implementation of the Convention.

(Article Thirteen)

Final Provisions

The duration of this convention is 50 years (Fifty), to be renewed automatically for 5 consecutive years (five years) unless either of the two parties notifies the other with its intention to terminate the agreement under a written notification through the diplomatic channels on a date no later than one year before the end of the first period or any of the additional periods.

The termination of the said convention shall by no means affect the fulfillment of the obligations accruing from the agreements concluded under the said agreement.

This agreement was concluded in Moscow, May 23, 2018 in the following languages: Arabic, Russian and English. All of which are equal in authenticity. In case there is any dispute in the interpretation of the said convention, the English version shall prevail.

Representative of the Government of
The Arab Republic of Egypt
(Signature)
Representative of the Government of
Federal Russia
(Signature)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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