The Egyptian government approached PHC (a company that distributes vaccines for HIV) about establishing a logistics network within Egypt for
The Egyptian government approached PHC (a company that distributes vaccines for HIV) about establishing a logistics network within Egypt for distributing pediatrics AIDS drugs to hospitals, infirmaries, and doctors throughout Egypt as well as through indigent clinics established by PHC and staffed by PHC-emplyed physicians. PHC negotiated the agreement with the Egyptian minister of health and signed three contracts. The first contract provided for PHC the exclusive right of a 10-year span to establish the logistics network and indigent clinics inside the Egyptian territory and to enjoy full government cooperation in obtaining all necessary permits and implementing legislation.The first contract also provided that the Egyptian Ministry of Health would apply to open documentary letter of credit in favor of PHC as beneficiary with an Egyptian bank. The purpose of the letter of credit was to facilitate payment by the Ministry to PHC for the pediatric HIV drugs that PHC imported into Egypt for use in PHC's pediatric clinics established in Egypt. When negotiating with the Egyptian Minister of Health, the Minister insisited that the letter of credit include, among the documents PHC was to present for payment, a certification signed personally by a member of the Minister's executive staff that certified a personal inspection of each lot of pediatric HIV drugs imported into the country. PHC countered that such a requirement could delay the Bank's payment to PHC for months, since the Ministry executive staff were already overextended and overworked, and demanded that the letter of credit instruct the Bank to add a 10% "administrative delay fee" for any lot for which the ministry did not issue certification within 60 days after import. The Minister countered that he could agree to that if PHC agreed to the following choice of law clause in the letter of credit and all contracts between PHC and Egypt: "Subject to the principles of the Glorious Sharia'a, these Agreements shall be governed by and construed in accordance with the laws of Egypt." PHC quickly agreed. The Egyptian government opened the letter of credit accordingly with the Egyptian Bank.The second contract provided that both PHC and the Egyptian government would submit any dispute under the first contract and under the letter of credit to binding arbitration before the International Chamber of Commerce (ICC) in Paris, under the ICC's rules for international commercial arbitration. (Note that the Egyptian Bank is not a signatory to the binding arbitration).Two years into the contract, the Egyptian government changed Presidents. The new President of Egypt terminated PHC's contract and awarded the contract to a new company established by his son, who completed his medical educations in the United States. The President also issued an order of "conversion" that transferred PHC's entire inventory, logistical equipment, and clinics to the new company his son had established. Menwhile, the President, instructed his Finance Minister to direct the Egyptian Bank to decline 10 pending drafts submitted by PHC, since the sums sought included the 10% "administrative delay fee," which the President contends is unlawful under Shari'a law.PHC's Presidents Akosua and Isabella immediately sent a cablegram to the Egyptian government to assert the it had willfully breached its contracts and the letter of credit, and demanded an arbitration of the matter before the ICC. The Egyptian government responded with a letter faxed form the Egyptian President's office refusing to submit the matter to the ICC and stating that under the sovereign constitution of the Republic of Egypt, only the President or the prime minister had the authority to bind the sovereign government to an agreement to arbitrate. Otherwise, the government enjoyed sovereign immunity. The President added that under the new rule of Shari'a law that he ushered in, no Islamic sovereign government could be held to an agreement to arbitrate except as it pleased that government to arbitrate. How likely is it that the arbitration agreement will be enforced by a Court in Paris, the location selected by the parties for their arbitration agreement since Paris is where the ICC's Court of Arbitration is located? Please explain in detail all of PHC options.Are the arguments by the new Egyptian President for disregarding the arbitration colorable and persuasive? Why or why not? Please be specific. Please include all references.
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Jan 02, 2020
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