Entitlement to interest / Egyptian law / Article 226 of the Civil Code: applicability to administrative contracts, yes / Article 231 of the Civil Code

'Claimant asked for an interest of 10% per year as from . . . on this amount of FF . . . Defendant contends that pursuant to Article 226 of the Egyptian Civil Code, Claimant would be entitled only to an interest of 4% if the Contract were a civil contract and of 5% if it were a commercial contract. However, as the Contract is an administrative contract, Claimant is not entitled to any interest. Without relying on any legal provision, Claimant contends that if the rate of interest is lower than 10%, it would be entitled to receive as damages the amount corresponding to the difference between the lower rate and the rate of 10%.

Defendant's contention that no interests are paid under administrative contracts is erroneous. The Higher Administrative Court decided that Article 226 of the Egyptian Civil Code must be applied to administrative contracts, as a general principle of obligations (Rule no. 1360 published in "Legal Rules passed by the Higher Administrative Court in Ten Years", November 1955-November 1965, Volume II). The Arbitrator shall therefore apply Article 226 of the Egyptian Civil Code. Pursuant to that Article, the debtor must pay to the creditor in commercial matters an interest of 5% which compensates the damage due to the delay, from the date of the filing of the claim.

Concerning the claim for damages, the Arbitrator refers to Article 231 of the Egyptian Civil Code according to which the creditor is entitled to claim supplementary damages which are added to the interests if it establishes that the damage exceeding the interest rate is due to the bad faith of the debtor. The creditor must prove an exceptional prejudice, which is not the prejudice caused by the delay and the mala fide of the debtor (decision of the Cour de Cassation of Egypt of 30th December 1976; published in "the Set of Rulings", rendered by the general Authority of Civil and Commercial Articles, the Civil Circuit and Personal Status Circuit, 2nd Volume, 27th year). As Claimant did not ever allege it suffered an exceptional prejudice and that Defendant would have acted in bad faith, the claim for damages must be dismissed.

The Arbitrator holds that Claimant is entitled to an interest of 5% from the date of filling the Request for Arbitration, i.e., from . . ., on the amount of FF . . . and rejects the claim for damages.'