Hania Abou Al-Shamat

The dominance of Europeans over international trade in 19th-century Egypt has been attributed to, among other factors, foreigners’ access to alternative legal systems that provided them with commercial and financial tools that facilitated the expansion of their businesses. Egyptians were subject to the traditional Islamic legal system that, back then, did not yet recognize collective legal entities and where litigation was based on oral testimony. Both factors, it is argued, prevented resource pooling and the emergence of corporations, and shortened the longevity of partnerships. Starting in 1883, Egyptians were subject to the same commercial and civil codes under which foreigners operated. A unified set of secular laws was adopted whereby corporate bodies, such as limited liability companies, were recognized as legal entities in the courts, opening the possibility for new organizational models.

This research investigates Egyptians’ response to these legal reforms. It studies the impact of change in the substance of law and reform of courts on Egyptians’ commercial and financial transactions in the key period between 1883 and 1949. Egypt presents a unique case to study the correlation between law and economic performance for the pluralism of its legal system in the period under study and its function as a magnet for foreign businesses searching for new investments. This investigation adopts an institutional economic methodological approach. It asks: How did Egyptian merchants and financiers perceive and understand the new law? Did they alter their commercial and financial transactions? What types of Egyptian owned businesses emerged after the reform? What forms of partnerships emerged? What financial institutions did Egyptians form after the reform? Existing literature provides indicators related to the reform and relative efficiency of the new national courts, yet Egyptian merchants could opt out of the new legal system, begging the question: how often did Egyptians resort to the national courts to resolve their commercial disputes?