Egyptian Billionaire In $5 billion Legal Claim Against Algerian State

Naguib Sawiris

VENTURES AFRICA – Egyptian telecoms tycoon, Naguib Sawiris, the Chairman of Weather Investments II S.à r.l. (Weather Investments), has announced a $5 billion legal claim against the Algerian state, as the country tightens investment regulations to the detriment of foreign investors.

Weather Investments Chairman launched the suit against the Algerian state through his finance group Weather Investments, claiming $5 billion in damages from the North African country’s government; the case to be considered at the International Centre for the Settlement of Investment Disputes (ICSID) – a body of the World Bank.

“I think they do not like foreign investors being profitable,” Sawiris commented to the National.

The claim relates to Sawiris’ and Weather Investments’ dealings in Algeria through subsidiary Orascom Telecom Holdings, which owns 96.8 percent of Algerian telecoms operator Orascom Telecom Algeria – locally known as “Djezzy”.

Since winning a telecoms licence from the government in 2001, Orascom Telecom Holdings has invested more than $3 billion in Algeria, and has created in excess of 4,000 jobs in the sector, according to Sawiris. Furthermore, the company has contributed to a 52 percent increase in mobile telephone usage in the north African country since 2005.

However, the government has recently been seen altering regulations to the detriment of foreign investors, including Sawiris – prompting the pursuit of a legal remedy by the Egyptian tycoon, who feels he has been unfairly targeted by the Algerian government’s stricter investment rules.

Explaining the points of contention, Sawiris says: “They enforced nationalisation of the operator … they changed the regulations under which we were operating, without any right or legal background, they prevented us from advertising on local TV stations, from importing SIM cards and our equipment – and they have acted this way with us only.”

The Egyptian billionaire contends the government is purposely abusing its position of power with respect to Djezzy, noting that investors coming to contribute to the local economy should be promoted. He notes: They should protect the investments in the country, they should protect it, they should not change the rules on which the investment was made.”

Weather Investments echoes Sawiris’ comments, with the company claiming that the government has: “since 2008 pursued a campaign of interference and harassment which has cost Weather Investments over $5 billion in damages.”

There is wide-spread speculation that the government is changing its investment regulations in order to obtain larger stakes in profitable foreign investment projects.

According to a statement released by Weather Investments yesterday, the Chairman, Naguib Sawiris said:

“In 2001 OTH won the competitive bid to build Algeria’s telecommunications infrastructure, investing $3 billion, creating 4,000 jobs and increasing telephone usage by 52 percent in just seven years. The Algerian Government committed to a number of protections, including a promise to refrain from arbitrary interference in our operations, but has since 2008 pursued a campaign of interference and harassment which has cost Weather Investments over US$5 billion in damages. This is a bad development not just for us, but for all foreign investors in Algeria. The Algerian regime stands as a stark exception to a region which, on the whole, is beginning to engage global investors, pursue economic development and implement reforms attractive to the international business community.”

The breaches of the Treaty form part of a campaign of harassment and improper interference by the Algerian Government against Djezzy and its owners, which has culminated most recently in the attempted “forced sale” of all or part of Djezzy to the Algerian State.

Other Treaty breaches by Algeria include, but are not limited to:

· the imposition of more than $950 million in unjustified tax reassessments and penalties on Djezzy for the years 2004 through 2009

· the blocking of Djezzy’s payments of dividends to its foreign shareholders, including Weather Investments

· the failure to protect Djezzy during football riots and violence against Djezzy’s premises in November 2009

· an injunction imposed by the Bank of Algeria on 15 April 2010 (which remains in effect today), restraining all Algerian banks from engaging in any foreign banking transactions on behalf of Djezzy

· a customs blockade imposed on Djezzy, preventing it from importing goods and network equipment essential to the maintenance and stability of its telecommunications network

· the shutdown of the Medcable and VSAT networks on alleged national security grounds

· the interference in, and thwarting of, the sale of OTH to the MTN Group in 2010

· the recent imposition of a $1.3 billion fine on Djezzy by Algerian courts, as a result of groundless allegations that it breached Algerian foreign exchange regulations, together with the threat of further massive fines to be imposed on Djezzy in the future

· the initiation of a number of unfounded criminal investigations into Djezzy and OTH employees, and the improper and unlawful criminal sentence of imprisonment of an OTA senior executive (later overturned by an Algerian court of appeal).

Algeria’s Treaty breaches, separately and together, have caused significant damage to Weather Investments’ stake in Djezzy, along with other losses. Algeria is responsible for these Treaty breaches and for Weather Investments’ losses, under the Treaty and under international law.

However, the government intends to fight the claim with counsel for the state, Emmanuel Gaillard of Shearman & Sterling law firm explaining that the defence hopes to prove that the international tribunal has no remit to hear the suit, saying: “We intend to defend the case vigorously, including by showing that Weather Investments’ claim cannot proceed due to a lack of jurisdiction.”