International Arbitration Newsletter - December 2021 | Regional Overview: Middle East and Africa

BAHRAIN

Bahrain found liable for expropriation

A UNCITRAL tribunal administered at the Permanent Court of Arbitration has awarded €200 million damages plus costs to two Iranian banks for the illegal expropriation of their assets by Bahrain in the wake of the 2015 Iran nuclear deal.

In 2015, in the context of the Nuclear Deal between Iran and several other nations, Bahrain, along with several other Gulf States, decided to take retaliatory measures against Iran. Bahrain in particular, decided to target Iranian banking assets in its territory by placing two Iranian banks, Future Bank, and Iran Insurance Company, under forced administration, prompting Iran to bring arbitral claims against Bahrain for illegally expropriating its assets. The arbitral tribunal has agreed with Iran’s allegations and has found Bahrain liable for illegal expropriation, establishing that there was no compelling reason why those banks had been placed under forced administration, deeming Bahrain’s actions to be “politically motivated”.

CAPE VERDE

Travel group to bring expropriation claims against Cape Verde Government

Loftleidir Cabo Verde (LCV), the local Cape Verdean subsidiary of Iceland’s Icelandair, has brought ICC arbitral claims against the government of Cape Verde for supposedly unilaterally terminating the restructuring agreement it had concluded with LCV earlier this year. In 2019 LCV acquired a majority share in Cape Verde’s national carrier, Cabo Verde Airlines, with the government retaining the remaining stake. After operations were suspended in 2020 in the wake of the coronavirus pandemic, Cape Verde decided to resume flight operations of its airline services, which had been severely affected by the travel ban.

In March 2021 LCV entered into a contract with the Cape Verdean government whereby, in addition to being able to resume its operations, the travel company was allowed to carry out a restructuring of its debts with the government. Nevertheless, LCV and Cape Verde have both launched crossed accusations of breach of the restructuring agreement, which allegedly prompted the Cape Verdean government to unilaterally terminate the contract.

REPUBLIC OF THE CONGO

Republic of the Congo faces yet another mining claim

The Republic of the Congo is yet again facing an arbitration claim from foreign investors for allegedly unjustifiably withdrawing a mining license. In this case, the UK-registered Midus Holdings, along with its subsidiary, Congo Mining, have brought ICSID claims against the Congolese state for supposedly withdrawing for no compelling reason its license to exploit the Mayoko-Moussondji iron ore project in southwest Congo. Midus Holdings maintains this constitutes a breach of the fair and equitable treatment, national treatment and most-favoured nation treatment clauses in the Congo-UK BIT.

This represents the latest iteration of the Republic of Congo’s numerous legal feuds with western foreign investors over the premature withdrawal of mining licenses, allegedly with the objective to grant them instead to Chinese mining companies.

Republic of the Congo to bring claims against Israeli oil companies

In a rather unusual move from the typical approach that prevails in investment arbitration, a state, the Democratic Republic of the Congo, is bringing ICC arbitral claims against two Israeli British Virgin Islands-registered oil companies, Foxwhelp and Caprikat, to obtain affirmation for the termination of an oil exploration and exploitation agreement. Both companies entered into said agreements in 2010, when the Congolese government agreed to grant an exploration and exploitation license for two oil blocks in the eastern Congolese province of Ituri.

Nevertheless, the project has been plagued by constant delays allegedly on Foxwhelp’s and Caprikat’s side, particularly involving their drilling tests, which have still not been properly carried out. The Democratic Republic of the Congo has sought to terminate the agreement on the grounds of a breach of contract, while the Israeli companies allege that those delays were due the steep fall in oil prices and have apparently invoked force majeure to prevent the termination of the contract. The Congolese government, in order to solve the dispute, has brought it before the ICC, looking to have the contract terminated and seeking a compensation of US$153.7 million for the companies’ alleged unjustified delays.

EGYPT

Egypt defeats hotel investor

An UNCITRAL tribunal at the Permanent Court of Arbitration in The Hague has reportedly issued a favourable award of Egypt in its recent dispute against Nile Douma Holding Co WLL, a Bahrain-registered luxury hotel developer. The case concerned Nile Douma’s purchase of a plot of land in the Rod El Farag area of Cairo, where the developer was planning to build a new luxury hotel complex. In 2016 the Bahraini company brought arbitral claims under the Bahrain-Egypt BIT against the Egyptian government for interfering with its investment by refusing to register the land for the project in Nile Douma’s name.

The arbitral tribunal agreed with Egypt, finding no legal breach on Egypt’s part and rejecting Nile Douma’s request for US$29.3 million plus interest.