International Arbitration Newsletter - March 2020 | Regional Overview: Middle East and Africa

EGYPT

PCA to decide claim against Egypt over plane crash

The claim relates to a plane crash that, according to experts, was caused by a bomb explosion. It occurred in 2015 over the Egyptian desert region of the Sinai. The crash killed all 224 passengers, the majority of which were Russian tourists. The Russian airline, Metrojet (a trademark of Kogalymavia Airlines) and the Turkish tour operator, Prince Group, (both companies are owned by Mr. Ismail Lepiev) are seeking at least US$200 million in an investment treaty claim against Egypt at the Permanent Court of Arbitration (PCA) in the Hague over the suspected terrorist attack.

The Claimants brought their claim in 2017, seeking compensation for both direct damages caused by the crash and the loss of their investment in the Egyptian economy. The airline, which stopped flying shortly after the crash and filed for bankruptcy shortly after, is seeking US$90 million in damages. The Turkish tour operator is seeking US$111 million.

Egypt defeats second claim by cotton investors

An ICSID tribunal has dismissed a US$500 million claim brought against Egypt by a US-based family, the Wahba family, over their investments in a cotton venture almost two decades after an ICSID tribunal dismissed a claim by members of the same family based on their dual nationality (Egyptian/American).

The arbitral panel decided to divide the arbitration proceedings to first hear arguments on jurisdiction and admissibility. It is understood that the arbitral tribunal dismissed all the family’s claims, finally deciding that it lacked personal jurisdiction over some of the family members and declaring that the remaining claims were inadmissible. The panel also ordered the Wahba family to pay Egypt’s full costs and legal fees.

Last year, Egypt brought proceedings against the family, this time before a Delaware State court. The Egyptian state argued that the family had repeatedly attempted to “ratify defective corporate acts” to retroactively create subject matter jurisdiction for their treaty claim. The case is still pending.

Libya

Libya defeats Indian constructor in another ICC arbitration caused by the Libyan civil war

An arbitration proceeding administered by the ICC, seated in Paris and subject to Libyan law, has ended with an award rejecting a US$205 million claim brought by an Indian contractor, Punj Lloyd, against a publicly owned oil company, Sirte Oil, a subsidiary of the Libyan National Oil Corporation , over a construction project that was interrupted by civil strife.

In 2006, Punj Lloyd and Sirte Oil signed two agreements to build a series of pipelines and compressor stations in Libya. When the civil war started in 2011, Punj Lloyd claims that the losses total US$55 million owing to the destruction caused by the conflict. At the outbreak, the project was not finished but, according to Punj Lloyd, the progress amounted to 87%. The region entered a period of relative peace in 2013, at which point, Punj Lloyd says, the parties met to discuss continuing with the construction. After these discussions, Punj Lloyd maintains that Sirte Oil had unilaterally expanded the project’s scope to include tasks that were not in the original agreement. Punj Lloyd decided then to bring a claim requesting damage and delay compensation.

The arbitral tribunal dismissed Punj Lloyd’s claim concluding that Sirte Oil had not unilaterally changed the terms or the agreement and that it had not, in any way, violated the original contracts. In addition, the award orders Punj Lloyd to pay US$5.195 million in costs and legal fees.

QATAR

The United Nations Universal Postal Union delivers an unprecedented ruling in an uncommon interstate procedure

The Universal Postal Union (UPU), recently issued a (10 to 2) ground-breaking resolution instructing the appointment of tribunal chairs in four different arbitrations. These proceedings have been filed by Qatar against its Gulf neighbours and their allies (Saudi Arabia, the United Arab Emirates, Bahrain, Egypt, the Maldives, Mauritania, Senegal, Djibouti, the Comoros, Jordan, Yemen and Libya) in relation to the suspension of postal services as part of Qatar’s blockade.

This resolution was issued under the dispute mechanism contained in article 32 of the UPU Constitution, which is seldom used by member states. This dispute resolution mechanism provides that any controversy between member states concerning UPU acts shall be settled by binding arbitration.

In 2017, after accusations that Qatar was supporting Islamist terrorist groups, neighbouring Gulf states decided to blockade Qatar diplomatically and economically. Amongst those measures, some of these states had chosen to suspend all postal services with Qatar, which according to its counsel, caused “significant harm to Qatar, its postal operator, its nationals, and its residents”.

The defendant states had refused to appoint the chair arbitrators in these proceedings. This being the case, under the UPU rules, if a party refuses to appoint an arbitrator within three months of the case being filed, the international bureau will, should the party continue to refuse, appoint one itself automatically. After the UPU’s resolution instructing the appointment of these chair arbitrators automatically had been published, the UPU announced that the defendant states had begun to allow post to travel indirectly via Oman into Qatar.