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

EGYPT

German construction company to bring claims against Egypt

Egypt is again facing an arbitration claim from foreign investors. The German construction material conglomerate, HeidelbergCement (HC), along with its French and Italian subsidiaries, have commenced ICSID arbitrationclaims under the French-Egyptian and Italian-Egyptian BITs against Egypt.

The facts of the case took place in 2016, when HC acquired the Egypt-based Suez Cement group to boost its operations in the country. However, the German group maintains that Egypt has constantly been interfering with its investment by forcing it to cut production and unjustifiably favouring local companies over foreign ones. In particular, HC claims that on top of forcing it to reduce its production by 10%, the Egyptian military has opened a cement factory next to its own installations, leading to further losses for HC owing to increased competition and reduced production.

This represents the next iteration in a long list of claims that foreign investors have brought against Egypt in recent years. The country has received increased criticism for its protectionist drift and its recurring interference with foreign assets and investments.

LIBYA

Libya to pay damages for disruption caused by the 2011 revolution

The US District Court for the District of Columbia has confirmed an ICSID additional facility rules award in favour of the Austria-incorporated Strabag group against Libya. The dispute concerned a joint operation between the Austrian company and the Libyan government, who in the early 2000s agreed to establish a joint venture, the Al Hani General Construction Company (Al Hani GCC), which was assigned several construction contracts in Libya between 2006 and 2010. After the 2011 revolution in Libya, much of Al Hani GCC’s equipment was severely damaged, prompting Strabag to bring arbitral claims against Libya under the Austria-Libya BIT for failing to comply with the treaty’s war compensation clause. Under such clauses, the State is responsible for compensating the investor in cases of losses resulting from war or conflicts in the country.

The arbitral tribunal found in favour of Strabag and awarded the company €84 million in damages. The Libyan government attempted to have the award set aside claiming that the tribunal has exceeded its authority in upholding its jurisdictions and had failed to consider its allegations concerning the advanced payments Strabag had received. The US District Court for the District of Columbia found no legal or contractual basis for Libya’s allegations and dismissed its claims, thereby upholding the award.

SUDAN

Petronas to bring arbitral claims against Sudan

Petronas, Malaysia’s national oil and gas company, has brought arbitral claims against Sudan. The Malaysia state-owned entity claims that the Sudanese government illegally confiscated part of the terrain its Sudanese subsidiary had acquired to build its local headquarters in Sudan’s capital, Khartoum. The government on its part alleges that those lands were granted through corruption and the use of bribery under the orders of former president, Omar al-Bashir, who was ousted in a coup in 2019. Thus, Sudan views its actions as perfectly compliant with the law and its anticorruption policy. Petronas denies these claims and maintains that all acquisitions were made in accordance with the law, viewing Sudan’s actions as unlawful and outright expropiatory. This has prompted Petronas to bring arbitral claims against Sudan before ICSID on the basis of the Malaysia-Sudan BIT for allegedly breaching its anti-expropriation protections.

YEMEN

Several oil companies forced to pay award despite terrorism claims

The Paris Court of Appeal has rejected a request by oil giants DNO, Petrolin Trading and MOE Oil & Gas Yemen to set aside an ICC award that awarded almost US$ 30 million to Yemen, despite the allegations that the money could be used to fund the terrorist groups that are currently in control of large areas of the country. In 2019, an ICC tribunal granted the Yemeni government said damages after it brought claims against the three companies for prematurely withdrawing from the operation of an oil field in the country, allegedly due to the civil strife and unrest that has become rampant in Yemen. The tribunal found the withdrawal to go against the stipulations of the production sharing agreement that the parties had signed.

The Respondents have attempted to have the award set aside alleging that the Yemeni government is under the terrorists control and that there’s a real possibility of the awarded money being used to fund terrorist activities, which in their view goes against French and EU international public policy. The Court, while acknowledging that those points could very well serve to set aside an award, held that they need to be adequately proven by the parties, which had not been the case, as a direct connection between the Yemeni government and a terrorist group had not been properly established.

ZIMBABWE

ICC allows Zimbabwe to pay award in local currency

The Republic of Zimbabwe has obtained a favourable ICC award. Pungwe B, a local power company owned by Nyangani Renewable Energy, Zimbabwe’s largest energy producer, which is in turn owned by the UK-based PGI Group, brought the arbitral claims before the ICC. The dispute revolved around Zimbabwe’s alleged right to make payments for its hydroelectric power scheme in its local currency, the Real Time Gross Settlement (RTGS) dollar.

In 2014 Pungwe B signed a power purchase agreement with Zimbabwe’s national electric company, whereby Pungwe B would provide the country with hydroelectric power. The dispute concerns the currency the state would use to make its payments. Zimbabwe held it was entitled to make payments in its national currency, the RTGS dollar, which was introduced in 2019 to replace the highly devalued Zimbabwean dollar, while Pungwe B believed that given that the contract was denominated in US dollars payments had to be made in the far more stable US currency. The arbitral tribunal agreed with Zimbabwe, holding that the power purchase agreement allowed the state to make payments in its national currency. This decision is sure to have great repercussions in the energy sector in Zimbabwe, given the number of similar currency denomination cases currently ongoing in the country.