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

SAUDI ARABIA 

Saudi Arabia achieves first win at ICSID

Saudi Arabia has obtained its first-ever favorable award from an ICSID tribunal. The facts of the case took place in 2005 when Saudi Arabia’s Ministry of Commerce and Industry, allegedly without justification, ordered the closure of the facilities of French fashion retailer Makae Trading Establishment. In 2017, Makae, Makae Trading Establishment’s parent company, brought an arbitration before ICSID under the France-Saudi Arabia BIT. Makae in turn, is partially controlled by Kuwaiti businessman Muhammad Ayed Khamis Alenezi.

The tribunal determined that Makae did not own Makae Trading Establishment and, contrary to Mr. Alenezi’s allegations, had never exerted actual control over it, which the BIT required in order to establish the tribunal’s jurisdiction. In light of this, the tribunal dismissed Makae’s claims.

ETHIOPIA

Egyptian investors threaten claims over Tigray civil war

Two Egyptian companies, Trafotech and Cynosure Agro-Processing PLC, a power transformer manufacturer and a furniture distributor, respectively, have threatened to bring arbitration claims against Ethiopia for its actions in the country’s northern region of Tigray. The area has been immersed in a civil war since late 2020, when the Ethiopian federal government ordered the army to intervene after a regional militia group attacked a federal military base in the region.

The Egyptian investors maintain that Ethiopia’s actions interfered with their operations in the region, threatening to bring claims before ICSID despite Ethiopia itself not being a signatory to the ICSID Convention. This may further escalate the ongoing tensions between Ethiopia and Egypt, which have been at odds for over half a decade, primarily over each country’s right over the Nile waters.

REPUBLIC OF THE CONGO

Australian mining company brings claims against the Republic of the Congo

EEPL Holdings, a Mauritius incorporated subsidiary of Australian mining company, Equatorial Resources, has commenced an ICSID arbitration against the Republic of the Congo under the Mauritius-Congo Bilateral Investment Treaty. Equatorial Resources claims that Congo unjustifiably revoked its iron ore mining licenses in the country in order to hand them to a Chinese mining conglomerate, Sangha Mining Development Sasu. 

Equatorial Resources maintains that Congo has been repeatedly revoking its licenses and concessions without any just cause and granting them to Chinese companies, which it views as a clear violation of the expropriation-protection and the fair and equitable treatment clauses contained in the Bilateral Investment Treaty between Mauritius and the Republic of Congo.

ALGERIA

Spanish company threatens investment claim over venture expropiation

Spanish company Grupo Villar Mir (GVM) has threatened to file an arbitration against Algeria for allegedly violating the expropriation-protection and FET provisions contained in the Spain-Algeria BIT. GVM, along with the Algerian national oil company Sonatrach, jointly own Fertial, an Algerian fertilizer producer. GVM maintains that Sonatrach (and by extension the Algerian government) has unjustifiably blocked Fertial’s accounts, thus preventing it from running its normal course of operations. GVM also argues that Algeria has repeatedly harassed Fertial by subjecting it to repeated and unjustified tax inspections and preventing the company from selling to its largest client in Norway. GVM maintains this is all a strategy by Algeria to reduce Fertial’s market value and acquire GVM’s shares at a discounted price.

This is the newest episode in GVM and Algeria’s turbulent relationship. Indeed, in April 2021, GVM had already initiated ICC arbitral proceedings regarding a purchase agreement of GVM’s Fertial shares by Sonatrach.

LEBANON

Franco-Lebanese joint venture wins fraud claims against Lebanese bank

Iraq Telecom, a joint venture incorporated in the United Arab Emirates and owned by France’s Orange and Kuwait’s Agility, has obtained a favorable award against the Intercontinental Bank of Lebanon (IBL). Iraq Telecom successful alleged that IBL had intentionally tricked it into entering a subordination agreement for a US$150 million loan. This loan was granted by IBL to a third party, Korek, on condition that Iraq Telecom agreed to subordinate a US$285 million shareholder loan granted to Korek. When Korek defaulted on its loan, Iraq Telecom was unable to recover its money. Iraq Telecom eventually uncovered that Korek shareholders and IBL had colluded to prevent Iraq Telecom from recovering its loan.

Iraq Telecom brought arbitral claims before the Lebanese Arbitration Center of the Chamber of Commerce, Industry and Agriculture of Beirut and Mount Lebanon, with Lebanese substantive law being applicable, looking for the subordination agreement to be declared null and void. The tribunal found in in favour of Iraq Telecom, establishing that Iraq Telecom had been deceived into entering an agreement without prior knowledge of the relationship between Korek and IBL, thereby declaring the invalidation of the subordination agreement.