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

EGYPT

Court of Cassation finds concession contracts not arbitrable

The Egyptian Court of Cassation has decided to set aside an ICC award valued at US$ 490 million brought by the Kuwaiti Damietta International Ports Company (DIPCO) consortium against the Damietta Port Authority (DPA), an agency operating under the Egyptian Ministry of Transport. The case concerned a concession agreement for DIPCO to operate the Egyptian port at Damietta for 40 years. Egypt revoked the concession in 2015 after alleging delays to the port’s operation. DIPCO sought damages for the wrongful termination of its concession and brought arbitral proceedings under the ICC. The tribunal found in favour of DIPCO and awarded it US$ 490 million..

The DPA sought to annul the award in the Cairo Court of Appeal, arguing that Egyptian law precluded government concession agreements from being subjected to arbitration. The Cairo Court of Appeal dismissed the DPA‘s claims, holding that the port concession agreement was to be considered a private law contract and thus arbitrable under Egyptian law. The Egyptian Court of Cassation has now overruled the Cairo Court of Appeal, maintaining that government concession agreements constitute unarbitrable administrative contracts, which fall under the jurisdiction of Egypt’s administrative courts.

This decision is expected to have wider implications for foreign investment in Egypt, seeing as it limits the recourse to international arbitration in the country, especially in proceedings concerning concession and state contracts.

Iran

Iran’s Central Bank brings claims against Bahrain

Iran’s Central Bank has brought arbitral proceedings against the Kingdom of Bahrain over investment lost as a result of the aftermath of the 2015 Iran nuclear deal. In its claim against Bahrain, Iran maintains that Bahraini authorities had prevented Iranian Central Bank officials and citizens from withdrawing their deposits from Bahraini banks in the wake of the 2015 Joint Comprehensive Plan of Action, highlighting the diplomatic connections between Bahrain and Iran’s geopolitical rival in the region, Saudi Arabia. Iran claims that such actions constitute a violation of fair and non-discriminatory treatment under the Iran-Bahrain investment treaty.

This action comes after a recent ruling where Bahraini courts found several Iranian banks responsible for allowing illegal financial transactions in violation of international sanctions against Iran.

Iraq

ExxonMobil files investment claim against Iraq

The American oil giant ExxonMobil has brought arbitral proceedings against Iraq’s national oil company, Basrah Oil Company (BOC), for allegedly interfering in its sale of its stake in the West Qurna 1 oil field in southern Iraq, one of the largest untapped oil fields in the world. ExxonMobil was granted the right to exploit the oil field in 2010, with a 20-year duration and the right to extend the contract for an additional five years.

Recently this year, ExxonMobil sought to sell a percentage of its interest in the West Qurna 1 oil field to PetroChina and China National Offshore Oil Corporation, with the latter’s right to purchase being later sold to Pertamina, Indonesia’s state-owned oil company.

The Iraqi government has allegedly opposed such operations, with the country’s oil minister claiming they would not accept any replacement that was not American and maintaining they would replace ExxonMobil with another American business if ExxonMobil attempts to sale its interests in the oil field. Meanwhile, ExxonMobil contends that Iraq’s actions constitute a breach of the concession contract, though the terms and details of the contract are yet to be disclosed.

Ivory Coast

Nigerian company seeks to prevent enforcement of ICC award

MRS Holding, a Nigerian oil trading company, has sought an injunction from the Federal High Court in Lagos against Ivory Coast´’s national oil company, Société Nationale d'Opérations Pétrolières de Côte d'Ivoire (Petroci), to prevent the enforcement of an US$ 11 million ICC award seated in Paris.

The dispute concerned an agreement between MRS and Petroci for the joint acquisition and operation of Chevron’s facilities in East and West Africa. To manage this operation, in 2008 both companies formed a joint venture vehicle, Corlay Global. Petroci alleges that it had the right under the constitution agreement to appoint half of Corlay Global’s board of directors and further claimed damages from MRS for contract breaches relating to the missapropiation of Corlay assets. The tribunal found that each company had to appoint half of the board members and awarded each party damages: Petroci US$ 25 million and MRS US$ 34 million. The tribunal in an addendum reduced MRS’ damages down to US$14 million, attributing it to a clerical error. MRS has applied to set aside the award before the Paris Court of Appeal, alleging that the modifications carried out in the addendum constitute an excess of powers by the tribunal. Furthermore, MRS has sought to prevent the enforcement of the award in Nigeria, on the very same grounds of excess of powers.

South Africa

Russian millionaire threatens claim against South Africa

Transasia Minerals, a South African-incorporated company owned by Russian millionaire, Azam Aslanov, has threatened to bring arbitral claims against South Africa under the 1998 Russia-South Africa Bilateral Investment Treaty for allegedly aiding a local businessman in defrauding Transasia of their mining rights in the country.

In 2011 Transasia acquired prospective rights for two mining sites in the South African province of KwaZulu-Natal from the company Umsobomvu Coal for US$ 930,000. Transasia claims that Umsobomvu Coal failed to transfer the mining rights after the payment had been made. Transasia further alleges that South African civil servants were involved in this obstruction of transfer of mining rights. Transasia maintains that this makes South Africa liable for a violation of investor expropriation protections under the Bilateral Investment Treaty.