Orascom intensifies €5 billion expropriation claim against Algeria

Naguib Sawiris, one of the main Principals of the Orascom Group, has submitted a petition for annulment with the International Centre for the Settlement of Investment Disputes (ICSID), in an ongoing battle against what it describes as ‘unlawful and arbitrary actions’ taken by the Algerian Government effectively expropriating the telecommunications infrastructure in the country.

In 2012 Orascom TMT Investments (OTMTI) – the Luxembourgish company through which the Sawiris family was forced to sell telecommunications operator Djezzy and various other entities in the Orascom Group in 2011 – launched international arbitration proceedings against the Algerian State following repeated breaches by the North African country of its international legal obligations to foreign investors under an investment treaty concluded between Algeria, Belgium and Luxembourg. It is one of the largest cases to be brought before ICSID.

Earlier this year, the ICSID arbitration tribunal dismissed the claims as inadmissible under the investment treaty. However, OTMTI is now vigorously challenging that decision by way of filing for annulment, which it submitted on 28 September 2017.

The Chairman of Orascom TMT Investments, Naguib Swairis said: “We are very confident of a successful legal claim. However, regardless of the outcome of the legal process, the Algerian Government’s unilateral expropriation of assets from an established and long-term foreign investor sets a deeply worrying trend, and sounds the warning bell to other current or prospective foreign investors in the country.”

“As history shows, State interference in business only suffocates that country’s growth, stifling the free flow of financial and human capital, the transfer of technology and knowledge, and inhibiting necessary competition in the domestic market that is crucial to economic growth and social development.”

“Added to the increasingly authoritarian economic, legal and political state of Algeria, the country could be spiraling towards dangerous isolation – at a time when declining oil prices puts the country at its greatest risk.”

Throughout the 2000s, the Orascom Group was the largest foreign investor in Algeria during what was a highly unstable time for the country.

In 2001, the Orascom Group (through OTH) won a competitive bid to build Algeria’s telecommunications infrastructure. In just seven years, the Group invested over €5 billion, created over 4,000 jobs and dramatically increased telephone usage in Algeria. The Orascom operating company in Algeria was called Orascom Telecom Algérie – known with its brandname “Djezzy”.

From 2008 onwards, it became increasingly clear that the Algerian Government wanted to expropriate the telecoms infrastructure in the country, regardless of the legal rights of the foreign investors and providers of the country’s telecoms. The Algerian Government began a concerted campaign of harassment, interference and intimidation against the ‘foreign’ operations of Djezzy, including:

  • the imposition of more than US$950m in unjustified tax penalties on Djezzy between 2004-2009
  • the blocking of Djezzy’s payments of dividends to its foreign shareholders
  • an injunction in 2010 restraining all Algerian banks from engaging in any foreign banking transactions on behalf of Djezzy
  • a customs blockade imposed on Djezzy preventing it from importing goods and network equipment essential to the maintenance and stability of its telecommunications network
  • the imposition of a US$1.3 billion fine on Djezzy based on groundless allegations that it breached Algerian foreign exchange regulations

Orascom says the actions against Djezzy and its foreign investors forced the sale of much of the Orascom Group, including Djezzy, at a drastic undervalue to a third party more closely aligned with the Algerian State in 2011.

In total, the Orascom Group has suffered losses amounting to €5 billion from the actions taken by the Algerian Government.

OTMTI has instructed international law firm White & Case LLP as its legal advisor on the matter.

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