The Africa Report | 6 October 2020

Algeria: Never-ending battle with Sawiris’ Orascom finally concudes

By Djamila Ould Khettab

Algeria has won the final round of a battle that pitted it against Egyptian billionaire Naguib Sawiris’s holding company. We take a look back on this more than 10-year-long judicial saga.

The long-winded legal battle has reached its epilogue. The Algerian state has definitively won its case against Egyptian businessman Naguib Sawiris’s holding company, Orascom TMT Investments (Orascom TMTI), which previously held a majority stake in the Algerian mobile network operator Djezzy.

An arbitral tribunal put an end to the showdown between the Algerian government and Egypt’s second-richest person on 17 September, when it rejected the $4bn claim filed by Sawiris against Algiers, according to the law firm Shearman & Sterling, who represented the Algerian authorities in the case. Let’s take a look back on the dispute’s key moments.

2010 – The dispute begins

Against a backdrop of deteriorating relations between Algeria and Egypt, Sawiris, the chief executive of a multinational empire specialising in sectors such as telecommunications, construction and media, decided in 2009 to sell Orascom Telecom Algérie (OTA), his highly lucrative subsidiary operating under the trade name “Djezzy”, Algeria’s leading telecommunications operator at the time.

The Egyptian magnate was in late-stage negotiations with South Africa’s MTN when Algiers vetoed the deal. The Algerian state, fully transparent about its intention to nationalise the country’s no. 1 mobile operator, exercised its pre-emption right and declined to allow OTA’s total or partial sale to a third party.

Cornered by Algeria’s tax authorities, who claimed they were owed nearly €600m, Sawiris joined forces with the giant Russian/Norwegian telecoms company VimpelCom (operating as VEON since 2017), which took over OTA in March 2011.

November 2012 – Case goes before arbitral body

Angry with Algeria’s leaders, Sawiris decided to bring the case before a court. In November 2012, Orascom TMTI, a company incorporated in Luxembourg and formerly owned by OTA, initiated arbitration proceedings before the International Centre for Settlement of Investment Disputes (ICSID) on the basis of the bilateral investment treaty between the Belgo-Luxembourg Economic Union and Algeria. Orascom TMTI sought compensation of more than $4bn from the Algerian state on the grounds that the latter blocked OTA’s sale to foreign investors by using its pre-emption right.

January 2015 – Algiers takes over Djezzy

Pending the ICSID’s ruling, Algiers, through its Fonds National d’Investissement (FNI), completed the $2.6bn sale of a 51% stake in OTA, owned by VimpelCom at the time, via its subsidiary Orascom Telecom Holding (now known as Global Telecom Holding), on the basis of the 51/49 law requiring foreign investors to set up a local company with at least 51% of the share capital owned by national shareholders.

VimpelCom retained the managerial and operational control of OTA while FNI was given veto rights over the company’s major strategic decisions.

May 2017 – Algeria’s first victory

After more than four years of proceedings, the ICSID dismissed the Egyptian billionaire’s claims. In a ruling made public on 31 May 2017, the arbitral tribunal rejected all of Orascom TMTI’s claims, describing Sawiris’s conduct as an “abuse of rights”.

The tribunal ordered the company controlled by Sawiris to reimburse the Algerian state for the amounts deposited with the ICSID in respect of arbitration costs and for “half of the legal fees and other expenses incurred in connection with the arbitration, representing a total amount of more than $3.5m”, according to the defence lawyers.

September 2017 – Orascom lodges an appeal

Orascom TMTI came back on the offensive in September 2017 by filing an application for partial annulment of the ICSID award, arguing that “the tribunal manifestly exceeded its powers, seriously departed from a fundamental rule of procedure and failed to state the reasons upon which the award is based”.

September 2020 – Case comes to a close

In a final ruling, an ICSID ad hoc committee unanimously rejected the application for annulment filed against the award rendered in favour of the Algerian government in its dispute with Orascom TMTI. The company was ordered to bear the full costs of the annulment proceedings, amounting to $755,000, according to Shearman & Sterling. The case is definitively concluded.