On September 17, 2020, an ad hoc committee dismissed the annulment request lodged against the award rendered in favor of the Algerian government in a dispute with Luxembourg-based Orascom TMT Investments (Orascom TMTI), a company owned and controlled by Egyptian billionaire Naguib Sawiris.
The award rendered in May 2017 by an international arbitral tribunal constituted under the aegis of the International Centre for Settlement of Investment Disputes (ICSID) had rejected Sawiris’ Orascom TMTI’s $4bn claim against Algeria in its entirety, holding it inadmissible and abusive. The Tribunal had also ordered Orascom TMTI to bear the costs of the proceedings as well as 50% of Algeria’s legal fees and expenses.
Mr Sawiris made his fortune in the telecommunications sector, notably profiting from his ownership interest in Algerian telecom company Orascom Telecom Algérie (OTA), operating under the trade name “Djezzy” since 2002. In 2008, the Algerian government took actions against OTA, in which Mr Sawiris’ OTMTI held an indirect stake, for various breaches of Algerian law. Mr Sawiris in turn alleged that Algeria’s measures against the company were part of a political vendetta against him. The Egyptian businessman repeatedly expressed his resentment against Algeria in the media, accusing the State of having “broken his dreams”, and proclaimed that he would pursue his claim “no matter how long it takes”, calling it “a matter of principle”.
In an effort to avenge this perceived persecution, Mr Sawiris submitted Orascom TMTI’s complaint to ICSID in 2012. The company claimed that Algeria repeatedly breached its international legal obligations under an investment treaty between Algeria and the Belgium-Luxembourg Economic Union, including in the alleged failure to protect OTA’s premises during riots following the Egyptian national football team’s victory over the Algerian side in a 2010 World Cup qualifying match.
A $16 billion UNCITRAL arbitration brought by OTA’s Egyptian direct shareholder, Orascom Telecom Holding (OTH), against Algeria over the same dispute was settled in 2014. This settlement was reached after three years of highly complex negotiations, following which the Algerian Fonds National d’Investissement (FNI), a strategic investment fund controlled by the Algerian State, signed a Share Purchase Agreement related to the acquisition of a 51 percent stake in OTA, for a purchase consideration of $2.643 billion. Orascom TMTI, OTH’s former indirect shareholder, argued that the 2014 settlement had no impact on its parallel, distinct proceedings.
After five years of proceedings, the arbitral tribunal concluded that OTMTI’s claim was inadmissible and held that it was precluded from exercising jurisdiction over the dispute. The tribunal also concluded that, given the circumstances surrounding Mr Sawiris’ claims, OTMTI’s suit amounted to “an abuse of the system of investment protection”. As a result, the tribunal ordered OTMTI, which had already incurred $20 million in legal fees and expenses, to pay for the entirety of the costs of the proceedings and to reimburse 50 percent of Algeria’s expenses incurred in relation to the arbitration, costing the company an additional $3.5 million.
In September 2017, Orascom TMTI filed an application for partial annulment of the award, seeking to annul the portions of the award relating to admissibility and costs. Orascom TMTI argued 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. In a decision dated September 17, 2020, an ICSID ad hoc committee constituted to hear the request for annulment, chaired by ICJ Judge Peter Tomka, rejected Orascom TMTI’s application for annulment and ordered Orascom TMTI to bear the costs of the annulment proceedings, amounting to $755,000.
Emmanuel Gaillard, lead counsel to Algeria and global head of Shearman & Sterling’s International Arbitration Group, says “We are extremely pleased with this decision. First and foremost, we are delighted for Algeria. Algeria has never been defeated in any of the investment arbitration matters brought against it. We are also immensely pleased that the committee confirmed the tribunal’s landmark award which will help future arbitral tribunals to police abusive conduct on the part of some investors who bring parallel arbitral proceedings at different levels of an integrated corporate chain in relation to the same dispute.”
Yas Banifatemi, co-lead counsel to Algeria and head of public international law at Shearman & Sterling, says “The committee’s decision is very well-reasoned, in particular with respect to the concept of admissibility. The committee confirms that deriving rules of inadmissibility from principles of international law, the tribunal’s inherent powers, and/or the purpose of investment arbitration constitutes a legitimate exercise of the tribunal’s function. This is a very welcome confirmation of the powers of investment tribunals and of their role in the development of investment law”.
The team that advised in relation to the corporate transaction included Of Counsel Cyrille Niedzielski, partners Guillaume Isautier (Paris-Mergers & Acquisitions) and Maude Lebois (Paris-International Arbitration) and counsel Anne-Sophie Maes (Paris-Tax).