November 18, 2012 10:45 pm

Sawiris’ Weather seeks $5bn Algeria damages

Weather, the investment company chaired by Naguib Sawiris, the Egyptian telecoms magnate, is seeking $5bn from the Algerian government for alleged harassment and interference of the country’s largest telecoms operator.

Weather Investments, a Luxemburg-based group, has lodged the commercial complaint with the International Centre for the Settlement of Investment Dispute (ICSID). It is one of the largest claims to be brought before the international arbitration tribunal, which is part of the World Bank.

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Weather alleges that the government of Algeria pursued a campaign of harassment and improper treatment against Orascom Telecom Algérie (OTA), the Algerian telecom group that operates as Djezzy, in which Weather owned a stake.

Weather Investments claims that Algeria repeatedly breached its international legal obligations under an investment treaty between Algeria and the Belgo-Luxembourg Economic Union.

Mr Sawiris said: “In 2001 [we] won the competitive bid to build Algeria’s telecommunications infrastructure, investing $3bn, creating 4,000 jobs and increasing telephone usage by 52 per cent in just seven years.

“The Algerian government committed to a number of protections, including a promise to refrain from arbitrary interference in our operations, but has since 2008 pursued a campaign of interference and harassment which has cost Weather Investments over $5bn in damages.”

Emmanuel Gaillard, head of the international arbitration group at Shearman & Sterling, the firm that is representing the Algerian government, said: “We confirm that Weather Investment has initiated arbitration proceedings for alleged treaty breaches. We intend to vigorously defend the case. We think the claimant has no case.”

Mr Gaillard argued that Weather Investment cannot pursue the matter in the first place given its opaque structure and its status as indirect minority shareholder in OTA. Even if jurisdiction were to be found, he said, “we don’t see any room for a treaty breach”.

Mr Sawiris said that this was a “bad development not just for us, but for all foreign investors in Algeria”.

Weather alleges that Algeria prevented the paying of dividends to its overseas owners. It also alleges that the government interfered in talks to sell the business.

Mr Sawiris said Weather was forced to sell the business to mitigate losses. He said Weather was dependent on the Algerian dividends to finance expansion and other networks, which then forced a capital increase when the proceeds were cut off.

He said that this led to the “forced” sale to VimpelCom last year. “We would have kept the business, but we had to sell it, and we had to sell it cheap,” he said, adding that this ended the “dream to create the first global pan-Arab telco company”.

The ICSID is the dispute resolution branch of the World Bank based in Washington. Weather Investments issued a notice of dispute in April 2012, putting Algeria on notice that it would face an ICSID claim if the dispute was not resolved in six months. The parties did not reach a settlement, and Weather filed the ICSID arbitration against Algeria. This was acknowledged on Friday.

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