Orascom Telecom: Algerian Govt Faces Two-Sided Battle Over DJezzy
Orascom Telecom Holding (OTH) (ORTE.CA) has asserted that Group Founder Naguib Sawiris has ‘personally’ resorted to the international arbitration in regard to Orascom Telecom Algeria (OTA) – Djezzy. The company further added that the international arbitration will not affect the talks between parent VimpleCom and the Algerian government on putting an end to the disputes.
Khalid Al Leithy, Chief Finance Officer of Orascom Telecom, said Sawiris has resorted to the international arbitration in his capacity as the Chairman of Weather Investments, which owns a stake in DJezzy.
He noted that Orascom Telecom Holding itself, excluding Sawiris, has also started the international arbitration procedures for around one year.
Al Leithy further told Amwal Al Ghad that the Algerian government is currently facing a two-sided battle over DJezzy, one from Orascom Telecom and other from Sawiris. Both cases filled by OTH and Sawiris will not affect VimpleCom’s attempts to reconcile with the Algerian government, he asserted.
It is worth noting that Sawiris announced on November 19th that he is seeking $5 billion 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.
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.
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.”
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”.
Sawiris said 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”.
