Egypt's Naguib Sawiris sues Algeria for $5bn

The telecoms tycoon lashed out against Algeria's treatment of foreign investors after launching a $5bn legal claim against the North African country.

Naguib Sawiris says that Algerian authorities have blocked more than $1bn in dividends from Djezzy. Simon Dawson / Bloomberg News

The Egyptian billionaire Naguib Sawiris lashed out last night against Algeria's treatment of foreign investors after launching a US$5 billion (Dh18.36bn) legal claim against the North African country.

"I think they do not like foreign investors being profitable," Mr Sawiris told The National.

The tycoon claims more than $1bn in dividends from his telecoms group Djezzy have been blocked from leaving the country by Algerian authorities among many other alleged breaches of contract.

The $5bn claim against the Algerian government was lodged with the International Centre for Settlement of Investment Disputes (ICSID) on behalf of Weather Investments, one of Mr Sawiris's investment vehicles. The claim is thought to be one of the largest ever registered with the World Bank body.

Emmanuel Gaillard, a partner at Shearman & Sterling, the legal firm representing the government of Algeria in the case, said: "We intend to defend the case vigorously, including by showing that Weather Investments' claim cannot proceed due to a lack of jurisdiction."

The claim comes after years of strained dealings between the Algerian government and the Egyptian businessman, whose company founded Orascom Telecom Algeria, better known as Djezzy.

The tycoon claims that Orascom Telecom Holding (OTH), a subsidiary of Weather Investments that owns 96.8 per cent of Djezzy, has invested about $3bn in Algeria since it won a mobile licence in 2001, as well as creating 4,000 jobs and increasing the country's telephone usage by 52 per cent in seven years.

He claims the government has acted unlawfully in its dealings with Djezzy.

"They enforced nationalisation of the operator … they changed the regulations under which we were operating, without any right or legal background, they prevented us from advertising on local TV stations, from importing SIM cards and our equipment - and they have acted this way with us only," said Mr Sawiris.

"They should protect the investments in the country, they should protect it, they should not change the rules on which the investment was made."

Analysts said that the battle between Mr Sawiris and the Algerian government was driven by the North African state's ambition to raise its stake in the company.

"The Algerian government want a bigger stake in Djezzy, so they have been making life difficult for the operator," said Mai Barakat, an analyst at Informa Telecoms & Media.

To date, the government had levied taxes and penalties of more than $950 million from 2004 until 2009 on Djezzy, the company said.

In April 2010, Bank of Algeria imposed an injunction on all Algerian banks, preventing them from engaging in foreign banking transactions on behalf of Djezzy.

The company has also been fined $1.3bn by Algerian courts on the grounds it breached foreign-exchange regulations.

"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," the company said.

Djezzy has been at the centre of much controversy, especially during the $6bn acquisition last year of OTH by Russia's Vimpelcom, when the Algerian government insisted on increasing its shareholding to 51 per cent. The operator is the country's most profitable and generates the most revenue for OTH's portfolio.

Vimpelcom signed a memorandum of understanding in January with Algeria's finance ministry to explore the sale of Djezzy. Talks have continued since, with no clear outcome as yet.

"It is a very difficult situation. [Vimpelcom are] making a lot of money, but the government is making it difficult for them to operate," said Ms Barakat.

Shearman & Sterling has valued Djezzy at about $7bn, but the government has previously said it was unwilling to pay more than $2bn to $3bn for the operator.

"The valuation is much higher than what they're willing to pay. There has been a lot of talk, but they have been having a lot of problems with investment," said Ms Barakat.

As of the end of last year, Algeria had a mobile penetration rate of 99 per cent. None of the three operators have third-generation (3G) licences.

Ms Barakat said there was "a lot of room for growth" in the Algerian telecoms market.

"There is still a lot of room for growth. The government wants more of an involvement in the industry. They want to make more revenues from the industry," she said.