ESQ Legal Practice Magazine JUNE 2014 EDITION | Page 34

DAMAC FILES FOR
ICSID ARBITRATION
AGAINST EGYPT

D

ubai-based
Damac
Properties has
this week filed
for international
arbitration against Egypt after
its chairman, Hussain Sajwani,
was convicted by an Egyptian
court for acquiring land below
its market value in the Red Sea
resort of Gamsha Bay during
2006.

And therein lies the rub: the
sins – or otherwise – of
previous governments will, in
time, require some degree of
unravelling once their
authority no longer applies.
Indeed, as Melanie Willems,
an international arbitration
partner in Chadbourne &
Parke in London, remarks,
“where there is regime change
there is always going to be
some questioning of the
Sentenced to five years in
commitments made by the
prison and fined USD 40.5
previous regime.”
million by the Cairo court,
It is, she notes, “almost as sure
Sajwani is thought to be
as night follows day.”
among the richest UAE
That being said, for Willems
nationals, with an estimated
“there is very little at this
stage which enables us to say
wealth of USD 2.5 billion.
whether or not there was a
The deal, concerning a 30
problem with the way the
square kilometre tract in the
Guilt by association
Gamsha Bay leisure
Kenneth Fleuriet, a partner in previous regime conducted
this particular commercial
development, had been
King & Spalding's
transaction.”
international arbitration
brokered by Egypt's former
tourism minister, Mohammad practice, acting as counsel for “Egypt has defended many
ICSID claims over the years,”
Damac's chairman, said that
Zuhair Garranah, at whose
says Craig Tevendale, an
trial for corruption the ruling the prosecution and
conviction of Sajwani was “a international arbitration
was made against Sajwani.
partner at Herbert Smith, “but
Damac's arbitration claim was classic case of guilt by
this will be the first which is
association.”
filed on 13 May at the
solely attributable to the
He acknowledged the
Washington-based
Egyptian court's finding that actions taken in the postInternational Centre for
Mubarak era.”
the amount paid for the
Settlement of Investment
Gamsha Bay property was too From a broader perspective,
Disputes (ICSID).
low: sold at USD 1 per square he believes that the case is
An arm of the World Bank,
worthy of further note
metre – a third of its true
established in 1966 by the
“because it is very unusual to
value, according to the
Washington Convention, the
see a matter of this nature
ICSID is considered to be the country's tourism authority.
brought by an Arab investor
The transaction – bought
foremost arbitral institution
against an Arab state –
through direct allocation
for investor-state dispute
rather than a public auction – although, of course, there are
settlement.
was nonetheless, Fleuriet
very significant differences
explained, “entirely proper,
between Egypt and the UAE
According to Damac, by
in a great many respects.”
convicting Sajwani in absentia and Damac was entitled to
rely upon the price charged by 'Several legal violations'
Egypt breached the Bilateral
Investment Treaty (BIT) which the government at the time.” What is equally clear,
Tevendale says, is that this
protects investments by UAE It was, he added, “an 'arms
will not be the last such claim.
length' transaction that was
nationals in the country.
fully vetted by the appropriate He explains: “it is no secret
In doing so Egypt was, the
company said in a statement, Egyptian officials at the time that there are a number of
of purchase.”
other parties, and certainly not
“responsible for a series of

www.esqlaw.net

blatant violations” of the 1997
BIT.
“There has been a gross
miscarriage of justice
according to international
principles,” it added.
“Unreservedly rejecting the
Egyptian court's judgment
regarding the company's
purchase of lands in the Red
Sea resort area,” Damac, the
statement went on, “has every
confidence that an ICSID
tribunal will ultimately
determine that Egypt has
violated a treaty and
international law with respect
to its treatment of Sajwani and
the investments of Damac in
Egypt.”

only from the Arab world,
who are lining up to
commence claims against
Egypt for losses arising from
the political turmoil itself, and
for the actions of the new
regime since.”
Indeed, the Egyptian
government may soon find
itself facing a further
international arbitration claim
– once again concerning deals
pushed through during the
regime of ousted president
Hosni Mubarak.
It follows the State Council's
Administrative Court recent
annulment of the deal that
saw Gamil Al-Kanbit,
chairman of Saudi-based
ret Z[\