Orascom-Algeria dispute needs mediator

Telecoms giant files a formal request for arbitration against the Algerian government after being hit by a $1.3 billion fine. Orascom Telecom (OTH) said on Thursday it had submitted a formal arbitration notice against the Algerian government, the latest twist in a long and bitter dispute over Orascom's local mobile phone unit. It follows years of acrimony between the Egyptian group and Algeria, which has hit the local subsidiary with millions of dollars in back-tax bills, put it under investigation over its currency deals and declared it would nationalise the firm. "OTH asserts that since 2008 its rights under the Agreement on the Promotion and Reciprocal Protection of Investments between Egypt and Algeria have been violated by actions taken by the Algerian government against (Algerian subsidiary) OTA," Orascom said in a statement. Among those actions, it said, were a recent court judgment against OTA imposing a fine of $1.3 billion and a criminal sentence on one of its top executives. Orascom said it would still support any move by its majority shareholder, Russia's Vimpelcom, to seek a solution with the Algerian government over OTA, which operates under the brand name Djezzy. Amr El Alfy, research director at CI Capital in Cairo, said the arbitration move may help lead to a settlement but could put further pressure on Djezzy's operations. "The press release leaves the door open to continue negotiations towards more favorable terms for both VimpelCom/Orascom Telecom and Algeria. However in the short term, this might add operating pressures on Djezzy," he said, adding that the arbitration process could take up to three years. Vimpelcom acquired assets from Orascom Telecom's Egyptian parent company last April in a deal worth around $6 billion. Vimpelcom said in January it had agreed to sell 51 per cent of Djezzy to the Algerian state and retain day-to-day management. But hopes that this marked an end to the dispute, which has weighed for years on Orascom's share price, were dashed last month when an Algerian court hit Djezzy with a $1.3 billion fine over its currency deals. In addition to the fine, the Algerian government also meted out a criminal sentence to one of Djezzy's executives. Orascom Telecom closed 1.5 per cent higher on Thursday prior to the announcement of the arbitration notice. Egypt's main index closed up 1.8 per cent. Asked by Reuters to comment on the decision to go to international arbitration, an official in Algeria's finance ministry, which has been handling negotiations with the Russian firm, said it had no immediate comment. From: Ahram online