Damac lodges claim against Egypt

Wednesday, May 18, 2011

Gulf News

Dubai A Dubai-based developer yesterday lodged an international claim against the Egyptian government over a $40 million (Dh146 million) fine and five year jail term handed down to its chairman.

Damac Properties has filed a case with the international arbitration and settlement court after Egypt overturned a 30 million square metre land deal inked with former tourism minister Mohammad Zuhair Garranah, who was this month jailed for five years for corruption.

As part of Garannah’s trial, Hussain Sajwani, a UAE national and multi-millionaire founder of Damac, was also fined and jailed in absentia over the deal for property sold to his company for $30million on the Red Sea coast in 2006.

‘Guilt by association’

“The criminal prosecution and conviction of Sajwani were a classic case of guilt by association. No crime was committed by simply conducting business with the former regime,” said Sajwani’s counsel, Ken Fleuriet.

“While the Egyptian court held that the price paid for the Gamsha Bay property was too low, the transaction was entirely proper, and Damac was entitled to rely upon the price charged by the Government at the time. It was an arm’s length transaction that was fully vetted by the appropriate Egyptian officials at the time of purchase.”

Damac has brought the International Court for Settlement of Investment Disputes (ICSID) claim against Egypt under the bilateral investment treaty between the United Arab Emirates and Egypt, which protects investments made by UAE nationals in Egypt.

Sajwani argues that Egypt’s recent criminal prosecution and conviction in absentia violate the treaty on investment protection and have caused significant damage to his investments in Egypt and the wider world.

In a statement released yesterday, Damac argued that the court case had been a sham, pointing out that Sajwani was not informed about the proceedings and had to learn about it in the press.

“Egypt’s public prosecutor offered no evidence or explanation as to how he had engaged in any wrongdoing by simply concluding a business transaction with the former government,” it said.

“He was not kept informed of the charges or evidence against him, and he was not allowed to be represented by counsel during several important hearings. He was convicted in a sham criminal proceeding that were rushed through Egypt’s judicial system at lightning speed. The outcome of the proceeding appears to have been a foregone conclusion from the start.”

Sajwani’s lawyer, Fleuriet, said that his firm, King and Spalding, had already successfully brought previous ICSID arbitrations against Egypt.

‘Travesty of justice’

“The treaty and international law clearly prevent malicious criminal prosecutions and violations of due process that result in the sort of travesty of justice that occurred in this case,” he said.

Damac says that the case has illustrated a breakdown in the rule of law in post-revolution Egypt, and highlight a bilateral investment treaty between the country and the UAE that prohibits investors being treated in a manner that is unfair, inequitable, arbitrary, or discriminatory.

“Egypt’s malicious and unwarranted criminal prosecution and conviction violated a number of Egypt’s obligations under the treaty,” Damac said.

By Orlando Crowcroft?Business New Editor