Foreign investors turn to World Bank for Mena disputes

Heidelberg Materials

• 30 cases at World Bank arbitrator ICSID
• 5 ongoing cases against Egypt
• Cases brought to ICSID grew over time

Foreign investors are increasingly filing cases at the World Bank’s arbitration unit to resolve disputes with countries in the Middle East and North Africa (Mena) region.

The World Bank launched the International Centre for Settlement of Investment Disputes (ICSID) in 1966 to enforce investor rights that are guaranteed within bilateral investment treaties between countries. In all, 163 nations are current ICSID signatories.

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“Investors want to know what they can do if things eventually don’t go as smoothly as promised,” said Anne-Karin Grill, attorney-at-law at Austria’s AKG Advisory and an international arbitrator and mediator, including for ICSID.

“Some investors are already quite sophisticated and aware of protections within bilateral or multilateral investment protection treaties, but they don’t really have an idea as to what it means to enforce those protections.”

Foreign investments in Mena’s renewable energy industry are founded upon confidence that ICSID rules apply via the respective bilateral investment treaties, said Grill.

There are 30 cases pending involving foreign investors in Mena countries, according to the ICSID database.

Four were filed in the first half of 2023 – versus Saudi Arabia, Qatar, Bahrain and Tunisia.

Egypt in the spotlight

Egypt is the Mena nation brought most frequently to ICSID. It is party to five ongoing cases, including filings by Germany’s HeidelbergCement and Al Jazeera Media Network.

In total, 33 cases against Egypt have been concluded, although many of these were discontinued. In such instances, as with all abandoned cases, there are no public documents explaining whether the parties came to an out-of-court settlement.

“We were one of the very first (law) firms in Egypt to handle cases against Egypt – in the past it used to be all foreign firms representing investors,” said Girgis Abd El-Shahid, managing partner at Cairo’s Shahid Law Firm.

Most cases relate to contractor concessions that various government ministries or entities subsequently revoked, said El-Shahid.

When Mohamed Morsi took power in Egypt in 2012 he sought to scrap many of the contracts agreed by his predecessor Hosni Mubarak.

El-Shahid said this led to a surge in ICSID cases, which continued when Morsi was replaced as president by former army general Abdel Fattah El-Sisi.

“Investors tend to go to ICSID because they have confidence in that system and to make sure any award is internationally recognised and a claim against Egypt would be enforced,” said El-Shahid.

The surge in cases against Egypt at ICSID has not deterred foreign investment, El-Shahid said. “It’s the complete opposite – most cases have been decently settled by Egypt.

“Egypt is a developing country, so being a member of ICSID gives an assurance to investors.”

Growing caseload

The number of cases registered at ICSID worldwide has steadily increased. From its inception to 1996, only 38 cases were registered. From 1997-2006, there were 184. From 2007 to mid-2023, there have been 711, which reflects increasing cross-border investments and greater deal complexity.

Mena countries have been respondents in 11 percent of ICSID cases. 

Overall, 64 percent of all cases brought to ICSID were decided by tribunal and 36 percent were either settled directly between the parties or withdrawn.

Some countries, including Bolivia and Venezuela, quit ICSID, accusing it of bias towards corporations, high costs and a lack of transparency or appeals process.

Arbitration cases are held in private and often the few documents available on ICSID’s website are redacted or lacking crucial detail.

“I mostly work with multinational enterprises, private investors who run excellent businesses that are not only technologically advanced, but also make a contribution to wider society,” said Grill.

“Those businesses deserve protection. It's not all about the big corporations eating up taxpayers’ money. It's about making sure international ventures can thrive under the protective umbrella that international investment protection treaties offer.

"The dispute resolution mechanism at ICSID is an important tool to that end.”

Of all ICSID cases decided by tribunals since its foundation, 48 percent gave an award upholding claims in part or in full.

Other pending arbitrtation cases involving foreign investors and Mena include Hong Kong’s PCCW suing Saudi Arabia over the liquidation of Saudi Integrated Telecom Co, which went public in 2011 with a $1 billion valuation but never began operations.

PCCW, a shareholder in the telecom business, declined to comment, as did the law firm representing Saudi Arabia.

In another case, US investment corporation Carlyle Group sued Morocco, claiming it lost hundreds of millions of dollars following state interference in an oil refinery.

The process was abandoned in September 2022. Carlyle’s financial statements make no mention of the outcome and the company declined to comment. Morocco’s law firm did not respond to requests for comment.

In July 2022, ICSID published new rules on arbitration and mediation. Mediation is becoming a popular, cheaper and quicker alternative to arbitration.

“Why break a relationship when there is an opportunity to overcome misunderstandings or conflicts of interest?” added AKG Advisory's Grill. “It isn’t always about money.”