Skip to content Skip to Search
Skip navigation

Korek Telecom fights $1.65 billion award to partners

Dubai Mercantile Exchange will be rebranded as Gulf Mercantile Exchange to reflect its position as a regional commodities exchange Dubai Tourism
Dubai Mercantile Exchange will be rebranded as Gulf Mercantile Exchange to reflect its position as a regional commodities exchange
  • Iraqi telecom co disputes claim
  • Takes on Orange and Agility
  • DIFC hearing in February

A Dubai court will next month hear whether it should scrap a $1.65 billion award against an Iraqi telecom operator and its politically connected top shareholder.

The long-running dispute underscores the risk that foreign investors face in Iraq, a country devastated by decades of conflict and sanctions and which is among the world’s most corrupt nations, according to Transparency International.

In March 2023, an arbitration panel awarded $1.65 billion to Iraq Telecom Ltd and an affiliate through which France’s Orange and Kuwait’s Agility Public Warehousing Co had invested in Korek Telecom Co, based in Erbil.  

The arbitrators found that Korek and its chairman Sirwan Saber Barzani had “participated in a corrupt scheme” to defraud Orange and Agility, according to a statement from White & Case, a law firm representing the claimants. 

However, Barzani and Korek have asked for the award to be scrapped, with Dubai’s DIFC Courts to hold a three-day hearing in the week starting February 19, according to Agility’s financial statements.

A Korek spokesperson said: “The award in this case was made on the basis of questionable information that was obtained by obscure means. We will challenge the result vigorously and look forward to making the arguments of our appeal clearly and forcefully at next month’s hearing.”

As recently as 2015, Korek was Iraq’s top mobile operator by subscribers but the dispute with Agilty and Orange, its failure to pay taxes and fees, and alleged chronic mismanagement have now left it a distant third to rivals Zain Iraq and Asiacell, which is majority owned by Qatar’s Ooredoo.

Following last March’s arbitration ruling, DIFC Courts granted a so-called recognition and enforcement order for the award and imposed a worldwide asset freezing order against Barzani.

The powerful Barzani family, along with the Talabani family, have long dominated Iraqi Kurdistan.

Barzani, along with Jawshin Hassan Jawshin Barazany and Jiqsy Hamo Mustafa, founded Korek in 2000, launching operations in northern Iraq and Kurdistan. Korek, Zain Iraq and Asiacell were awarded 15-year national mobile telecommunications licences in 2007. Each licence cost $1.25 billion, with the companies required to make an initial payment of $375 million.

Korek’s shareholders sought “external funding” for a second $250 million instalment due in September that year, according to documents from a separate 2021 Lebanese arbitration hearing obtained by AGBI.

That led Agility to invest $240 million in Korek through a convertible loan agreement and senior note guaranteed by Kurdistan’s regional government. Agility paid the licence fee tranche directly to Iraq’s telecom regulator.

Agility and Orange increase stake

In late 2009, Korek needed more money and expertise to enable it to expand outside Kurdistan.

Agility and Orange agreed to pay $810 million for an indirect 44 percent stake in Korek in a deal that also gave the joint venture partners an option to take majority control by buying a further 7 percent.  

All Korek shares were transferred to International Holdings Ltd, with Iraq Telecom – Orange and Agility’s joint venture – owning 44 percent. Korek’s co-founders held the remaining 56 percent. These included Barzani, who ultimately owned 42 percent of Korek.

In December 2013, the telecom regulator, the Communications & Media Commission (CMC) accused Korek and its partners Agility and Orange of failing to meet the terms it set in approving the pair’s investment in the Kurdish company.

The regulator revoked the partnership between Korek and Orange and Agility in July 2014, subsequently ordering the foreign duo to return their shares to Korek’s co-founders, including Barzani.

Agility and Orange claimed Barzani and his associates persuaded the CMC to annul their stake in Korek “through cash payments, gift bribes, and real estate transactions for the benefit of high-ranking CMC officials”, according to the final award document from the March 2023 International Chamber of Commerce tribunal.

The tribunal found that the respondents made illegal payments to CMC members through a bogus Lebanese law firm, IC4LC, and that illicit funds were used to buy two London properties for the use of Ali Al-Khwildi and Safa Aldin Rabee, two top CMC officials at the time. The combined purchase price of the properties was £2.25 million.

The tribunal also decided that Korek and Barzani conspired to get the CMC to revoke Agility and Orange’s shareholding and prevent the duo from taking majority control.

Orange has lodged a case against Iraq at the World Bank’s International Centre for Settlement of Investment Disputes, where companies can sue countries for breaching the protections enshrined in bilateral investment treaties.

Unauthorised payments

Orange and Agility’s evidence listed more than $50 million in unauthorised payments from Korek to entities owned and controlled by Raymond Rahmeh, a Lebanese business associate of Barzani and who also served on Korek’s management committee.

Korek made multimillion-dollar payments to other companies owned by Korek’s founding shareholders, the tribunal heard.

The tribunal awarded $1.24 billion in damages, plus a further $409 million in interest, fees and costs to the Orange-Agility joint ventures. Barzani and Korek are now seeking to have this award scrapped.

Orange, Agility and the CMC did not respond to requests for comment.

The earlier Lebanese tribunal also annulled a complicated agreement at Agility and Orange’s request after finding that Barzani had pocketed almost all the interest on a $150 million loan that Korek took from Beirut’s Intercontinental Bank of Lebanon.

Latest articles

GCC UK tax. The Labour government under new prime minister Keir Starmer may merge capital gains tax with income tax Video length: 04:06

GCC investors in UK warned of new tax liabilities

The newly elected Labour government is expected to introduce a range of tax changes that will impact non-doms – British expatriates living overseas – as well as the UK’s community of wealthy foreign investors.  Tax consultants suggest that GCC investors considering selling their UK assets should do it “sooner rather than later” to escape the […]

Iraqi Airways is seeking to expand its international reach. The airline has been working to modernise its fleet and improve its service standards,

Iraq given boost in plan to lift European flight ban

Iraq has moved a step closer to returning its flag carrier to European skies after receiving the support of the International Air Transport Association (IATA). Iraqi Airways was originally banned from Europe in 1991 due to safety concerns. Restrictions were briefly lifted in 2009 but enforced again in 2015 as the airline failed to meet […]

Part of the $3 billion deal is to redevelop Indonesia's Soekarno-Hatta International Airport

Eagle Hills gets claws into Indonesia

Eagle Hills, the Abu Dhabi developer, looks set to add Indonesia to its burgeoning worldwide portfolio. A tentative agreement was signed on Wednesday with the Indonesian government to develop $3 billion worth of tourism assets in the Southeast Asian archipelago. The deal has a validity of one year only, with the possibility of renewal, and […]

In a concession to the electorate, the legislation before parliament proposes a 25 percent increase in the payment to pensioners on the lowest rate of support

Turkey targets business with steep taxes to raise revenue

Multinational corporations operating in Turkey face a steep increase in their tax bills, thanks to one of the new revenue-raising measures outlined by the government in draft legislation aimed at narrowing the budget deficit. Under the new tax reforms, tabled before the parliament on July 16, multinationals with more than $817.6 million in annual consolidated […]