Saudi investors intend to make a $250 million claim against the Egyptian government after it seized control of their fruit and vegetable firm.
Saudi investors preparing $250m claim against Egypt
Saudi investors intend to make a US$250 million (Dh918.2m) claim against the Egyptian government after it seized control of their fruit and vegetable firm.
Sheikh Abedlelah Mohammed Saleh Kaki and other Saudi investors are protesting against a decree by Egypt's ministry of agriculture to expropriate Noubaria Seed Production in Alexandria and dispose of its assets.
"Our clients will be vigorously pursuing their rights against the Egyptian authorities and believe they will get a more impartial and objective hearing at an international level rather than a local level," said Robert Lambert, a partner at Clifford Chance, the UK law firm representing Sheikh Kaki and the other investors.
"Claims of this nature will undoubtedly have a chilling effect on foreign investment at a time when Egypt most needs to encourage it."
The action forms part of a growing number of foreign investors who are resorting to international arbitration in protest at government expropriation of their firms. Sheikh Kaki is already pursuing separate legal proceedings after a Cairo court annulled the privatisation of Tanta Flax and Oil, another company where he is chairman.
In October, army and police officials stormed the Alexandria offices of Noubaria, seizing documents and giving orders to managers to answer to them. Customers of the firm were told to redirect their payments to the ministry of agriculture.
Acting on Sheikh Kaki's behalf, Clifford Chance wrote to the government on several occasions protesting against the seizure before sending a "letter before action" to Kamal El Ganzouri, the Egyptian prime minister, last month, describing the expropriation as unlawful and having a serious financial impact on the businessman's investment. It threatened legal action unless the government responded by a deadline of February 29.
No response was received and, instead, the government issued a press release last week saying it was installing a new committee to rule the company.
The military-appointed government has embarked on a legal effort to renationalise some Egyptian firms privatised under the regime of the former president Hosni Mubarak. It has said many such assets were sold too cheaply without guaranteeing the interests of workers.
Officials were only looking into cases where concerns about corruption existed, said a source representing Egypt's foreign business community, who asked to remain anonymous.
"They are opening files where there was suspicion of certain privileges given (to companies) by the past regime," said the source.
"They are also needing to be responsive to complaints from workers." Sheikh Kaki, a long-term investor in Egypt, took full ownership of Noubaria in 1997 and an investigation into the privatisation in 2006 found no criminal wrongdoing. The firm, which employs close to 1,000 workers during peak season, exports fruit and vegetables mainly to European and Russian markets.
Sheikh Kaki and his legal team have been given no reason for the government's action.
Foreign investors have become increasingly wary since the new government came into power. Its seizure of companies has often appeared at odds with public talk by officials about a desire to entice foreign investors.
Nobody was available to comment from Egypt's ministry of agriculture.