US cotton investor sues Egypt for $100 million at World Bank tribunal
A group of American investors led by cotton processing and trading enterprise Champion Holding Company has filed an arbitration suit against the Arab Republic of Egypt. The investors claim over $100 million in compensations from the government of Egypt for the expropriation of their interests in the Egyptian cotton industry.
The lawsuit was registered on August 8, 2002 by the Washington-based International Center for Settlement of Investment Disputes (ICSID), a World Bank affiliate administering the arbitration of investment disputes between states and private foreign investors.
Operating from Greenwich, Cincinnati, the Champion corporation is owned by Mahmoud Wahba, a US citizen of Egyptian descent, who is also a founder of the New York-based Egyptian American Business Association.
After Egypt passed laws privatizing and liberalizing cotton trading and ginning in 1994, the US investors established a private cotton trading and ginning venture in Egypt. The company leased 17 cotton gins and employed some 5,000 workers, soon gaining a market share of about 18 percent of the annual Egyptian cotton crop, valued at $250 million.
According to the complaint, despite passing laws liberalizing the cotton market, the Egyptian government required the claimant investors to buy raw cotton from local farmers at fixed minimum prices and prohibited them from storing their cotton inventory. At the same time it refused to allow them to sell their cotton to overseas buyers. As a result, the investors were forced to sell their inventory at a huge loss to the only domestic buyer: the government itself.
"Arbitrary decisions by state officials and their failure to adhere to liberalization and privatization laws caused the collapse of my family's cotton business,” Wahba stated. “In the process, other investments by individual members of my family and affiliated companies were also damaged and my family was defamed in government-owned newspapers.”
"This dispute has arisen at a time when Egypt is transitioning from a socialist economy to a market economy. That transition process is something I have encouraged for a long time, and I continue to do so,” the aggrieved investor added. “Egypt needs foreign investment but because of past mistakes, it also needs to reassure the foreign investment community by actions, not just words.”
In December 2000, the Egyptian Supreme Court awarded Wahba’s now-obsolete National Cotton Company (NCC) 100 million Egyptian Pounds ($22 million) as compensation for losses suffered during the 1995/96 cotton season. NCC was established as a partnership between the American-owned firm and the government-owned National Bank of Egypt.
The case was similar to the one currently pending in the ICSID: government agencies prevented NCC from exporting his top quality long staple cotton at high international prices. NCC was also prevented from storing that cotton for more than one month, thus compelling the company to sell its entire inventory to government-owned spinning mills at less than half the export price.
Wahba is not alone in contesting Egypt’s credentials as a good destination for foreign investment. Also in December 2000, the ICSID awarded British-owned Wena Hotels $20 million in damages for the expropriation of the Nile Hotel and Luxor Hotel for which the UK-company signed long-term leases in 1989. — (menareport.com)
© 2002 Mena Report (www.menareport.com)