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International tribunal rejects Korek Telecom case

24 Feb 2021

The World Bank’s International Centre for Settlement of Investment Disputes (ICSID) has rejected a claim from Kuwaiti logistics firm Agility regarding the confiscation of its stake in Korek Telecom, Reuters reports, citing court documents. Agility had sought the recovery its investment of more than USD380 million in the telco on the grounds that the Iraqi government had violated a bilateral investment protection agreement between Kuwait and Iraq. Agility argues that it and its subsidiaries were denied the opportunity to challenge a 2014 decision by Iraq’s telecoms watchdog the Communications and Media Commission (CMC) to annul the investment made by Agility and its partner – France’s Orange Group – in the company. CMC had cited as its reason for the decision Korek’s failure to meet certain requirements regarding coverage and service quality which had been imposed as a conditions for its approval of Agility and Orange’s investment in the company.

According to Reuters – citing an unnamed source in the Iraqi Prime Minister’s office – ICSID has rejected Agility’s claim as the dispute predates the 2015 Kuwait-Iraq treaty, and because the company did not use all the legal avenues in Iraq to challenge the CMC’s order. Agility has been ordered to pay USD5.2 million in legal fees to the Iraqi government. The Kuwaiti firm is considering seeking the decision’s annulment, however, describing the ruling as ‘fundamentally flawed’. Agility argues that the tribunal made its decision without investigating or considering evidence of corruption by key members of the CMC.

As noted by TeleGeography’s GlobalComms Database, Orange and Agility acquired a 44% stake in Korek Telecom via joint venture Iraq Telecom in 2011, with a call option that would allow the JV to acquire a 51% stake in July 2014. Shortly before that date, however, the CMC ordered that the company’s shareholding structure revert to its pre-2011 form, arguing that obligations imposed by the regulator related to investment and network construction had not been met. Despite legal action from the two partners, full control of Korek was handed to local investors in March 2019. As part of the legal proceedings the Agility and Orange accused Korek’s directors of mismanagement and misappropriation of millions of dollars of the company’s funds, including using money syphoned from Korek to bribe CMC officials. For example, Iraq Telecom claimed that two properties in London were purchased by an associate of one of the local shareholders and then occupied by senior CMC officials and their families.

Orange initiated similar arbitration proceedings with the ICSID in October 2020, also citing the violation of bilateral investment protection treaties.

Iraq, Communications & Media Commission (CMC) [Iraq], Korek Telecom, Orange Group

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