By Nigel Ash and Nihal Zaroug.
Tripoli, 22 May 2013:
Consternation surrounds reports that an arbitration panel in Cairo has ordered Libya to . . .[restrict]pay nearly a billion dollars to a Kuwaiti company for the loss of 90 years income from a cancelled Tripoli tourism project.
Reports carried in the Kuwaiti press and picked up by Reuters said that Kuwait’s Kharafi Group had been given the damages in arbitration proceedings organised by the Arab League.
Since 1992, the Arab Convention on Commercial Arbitration has worked under the aegis of the League.
The Kuwaiti group, owned by one of the richest merchant families in the Gulf, has a $4-billion annual turnover. It had agreed in 2006 to develop a $130-million Holiday Inn-branded resort in the Tajoura area of Tripoli, to be completed in 2011. Besides a 252-room hotel hotel, it would have included 100 villas, a shopping mall, a convention centre, spa and 1.4 km of beach with a club and water sport facilities. When Kharafi established its subsidiary Sovereign Hospitality Holdings in 2008, the project was transferred to it.
Until the uprising, when the deal was apparently cancelled, the Kuwaitis said that they had invested in feasibility studies, design and management contracts. However, the major part of their claim was for the loss of profit which they put at LD1.2 billion, plus interest.
It is thought that this may be the first such ruling on loss of future income by the Arab Convention on Commercial Arbitration, which was in part designed to protect Arab investors in other Arab League countries. As such it is certain to be appealed.
However, there appears to have been little awareness in Tripoli that the case and its potential financial implications was even under way in Cairo. Indeed there was some official confusion as to which Libyan entity was actually the defendant in the case.
A senior government official told the Libya Herald this evening that if the award, with its key component for loss of future income, were allowed to stand, it would be “a disaster”. Libya could be faced with claims running in to hundreds of billions, said the source.