Telecoms disputes in the Middle East and Africa

In summary

The telecoms sector is typically heavily regulated in the Middle East and Africa; however, many countries in this region have made efforts to liberalise their telecoms sectors. This article discusses recent telecoms disputes in the Middle East and Africa, highlighting how arbitration remains the preferred forum for resolving cross-border disputes in the telecoms sector.

Discussion points

• Recent telecoms disputes and arbitration in the Middle East and Africa
• Arbitrability in telecoms disputes

Referenced in this article

• Agility v Iraq
• Vivacell v South Sudan
• Smile v ATC Uganda and Eaton
• ATC Kenya v Telkom
• Geonet v Safaricom
• Iraq Telecom v Korek

Introduction

Telecommunications is one of the fastest-growing sectors in the world.^[1] Telecoms technology has developed over several generations, with each generation being characterised by new frequency brands, higher data speeds and more complex transmission technology. Projections indicate that, by 2035, 5G technology will unlock an estimated US$12.3 trillion in global output, while its accompanying value chain is anticipated to generate approximately US$3.5 trillion in output.^[2] This will have a profound impact on local enterprises and empower regions such as the Middle East and Africa to engage competitively in the telecoms space.^[3]

The regulatory framework that governs licensing requirements, competition policies, pricing controls, consumer protection and security measures differ from country to country.^[4] In the Middle East and Africa, the telecoms sector is typically heavily regulated. Consequently, governments in these regions often play a significant role in overseeing telecoms infrastructure, services and operators.

However, many Middle Eastern and African countries have made efforts to liberalise their telecoms sectors. Bahrain was the first country in the Gulf to liberalise its telecoms sector and open up its market to competition, encouraging investment and innovation.^[5] Bahrain’s national development plan, referred to as ‘Economic Vision 2030’, highlights that services, including telecoms, ‘will be readily accessible and competitively priced, providing a stable base for businesses’.^[6]

Rapid technological advancements, combined with the complexity of the telecoms sector and varied regulatory environments, create fertile ground for disputes to arise. This is particularly important in Africa where telecoms is one of the fastest-growing sectors of the economy.^[7] Disputes in the telecoms sector mainly arise from technological advancements, regulatory changes, interconnection issues, billing practices and the international nature of telecoms investments.^[8] Further, technological evolution from 3G to 4G and now 5G introduces new capabilities that may lead to disputes over licensing agreements, patent rights and technological integration.^[9]

Given that matters involving the interpretation of complex regulatory frameworks or public policy considerations often require judicial or regulatory intervention, international arbitration has inherent limitations in addressing certain telecoms disputes. Regulatory bodies established to ensure compliance with laws, standards and policies governing the telecoms sector are often given exclusive jurisdiction to resolve disputes involving specific matters in the sector.

On the other hand, the technical nature of telecoms disputes emphasises the importance of arbitration as a specialised forum. Arbitral tribunals usually include an arbitrator with expertise in the technical aspects of the sector, which provides the opportunity for fair and informed decisions.^[10] In addition, because telecoms ventures often span international boundaries and involve stakeholders from various countries, arbitration emerges as the preferred dispute resolution method, guaranteeing impartiality and avoiding favouritism toward any specific legal jurisdiction. Telecoms disputes also require prompt resolution to prevent disruption to innovation and market competition, given that technology advances swiftly. For these reasons, among several others, arbitration remains the preferred forum for resolving cross-border disputes in the telecoms sector.

Recent telecoms disputes and arbitration

In the Middle East and Africa, commercial and investment arbitration is increasingly used by telecoms companies to settle various contractual disputes, including interconnection disputes, disputes about billing practices, investment disputes and shareholders disputes. These types of disputes usually occur between (1) operators (ie, inter-operator disputes), (2) operators and regulators, (3) operators and commercial counterparties and (4) foreign operators and regulators or the state.

Investor-state telecoms disputes

Foreign investors infuse substantial amounts of capital required by local telecoms companies, whether privately or state-owned, through loans, joint ventures and share acquisitions;^[11] therefore, it is plausible for conflicts to arise between investors and states if investors believe that their expectations and protections outlined in bilateral investment treaties (BITs) between their home country and the host state are not fulfilled.^[12]

The telecoms sector has witnessed several investment arbitration proceedings against Middle Eastern and African states. The International Centre for Settlement of Investment Disputes (ICSID) reported that 9 per cent of its cases in 2022 involving states in the Middle East and North Africa pertained to the ‘information and communication’ sector.^[13]

Agility v Iraq

A recent example is the case of Agility v Iraq concerning the investment by Agility Public Warehousing Company KSC (Agility) in an Iraqi telecoms joint venture.^[14] Agility, in collaboration with its partner Orange SA (Orange) established Iraq Telecom in 2011 as a vehicle to acquire a stake in Korek Telecom Company LLC (Korek), an Iraqi telecoms company, for US$810 million. The agreement included the possibility of acquiring a controlling stake subject to obtaining relevant approval from Iraq’s telecoms regulatory body, the Communications and Media Commission (CMC).

On 2 July 2014, the CMC informed Korek of its decision to consider the partnership between Korek, Orange and Agility as ‘void, null and invalid’ and to ‘reinstate the status’ to as it was in 2011. In response, Agility filed a complaint with the Iraqi Council of Representatives challenging the CMC’s order. The Council established a special investigative committee to review Agility’s complaint. The committee concluded that the CMC lacked the authority to terminate the partnership contract. Despite this finding, the CMC failed to adhere to the committee’s decision and maintained its position.

In the ICSID arbitration, Agility alleged that Iraq had breached its substantive obligations under the 2015 Iraq–Kuwait BIT and under public international law.^[15] The tribunal dismissed all claims presented by Agility in an award dated 22 February 2021.^[16]

In February 2024, the tribunal’s award was partially annulled by the ICSID annulment committee.^[17] The committee concurred with Agility’s argument that the initial tribunal had failed to consider the implementation of the CMC order, thereby neglecting to evaluate Iraq’s actions against the key provisions concerning expropriation and unfair treatment outlined in the Iraq–Kuwait BIT. As a result of the annulment committee’s ruling, Agility now has the opportunity to resubmit its claims before a newly constituted arbitral tribunal.

Vivacell v South Sudan

Another notable example of a recent dispute is the case of Vivacell v South Sudan. After South Sudan gained independence from Sudan, the South Sudan’s telecoms regulator suspended the licence of Vivacell, a Lebanese-owned mobile phone service provider.^[18] It also reportedly demanded US$66 million in licence fees and taxes.^[19]

These actions prompted Vivacell to commence arbitration proceedings under the Arbitration Rules of the International Chamber of Commerce (ICC) against South Sudan, alleging unlawful termination of licence agreements. In a decision dated 10 November 2022, the sole arbitrator, Jason Fry, found various breaches of the licence agreements by the state. Damages have yet to be awarded but the claim was for US$2.7 billion. ^[20] Some of the claimant's arguments were dismissed at the liability stage, so any award is likely to be a lesser amount. South Sudan challenged the award before the Swiss Federal Tribunal, which rejected the challenge on 7 August 2023.^[21]

Electricity billing practices

A common type of dispute in the telecoms sector involves disagreements concerning billing practices between telecoms companies and service providers. Billing disputes may arise owing to various reasons, such as discrepancies in invoicing, disagreements over charges, billing errors, contractual disputes about pricing and payment terms, or disputes over the quality or quantity of services provided.

Smile v ATC Uganda and Eaton

In April 2023, a Ugandan High Court set aside an arbitral award made on 28 January 2022 in favour of ATC Uganda Limited and Eaton Towers Uganda Limited (ATC Uganda).^[22] By way of background, Smile Communications Uganda Limited (Smile) had executed a colocation licence and services agreement with ATC Uganda and a master space tower use agreement with Eaton Towers Uganda Limited (Eaton). These agreements granted Smile access to tower and ground space at ATC Uganda’s and Eaton’s sites for installing telecoms and other electronic, voice and data transmission equipment. Both agreements stipulated ICC arbitration for dispute resolution.^[23]

In 2018, a dispute arose between Smile and ATC Uganda regarding the implementation of an amendment to the colocation licence and services agreement. Smile accused ATC Uganda of coercion, undue influence and misrepresentation carried out for the purposes of obtaining Smile’s signature on the amendment. Another dispute arose between Smile and Eaton concerning the legality of Eaton’s billing practices under the master space tower use agreement. The disputes were consolidated in an ICC arbitration seated in Uganda.^[24]

The respondents refuted all allegations and counterclaimed for an award of US$987,086, comprising unpaid site rentals and unbilled amounts, along with general damages for breach of contract.^[25] In a decision rendered on 28 January 2022, the arbitrator rejected all claims made by the applicant and ruled in favour of the respondents on all aspects of the counterclaims presented. Smile was directed to remit approximately US$1,398,523 for the outstanding billed amounts and unbilled sums, along with US$100,000 as general damages for breach of contract.^[26]

Smile sought to have the arbitral award annulled before the High Court of Uganda, citing several grounds, including (1) evident partiality favouring the respondents in the award’s procurement and (2) contention that the dispute regarding electricity billing practices could not be settled by arbitration as it fell under the exclusive jurisdiction of the Electricity Disputes Tribunal established by the Electricity Act of Uganda.^[27]

On 11 April 2023, the High Court overturned the award, determining that the award had been influenced by evident partiality in favour of the respondents. This conclusion stemmed from the fact that the arbitrator had previously served as an associate at the law firm representing the respondents and had also authored a book dedicated to the firm during the arbitration process.^[28] According to the Court, this dedication provided compelling evidence of the arbitrator’s enduring association with the law firm representing the respondents and therefore indicated bias.^[29]

On the arbitrability point, the High Court emphasised the significance of certain rights and obligations within the telecoms sector, given the complexity and substantial national importance in the energy industry. Consequently, specific matters within this domain are considered fundamental and fall under the purview of the Electricity Regulatory Authority (ERA), a government agency that regulates, licenses and supervises the generation, transmission, distribution, sale, export and importation of electrical energy in Uganda; however, the Court found that, in the present case, the disputed facts were ‘unique to the parties’, indicating that the resolution of the dispute did not significantly impact the regulatory responsibilities of the ERA.^[30]

ATC Kenya v Telkom

American Tower Corporation Kenya Operations Limited (ATC Kenya) filed a suit in the High Court of Kenya against Telkom Kenya Limited (Telkom) claiming unpaid invoices and additional damages totalling approximately US$6 million. Under the underlying licence agreement, ATC Kenya had agreed to provide licensed spaces for the installation, maintenance and operation of Telkom’s towers and communication equipment in consideration of licensing fees.^[31]

In the proceedings before the High Court of Kenya, Telkom raised preliminary jurisdictional objections, contending that the Court lacked jurisdiction and the matter should be referred to the London Court of International Arbitration in accordance with the arbitration clause in the licence agreement.^[32] The High Court ordered a stay of the proceedings and directed the parties to arbitration, affirming the existence of a valid arbitration agreement.^[33]

The above disputes underscore the complexity and importance of clear contractual agreements and dispute resolution mechanisms in the telecoms sector. Among other types of disputes, billing disputes often involve intricate legal and regulatory considerations, such as jurisdictional issues and the scope of arbitrability. These cases highlight the need for specialised understanding in handling disputes within the telecoms sector.

Interconnection disputes

Another category of disputes within the telecoms sector pertains to interconnection issues. Interconnection involves any links (eg, lines, cables and transformers) that are capable of transmitting electrical energy between networks, between power stations or between power stations and networks.^[34]

In certain cases, interconnection disputes have been resolved by telecoms regulators through sector-specific dispute resolution mechanisms. For instance, the Communications Authority of Kenya (CAK) decided the interconnection dispute between Safaricom Limited (Safaricom) and Geonet Communications Limited (Geonet) based on a clause in their interconnection agreement that prohibited termination of international calls through interconnected links between the parties. In 2016, the parties filed interrelated complaints against each other.^[35] Safaricom alleged Geonet had illegally terminated international voice traffic and disguised the transit of international calls to Safaricom’s network as local Geonet calls. Conversely, Geonet reported to the CAK about interference and interruption of its numbering block by Safaricom.^[36]

In other instances, interconnection disputes between telecoms providers have been resolved amicably. For example, the prolonged interconnection debt dispute between MTN Nigeria Communications Plc (MTN) and Globacom Limited (Globacom), which dates back to 2019, was settled amicably in February 2024. This resolution prompted the Nigerian Communications Commission to retract the approval granted to MTN for disconnecting Globacom.^[37]

These cases shed light on the complexities inherent in cross-border business ventures, particularly within the telecoms sector.

Shareholder disputes

Shareholder disputes in the telecoms sector can arise owing to various reasons, including disagreements over corporate governance, financial performance and distribution of dividends.

In March 2023, an ICC tribunal unanimously found that Korek and Mr Sirwani Saber were involved in a corruption scheme to defraud Iraq Telecom Limited (ITL) and International Holdings Limited (IHL). It found that Korek and Saber bribed Korek’s regulators at the Iraqi CMC to issue a decision that unfairly stripped ITL and IHL of their shares in Korek without compensation.^[38] In addition, the tribunal held that the respondents had breached Korek’s shareholders’ agreement by engaging in fraudulent activities, such as self-dealing, diversion of corporate assets, sham loans and other deceptive practices.^[39]

Consequently, the tribunal awarded US$1.012 billion in damages to IHL and US$228.8 million in damages to ITL. It also ordered the respondents to pay pre-award interest amounting to US$17 million to IHL and US$71.7 million to ITL, along with legal fees and arbitration costs.^[40]

Arbitrability in telecoms disputes

Telecoms play a vital role in fostering economic activity, enhancing security measures and facilitating social interactions. Given the significant public interests involved, these aspects may raise questions regarding the arbitrability of disputes within the telecoms sector.

The notion of arbitrability is defined in the Convention on the Recognition and Enforcement of Foreign Arbitral Awards 1958 as a question of whether the dispute is ‘a subject matter capable of settlement by arbitration’.^[41] Whether a matter has been reserved for determination by national courts must be answered by national courts. There is no concept of arbitrability that applies internationally.^[42]

In the telecoms sector, specific methods of dispute resolution are often prescribed by law or regulations, particularly concerning network access, interconnection or consumer rights. These frameworks may limit the applicability of arbitration; however, the fact that the subject matter of a dispute relates to telecoms will not automatically affect its arbitrability.

The case of Smile v ATC Uganda and another serves as an example in which the question of arbitrability was raised before the High Court of Uganda.^[43] The High Court made an extensive analysis on the issue of arbitrability in telecoms disputes. It started off by noting that ‘arbitrability is the norm and non-arbitrability the exception’^[44]. It then highlighted that energy disputes often entail balancing competing interests and navigating complex regulatory frameworks.^[45] The ERA has specialised expertise to handle matters related to the regulation of electricity; however, when the facts in dispute are ‘unique to the parties’ and do not affect public interest, their resolution does not fall within the jurisdiction of the ERA.^[46] In contrast, considerable deference will be given to the regulator when the issues concern interpretation of its home statutes as opposed to contractual obligations.^[47]

The High Court of Uganda adopted a rather modern perspective by recognising that the telecoms sector does not inherently exclude arbitration as a means of dispute resolution. This aligns with contemporary views that arbitration can be an effective means of resolving disputes in various sectors, including telecoms. At the same time, the Court indicated a cautious approach, recognising that, while arbitration is generally favoured, there are circumstances where its applicability may not be appropriate, especially in cases relating to the public interest and the function of the state.^[48]

Likewise, as evidenced in the Geonet v Safaricom case, conflicts related to interconnection matters in the telecoms sector may not be resolved through arbitration, especially if laws or regulations mandate a specific dispute resolution process within the sector.^[49] Further, statutes often authorise the regulator to address complaints and disputes within the sector, especially when their consequences extend beyond the commercial relationship of the parties, significantly impacting the sector as a whole.

Conclusion

The recent telecoms disputes in the Middle East and Africa shed light on the evolving landscape of dispute resolution within the telecoms sector. These disputes encompass a wide array of issues, including interconnection disputes, billing practices, investment disputes and shareholder disputes. The variety of the issues involved in these cases indicates that there is increasing reliance on arbitration as a means of resolving complex contractual conflicts. While not all disputes are suitable for arbitration owing to regulatory constraints, arbitration remains a preferred choice, when applicable, for many telecoms-related conflicts.

Looking ahead, several questions arise regarding the future of arbitration in the telecoms sector. First, there is a need for arbitrators to adapt to the rapidly changing landscape of the sector. This includes generally staying abreast of technological advancements, regulatory developments and industry trends. Second, counsel working on telecoms disputes must consider the specialised nature of the sector, including regulatory frameworks, technical complexities and public policy considerations.

Given that the telecoms sector is characterised by fast-paced change, it is anticipated that disputes will continue to arise in 2024. As such, stakeholders must be proactive in identifying and addressing potential disputes, including pre-dispute planning and effective risk management strategies, and in obtaining a comprehensive understanding of applicable dispute resolution mechanisms.

By leveraging specialised expertise, promoting transparency and accountability, and adapting to technological and regulatory changes, arbitration can become the preferred method of dispute resolution for telecoms disputes, offering a more efficient and effective alternative to litigation.

^* The authors would like to thank Vianney Sebayiga for his assistance in the preparation of this article.

Endnotes

^[1] Kamal Shehadi, ‘Telecommunications Trends in the Middle East’, Middle East Institute (22 Oct 2021); Dick van Schooneveld, ‘Unleashing the Power of Africa’s Connectivity: Navigating the Telecommunications Landscape For Strategic Growth and Market Leadership’, Hylman Consulting (23 May 2023).

^[2] Karen Campbell et al, ‘The 5G economy: How 5G technology will contribute to the global economy’, IHS Economics and IHS Technology (Jan 2017).

^[3] Paravee Maneejuk and Woraphon Yamaka, ‘An analysis of the impacts of telecommunications technology and innovation on economic growth’, Telecommunications Policy, Vol. 44, Issue 10 (2020), p. 4.

^[4] Robert R Bruce et al, ‘Dispute resolution in the telecommunications sector’, International Telecommunication Union (2004), p 3.

^[5] Government of Bahrain, ‘Emerging Technologies’.

^[6] ‘The Economic Vision 2030 for Bahrain’, section 2.5, p. 19.

^[7] ‘Africa Entertainment and Telecommunication Market Size & Share Analysis - Growth Trends & Forecasts (2024 - 2029)’, Mordor Intelligence.

^[8] RUS Prasad, ‘Dispute Resolution Mechanisms in the Telecom Sector: Relating International Practices to Indian Experience’, Working Paper No. 372, Stanford Center for Professional Development (2018), paragraphs 1 and 35; Bruce et al.

^[9] Bruce et al; Brian J Love and Christian Helmers, Christian, ‘Are Market Prices for Patent Licenses Observable?: Evidence from 4G and 5G Licensing’, Columbia Science and Technology Law Review, Vol. 24, No. 1 (2022), pp. 66–72.

^[10] Bruce et al.

^[11] Tamara L Slater, ‘Investor-State Arbitration and Domestic Environmental Protection’, Washington University Global Studies Law Review, Vol. 14, Issue 1 (2015), p. 136.

^[12] ibid.

^[13] ‘Spotlight on the ICSID Caseload: Middle East and North Africa’, ICSID-ADGM Joint Conference Investment Treaty Arbitration in the Middle East, International Centre for Settlement of Investment Disputes (ICSID) (17 Mar 2022), p. 3.

^[14] Agility Public Warehousing Company KSC v Republic of Iraq, ICSID Case No. ARB/17/7, Final Award (22 Feb 2021).

^[15] ibid, paragraph 5.

^[16] ibid, paragraph 279.

^[17] Agility Public Warehousing Company KSC v Republic of Iraq, ICSID Case No. ARB/17/7, Decision on Annulment (8 Feb 2024).

^[18] ‘South Sudan suspends mobile operator Vivacell’, Reuters (20 Mar 2018).

^[19] James Barton, ‘South Sudan allocates funds to challenge Vivacell licence settlement’, Developing Telecoms (24 Jan 2023).

^[20] Vivacell v Republic of South Sudan, ICC Case No. 23822/GR/PAR, Partial Award (10 Nov 2022).

^[21] Vivacell v Republic of South Sudan, Decision of the Swiss Federal Tribunal, 4A_575/2022 (7 Aug 2023); Toby Fisher, ‘South Sudan loses challenge to telecoms award’, GAR (31 Aug 2023).

^[22] Smile Communications Uganda Limited v ATC Uganda Limited and another (Arbitration Cause 4 of 2022) [2023] UGCommC 30 (11 Apr 2023).

^[23] ibid, p. 1

^[24] ibid.

^[25] ibid, pp. 2–3.

^[26] ibid, p. 3.

^[27] ibid page 4.

^[28] ibid, p. 14.

^[29] ibid.

^[30] ibid, p. 24.

^[31] American Tower Corporation (ATC) Kenya v Telkom Kenya, Civil Case E096 of 2022 [2023] KEHC 26183 (KLR), paragraph 2.

^[32] ibid, paragraph 1.

^[33] ibid, paragraphs 22–23.

^[34] ‘Interconnection’, Body of Knowledge on Infrastructure Regulation.

^[35] Geonet Communications Limited and another v Safaricom PLC and three others, Civil Appeal E023 and E028 of 2022 (Consolidated) [2023] KEHC 2326 (KLR), paragraph 5.

^[36] ibid, paragraph 6.

^[37] Press release, ‘Press Statement RE: PRE-DISCONNECTION NOTICE: Glo — MTN Resolve Interconnect Debt Dispute’, Nigeria Communications Commission (9 Feb 2024).

^[38] Iraq Telecom Limited and International Holdings Limited v Korek Telecom Company LLC, Korek International (Management) Ltd and Sirwan Saber Mustafa, ICC Case No. 25194/AYZ/ELU, Final Award (20 Mar 2023).

^[39] ibid.

^[40] ibid.

^[41] Convention on the Recognition and Enforcement of Foreign Arbitral Awards1958, articles II(1) and V(2)(a).

^[42] Winnie Jo-Mei Ma and Lawrence Boo, ‘Autonomous Arbitrability? Whose Autonomy? Whose Arbitrability?’, in Franco Ferrari and Friedrich Rosenfeld (eds), Autonomous Versus Domestic Concepts under the New York Convention, Wolters Kluwer (2021), p. 300; Emily Hay, ‘Issues of Arbitrability in Telecoms Arbitrations’, in Wesley Pydiamah (ed), The Guide to Telecoms Arbitration (2nd edn), GAR (17 Oct 2023).

^[43] Smile [2023] UGCommC 30.

^[44] ibid, p. 17.

^[45] ibid, p. 24.

^[46] ibid.

^[47] ibid.

^[48] ibid, p. 17.

^[49] Geonet, [2023] KEHC 2326 (KLR)