Monday, May 18, 2009

Econet Challenges Zain Takeover of V-Mobile

The appointment of the final member of an international tribunal to review the sale of V-Mobile Nigeria to Middle East headquartered mobile phone operator Zain, has this week been confirmed by the Chief Justice of the Nigerian Federal High Court.
This comes despite objections by founding shareholder Econet Wireless. Econet claimed its pre-emption rights were breached when the sale was concluded.
In a statement, Econet said that it had been notified of the appointment of the panel and that the tribunal was intending to commence hearings as early as the end of this month.
Econet Wireless was the operator in a consortium of investors that launched Nigeria's first GSM mobile network operation in 2001. The network has grown into country's second largest operator, with about 20 million customers.
Econet claimed that its pre-emption rights in respect of shares had been breached when Econet's predominantly Nigerian partners decided to sell their shares in V-Mobile to Zain in 2006. Consequently, Econet tried to prevent the sale of the shares to Zain through the UK courts, but the judge ruled that the UK was not the appropriate place for such legal proceedings as the matter was more closely connected with Nigeria. Since then, Econet has commenced ongoing legal proceedings in the Nigerian courts.
The tribunal will undertake the arbitration using the rules of the United Nations Commission on International Trade Law, known as UNCITRAL. Arbitration proceedings normally take approximately 18 months to conclude.
In a yet further arbitration concerning the disputed sale, a London Court of International Arbitration (LCIA) tribunal has ruled that Zain was under an obligation, if it involved itself in the Econet transaction, to act in good faith so as to ensure the minimum conflict with Econet possible. This decision was recently introduced into the Nigerian proceedings and will be a key document in Econet's claim in the Nigerian courts going forward.
Meanwhile, Econet has also been pursuing its battle through the Dutch courts, where Zain's African operations had its headquarters at the time of the sale.

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