September 28, 2013
A Cairo court upheld on Saturday a previous ruling nullifying the privatization contract of the Tanta Flax and Oils Company, in what is considered a landmark verdict.
The Supreme Administrative Court in the Dokki district of Giza issued the final verdict on Saturday, nullifying the privatization contract of the Tanta Flax and Oils Company which was sold to Saudi investor Abdel Ellah al-Kaaki in 2005.
The ruling upheld a prior verdict issued on September 21, 2011 by the Administrative Court, which found that Tanta Flax had been sold for well below its real market value, at a mere LE84 million when its real market value was estimated at LE211 million in 1996.
Some estimates even suggest that the company was actually worth around LE500 million.
Tanta Flax, along with the Shebin el-Kom Textile Company and the Nasr Boilers Company, all had their privatization contracts nullified by the court in September 2011.
The privatization of Omar Effendi department stores and the Nile Cotton Ginning Company were also dealt a similar fate in May and December 2011, respectively.
The chief justice presiding over today’s case announced that “all appeals against the previous verdict are rejected.” While this means that the rulings cannot be appealed in local Egyptian courts, al-Kaaki has reportedly taken the cases to international arbitration.
The courtroom erupted with celebration when the workers heard the verdict, which they’d eagerly anticipated for years. Workers from other privatized companies, who had come to stand in solidarity with the Tanta Flax workers, also cheered in hopes for similar verdicts.
Gamal Othman, a worker and activist who had been sacked from the Tanta Flax and Oils Company several years earlier, said, “Today our company has returned to its rightful owner and rightful place: the public sector.”
He added, “We just hope the authorities enforce the verdict, to resume company operations in full capacity and to reinstate all sacked workers.”
Since the late 1990s, numerous committees have been established to salvage the state-owned textile companies — often resulting in privatizations, mass-layoffs and factory closures.
While the three public-sector textile companies, which had been privatized under the Hosni Mubarak regime, had their privatization contracts nullified in 2011, the state has repeatedly declined to reabsorb these three companies back into the public sector — thus leaving thousands of workers in a state of limbo.
From its original workforce of some 2,300 prior to the 2005 privatization, Tanta Flax had downsized to fewer than 200 workers, as the majority of its production lines came to a halt.
Workers claim that al-Kaaki had sought to sell-off both the factories and the land on which the company is based, in Mit Hebeish, located in the Delta governorate of Gharbiya.
Neither al-Kaaki, nor his administrators could be reached for comment.
On Saturday, the Supreme Administrative Court adjourned another trial pertaining to the privatization of the Nile Cotton Ginning Company. The verdict in this trial, along with the verdicts pertaining to other companies’ privatization contracts, has not yet been determined.
On April 17, 2013 a court sentenced former Prime Minister Hisham Qandil to one year in prison, along with his removal from public office, for failing to uphold the December 2011 verdict nullifying the privatization contract of Nile Cotton Ginning.
Qandil is still appealing the verdict.
*Photo of Tanta Flax workers outside Administrative Court by Jano Charbel
Daily News Egypt
50% of the company’s shares were sold in the bourse in 1997 due to a stakeholders’ decision; process is deemed illegal
Supreme Administrative Court ruled the nullification of the privatisation of the Nile Cotton Ginning Company on Sunday.
Egyptian Centre for Economic and Social Rights (ECESR) lawyer and former presidential candidate, Khaled Ali, tweeted that the verdict was issued; fellow ECESR lawyer Malek Adly confirmed the news.
The verdict cancelled the decision of the then state-owned company’s stakeholders at their meeting in 1997 to sell 50% of its shares on the bourse; it also means the rejection of the objection filed by the government against the first-degree Administrative Court verdict ruling the annulment.
“The hardest challenge regarding Nile Cotton Ginning company case was that it was sold through the bourse,” Adly said.
He explained that most companies that were privatized under ousted President Hosni Mubarak’s government were sold directly to an investor, thus, the lawsuits were filed against the government and the investor; in the Nile Cotton Ginning company case, it was filed by Ali against the government and the company’s stakeholders for their decision to sell the shares in the bourse.
Adly said that the reasons behind the verdict are yet to be known, but expected them to be published shortly.
A press statement issued by ECESR read: “The governmental committee that was responsible for valuation of the company has no authority, because it does not have legal basis in the 1971 constitution or in state-owned business sector law.”
The statement explained that Article 26B in the state-owned business sector law , which legalizes such a selling process, was added by a prime minister in 2006, nine years after the selling process, making it illegal by the time it happened.
ECESR lawyer, Hend Al-Adawy, who is a specialist in privatization cases, said: “The company was nationalized by a presidential decree in 1963, thus, the stakeholders’ decision to sell it through the bourse is illegal; Egyptian law prohibits the return of nationalized companies to private ownership.”
Sunday’s verdict is the second verdict by the Supreme Administrative Court this week, ruling the annulment of privatizing a government-owned-company, the first being the Tanta Flax and Oil company verdict on Saturday.
The Administrative Judiciary issued 11 verdicts ruling the annulment of privatizing state-owned-companies since the toppling of Mubarak’s regime on 11 February 2011.