On 15 July the International Centre for Settlement of Investment Disputes (ICSID) issued its ruling in the claim made by Corral Morocco Holdings against Morocco regarding the ill-fated Société anonyme marocaine de l’industrie du raffinage (SAMIR) refinery. 

The 150,000 b/d capacity plant in Mohammedia, which is Morocco’s only refinery, was established and state-run from 1959 until 1997, when it was sold to Swedish company, Corral Morocco Holdings, which belongs to Saudi billionaire, SheikhMohammed Hussein al-Amoudi. However, after warnings at the time that its privatisation was a major gamble, by mid-2015, operations had ground to a halt amidst accusations that Corral Holdings had failed to respect its contractual obligations or to invest sufficient funds into the project. 

Due to accumulated debts of more than US$4 billion (MAD40 billion), the Commercial Court of Casablanca issued a judicial liquidation and also ruled in 2018 that the main reason for the failings was mismanagement on the part of the refinery’s board. 

In 2019, however, al-Amoudi demanded that Morocco pay him compensation. He accused Rabat of neglecting and violating a number of contract terms and of being party to the financial debacle that resulted in the refinery ceasing operations and filed a complaint against the government at the ICSID. The latter held an arbitration hearing in Paris in October 2022 and delivered its ruling on 15 July. 

The tribunal ruled that Morocco should pay US$150 million or 6% of the total US$2.7 billion in compensations sought by Corral. While this is significantly less than the amount sought by al-Amoudi, and some Moroccans were pleased at the outcome, the ruling is still a bitter pill for Rabat to swallow. Not only do many believe the fault lies with the foreign investor but the refinery’s closure for almost a decade has cost the Kingdom dear because it has had to had to import refined fuel products. According to some estimates, it lost over US$304 million in 2022 alone because of the cost of importing fuel. 

The National Front to Save the SAMIR Refinery — a pressure group of employees, union representatives and economists involved with the refinery who have long denounced Corral Morocco Holdings — have accused the company of ‘dragging the sole national refinery into an infernal spiral,’ and objected loudly to the ICSID ruling. It called on the government to appeal the decision, reiterating its view that it was the Corral rather than the state that had violated its obligations. It insisted that Morocco must not allow ‘a single dirham of Moroccan money to be lost,’ and noted that US$150 million ‘is not a small number.’ 

As for the government, it has been more circumspect about the ICSID’s ruling. Economy and Finance Minister Nadia Fettah Alaoui said when the ruling had been issued that ‘all possibilities are open,’ not making it clear whether the government is intending to appeal the decision. She commented that Morocco had always ‘maintained a fair position vis-à-vis Corral.’ She was also keen to assert that the Kingdom had met all its contractual obligations stressing, ‘Morocco remains committed to upholding its responsibilities and rights towards international partners and organizations, in full compliance with international and bilateral agreements.’ The government is acutely aware of the need to ensure that Morocco does not appear to be a troublesome investment partner. 

Despite this rather non-committal response, the government will soon need to decide about an appeal and what to do about the refinery. It has long said it would only take action in this respect once the international ruling was issued. All eyes are therefore on it to see what it will do next with some commentators insisting that now is the right time to revisit the issue. 

Rabat has long sought a buyer for the refinery but this has proved extremely challenging and, despite several companies showing an interest over the years, none has gone ahead. This has left the Kingdom without a functioning refinery, so it is still having to import fuel at high costs, which is a drain on its foreign currency reserves. Importing fuel has been of benefit to the Kingdom’s private fuel distribution companies — including the one owned by the prime minister — which has been a key source of grievance over recent years. 

SAMIR’s closure has furthermore had a negative impact on the oil terminal at the Mohammedia port which is operating at only 45% of its capacity. The state has also continued to pay refinery employees, albeit on reduced wages amounting to around 60% of their full salaries. While some have left, there are still around 470 employees at the facility. They are furious with the state and have staged many protests over the years at their circumstances. Not only are they receiving reduced wages, but their pension contributions have not been paid since 2016. 

Some Moroccans are therefore calling for state intervention and are demanding that the government buy the 82% stake in the refinery in order to stabilise fuel prices and ensure Morocco’s energy security. With no private buyer in sight, these calls are likely to increase. 

The July 2024 issue of Morocco Focus also includes the following:

Politics

• The political scene heats up…
• Implications
• Medical students boycott their exams… 
• Setback for Justice Minister over Family Code 

Energy & Economy

• ICSID verdict in the SAMIR Refinery case….