Turkcell Drops $4.2Bn Bribery Suit against MTN

Turkcell, Turkey based has dropped a lawsuit it was filing in the USA claiming that South Africa’s MTN used bribery to deprive it of its Iranian mobile network license.

Turkcell said that it is dropping the case because of an earlier Supreme Court’s ruling last month on the Alien Tort Statute, which limits lawsuits in the USA affecting companies that predominantly operate overseas.

MTN had long argued that any dispute between South African and a Turkish companies, over an Iranian issue should not be held in the USA.

Turkcell’s lawsuit in the US had been put on hold while the Supreme Court deliberated on an unrelated case affecting the Shell oil company. Shells’ victory in that case underminded Turkcell’s argument to have its case heard in the USA as well.

Turkcell was suing MTN for US$4.2 billion in damages over how its Iranian mobile license was cancelled and later awarded to the South African company.

A case heard in the USA has theoretically higher damages potential against a loser.

MTN, through one of its subsidiaries, owns a 49% shareholding in Irancell, which holds the second GSM telecommunications licence in Iran. The remaining 51% of Irancell is owned and controlled by Iran Electronic Development Company (IEDC).

Turkcell and its subsidiary, East Asian Consortium (EAC) was originally awarded the license in 2003. Turkcell’s near 70% stake was reduced to 49% by the Iranian government in 2005.

In June 2005, the Iranian government cancelled the Turkcell license and started talks with South Africa’s MTN, with eventually resulted in the license being transferred.

MTN denies Turkcell’s allegations that it bribed Iranian officials to secure the licenser and says that an investigation could not find any evidence of bribery or political pressure on the Iranians being used.

That MTN funded report did however raise concerns about a US$400,000 payment, but due to the unreliability of the witnesses was unable to find out what had happened to that money.

The UK judge, Lord Hoffmann who lead the investigation concluded that Turkcell’s allegations are “a fabric of lies, distortions and inventions”.

Turkcell withdrew its US lawsuit, but has not dropped the wider complaint.