Egyptian bank sues Israel for dividends

The King David Hotel in Jerusalem.Photo: Ariel Jerozolimski

27 June 2007

By ETGAR LEFKOVITS

A state-owned Egyptian bank is suing the State of Israel for $78 million in unpaid dividends for its investment seven decades ago in the company that built Jerusalem's landmark King David Hotel, an attorney representing the bank said Wednesday.

The National Bank of Egypt claims that Israel's Custodian General expropriated shares that it purchased in the company seven decades ago, without ever sharing any profits or dividends with the bank, said attorney Jasser Ashraf, who filed the suit on behalf of the Egyptian bank in the Jerusalem District Court last week.

News of the unusual lawsuit was first reported in Yediot Aharonot.

The history behind the legal saga dates back to 1929, when Palestine Hotels Ltd. purchased 4.5 acres of land on Julian's Way in Jerusalem, which was later renamed King David Street, to build the luxury hotel.

Albert Mosseri, a wealthy Egyptian Jewish banker who was at the time director of the bank, paid about half of the construction costs, while another 46 percent was covered by other affluent Jews from Cairo.

The bank invested the remainder of the sum, purchasing 693 shares of Palestine Hotels Ltd. between 1934 and 1943, Ashraf said.

After the establishment of the State of Israel, Mosseri sold all his shares to Federmann Enterprises, which manages the Dan hotel chain, and in 1958, the bank's shares in the hotel were seized by the Custodian General.

Then, in 1993, the Custodian General sold the bank's stocks to private shareholders after the bank was declared a "missing" party, the attorney said.

In the lawsuit, the bank is asking the court to make Israel pay $78 million in damages, based on its initial investment in current values, and the compound interest over the last seven decades, Ashraf said.

The Justice Ministry referred all queries on the issue to the Finance Ministry.

"Neither the Finance Ministry nor the Custodian General has received this claim. We are not familiar with the subject," the Finance Ministry said in a statement.

"If and when such a suit will be received, we will study it and respond to the court."