(Adds details, background)
CAIRO, May 17 (Reuters) - Dubai property developer Damac said on Tuesday it had filed an international arbitration case against Egypt over a land dispute and the conviction of its chairman and owner, Hussain Sajwani.
A Cairo court last week sentenced Sajwani in his absence to jail and ordered him to pay a $40.5 million fine in connection with his 2006 purchase of land at Egypt's Red Sea resort of Gamsha Bay near Hurghada.
The Cairo court also sentenced former Tourism Minister Zoheir Garranah, who approved the sale, to five years' imprisonment for squandering public funds, saying he had sold the Gamsha land and another parcel at below market value. [ID:nLDE7491M2]
Garranah was among several former Egyptian officials to be investigated after an uprising against former President Honsi Mubarak, who left office on Feb. 11.
The army generals who took control from Mubarak have been under pressure to take a hard line against high-level corruption and show they are forging political change before an election for a new parliament in September.
"Egypt's recent criminal prosecution and conviction in absentia violate the treaty on investment protection and have caused significant damage to his investments in Egypt and the wider Gulf area," said Damac, the United Arab Emirates' biggest property developer, in an emailed statement.
"The criminal prosecution and conviction of Mr. Sajwani were a classic case of guilt by association. No crime was committed by simply conducting business with the former regime," it said.
Sajwani filed the arbitration claim before the International Centre for Settlement of Investment Disputes, based on an Egyptian treaty with the United Arab Emirates that protects investments made by UAE nationals in Egypt, Damac said.
Damac said the purchase was an arms' length transaction that was fully vetted by the appropriate Egyptian officials at the time of purchase.
"While the Egyptian court held that the price paid for the Gamsha Bay property was too low, the transaction was entirely proper, and Damac was entitled to rely upon the price charged by the government at the time," it said.
In addition to the 30 million square meter Gamsha Bay project, Damac has four major real estate projects around Cairo. (Reporting by Patrick Werr; Editing by Andrew Callus)