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Cablegate: 2007 Report On Investment Disputes and Expropriation

VZCZCXRO3147
PP RUEHROV
DE RUEHDS #1958/01 1731211
ZNR UUUUU ZZH
P 221211Z JUN 07
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC PRIORITY 6719
INFO RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 05 ADDIS ABABA 001958

SIPDIS

SENSITIVE
SIPDIS

DEPARTMENT FOR EB/IFD/OIA: HEATHER GOETHERT
DEPARTMENT FOR L/CID: SAM MCDONALD

E.O. 12958: N/A
TAGS: CASC EINV KIDE OPIC PGOV ET

SUBJECT: 2007 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION
CLAIMS

REF: A. STATE 55422
B. 06 ADDIS ABABA 1592 (NOTAL)
C. 05 ADDIS ABABA 2309 (NOTAL)

1. (U) SUMMARY. Post is aware of four (4) claims by U.S. persons
which may be outstanding against the Government of Ethiopia. One
claim included in the 2006 report has been resolved. There is one
new reported claim. (See update to case of Claimant E, and new
claim by Claimant H). Post is also aware of two disputes involving
the confiscation of property that may involve outstanding claims
against the GOE by current U.S. citizens who were not U.S. citizens
at the time of the expropriations. Per ref A, Post is also
forwarding updates via email to EB/IFD/OIA. END SUMMARY.

2. (U) The U.S. Government is aware of four (4) claims by U.S.
persons which may be outstanding against the Government of Ethiopia.
One claim included in the 2006 report has been resolved. There is
one new reported claim. The U.S. Government is also aware of two
disputes involving the confiscation of property that may involve
outstanding claims against the Government of Ethiopia by current
U.S. citizens who were not U.S. citizens at the time of the
expropriations. While the Act does not require a report on these
claims, we have included the cases of Claimants D and E in this
report. These cases stem from the confiscation of property during
the communist Derg regime which reigned from 1974 to 1991. There
have been no cases of expropriation reported by U.S. citizens under
the current government.

3. (U) Other cases occurred following the Ethiopian- Eritrean border
conflict in May 1998. The Government of Ethiopia deported tens of
thousands of persons identified as Eritrean nationals, and in many
cases confiscated their assets to pay for outstanding loans. In
2000, Ethiopia and Eritrea agreed to the creation of the
Ethiopia-Eritrea Claims Commission to address property claims
arising out of the border conflict. The Embassy and the Department
of State provide information about the Claims Commission and other
assistance to these Claimants, when appropriate. No cases resulting
from the Ethiopian-Eritrean border conflict were reported to the
Embassy during 2005-2007.

----------
CLAIMANT A
----------

4. (U) Update on Pending Claim
a) Claimant A
b) 1987
c) Claimant A entered into an agreement with the Ethiopian
Development and Hotels Corporation (EDHC) for the design and
construction of an extension to the Addis Ababa Hilton Hotel in
1983. Two associated firms were also involved in the agreement.
Although construction was completed and premises were handed over in
1986, due to disagreements over the contract, payment was not
rendered to the construction firm until 1996. Payment to Claimant A
for design and professional services remain outstanding.

5. (U) At Claimant A's request, the U.S. Embassy has contacted the
Government of Ethiopia on numerous occasions to request resolution
of this outstanding claim. The then-U.S. Ambassador raised this
issue in March 2000 with Ethiopia's Tourism Commissioner, a former
board member of EDHC. The Commissioner reasserted his willingness
to help but neglected to arrange a meeting between Claimant A's
local representatives and EDHC officials. The dispute currently
remains unresolved. The Embassy continues to monitor this case and
has raised it in meetings with government officials. For the past
six years, Claimant A has not contacted the Embassy nor requested
additional U.S. Government assistance.

6. (U) Update: We are not aware of any attempts or requests for
further assistance.

----------
CLAIMANT B
----------

7. (U) Update on Pending Claim
a) Claimant B
b) 1998
c) Claimant B entered into a contract with Ethiopia's
Ministry of National Defense (MOND) in Addis Ababa, Ethiopia, to
provide remote sensing and imagery processing services and
equipment. The contract was abruptly terminated and Claimant B was
not paid for the completed portion of the contract. Payment of
approximately USD 230,000 is now almost four years overdue. In
addition, Claimant B has incurred significant additional expenses in

ADDIS ABAB 00001958 002 OF 005


attempting to resolve outstanding issues and obtain final payment.

8. (U) The Embassy sent a diplomatic note in July 1999 to the
Ministry of Foreign Affairs requesting it to transmit an attached
letter to the Chief of Procurement at MOND and to help expedite a
resolution to the dispute. Following the issuance of the Embassy's
diplomatic note, Claimant B has neither contacted the Embassy nor
requested additional U.S.
Government assistance.

9. (U) Update: We are not aware of any attempts or requests for
further assistance.

----------
CLAIMANT C
----------

10. (U) Update on Pending Claim
a) Claimant C
b) 2002
c) Claimant C, a U.S.-registered company, bid on a competitive
tender to manage a state-owned sugar plantation several hundred
kilometers northwest of Addis Ababa. After exhaustive reviews, the
tender was awarded to the claimant. A draft management contract was
initialed in March 2001, but the final contract was never signed due
to delays within the Ethiopian government. On June 11, 2002, the
Public Enterprise Supervising Authority of the Ministry of Trade and
Industry finally notified the claimant that the tender had been
canceled. At the request of the claimant, Embassy officials have
repeatedly brought the matter to the attention of the Minister of
Trade and Industry and the Prime Minister, starting from July 2001
when it became apparent that the government was delaying
finalization of the contract. Claimant is now attempting to recover
the bid security (amount not available), but feels that progress is
slow or impossible. Last Claimant-initiated contact with Embassy
was in October 2002 to update Embassy on attempts to resolve the
case. In June 2004, Claimant C privately advised the Embassy it
does not intend to actively pursue the case.

11. (U) Update: We are not aware of any attempts or requests for
further assistance.

----------
CLAIMANT D
----------

12. (U) Update on Pending Claim
a) Claimant D
b) 1992
c) Claimant D was not a U.S. citizen at the time of
expropriation by the communist Derg government. The property is a
liquor and alcohol factory that supplies alcohol to other factories
and retail distributors around Ethiopia. The Ethiopian
Privatization Agency (EPA), now the Privatization and Public
Enterprises Supervising Authority, determined that the property
qualified for compensation or restitution under
Proclamation No. 110/1995. A valuation study was subsequently
Conducted, and the claimant was offered either compensation or
restitution of the property. Following an interruption of the
processing of the case due to the Ethiopian-Eritrean border
conflict, a subsequent proclamation was passed (No. 193/2000), which
precludes restitution of certain properties. Based on this
proclamation, the Board of Management of EPA determined that the
Claimant was only eligible for compensation. EPA notified the
claimant of the offer. Claimant D has refused to accept the
compensation claim, insisting that a) restitution should still be
offered, and b) the claim does not accurately reflect the value of
the property. The compensation claim is valued by EPA at
approximately USD 320,000.

13. (U) Embassy officers have raised the issue in meetings with the
Prime Minister, the General Manager and Deputy General Manager of
EPA, the Vice President of the World Bank's Multilateral Investment
Guarantee Agency (MIGA), and officials at the Ministry of Foreign
Affairs. Embassy officers have also discussed the case on a number
of occasions with Claimant D. EPA has provided documentation to
Embassy officers on the case, including official correspondence from
EPA to Claimant D. This information states the compensation claim
offered by EPA as well as the principles on which the valuation was
calculated. Embassy officers have also met with MIGA, who confirmed
that the valuation of the property was done in accordance with MIGA
principles. The Finance Minister has stated in writing his
willingness to discuss the valuation figure with the Claimant.
Claimant D indicated in May 2005 to Embassy officials that he may be
willing to meet with the government to discuss the value of the

ADDIS ABAB 00001958 003 OF 005


compensation claim. To date, and contrary to long-standing Embassy
advice, Claimant D has not sought legal counsel. The Claimant has
not contacted the Embassy since 2005. The Embassy continues to
monitor this case closely. The case is still pending.

14. (U) Update: Our section is not aware of any attempts or requests
for further assistance.

----------
CLAIMANT E
----------

15. (U) Update on Pending Claim
a) Claimant E
b) 1998
c) Claimant E was not a U.S. citizen at the time of
expropriation by the communist Derg government in July 1975. The
property is a hotel in Addis Ababa established by the claimant's
father in 1962. The Restitution Department of the Ethiopian
Privatization Agency (EPA) has completed its valuation of property.
As required by Ethiopian law, the EPA valued investments made to the
property during the period of expropriation. These investments were
valued by EPA at USD 770,000. The Claimant is not satisfied with
the valuation and objects to the requirement that he pay the
Ethiopian government to receive back his property. Claimant E has
requested that the EPA use a different method of valuation. Embassy
officials have, over the past three years, discussed the case
several times with the Claimant and with EPA and other Ethiopian
government officials.

16. (U) Update: Despite the Derg's ouster in 1991, the current
government of Ethiopia continued to control the property until April
2007. In December 2006, Claimant informed Embassy officials that he
had agreed to pay the Government of Ethiopia the USD 770,000 that
EPA had decided to charge him, in order to recover title to his
hotel. The EPA arrived at the USD 770,000 figure by claiming it had
invested an equivalent sum in upgrading the hotel (e.g., purchasing
new furniture); when under the control of the current government,
the hotel had been operated by the Ministry of Culture and Tourism.
According to the Claimant, the hotel was renovated in 1986 and again
in 1997, when under the control of the former Communist Derg
government and then the current government, respectively. As a
condition of recovering title, the Claimant is responsible for
maintaining 120 hotel employees hired by the current government, a
sharp increase from the 46 original employees working at the hotel
when originally operated by the Claimant's father. The Claimant has
now recovered title to his hotel, and is seeking financing for
further renovations. The Claimant informed the Embassy in June 2007
that he had taken custody of the hotel as of April 1, 2007
(following 7 years of negotiations with the government), and was now
operating it by himself. The case has now been resolved.

----------
CLAIMANT F
----------

17. (U) Update on Pending Claim
a) Claimant F
b) 2003
c) Claimant F purchased an animal feed processing plant, located in
Addis Ababa, from the Ethiopian Privatization Agency (EPA) through a
public auction. Claimant F paid approximately USD 240,000 for the
property. Under the contract between EPA and Claimant F, all
ownership documents were to be transferred to the Claimant.
However, when Claimant F requested the title deed transfer from the
Addis Ababa City Administration, he was sent a bill for
approximately USD 60,000, based on a valuation of the property
conducted by the City Administration. The Claimant and the Minister
of Trade and Industry have written the City Administration
requesting that the title be transferred in accordance with the
contract signed with EPA. The City Administration never formally
responded. At the Claimant's request, Embassy officials raised the
case several times in 2005 with both EPA and the City
Administration. The City Administration advised Embassy officials
in May 2005 that they were in discussions with the federal
government and hoped to reach a settlement shortly. In September
2005, the Addis Ababa City Administration transferred the title to
the Claimant in accordance with the contract. The case is
resolved.

----------
CLAIMANT G
----------

18. (U) Update on Pending Claim

ADDIS ABAB 00001958 004 OF 005


a) Claimant G
b) 2004.
c) Claimant G was threatened with legal action and potential closure
of its operations by Ethiopia's Federal Inland Revenue Authority
(FIRA) over alleged non-payment of tax arrears. The property
includes two bottling plants located in Addis Ababa and Dire Dawa.
The Claimant appealed the tax assessment provided by FIRA by stating
that certain production costs should not be subject to excise taxes
under Ethiopian law. FIRA informed Claimant G that the appeal
period had expired, and that payment on all tax arrears was
expected. A payment scheme was offered by FIRA to Claimant G. The
Claimant was temporarily denied the right to renew its trade
license.

19. (U) Claimant G requested U.S. Embassy assistance in February
2005. Following a meeting between Embassy officials and the
Claimant, the then-Ambassador wrote a letter dated to the Ministers
of Revenue, Trade/ Industry and Finance/Economic Development. In
response, the government formed a committee to investigate the case
and propose solutions. In March 2005, Embassy officials were
informed by the government that no legal action would be taken
against the Claimant until a full investigation was conducted.
Claimant G was subsequently granted a temporary renewal of its trade
license and was allowed to continue operations. The Claimant
informed the Embassy in August 2005 that the Government of Ethiopia
had agreed to waive all pre-2003 tax arrears. A final agreement was
subsequently negotiated. The case is resolved.

----------
CLAIMANT H
----------

20 (U) New Claim
a) Claimant H
b) 2006
c) Claimant H, who became a U.S. citizen in 1998, originally tried
to resolve his claim through a MIGA-GOE agreement, whereby MIGA
would facilitate resolution of claims by foreign nationals. Claims
by citizens of the United States and Italy were not covered by this
agreement, since other bilateral agreements were in place. MIGA was
not successful in this case, and the agreement has since expired.
The claimant subsequently applied for assistance under a 1985
U.S.-Ethiopian claims agreement. However, he was ineligible, since
he was not a U.S. citizen at the time of the expropriation. In
2007, he sought assistance from Embassy officials.

21. (U) Contrary to correspondence from the U.S. Department of
Justice, the GOE asserts Claimant H is eligible to pursue relief
through the U.S. Claims Commission, and claims that the GOE
therefore has no further obligations related to the case.
Ethiopia's Ministry of Finance and Economic Development (MOFED)
claims to have sent a letter regarding this claim to the Embassy's
Commercial Attache more than 10 years ago; however, MOFED officials
cannot identify the attache, nor can they produce copies of the
letter. In September 2006, Embassy officials requested that MOFED
provide the Embassy with a copy of the letter mentioned in the
Ministry's correspondence. Repeated attempts to contact MOFED
officials have failed to produce any additional results, as the
individuals tracking this issue have either transferred or are on
extended vacations.

22. (U) Claimant H has requested that the Embassy send MOFED a
letter correcting MOFED's assertion about the 1985 claims commission
and requesting that the ministry work with the claimant on a
settlement. In May 2007, Embassy officials attempted to contact
Claimant H to obtain further information on his previous
correspondence with MOFED and on any new developments. However, the
Embassy has not been able to contact Claimant H. The Embassy will
continue efforts to contact Claimant H and to monitor his claim.

----------------
CLAIMANTS' NAMES
----------------

23. (SBU) Per ref A, claimant information is provided separately
below (only Claimant D has signed a Privacy Act Waiver):

Claimant A: Ed Reidel, WBTL Associates; U.S. citizen.

Claimant B: Jim Fry, Earth Satellite Corporation; U.S. citizen.

Claimant C: Schaffer and Associates International, Finchaa
Management Contract; U.S.-registered company.

Claimant D: Mr. Berhane Gebremedin, National Alcohol and Liquor

ADDIS ABAB 00001958 005 OF 005


Factory; Ethiopian citizen at time of expropriation, but now a U.S.
citizen. Has signed Privacy Act Waiver limited to family members
only.

Claimant E: Mr. Bisrat Seuifu, Hotel d'Afrique; Ethiopian citizen at
time of expropriation, but now a U.S. citizen.

Claimant F: Mr. Fasil Tsegaye, Akaki Feed Plant; U.S. citizen at
time of dispute. Has registered with Embassy Consular Section but
has not/not signed a Privacy Act Waiver.

Claimant G: East Africa Bottling Company S.C. (franchise bottler of
Coca Cola, but owned by South African nationals not U.S. citizens).

Claimant H: Mr. Paul Constantinou; not a U.S. citizen at time of
expropriation.

YAMAMOTO

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