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Cablegate: Mozambique - 2007 Report On Investment Disputes And

VZCZCXYZ0009
RR RUEHWEB

DE RUEHTO #0675 1690543
ZNR UUUUU ZZH
R 180543Z JUN 07
FM AMEMBASSY MAPUTO
TO SECSTATE WASHDC 7464

UNCLAS MAPUTO 000675

SIPDIS

SIPDIS

AF/S FOR HTREGER
EB/IFD/OIA FOR HGEOTHERT
L/CID FOR SMCDONALD

E.O. 12958: N/A
TAGS: ECON EAID EINV ETRD OPIC PGOV KIDE CASC MZ
SUBJECT: MOZAMBIQUE - 2007 Report on Investment Disputes and
Expropriation Claims

REF: A. STATE 055422

B. 05 Maputo 1062

1. Post is aware of one (1) claim that may be outstanding against
the Government of the Republic of Mozambique (GRM).

2. Claimant A.

3. This potential claim arose on or around August 5, 2005.

4. In 2001 Claimant A received authorization for a foreign
investment project from the GRM's Ministry of Planning and Finance.
The GRM granted Claimant A a ten-year right to operate (the
"concession") in the District of Chifunde, Province of Tete, with
the option to renew for five years. The concession was for the
cultivation, fomentation and commercialization of loose-leaf
tobacco. Each year Claimant A's subsidiary was required to submit a
proposed program of cultivation, fomentation and commercialization
to the GRM, allowing the subsidiary to proceed with the program for
the following season. This concession was one of several held by
Claimant A within the country of Mozambique.

5. On August 5, 2005, the Minister of Agriculture issued a decision
interrupting/revoking Claimant A's concession rights in the District
of Chifunde. On August 15, 2005, Claimant A filed an appeal with
the Minister of Agriculture requesting reconsideration and
revocation of the August 5 decision. The status quo was not
maintained during consideration of this appeal, and on September 15,
2005, the Governor of Tete issued a decision granting another
American company the immediate right to operate the concession.
Claimant A maintains that the grounds given for
interruption/revocation of the concession were false, and that the
GRM failed to follow procedures outlined in the concession agreement
and Mozambican law regarding revocation of concession rights.

6. In response to private sector and Claimant A's complaints, on
October 11, 2005, the Minister of Agriculture sent the issue to the
Governor of Tete for further consideration. Fact-finding
investigations were supposed to occur but did not. Claimant A
stated to Embassy officers that it spent the following eight months
trying to regain possession and use-rights to the concession.
Efforts included meetings with the Governor of Tete, meetings with
governors of other provinces in which Claimant A had concessions,
meetings and correspondence with the Ministry of Agriculture and
presidential advisors, and open letters by the private sector.
Claimant A retained local legal representation to assist in these
efforts.

7. As the result of the loss of its concession in Tete, Claimant A
decided in March 2006 to cease all operations in Mozambique.
Claimant A informed the Embassy at that time that it was in the
process of filing an insurance claim against the GRM and was
considering pursuing international arbitration under the Bilateral
Investment Treaty. According to Claimant A, it has suffered damages
in an amount exceeding ten (10) million dollars ($10,000,000) as the
result of the loss of this concession and its departure from
Mozambique.

8. The Embassy last received information on this dispute in June
2007. Claimant A's Country Director confirmed that that all
operations were shut down and that Claimant A would be completely
out of Mozambique by August 2007. Claimant A's Country Director
also confirmed that to the best of his knowledge Claimant A would
not be pursuing legal action or international arbitration regarding
the concession dispute.

9. Claimant A: Alliance One International (formerly
DIMON Incorporated). Post understands that Alliance One
International formed on May 13, 2005, as the result of a merger of
DIMON Incorporated ("DIMON") and Standard Commercial Corporation
("Stancom"). The concession at issue was originally granted to
DIMON; however, both DIMON and Stancom held concessions in
Mozambique. Post does not have any information indicating whether
Alliance One or any of its subsidiaries or predecessors signed a
Privacy Act waiver.

Dudley

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