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Cablegate: Ethiopia: 2008 Report On Investment Disputes And

VZCZCXRO3866
RR RUEHROV
DE RUEHDS #1691/01 1720659
ZNR UUUUU ZZH
R 200659Z JUN 08
FM AMEMBASSY ADDIS ABABA
TO RUEHC/SECSTATE WASHDC 1027
INFO RUCNIAD/IGAD COLLECTIVE

UNCLAS SECTION 01 OF 04 ADDIS ABABA 001691

SIPDIS
DEPT FOR EB/IFD/OIA HGoether and KButler, L/CID GSwiney and
CHolland, and AF/E

E.O. 12958: N/A
TAGS: EINV ETRD ECON ET

SUBJECT: ETHIOPIA: 2008 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS

Ref: State 43784

1. The United States Government is aware of four (4) claims by U.S.
persons which may be outstanding against the Government of Ethiopia
(GOE). One claim included in the 2006 report has been resolved.
There are two new reported claims.

2. The U.S. Government is also aware of two other 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. 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 two cases of expropriation reported by U.S.
citizens under the current government.

3. Other cases occurred following the Ethiopian-Eritrean border
conflict in May 1998. The GOE 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 2005-2008.

4. 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 remains outstanding.

At Claimant A's request, the U.S. Embassy has contacted the GOE 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 on 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.

Update: The Department is not aware of any attempts or requests for
further assistance.

5. 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 overdue. In addition, Claimant B has incurred significant
additional expenses in attempting to resolve outstanding issues and
obtain final payment.

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 not contacted the Embassy nor requested
additional U.S. Government assistance.

Update: The Department is not aware of any attempts or requests for
further assistance.

6. 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 Claimant C. A draft management contract was
initialed in March 2001 but the final contract was never signed due

ADDIS ABAB 00001691 002 OF 004


to delays within the GOE. On June 11, 2002, the Public Enterprise
Supervising Agency 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 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 had previously attempted to recover the bid security
(amount not available), but feels that progress is slow or
impossible. The 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.

Update: The Department is not aware of any attempts or requests for
further assistance.

7. 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 which 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.

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
compensation claim. To date, and contrary to long-standing Embassy
advice, Claimant D has not sought legal counsel.

Update: The Claimant has not contacted the Embassy since 2005. The
Embassy continues to monitor this case closely. The case is still
pending. The Embassy is not aware of any attempts or requests for
further assistance.

8. 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 Claimant E's father in 1962. The
Restitution Department of the Ethiopian Privatization Agency (EPA),
as required by Ethiopian law, valued investments made to the
property during the period of expropriation. These investments were
valued by EPA at USD 770,000. The Claimant was not satisfied with
the valuation and objected to the requirement that he pay the
Ethiopian government to receive his property back. Claimant E
requested that the EPA use a different method of valuation.
Claimant considered pursuing legal action in the United States.
Embassy officials have, over the past three years, discussed the
case several times with the Claimant, EPA, and other GOE officials.

Despite the Derg government's ouster in 1991, the GOE continued to
control the property until April 2007. In December 2006, Claimant
informed Embassy officials that he had agreed to pay the GOE 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

ADDIS ABAB 00001691 003 OF 004


current government, the hotel had been operated by the Ministry of
Tourism and Culture. According to the Claimant, the hotel was
renovated in 1986 and again in 1997, when it was 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 posession of 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 seven years of
negotiations with the government), and was now operating it by
himself. In this way, the case has now been resolved.

Update: Claimant recently informed the Embassy that he is having
difficulties obtaining the title to the hotel from the city of Addis
Ababa. Claimant has retained legal counsel and is not asking for
any additional assistance at this time, but wanted the Embassy to be
aware.

9. a. Claimant F

b. 2001

c. Claimant F was not a U.S. citizen at the time the claim arose.
Claimant F was a U.S. national when the claim was submitted.
Claimant F, who became a U.S. citizen in 1998, originally tried to
resolve his claim through a MIGA-GOE agreement, whereby MIGA would
help facilitate resolution of claims by foreign nationals. Claims by
citizens of the United States and Greece 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.
Claimant F 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 the claim arose. In 2007, he
sought assistance from Embassy officials.

The GOE has asserted that Claimant's claim was covered by the 1985
U.S.-Ethiopia claims agreement referred to above, and that therefore
the 1985 claims agreement relieves the GOE of any obligations or
liabilities related to the claim. In contrast, the U.S. Department
of Justice has indicated that the claim never fell within the scope
of the 1985 claims agreement because Claimant was not a U.S. citizen
at the time the claim arose. Ethiopia's Ministry of Finance and
Economic Development (MOFED) claims to have sent a letter to the
Embassy's Commercial Attache more than ten years ago; however, the
Embassy has no record of this letter and 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 MOFED's
correspondence. Repeated attempts to contact MOFED officials have
failed to produce any additional results, as the few individuals
tracking this issue in MOFED have either transferred or are on
extended vacations.

Claimant F has requested that the Embassy send MOFED a letter
correcting MOFED's assertion about Claimant's eligibility under the
1985 claims agreement and requesting that the Ministry work with the
Claimant on a settlement. In May 2007, Embassy officials attempted
to contact Claimant F to obtain further information on his
correspondence with MOFED and on any new developments

Update: Claimant F re-contacted the Embassy in January 2008 noting
that the government of his citizenship at the time of expropriation,
and still his dual-citizenship (Greece), is pursuing the matter with
the GoE. As such, the claimant requested the Embassy to temporarily
stand down in advocating for his case.

10. a. Claimants G & H

b. 2007

c. Claimants G & H were U.S. citizens at the time of the
expropriation of an 85 hectare farm inherited from the late father
of Claimant G by the Bora Wereda administration of the Oromia
Regional Government. This 85 hectare farm land had been managed by
Claimant G (legal co-owner and representative of his three brothers
residing in the United States who are entitled to the heir) and
Claimant H who is co-investor.

The Claimants had presented an investor certificate issued by the
Federal Investment Agency and copies of income tax receipts paid up
to December 2007.

The Claimants estimate the property confiscated worth about USD
16,000,000. The property comprises of 17 hectares of ready to
harvest land planted with vegetables, fruits and food crops, 3.5

ADDIS ABAB 00001691 004 OF 004


hectares of seedling nursery, residential building, barn, 37 live
cattle, generators, irrigation pumps, a pesticide sprayer, a variety
of farm tools and supporting equipment. There is no official or
third-party valuation of the land in question.

The Claimants allege that they were forced out of the farm land
under duress and forcibly removed from the farm at gun point by
Eastern Oromia Administration, Bora Wereda Officials and the local
farmers association ledership.

The Claimants have appealed at the Regional as well as higher,
national authorities in order to find administrative solutions but
to no avail so far. They have asked the Embassy to delay involvement
until they exhaust every available venue. Claimants G&H last
contacted the Embassy in March 2008.


11. a. Claimant I

b. 2008

c. Claimant I was an American Citizen at the time of the
expropriation of his land and other properties. Claimant I returned
to Ethiopia in 2005 to partake in commercial farming in the Amhara
regional state.

The property confiscated is a 400 hectare land and other farming
implements (tractors, generator sets etc.) and recent harvest years
produce of sesame seeds.

The Claimant reported to Embassy that the 400 hectares leased to him
by the Amhara National Regional State Land Administration Bureau in
August 2005 for 15 years. The land is in Gondar, at the Wereda of
Quara which is along the international border with Sudan.

The Claimant alleges that, one morning, government troops of the
Sudan government, ransacked his residence, burned his house and
whole farm, kidnapped his workers, and took away everything from his
farm land with no compensation at all.

He appealed for the assistance at the kebele, wereda and federal
authority level but to no avail, receiving only a complete denial of
the incident.

Claimant I was afraid for the life of his workers and relatives
allegedly kidnapped by Sudanese troops from his farm, and also for
his wife and two siblings when he reported this incident.

This Claimant has asked for Embassy's intervention in this matter
only after he exhausts his efforts at the Federal level.

Embassy has advised the Claimant to retain legal counsel to further
follow up the matter. A list of attorneys has been provided.


12. List of Claimants:
Claimant A: Ed Reidel, WBTL Associates
Claimant B: Jim Fry, Earth Satellite Corporation
Claimant C: Schaffer and Associates International, Finchaa
Management Contract
Claimant D: Berhane Gebremedin, National Alcohol and Liquor Factory

Claimant E: Bisrat Seifu, Hotel d'Afrique
Claimant F: Paul Constantinou
Claimant G: Yared Eshetu H. Giorgis
Claimant H: Hagos Girma
Claimant I: Tilahun Tedla

YAMAMOTO

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