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Cablegate: Egypt: 2005 Report On Investment Disputes And

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS SECTION 01 OF 02 CAIRO 004532

SIPDIS

STATE FOR NEA/ELA, NEA/RA, L/CID/JNICOL AND
EB/IFD/OIA/JPROSELI
USAID FOR ANE/MEA MCCLOUD
USTR FOR SAUMS
TREASURY FOR MILLS/NUGENT/PETERS
COMMERCE FOR 4520/ITA/ANESA/TALAAT

E.O. 12958: N/A
TAGS: CASC EFIN EINV KIDE PGOV EG OPIC
SUBJECT: EGYPT: 2005 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS

REF: STATE 70014

Post is aware of six claims of U.S. persons that may be
outstanding against the Government of Egypt:

1. a) Claimant A
b) 2001
c) In June 2001, the Alexandria Governorate took
approximately 6,000 square meters of claimant's land (on
which a factory had been built) to widen the adjoining
highway. The Governorate's ensuing construction work also
damaged a wall and some property. As a result of this
action, Claimant A made a request to the Governorate for
compensation of LE 2 million (approximately $390,000) for
the seized land and physical damage. The compensation case
proceeded smoothly at first. However, during the final
stages of the compensation process in late 2003, the
Governorate informed Claimant A that it did not have legal
title to the entire property (despite documentation to
contrary), and thus had no right to compensation for the
land taken for the highway. The Governorate officials
further informed claimant A that it had no right to expand
operations, sell the land or engage in any legal proceedings
involving the land, and that Governorate would file a
lawsuit against Claimant A to reclaim the land. Because of
the dispute, Claimant A was unable to expand operations and
meet growing export orders. After the Embassy participated
in a meeting with the claimant and GAFI, the governmental
investment authority, GAFI established a technical committee
to review the issue. In March 2005 GAFI officially
confirmed Claimant A's ownership of the land and notified
the Governorate, which offered compensation of less than the
LE 2 million requested by the claimant. At the time of this
report's submission, Claimant A was starting negotiations
with the Governorate regarding the amount of compensation.

2. a) Claimant B
b) 1992
c) Claimant B was awarded a contract in 1989 to
refurbish an Egyptian Government-owned hotel in the Ain
Sokhna area. The Claimant had spent several million dollars
by 1992 and was ready to inaugurate the project when the
Ministry of Public Enterprise informed him that the contract
was null and void. Both parties agreed to arbitration,
which resulted in a favorable ruling for Claimant B.
Nonetheless, the Ministry of Public Enterprises continued to
demand that Claimant B surrender the assets and took the
matter to court. The case was initially denied on the
grounds that the original contract stipulated that in case
of legal disputes both parties would seek arbitration. The
Ministry then appealed and a court agreed on the grounds
that the arbitration decisions were never executed.
Claimant petitioned against this decision and is still
awaiting further court action. There has been no change in
the status of this case over the past year, and Claimant B
is reported to have withdrawn operations from Egypt.

3. a) Claimant C
b) 1998
c) Claimant C secured a $6.2 million, 4-year contract
with Egypt's then-Ministry of Trade and Supply to provide
technical assistance to the Egyptian Export Development
Center and export-promotion support for Egyptian companies.
The money was allocated from the Ministry of International
Cooperation through local currency proceeds generated from
the USAID cash transfer program. Claimant C began to
provide training, and an initial payment of $1.6 million was
due in March 1998. In June 1998, the claimant received a
partial payment of $560,000, and the Egyptian Export
Development Center, under the successor Ministry of Economy
and Foreign Trade (now the Ministry of Foreign Trade and
Industry) subsequently cancelled the contract and all future
services to be provided, claiming services already provided
were of unsatisfactory quality. No other payments were
made, despite Embassy Cairo's numerous approaches to the
Prime Minister, former Minister of Trade and Supply, former
Minister of Economy and Foreign Trade and Managing Director
of the Egyptian Export Development Center. Embassy Cairo
repeatedly advised Claimant C to pursue arbitration, but the
claimant continued to seek a political solution. At the
time of this report's submission, claimant was awaiting a
response to the claim from the new Ministry of Foreign Trade
and Industry. The Egyptian Export Development Center was
closed in 2002, but a new export-promotion center will open
soon. The Ministry of Foreign Trade and Industry has
indicated that once the new center is established, claimant
will be welcome to submit a proposal to offer services.
4. a) Claimant D
b) 2004
c) The Egyptian National Air Navigation Services Company
(NANSC), part of the Egyptian Ministry of Civil Aviation,
contracted with Claimant D to supply seven surveillance
radars to be installed in seven different locations across
the country. Prior to the final stages of the contract, the
Egyptian authorities seized the company's $3.4 million
performance bond, claiming performance deficiencies in the
supplying of proper documentation, spare parts, and test
equipment. Embassy Cairo has been involved in discussions
between the parties and has raised the dispute up to and
including the level of the Prime Minister. In August 2004,
a mediation committee was set up between the GOE and
Claimant D to resolve the issue. However, NANSC terminated
the committee before a decision was reached and did not
respond to solutions offered by the claimant at the end of
2004 in pursuit of a negotiated settlement. In January 2005
the Minister of Civil Aviation decided to resort to official
arbitration after meeting with the senior management of
Claimant D. At the time of this report's submission, no
action had been taken on the arbitration. In February 2005
Embassy Cairo approached the Ministry of Foreign Trade and
Industry to assist in negotiations and is awaiting a
response.

5. a) Claimant E
b) 2005
c) In April 2005 Claimant E sent an official complaint
to the Egyptian customs authorities regarding the importing
of fake products from China under the claimant's trademark,
using forged documentation. Embassy Cairo referred the
issue to the GOE's specialized office for such matters --
the Ministry of Foreign Trade and Industry's Intellectual
Property Rights Contact Point -- with a request to
investigate the case and coordinate GOE action to prevent
further importation of the fake products.

6. a) Claimant F
b) 2002
c) In 2002 the Egyptian National Authority for Remote
Sensing and Space Sciences (NARSS) purchased from Claimant F
a ground receiving station for $2 million. NARSS did not
want to pay in foreign currency and contracted the purchase
through the claimant's local agent, who signed two contracts
with the claimant and NARSS in local currency and U.S.
dollars, in order to hedge the parties against exchange rate
risks. The station was to be installed in a new building in
Aswan that was completed only in late 2004. NARSS requested
that the local agent and the claimant start installation, at
which time the claimant raised a number of concerns
regarding the condition of the equipment and issues related
to the contract terms including software license, warranty
issues and delay penalties. During the negotiations between
the parties it became clear that NARSS did not want the
local agent involved in the case. The local agent was
reluctant at first to dissolve the partnership due to
financial issues, but is now negotiating with both NARSS and
the claimant to establish a direct relationship between
NARSS and Claimant F.

7.
Claimant A: Colgate-Palmolive
Claimant B: H and H Enterprises
Claimant C: International Trade and Marketing (ITM)
Claimant D: Northrop and Grumman Electronic Systems
Claimant E: Hanover Wire Cloth Inc.
Claimant F: Datron Co.

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