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Cablegate: 2007 527 Report for Egypt

VZCZCXYZ0003
RR RUEHWEB

DE RUEHEG #2474/01 2240507
ZNR UUUUU ZZH
R 120507Z AUG 07
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC 6483
INFO RUEATRS/DEPT OF TREASURY WASHDC
RUCPDOC/USDOC WASHDC 0309

UNCLAS CAIRO 002474

SIPDIS

SIPDIS

STATE FOR EEB/IFD/OIA HGOETHERT, L/CID SMCDONALD,
NEA/ELA AND NEA/RA

E.O. 12958: N/A
TAGS: ECON EINV KIDE EG
SUBJECT: 2007 527 REPORT FOR EGYPT

REF: STATE 55422

The United States Government is aware of four (4) claims of U.S.
persons that may be outstanding against the Government of Egypt
(GOE):

1. a. Claimant A

b. 2001

c. In June 2001, the Alexandria Governorate took approximately 6,000
square meters from Claimant A'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 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 the
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 the Governorate would
file a lawsuit against Claimant A to reclaim the land. As a result
of the dispute, Claimant A was unable to expand operations and meet
growing export orders. After the U.S. Embassy participated in a
meeting with Claimant A and GAFI, the GOE 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 then offered compensation of
less than the $390,000 requested by Claimant A. Later in 2005, the
Ministry of Housing assessed the value of the land based on 2003
prices. Claimant A disputed this assessment, and was informed by
the Governorate that the land could only be re-assessed after three
years. Claimant A's CEO met with the Governor to try to resolve the
matter. Claimant A was informed by the Governorate that
negotiations could only be conducted directly between the
Governorate and Claimant A's headquarters. The parties are
currently working on continuing negotiations.

In December 2006, Embassy and APP staff met with the new
Governor, appointed in 2006, to discuss the case. The Governor
instructed his staff to look into the case. The Embassy advised the
claimant of this meeting and asked the claimant to follow up
directly with the Governor's office. The claimant reports no
additional progress, as the Governor referred the case to the Deputy
Governor, who referred it to Alexandria Higher Committee for
Evaluating the Price of Land, affiliated to the Ministry of Housing,
for an opinion. The opinion still has not been rendered. In
discussions with the claimant, post suggested the possibility of
pursuing compensation in kind (e.g., tax concessions, etc.) rather
than monetary compensation. Claimant seemed agreeable to this
approach.

2. a. Claimant B

b. 1992

c. Claimant B was awarded a contract in 1989 to refurbish a
GOE-owned hotel in the Ain Sokhna area. Claimant B had spent
several million dollars by 1992 and was ready to inaugurate the
project when the then-Ministry of Public Enterprise informed
Claimant B 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 court initially refused to hear the case on the grounds that the
original contract stipulated that in case of legal dispute both
parties would seek arbitration. The Ministry appealed the decision
and the appellate court agreed to hear the case on the grounds that
the arbitration decision was never executed. Claimant B petitioned
against the appellate court's decision and no further court action
was taken. There has been no change in the status of this case over
the past year, and Claimant B has reportedly removed operations from
Egypt. Claimant B has not contacted the Embassy since petitioning
against the appellate court's decision and the Embassy considers the
case closed until informed otherwise.

3. a. Claimant C

b. 1998

c. Claimant C secured a $6.2 million, 4-year contract with the
then-Ministry of Trade and Supply to provide both technical
assistance to the Egyptian Export Development Center and
export-promotion support to Egyptian companies. The money was
allocated from the Ministry of International Cooperation through
local currency proceeds generated from a USAID cash transfer
program. Claimant C began providing training, and an initial
payment of $1.6 million was due in March 1998. In June 1998,
Claimant C received only 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 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, and the Egyptian Export
Development Center was closed in 2002. The Embassy raised the issue
numerous times with various officials, including the former Prime
Minister but the GOE took no further action.

The Embassy repeatedly advised Claimant C to pursue
arbitration, but Claimant C continued to seek a political solution.
The Ministry of Trade and Industry has indicated in discussions with
Embassy officials that a new export promotion center will open soon,
and that Claimant C is welcome to submit a new proposal to provide
services. Claimant C, however, seeks a written response from the
Ministry of Trade and Industry to Claimant C's contention that the
previous contract is still valid. Embassy officials continue to
raise the issue with GOE officials.

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 Egypt. 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.
The Embassy has been involved in discussions between the parties and
has raised the dispute up to 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 Claimant D at the end of 2004 in the 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. In February 2005, Embassy
officials approached the then-Ministry of Foreign Trade and Industry
to press for resolution of the issue, but did not receive a
response. The parties are currently in arbitration.

4. Claimant A: Colgate Palmolive
Claimant B: H and H Enterprises
Claimant C: International Trade and Marketing (ITM)
Claimant D: Northrop and Grumman Electronic Systems
RICCIARDONE

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