DOMINICAN REPUBLIC: 2004 INVESTMENT DISPUTES AND

UNCLAS SECTION 01 OF 07 SANTO DOMINGO 003312

SIPDIS

STATE TO EB/IFD/OIA/ATBRYAN AND L/CID/JNICOL
STATE ALSO TO WHA/CAR (MCISAAC)
STATE PASS TO TREASURY FOR LLAMONICA

E.O. 12958: N/A
TAGS: DR ECON KIDE EINV
SUBJECT: DOMINICAN REPUBLIC: 2004 INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS REPORT

REF: SECSTATE 78697


1. This cable provides the 2004 Investment Disputes and
Expropriation Claims Report for the Dominican Republic per
reftel.


2. The United States Government is presently aware of 13
claims of U.S. persons that may be outstanding against the
Government of the Dominican Republic (GODR),down from 22
claims a year ago. Though there has been a considerable
effort to resolve the many cases that have languished for
years, the recently negotiated Free Trade Agreement with the
United States has made the resolution of outstanding disputes
a priority for the GODR. A USAID-sponsored consultant has
been working with the GODR to develop a system for evaluating
and resolving claims through the use of bonds. In 1999, Law
104-99 was passed, offering the opportunity for claimants
whose disputes arose on or before August 16, 1996, to
circumvent the traditional method of claim resolution (at the
"Bienes Nacional"),and seek compensation from a specially
appointed Commission, provided the claimants are willing to
accept payment in bonds. Recent legislation has made the
Commission a permanent fixture of the Ministry of Finance and
has opened the opportunity for claimants with cases
post-August 16, 1996, who filed their claims prior to the
August 16 cut-off, to bring their cases before the
Commission. The Embassy raises these expropriation and
investor dispute cases with the GODR on a regular basis, and
all information provided herein was last updated in May 2004.


1. a) Claimant A

b) 1999

c) Eight independent power producers (IPPs),six of
which are U.S.-owned, provide approximately 30 percent of the
Dominican Republic's electricity. In 1999, the IPPs entered
into a "Definitive Agreement" with the GODR under which an
escrow account would be established in order to permit the
capitalization of the State electricity company,s
(Corporacion Dominicana de Electricidad (CDE)) power
generation and distribution facilities. This escrow account
would receive payments from the new distribution companies
that would be used to pay the IPPs for both current invoices
and accumulated arrears. The GODR did not live up to its
commitment to implement this escrow arrangement; CDE failed
to keep its payments current to the IPPs; and the GODR
breached several agreements to make up the shortfall, which
exceeded $100 million dollars.

In September 2002, the GODR announced that seven of the eight
IPP's had agreed in principle to give up their existing
long-term contracts. To date, the GODR has successfully
renegotiated only one new contract with these IPP's. In
February 2004, the GODR and CDE signed a short-term agreement
with two of the Claimants whereby the GODR agreed to increase
tariff rates, make payments on current invoices and negotiate
accumulated arrears. Although tariff rates were increased
CDE and the GODR have continuously failed to make timely
payments to Claimants A, resulting in cash flow problems and
credit difficulties, and they are presently in default to
Claimants A, and other generating companies in the sector, in
excess of $400 million dollars. Of additional concern, the
contracts with Claimants A are backed, in part, by
guarantees. Should Claimants A's lenders call those
guarantees, the GODR faces liability of more than $425
million dollars. The Embassy has made repeated approaches to
high government officials in an effort to resolve this
ongoing problem.


2. a) Claimant B

b) 1998

c) Claimant B purchased land located on the access
road to Santo Domingo's Las Americas Airport. In 1998, the
Public Works Department built the ramp for a highway overpass
on Claimant B,s land. Embassy contacted Public Works on
behalf of Claimant B and was informed that Claimant B will be
included in whatever settlement (i.e., cash payment or
relocation) was to be offered to Dominican landowners
affected by this construction. The GODR has yet to authorize
funding to settle Claimant B,s claim, and it fell too late
to be included in the original bond issuance program. A
possible GODR initial settlement offer will likely be in the
form of bonds. No time has been set for a decision.


3. a) Claimant C

b) 1994 and various

c) In 1996, Claimant C discovered that various
components of the GODR had, over time, built facilities
(including an airport runway extension) on a parcel of land
near the town of Barahona that Claimant C's company had owned
since the 1920s. The Embassy raised this case on numerous
occasions with senior Dominican officials and facilitated
meetings between Claimant C and the GODR. In 1999, Claimant
C accepted an offer of settlement in partial payment of the
claim of approximately $1.5 million dollars, which the GODR
paid in three equal payments. Efforts by Claimant to recoup
the remainder of its claim have been rebuffed by the GODR,
which takes the position that the claim has been satisfied in
full. The matter is presently in litigation.


4. a) Claimant D

b) 1994

c) Claimant D performed construction and asphalt
paving services for the Dominican Department of Public Works
at the Maria Montez International Airport, as well as other
asphalt paving services in other locations in Barahona
Province. At the time the work was completed (1996),the
Dominican Department of Public Works owed Claimant D
approximately $2 million dollars.

The Embassy facilitated meetings between Claimant D and the
Secretariats of Public Works and Finance in December 1998.

SIPDIS
At that time, Claimant was informed that the GODR was
considering the issuance of bonds to cover such public-works
debts. Claimant D was not satisfied with this response and
initiated legal action against the GODR in the U.S. District
Court for Puerto Rico; however the action was dismissed for
lack of standing in July 2000. In January 2000, Claimant D
applied for bonds under Law No. 104-99, which was designed to
liquidate a variety of claims inherited from previous
governments. In July 2000, Claimant D was awarded government
bonds equal to about $1 million dollars. According to
representatives of the GODR, the claim has been fully
satisfied. This case has been concluded.


5. a) Claimant E

b) 1992

c) Claimant E owned land bordering the road to the
Santo Domingo airport, which was expropriated by the GODR in
1992 for highway expansion. The Embassy repeatedly contacted
GODR officials urging resolution of this case. On January
31, 2003, the case was settled with bonds provided under Law
No. 104-99, with claimant receiving 2,051,724 pesos in bonds
at today's rate of exchange the equivalent of just over
$45,593. In January 2004, Claimant E notified the Embassy
that the GODR had been eight months behind on its scheduled
payments. According to Claimant E, the GODR had also been
paying every six months instead of every three months as
agreed in the settlement. The Embassy requested the GODR to
look into the matter and payments have resumed. This case
has been concluded.


6. a) Claimant F

b) 1992

c) In 1992, Claimants F purchased 20,000 square
meters of land near Santo Domingo, valued at $40,000. Six
months after Claimants F occupied the land and planted crops,
the GODR's Agrarian Institute (IAD) cut down the fence and
permitted Dominican peasants to occupy the land.

Claimants F reported they held legal title to the land, and
provided the Embassy with copies of documents supporting
their claim. The IAD maintained that since the original
owner was prevented by Dominican law from selling this parcel
of "agrarian reform land," their land seizure was legal.
According to Claimants F, IAD officials have admitted that
they made a mistake when they cut the fences and permitted
the occupation of the land.

The Embassy raised this case repeatedly with IAD and GODR
officials, and as a result, police removed some squatters
from the property. Others remained however, and continue to
occupy part of the property. In January 2000, Claimants F
applied for bonds under Law No. 104-99, and received a
settlement from the Commission for 3 million pesos ($66,670).
This case has been concluded.


7. a) Claimant G

b) 1991

c) In 1988, the GODR asked Claimant G to build 1,000
homes for sugar cane workers. Claimant G never signed a
contract with the GODR. Materials were shipped to the
Dominican Republic for the first phase of construction (30
homes) and Claimant G had invoices showing that the materials
arrived. In 1989, Claimant G was informed that, due to heavy
rains and a bad crop, construction of the homes would be
delayed. Claimant G arranged with port authorities to have
the materials remain in the port until construction could
begin. In 1991, Claimant G discovered that all of the
materials had disappeared. Claimant G alleged that some of
the materials were auctioned off, and some given to GODR
entities. Claimant G estimates losses at $1.3 million.
Claimant G,s case was disqualified under Law No. 104-99.
Claimant G has since initiated legal action in a Dominican
court.


8. a) Claimant H

b) 1991

c) In 1991, the GODR's Agrarian Institute (IAD)
expropriated approximately seven hectares of land in
Esperanza belonging to Claimant H's mother. Claimant H
claimed to have obtained several Dominican court orders
requiring the peasant squatters who occupied the land to
leave, but these orders were not enforced.

In September 1997, the IAD made a settlement offer, which
Claimant H refused. Claimant H requested Embassy assistance
in negotiating a better offer from the GODR, which in
Claimant H's view, should include not only payment for the
land, but also payment for lost economic use of the land.
The Embassy repeatedly explained to Claimant that it could
not negotiate on behalf of U.S. claimants. The IAD
maintained that, having forwarded its offer of compensation
to higher authorities, it had no further role to play. In
January 2000, Claimant H applied for bonds under Law No.
104-99.

In January 2003, the GODR's bond Commission concluded their
evaluation of Claimant H's case, and offered a settlement of
413,160 pesos or roughly $9,181 dollars. Claimant H refused
this offer and was seeking approximately ten times this
amount. Dominican officials advised Claimant H to withdraw
his claim from consideration under the Ministry of Finance's
bond program, and pursue it through the "Bienes Nacionales,"
the organization normally charged with the resolution of
expropriation cases. Embassy has been advised that a
settlement in Claimant H,s matter has been reached but that
payments have not begun. This case has been concluded.


9. a) Claimant I

b) 1990

c) In 1989, Claimant I purchased a 75 percent
interest in beachfront property near Barahona. Claimant I's
Dominican partners owned the remaining 25 percent. Claimant
I's interest in the land had an estimated value of $112,000.

On September 18, 1989, the GODR seized the land, stating that
it intended to use it for the construction of a power plant.
Following this action, Claimant I entered into a new
agreement with its Dominican partners, under which Claimant I
would cease payments on the land and would reduce its
interest in the property to 15 percent. It was agreed,
"legal actions would be undertaken jointly, the proceeds of
which would be distributed between the co-owners in the same
proportion as their interest in the property."

Claimant I and its Dominican partners have sought
compensation in Dominican courts, and reported to the Embassy
in 1994 that the courts had ruled in their favor. No
compensation was received so in January 2000, Claimant I
applied for bonds under Law No. 104-99. The Embassy was
advised in 2003 that the GODR was reevaluating the matter.
No time has been set for a decision.


10. a) Claimant J

b) 1990

c) In 1989, Claimant J, and a number of U.S. and
Dominican partners, signed a 20-year lease with the GODR's
State Sugar Council for the use of some 200 acres of farmland
at a site known as La Esperanza in the Northwestern Dominican
Republic. Claimant J claimed to have started significantly
improving the land when, in 1990, the GODR took control and
turned it over to peasant squatters. Claimant J sought
compensation from the GODR for damages suffered as a result
of that seizure.

In July 1992, the government of President Balaguer reportedly
accepted Claimant J's claim of 4.1 million pesos (then
$303,000). Claimant J received approximately 2 million pesos
as part of this settlement offer from the GODR, but continued
to seek payment for the outstanding 2.1 million pesos
(presently approximately $44,450). The Embassy repeatedly
raised this case with senior GODR officials, and in April
2003, the GODR awarded Claimant J bonds to cover the
outstanding $2.1 million peso debt balance, redeemable in

2005. This case has been concluded.


11. a) Claimant K

b) 1983

c) Claimant K is the owner of land with an assessed
value of approximately $1 million in the Puerto Plata area of
the Dominican Republic. In 1983, the GODR seized the land,
which is now part of the "Isabel de Torres Scientific
Preserve." Claimant K sought compensation, but none was
approved.

According to Claimant K, the GODR previously valued the land
at $330,000. Claimant K reported that it has an assessment
valuing the land at approximately $990,000.
Claimant K is willing to negotiate. The Embassy raised this
matter in all discussions of investment disputes with the
GODR. To date there has been no resolution, and the matter
continues to experience payment opposition on behalf of
Claimant K.



12. a) Claimant L

b) 1972

c) Claimant L's family invested in land just east of
Santo Domingo with the intent of building a hotel. The GODR
seized the land to help create what is today a public park.
Claimant L had documents verifying the GODR debt to the
family. Embassy is not aware of any official estimate of
value, but has been advised that a settlement has been
reached and payment received. This case has been concluded.


13. a) Claimant M

b) 1980's

c) The GODR expropriated Claimant M's property in
the 1980's, which Claimant M valued at several million
dollars. The Embassy continues to include the matter in all
discussions of investment disputes with the GODR. To date
there has been no resolution.


14. a) Claimant N

b) 1986

c) Pursuant to a presidential decree in 1986, the
GODR expropriated 823,495.70 square meters of land belonging
to Claimant N for use in the construction of the
Maria Montez Airport in Barahona. Claimant N has sought
compensation for the land, improvements to the land, crops
located thereon, and for three million cubic meters of raw
materials extracted from the land. The claim was brought to
the attention of the Embassy in May 2001, and has been
included in all discussion of investment disputes with the
GODR since that time. To date there has been no resolution.
The matter continues to be considered for settlement.


15. a) Claimant O

b) 1998

c) Claimant's land was expropriated in 1998 to
permit highway expansion on the road from Santo Domingo to
Bavaro. The matter was initially presented to the Commission
for possible resolution with bonds, however the Commission
lacked the legal authority to offer settlement, as the
expropriation occurred after August 16, 1996. Claimant O
requested the case be withdrawn from consideration without
prejudice. The initial settlement offer was for 15,540,000
pesos (approximately $345,333.)


16. a) Claimant P

b) 1994

c) Government expropriation occurred in Moncion by
INDRHI ("Instituto Nacional de Recursos Hydroelectricos") for
purposes of dam construction. Parties initially resolved the
dispute by contract, agreeing to compensation in the amount
of 1,053,971 pesos. GODR assigned this matter to INDRHI for
resolution and that agency has handled all payments to date.
This case has been concluded.


17. a) Claimant Q

b) 1992

c) Claimant Q's land was expropriated in Santo
Domingo to permit highway expansion. Claimant Q signed a
settlement contract with the GODR in 1999, but was not paid.
Claimant received bonds for payment in 2003 in the amount of
141,840 pesos (approximately $3,152.) and the case has been
concluded.


18. a) Claimant R

b) 1971

c) Claimant R sold land in Santo Domingo to the GODR
in 1971. Terms of the contract provided for partial payment
at the time of sale, and final payment shortly thereafter.
Claimant R received the initial payment, but never the final
payment. The outstanding amount is 22,696 pesos
(approximately $504). Claimant is not interested in bonds,
and has requested removal from consideration by the
Commission. Embassy has been advised that payment has been
approved but not yet disbursed. This case has been concluded.


19. a) Claimant S

b) 1998

c) Claimant S signed a contract with the GODR in
1999 to receive compensation for expropriated property. The
contract was silent regarding specific terms or timing of
payments, and Claimant S was never paid. The total amount
owed to Claimant S was 948,087 pesos (approximately $21,070).
Embassy has been advised that payment has been made. This
case has been concluded.


20. a) Claimant T

b) 1998

c) Claimant T's land was expropriated in 1998 for
highway expansion in Santo Domingo. The claim is for
15,342,840 pesos (approximately $340,950),but as it arose
after August 16, 1996, Claimant T was not eligible for the
bond program under Law 104-99.


21. a) Claimant U

b) 1987

c) Claimant U's contract claim involves the unpaid
commission for loan guarantees on a real estate transaction
brokered in 1976. Claimant U asserts he is entitled to 2% of
12 million dollars, the loan guarantee amount. Claimant has
a default judgment from the U.S. Court of Appeals for the
Ninth Circuit, entered in 1987, for $240,000. Claimant U
asserts that with interest, the claim is now valued at
approximately two million dollars. Embassy has raised this
issue with GODR officials and facilitated a meeting between
Claimant U and GODR officials, and the parties are presently
in discussion.


22. a) Claimant V

b) 1995 and various

c) Claim involves non-payment for the major repair
of a power plant located in Haina, which began in March 1993.
After a number of delays, the unit was operational in April
1994, and final invoices from 1995 indicate $1,956,858, and
8,878,485 pesos owed for goods and services rendered. At a
1997 meeting between the parties, Claimant V asserted that
the GODR acknowledged interest on the debt of 8,380,624 pesos.

Embassy repeatedly contacted GODR officials in regard to this
claim. On April 30, 2003, Claimant V was presented with a
settlement check, for cash, in the amount of 19,250,000 pesos
(approximately $427,780). GODR officials have stated that
the money represents final settlement of Claimant V's claim.
This case has been concluded.


23. a) Claimant W (NEW)

b) 2003

c) In 1998 Claimant W and family responded to
advertisements by the Dominican Republic seeking U.S.
investment by purchasing two adjacent parcels of land located
in Cumayasa, San Pedro de Marcoris. In March of 2003
Claimant W, while visiting his property, discovered that
almost 700 mature coconut trees had been bulldozed and other
property destroyed by the Dominican Consejo Estatal de Azucar
(CEA). When Claimant W contacted the CEA office in Santo
Domingo to request an immediate evacuation of the area a CEA
engineer recommended that Claimant W instead request that the
properties be replaced with other unspecified parcels in
unspecified areas, citing the CEA had incurred expenses in
grading the land and uprooting the fruit trees.

Claimant W immediately contacted a local attorney and
initiated legal action in a Dominican Court. The Embassy
contacted GODR officials in regard to this claim. The matter
is currently pending a judicial decision.


24. a) Claimant X (NEW)

b) 1992

c) In 1991 as an insurer to an international company
with a contract to provide the sale of power station spare
parts for the Dominican Corporacion Dominicana de
Electricidad (CDE),Claimant X paid approximately
$2,829,112.63 to the insured and accepted transfer of all
rights to settlement in the dispute with the Dominican
government. On May 12, 1992 an Italian court ruled in favor
of Claimant X and ordered the payment of approximately
$5,369,781 (original sum plus accrued interest and expenses)
by the CDE/GODR. In early 2003, GODR officials sought to
retain a law firm in the United States to negotiate a final
settlement with Claimant X. The retainer was never
completed. On May 27, the Ministry of Finance,s Legal
Department issued its opinion on the issue and it is expected
that negotiations will begin on a final settlement within the
next few months.

The Embassy had been in repeated contact with GODR officials
in regard to this claim and brought it to the specific
attention of the Ministry of Finance at every available
opportunity. Claimant X will continue to engage GODR
officials through their local attorney. The estimated amount
owed by the GODR is now approximately $10 million.



3. The list of claimant names follows, all of whom are
believed to be either U.S. citizens or companies with
significant U.S. citizen investment. No privacy act waivers
have been signed by these claimants.

Claimant A: Smith-Enron CLP, AES Dominican Power
Partners,
Coastal Corporation, Seaboard Corporation,
Maxon Engineering Services Inc., and Cogentrix Corporation
Claimant B: Boyd Hernandez Collazo
Claimant C: Hunt Marckwald, Habanero Land Company
Claimant D: Betteroads Asphalt
Claimant E: Carlos Langa
Claimant F: Daniel and Lorrie Taveras
Claimant G: Warner Chilcott
Claimant H: Juan Dominguez
Claimant I: Ronald Blisset, Blisset Enterprises
Claimant J: Craig Frederickson
Claimant K: Luis M. Bordas and Neyda Lopez Bordas
Claimant L: Andrew Abdo and Family
Claimant M: Mercedes Colwin
Claimant N: Miguel Angel Fuentes Vasallo
Claimant O: Immobilaria ANATOLE, S.A.
Claimant P: Successors of Martin Gomez
Claimant Q: Silvio Eusebio Diaz Infante
Claimant R: Successors of Ricardo Molinari Diaz
Claimant S: Sergio M. Francisco
Claimant T: Matia de los Angeles Barcelo Salas
Claimant U: Charles V. Meadows
Claimant V: Besco Inc.
Claimant W: Dante Llacuna
Claimant X: New Hampshire Insurance Company
HERTELL