Identifier
Created
Classification
Origin
05BOGOTA6340
2005-07-05 22:56:00
UNCLASSIFIED
Embassy Bogota
Cable title:  

2005 REPORT ON INVESTMENT DISPUTES AND

Tags:  KIDE EINV EFIN PGOV CASC CO 
pdf how-to read a cable
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 BOGOTA 006340 

SIPDIS

STATE FOR EB/IFD/OIA/JPROSELI, AND L/CID/JNICOL

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

REF: SECSTATE 77014

UNCLAS SECTION 01 OF 02 BOGOTA 006340

SIPDIS

STATE FOR EB/IFD/OIA/JPROSELI, AND L/CID/JNICOL

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

REF: SECSTATE 77014


1. This is post,s response to reftel request for the 2005
report on U.S. citizen expropriation claims and other
investment disputes involving the Government of Colombia. It
is worth noting that the two cases in the 2005 report are
being decided through normal judicial action or in
transparent negotiations with the claimants.

COLOMBIA


2. The United States Government is aware of two (2) claims
of United States Persons against the Government of Colombia,
one of which one has been resolved.


I. A. Claimant A


B. 1984


C. The claim is based on Claimant A,s reported 1982
discovery of the Spanish galleon San Jose. In accordance
with Colombian law, Claimant A registered the coordinates of
the discovered ship with the Colombian Government and
negotiated with the Government of Colombia for a contract to
salvage the galleon over a two year period of time.

Claimant A maintains that under Colombian law in place at the
time of the discovery of the San Jose, Claimant A had a right
to approximately 50 percent of the property salvaged.
Claimant A also claims that a 1984 Presidential decree and a
1996 law, which stipulated that Claimant A could only receive
5 percent of any treasure salvaged from the site, were
expropriatory acts because they illegally reduced Claimant
A,s share of the salvaged property. The Colombian
Government has consistently maintained that Colombian law
existing at the time Claimant A reported its coordinates
granted Claimant only a 5 percent finder,s fee.

Three 1994 Colombian court cases support Claimant A,s
claims. 1) On March 10, 1994, the Constitutional Court
(Colombia,s higher court on Constitutional matters) struck
down as unconstitutional the 1984 Presidential decree. 2) On
July 6, 1994, a district court established that Claimant A is
entitled to a 50 percent discoverer,s share of any treasure
recovered from the site, a decision upheld on appeal by the
district superior court March 7, 1997. The Government of
Colombia has appealed this decision. 3) On October 12, 1994,

another district court issued a sequestration order requiring
any treasure salvaged from the sites to be held by the court
pending resolution of the dispute.

At Claimant A,s request, State Department officials have
repeatedly raised the possibility of a negotiated settlement
with Colombian Government officials since 1995. The
Colombian Government agreed in mid-1998 to discuss an
out-of-court settlement with Claimant,s attorneys. In April
1999, Claimant,s lawyers met in Washington with the chief
counsel of the Colombian Presidency and representatives of
the Colombian Embassy.

In February 2004, a Colombian court agreed with the Colombian
Government,s argument that the Colombian people owned the
estimated $US5 billion treasure. The tribunal denied
Claimant,s aspiration to half of the property. The
tribunal,s decision came after a Bogota court,s recent
rejection of a UNESCO convention on undersea cultural
heritage, which backed Spain,s claims to its sunken galleons
around the world. However, this decision will not have a
practical effect until the Colombian Constitutional Court
decides on a pending appeal filed by Claimant A . The
Constitutional Court has delayed ruling on this issue several
times, initially expected for June 2004, but now delayed
until the second half of 2005. The Government of Colombia is
not interested in any further negotiations until the
Constitutional Court issues a decision.

II.


A. Claimant B


B. 2004

TermoEmcali is a 234 MW, natural gas-fired combined cycle
power station located near Cali, and supplies power to the
Emcali utility. The project,s majority owner is an
affiliate of Claimant B. TermoEmcali bondholders include
some of the largest global financial institutions --
including pension funds, insurance companies and investment
banks.

On March 6, 2003, the Colombian Federal Government, which
took control of Emcali in 1998, announced it had issued a
resolution halting all payments to Emcali creditors,
including those associated with the TermoEmcali power
facility. The federal government action caused TermoEmcali
to default on its bonds.

On December 28th, 2004, Emcali and the bondholders reached a
restructuring agreement with the Colombian authorities.
Separately the Colombian authorities reached an agreement
with local creditors of TermoEmcali. The agreements allowed
local creditors to receive their payments and gave them
approval rights over any subsequent debt restructuring
agreement.

On February 16th the local creditor executive committee
rejected a proposed restructuring agreement and asked to
delay negotiations with the TermoEmcali project for an
additional 10 years. On April 21st, ThermoEmcali filed a
lawsuit challenging certain payments mandated by the December
28th decision of the Superintendent concerning local
creditors.

The Committee of Emcali Creditors met again on May 17 and
agreed to allow payments to ThermoEmcali to be deposited in a
fiduciary account pending the restructuring of the debt
agreement. The Committee also extended the deadline for
restructuring negotiations until October. The GOC indicates
that the case should be favorably resolved by the 31st of
October.
WOOD