KUWAIT INPUT FOR 2005 REPORT OF INVESTMENT

UNCLAS KUWAIT 002231

SIPDIS

SENSITIVE

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

E.O. 12958: N/A
TAGS: EINV EFIN CASC PGOV KIDE KU OPIC
SUBJECT: KUWAIT INPUT FOR 2005 REPORT OF INVESTMENT
DISPUTES AND EXPROPRIATION CLAIMS

REF: STATE 70014

This cable is sensitive but unclassified; please protect
accordingly. Not for internet distribution.


1. (U) As requested reftel, post is submitting the following
update for inclusion in the 2005 Report on
Investment Disputes and Expropriations Claims.


2. (U) A. Claimant Designation: Claimant A vs. Kuwait
Ministry of Finance, Offset Department.


3. (U) B. Year When Dispute Arose: The dispute arose on
October 5, 1997 and is ongoing.


4. (U) C. Case History: Claimant A acted as the third party
broker for various offset obligors under the Ministry of
Finance's Offset Program. Claimant A's business plan for an
offset project was approved by the Ministry of Finance's
Offset Department (formerly known as the Program Executive
Office) in a letter dated January 24, 1996. As a condition
of the approval letter, Claimant A had to fulfill certain
requirements as instructed by the Offset Department, such as
providing the names of offset obligors within a four-month
period, completing feasibility studies, establishing a local
project company and obtaining approval for its project from
the Ministry of Electricity and the Ministry of Water and
Public Works. Claimant A fulfilled all of its obligations,
but in an October 5, 1997 letter from the Undersecretary of
the Ministry of Finance, Claimant A's business plan was
revoked due to a "technical default" and the Ministry
threatened to apply penalties under the Offset Program. The
Offset Department claimed that Claimant A failed to meet the
four-month deadline for naming the committed obligors.


5. (U) Case History, Continued: After several attempts for
an amicable resolution to this issue, Claimant A filed a case
in the Kuwaiti Court of First Instance against the Ministry
of Finance's Offset Department. The claim amount was
approximately USD ten million. The court ruled against
Claimant A on October 31, 1999. Claimant A appealed on
January 22, 2000, and the Court of Appeals overturned the
lower court's ruling on June 17, 2001. The Court of Appeals
returned the case to the Court of First Instance, which in
turn referred the case to the Ministry of Finance's Experts
Department in May 2002, to calculate the damages owed to
Claimant A. The Experts Department set damages at 1,386,609
Kuwaiti dinar (about US$4.6 million). However, the Court of
First Instance refused to enter the case for final judgment,
saying it disagreed with the Experts Department's
recommendation. On October 31, 2004, the Court of Appeals
reversed the Court of First Instance's refusal to enter the
case for final judgment, ruling in favor of Claimant A and
supporting the Experts Department's recommendation. The
Ministry of Finance has appealed the Court of Appeals'
decision, and the case is now pending before the Court of
Cassation. Claimant A expects a final ruling by the end of
October 2005.


6. (SBU) Separate List of Claimants' Names: Claimant A --
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