ESSO CONTRACTOR IN COMMERCIAL DISPUTE

C O N F I D E N T I A L NDJAMENA 000901

SIPDIS

DEPARTMENT FOR AF, AF/C, EB, LONDON AND PARIS FOR
AFRICAWATCHER, TREASURY FOR OTA, ENERGY FOR GPERSON AND CGAY

C O R R E C T E D C O P Y - CLASSIFIED BY STATEMENT AND
REASON ADDED

E.O. 12958: DECL: 06/07/2015
TAGS: ECON ENRG EPET CD
SUBJECT: ESSO CONTRACTOR IN COMMERCIAL DISPUTE

CLASSIFIED BY: KFITZGIBBON, REASON: 1.4(B)


1. (SBU) Summary: The Esso-led oil project is facing
another commercial dispute involving one of its contractors.
Members of a Chadian labor union took the contractor to court
claiming the company did not pay them overtime salaries over
a four-year period. According to Esso, TCC paid all of the
salary payments due the workers and has the salary slips to
prove it. TCC received a verbal judgment in its favor, but a
second court subsequently changed the decision and ordered
TCC to pay 12.5 million USD in compensation on May 23. The
jubilant workers marched to the ruling Movement for Patriotic
Salvation (MPS) headquarters to celebrate their court
victory. However, the written judgment has apparently not
yet been issued. Esso is concerned about the precedent the
manipulated, and apparently politicized, court procedures
will set for future investments. Esso officials have relayed
their concerns and a written description of the facts of the
case to the National Coordinator for the Doba Oil Project,
Haroun Kabadi, on May 26. They explained the issues at stake
to Embassy officials on June 1. The Ambassador met with
Presidential Cabinet Director Mahamat Annadif June 3 to
discuss the flawed court proceedings and their negative
impact on U.S. investment. End Summary.

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CASE BACKGROUND
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2. (SBU) On June 1, Esso's Public Relations Director Miles
Shaw and Chief Negotiator Lindsey Peromdelon told the
Ambassador and P/E officer about a serious commercial dispute
between its contractor, TCC, which is a subsidiary of
Kellogg, Brown, and Root, and its former workers. The origin
of the dispute began in November 2004 when TCC began
demobilizing its work force. The workers claimed that they
had not been paid salaries for overtime. In 2001, TCC
applied for and received approval for some of its workers to
work more than the 39 hours and up to the 72 hours permitted
by Chadian law. TCC kept within these regulations, and
overtime payments for those employees working over 39 hours
appeared in the employees' payslips. At the end of 2004, the
workers claimed that TCC had not paid them overtime since

2001. They claimed that they should have received pay for
the 33 hours difference between 39 and 72 hours even though
they had not worked those 33 hours.

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TWISTS, TURNS, AND REVERSAL IN COURT
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3. (SBU) The workers called for labor arbitration on the
issue, while TCC claimed that the workers' charges were not
valid. In February 2005, the President of the Labor Tribunal
in N'Djamena referred the matter to the President of the
Chamber for Social Affairs. The judge determined that the
issue was beyond the prescribed limits of time and wrote this
on the side margins of the letter referring the matter to
her. She did not write a full letter. The President of the
Labor Tribunal held a hearing in late February 2005, but was
transferred that month and a new President was appointed.
The new judge appointed two assessors, one on behalf of the
employees and a second for TCC. This judge was then
transferred in April 2005. One of the assessors that had
been appointed was Rakis Manani, the President of the
Employers Union and Director of Star National Insurance
Company. According to Manani, during two court hearings on
May 10 and 12, the judge rejected the workers' claims on the
grounds that he could not legally accept a collective claim
from the employees. Manani told Esso that the judge and
assessors found the case to be very unclear and therefore
decided to reject it. However, no written judgment was given
at the time.


4. (SBU) However, the court was reconvened on May 19, while
Manani was traveling to Libya with President Deby. The court
adjourned until May 23 at which time a new assessor was
appointed to replace Manani. The hearing was set for the
same day. TCC protested, but was overruled by the judge.
The judge was presented with stolen TCC documents and
information from its databases. A list was created with all
of the employees names from 2000/2001, which included
employees who had died and those who were not eligible for
overtime, including TCC employees in N'Djamena. A

calculation was done for 33 hours of overtime not worked for
all of these employees. This information was presented in
court on forged TCC letterhead. The judge accepted it and
ordered TCC to pay the employees 12.5 million USD. According
to Esso, the written judgment has been issued.

5. (SBU) Press releases on the radio during the same week
stated that the judgment was fair and equitable. On May 28,
the TCC workers marched to the ruling Movement for Patriotic
Salvation (MPS) headquarters in N'Djamena to celebrate and
share their victory. On May 30, the Government newspaper
featured a picture of the celebration and quoted several
former TCC employees pledging to work together with the MPS.
Others declared that they will join the ruling party as well
as make a financial contribution to the referendum campaign.
(Note: The ruling party had mobilized for the public
referendum set for June 6 on constitutional amendments which
would remove presidential term limits. End Note.) On May
30, another press release on the radio declared that TCC owed
the workers money and that because TCC has closed in Chad,
Esso has a moral obligation to pay the money.


6. (C) The story has another troubling political twist. One
of the former TCC employees in the case is the current
Minister of Labor, Mahamat Nour Mallaye. Esso described its
past dealings with Mallaye as "very good". His role in the
case is not yet clear, but Esso officials are surprised that
Mallaye has not removed himself from the case due to conflict
of interest.

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NEXT STEPS
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7. (C) The written judgment can be appealed through a
court in Abidjan. However, TCC would have to make the 12.5
million USD payment before the appeal is heard. According to
Esso, it is unlikely TCC would ever get this money back, even
with a favorable judgment. Based on its past experience with
the Taylor case, Esso is concerned that once a written
judgment is handed down, the court bailiffs will be on the
doorstep of Esso because TCC has pulled out of Chad. Esso is
considering its options at this point. Esso has presented
all of the case documents to Haroun Kabadi, Coordinator for
the National Petroleum Project at Doba, who in the past has
been a key point of contact with access to President Deby for
Esso. The Ambassador told Esso that he would see what could
be done prior to the judgment being issued in writing.

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CABINET DIRECTOR LOOKING INTO ISSUE
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8. (C) Following the meeting with the Esso representatives,
the Ambassador requested a meeting with the Minister of
Justice, but that minister, like all other ministers, was
outside N'Djamena campaigning for a "yes" vote on the public
referendum. On June 3, the Ambassador and P/E officer met
with President Deby's Cabinet Chief, Mahamat Saleh Annadif,
to raise the issue of the TCC labor dispute, the flawed
judicial process, and its implications for future foreign
investment in Chad. The Ambassador explained that TCC had
documented the salary payments, but that the decision of the
arbitrator in a dubious court process was against TCC. The
Ambassador gave Annadif a copy of the documents related to
the case and expressed hope that a solution could be found
before the rendering of a written decision. The Ambassador
also showed Annadif the photograph of the TCC employees
rallying for a "yes" vote on the referendum in the government
newspaper. The Ambassador also told Annadif that if a
solution cannot be found for the case, it would send a bad
signal to other potential investors. Annadif appeared to
quickly grasp the consequences of the situation and promised
to read the case information carefully.

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COMMENT
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9. (C) We will continue to follow up on this case with
relevant government officials, such as the Minister of
Justice. As of June 7, Esso representatives told us they

understood the judgement has been drafted, but had not yet
seen the decree. If the case stands, it will send the wrong
signals to U.S. and other outside investors. First, the
retroactive attempt by former employees to extort salary
payments when no work was performed means that no U.S.
company can be sure that it will not be taken to court by
labor unions for the same reasons. Second, the apparent
manipulation of the judicial process against a partner of a
major foreign investor in a key sector also means that no
company is safe from political harassment. Finally, because
TCC has left Chad, Esso, as the primary contractor, will be
forced to pay on behalf of its contractor, a creeping
expropriation that Esso fears could become the norm, rather
than the exception.
WALL


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