DOMINICAN REPUBLIC: 2005 INVESTMENT DISPUTES AND

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003930 SIPDIS DEPT FOR EB/IFD/OIA/JPROSELI, L/CID/JNICO; USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION USDOC FOR 3134/ITA/USFCS/RD/WH; TREASURY FOR M WAFER E.O. 12958: N/A TAGS: CASC DR EFIN KIDE PGOV EINV SUBJECT: DOMINICAN REPUBLIC: 2005 INVESTMENT DISPUTES AND EXPROPRIATION CLAIMS REPORT REF: A. 05 STATE 70014 ¶B. E-MAIL KENDRICK OR MEIGS/MCISAAC ¶C. SEARBY ¶1. This cable provides the 2005 Investment Disputes and Expropriation Claims Report for the Dominican Republic. ¶2. The United States Government is presently aware of 18 claims (including 5 new ones for 2005) by U.S. persons/entities against the Government of the Dominican Republic (GODR). There has been considerable progress in resolving the many of the cases that have languished for years. A USAID-sponsored consultant has been working with the Dominican Government to implement a system for evaluating and resolving claims through the use of bonds. In 1999, Law 104-99 was passed, offering to claimants whose disputes arose on or before August 16, 1996, the option of circumventing the traditional method of claim resolution (at the "Bienes Nacionales"),and instead to seek compensation from a specially appointed Commission, provided the claimants are willing to accept payment in bonds. ¶3. Action on resolution of claims stopped when the Fernandez administration took office in August, 2004. Office of Public Credit within the Ministry of Finance is responsible for expropriations and investment disputes; it has had four directors in less than a year. This high turnover rate with the change in administration has delayed consideration of claims. Embassy Santo Domingo sees no movement even now, 9 months in the administration. ¶4. The Embassy continues these expropriation and investor dispute cases with the Dominican Government on a regular basis, and all information provided herein was last updated in June 2005. Details of the new claims follow: 14.a) Claimant M (NEW 2005) b) 1992 c) Claimant M owned 400 m2 of land bordering the road to the Santo Domingo Las Americas Airport, the land was expropriated by the Dominican Government in the 1990's for highway expansion. Claimant M's claim is being held up in the Ministry of Finance-Office of Engineering. In order for Claimant M to receive compensation, the Office of Engineering must evaluate the claim and then pass it to the Office of Public Credit for payment. The Office of Engineering has had the paperwork since April 2002. The Embassy contacted the Office of Engineering in June, 2005, asking the staff to look into the matter and pass the paperwork on to the Office of Public Credit for payment. The claim is worth around 400,000 Dominican pesos or about 14, 000 USD. Note: Claimant M had a previous case involving an expropriation under similar circumstances that was settled in 2004. 15.a) Claimant N (NEW 2005) b) 2003 c) Claimant N is involved in a contractual dispute with the Dominican Procuraduria General de la Republica (Attorney General) concerning a telephone system for Dominican prisons. (Note: this is a system similar to those used in U.S. Federal Bureau of Prisons.) Claimant N's company, in partnership with a California-based equipment maker, is having trouble activating the system in the prisons due to bureaucratic delay in the Dominican Procuraduria. His telephone equipment has already been installed in the central offices of the Procuraduria General and the Najayo, Puerto Plata and La Victoria prisons. In 2004, when representatives Claimant N went to activate the equipment at the central office, they were informed they could not operate the equipment until they had a letter of authorization from the Procuraduria's office. Claimant N has invested over $150,000 and is currently losing $7,000 a month waiting for the Procuraduria to sign the appropriate letter. Claimant N signed a contract with the Dominican Government on Sept 4, 2003. A new presidential administration began on August 16, 2004 and appears reluctant to honor the agreements of the previous administration. The Embassy has met with the Deputy Attorney General for Prisons the Dominican telecommunications regulating agency of behalf of Claimant N. ¶16. a) Claimant O (NEW 2005) b) 2005 c.) On May 7, 2004, Claimant O and the company he represents signed a contract with the Dominican Government (Corporacion Dominicana de Empresas Estatales - CORDE) granting Claimant O the right to exploit a government-owned salt mine in the area of Las Salinas, Province of Barahona, for a period of 25 years. Claimant O alleges the Dominican Government is not honoring the contract and is denying his company access to the area. Claimant O has invested money in equipment and has made other investments including contractual payments and tax payments to the Dominican Government. The contract requires Claimant O to invest U.S. $1.5 million in the mine over the first five years of the contract and then U.S. $150,000 USD every year thereafter. Claimant O has been unsuccessful in his attempts to obtain meetings with government officials. A new presidential administration began on August 16, 2004 and appears reluctant to honor the agreements of the previous administration. The Dominican Government has sent this contract to a newly established government ethics commission for review. The Embassy has contacted the Dominican Government's commission several times, as well as the General Director of Mining, to advocate on the behalf of Claimant O. ¶17. a) Claimant P (NEW 2005) b) 2002 c.) Claimant P entered a contract with Unidad Corporativa Minera (UCM, a government-owned entity closed in 2004) to determine the economic viability of sulphate based gold reserves at the Pueblo Viejo mine. UCM contracted Claimant P to conduct an environmental study, fish assessment, tailings dam sitings and an overall technical review. The job was finished in June 2002, but UCM failed to pay Claimant P more than U.S. $125,0000. Embassy officials have been in contact with UCM and the Director General de Mineria. Obtaining payment from the Dominican Government has been difficult in part because the UCM no longer exists and the changing of officials at the Office of Public Credit has slowed processing. ¶18. a) Claimant Q (NEW 2005) b) 2002 c.) Claimant Q is currently involved in a legal dispute with the Anabalca Shipyard Company (50% owned by the Dominican Navy),the company he contracted to repair his tugboat. Anabalca is holding his tugboat as collateral for $40,000 in repairs performed after the tugboat experienced transmission problems. Claimant Q claims Anabalca did not correct the transmission problem and he refuses to pay for the services Anabalca has provided. The case is currently before the Dominican Court of First Instance in Santo Domingo. Claimant Q's tugboat has been in the Port of Las Calderas, Province of Peravia, since June 2001. Embassy officials have raised this issue with the managers of the Anabalca Shipyard and the Dominican Armed Forces. Claimant N: Carlos Langa Claimant O: Gabelle Prison Telephones- Ruben Cerezo Claimant P: Pedro Antonio Martinez, Agregados del Lago, S.A Claimant Q: Pincock, Allen & Holt, subsidiary of HartCrowser Claimant R: Tugboat Linda W- Gene Martin MEIGS