EGYPT: 2006 REPORT ON INVESTMENT DISPUTES AND

UNCLAS CAIRO 003706

SIPDIS

STATE FOR NEA/ELA, L/CID/EDAUGHTRY AND EB/IFD/OIA/JROSELI
USAID FOR ANE/MEA MCCLOUD
USTR FOR SAUMS
TREASURY FOR NUGENT/ADKINS
COMMERCE FOR 4520/ITA/ANESA/TALAAT
SIPDIS

E.O. 12958: N/A
TAGS: CASC EINV KIDE OPIC PGOV EG
SUBJECT: EGYPT: 2006 REPORT ON INVESTMENT DISPUTES AND
EXPROPRIATION CLAIMS

REF: STATE 60294

Post is aware of four (4) claims of U.S. persons that may be
outstanding against the Government of Egypt (GOE):


1. a. Claimant A
b. 2001
c. In June 2001, the Alexandria Governorate took
approximately 6,000 square meters from Claimant A's land (on
which a factory had been built) to widen the adjoining
highway. The Governorate's ensuing construction work also
damaged a wall and some property. As a result of this
action, Claimant A made a request to the Governorate for
compensation of approximately $390,000, for the sei
zed land
and physical damage. The compensation case proceeded
smoothly at first. However, during the final stages of the
compensation process in late 2003, the Governorate informed
Claimant A that it did not have legal title to the entire
property (despite documentation to the contrary),and thus
had no right to compensation for the land taken for the
highway.

The Governorate officials further informed Claimant A that
it had no right to expand operations, sell the land or
engage in any legal proceedings involving the land, and that
the Governorate would file a lawsuit against Claimant A to
reclaim the land. As a result of the dispute, Claimant A
was unable to expand operations and meet growing export
orders. After the U.S. Embassy participated in a meeting
with Claimant A and GAFI, the GOE investment authority, GAFI
established a technical committee to review the issue. In
March 2005 GAFI officially confirmed Claimant A's ownership
of the land and notified the Governorate, which then offered
compensation of less than theQ90,000 requested by Claimant

A. Later in 2005, the Ministry of Housing assessed the
value of the land based on 2003 prices. Claimant A disputed
the assessment, and was informed by the Governorate that the
land could only be re-assessed after three years. Claimant
A's CEO met with the Governor to resolve the matter.
Claimant A was later informed by the GovernorQ that
negotiations could only be conducted directly between the
Governorate and Claimant A's headquarters. The parties are
currently arranging to continue negotiations.


2. a. Claimant B
b. 1992
c. Claimant B was awarded a contract in 1989 to
refurbish a GOE-owned hotel in the Ain Sokhna area.
Claimant B had spent several million dollars by 1992 and was
ready to inaugurate the project when the then-Ministry of
Public Enterprise informed Claimant B that the contract was
null and void. Both parties agreed to arbitration, which
resulted in a favorable ruling for Claimant B. Nonetheless,
the Ministry of Public Enterprises continued to demand that
Claimant B surrender the assets and took the matter to
court. The court initially refused to hear the case on the
grounds that the original contract stipulated that in case
of legal dispute both parties would seek arbitration. The
Ministry appealed the decision and the appellate court
agreed to hear the case on the grounds that the arbitration
decision was never executed. Claimant B petitioned against
the appellate court's decision and no further court action
was taken. There has been no change in the status of this
case over the past year, and Claimant B has reportedly
removed operations from Egypt. Claimant B has not contacted
the Embassy since petitioning against the appellate court's
decision and the Embassy considers the case closed until
informed otherwise.


3. a. Claimant C
b. 1998
c. Claimant C secured a $6.2 million, 4-year contract
with the then-Ministry of Trade and Supply to provide both
technical assistance to the Egyptian Export Development
Center and export-promotion support to Egyptian companies.
The money was allocated fromQe Ministry of International
Cooperation through local currency proceeds generated from a
USAID cash transfer program. Claimant C began providing
training, and an initial payment of $1.6 million was due in
March 1998. In June 1998, Claimant C received only a
partial payment of $560,000 and the Egyptian Export
Development Center, under the successor Ministry of Economy
and Foreign Trade (now the Ministry of Trade and Industry)
subsequently cancelled the contract and all future services
to be provided, claiminQervices already provided were of
unsatisfactory quality. No other payments were made, and
the Egyptian Export Development Center was closed in 2002.
The Embassy raised the issue numerous times with various
officials, including the former Prime Minister but the GOE
took no further action.

The Embassy repeatedly advised Claimant C to pursue
arbitration, but Claimant C continued to seek a political
solution. The Ministry of Trade and Industry has indicated
in discussions with Embassy officials that a new export
promotion center will open soon, Claimant C is welcome to
submit a new proposal to provide services. Claimant C,
however, seeks a written response from the Ministry of Trade
and Industry to Claimant C's contention that the previous
contract is still valid. Embassy officials continue to
raise the issue with GOE officials.


4. a. Claimant D
b. 2004
c. The Egyptian National Air Navigation Services
Company (NANSC),part of the Egyptian Ministry of Civil
Aviation, contracted with Claimant D to supply seven
surveillance radars to be installed in seven different
locations across Egypt. Prior to the final tages of the
contract, the Egyptian authorities eized the company's $3.4
million performance bon, claiming performance deficiencies
in the supplyng of proper documentation, spare parts, and
tes equipment. The Embassy has been involved in
dicussions between the parties and has raised the dipute
up to the level of the Prime Minister. In ugust 2004, a
mediation committee was set up betwen the GOE and Claimant
D to resolve the issue. However, NANSC terminated the
committee before a decision was reached, and did not respond
to solutions offered by Claimant D at the end of 2004 in the
pursuit of a negotiated settlement. In January 2005 the
Minister of Civil Aviation decided to resort to official
arbitration after meeting with the senior management of
Claimant D. In February 2005, Embassy officials approached
the then-Ministry of Foreign Trade and Industry to press for
resolution of the issue, but did not receive a response.
The parties are currently still selecting arbitrators.


5. Claimant A: Colgate-Palmolive
Claimant B: H and H Enterprises
Claimant C: International Trade and Marketing (ITM)
Claimant D: Northrop and Grumman Electronic Systems