BOSNIA INPUT TO 2006 REPORT ON INVESTMENT DISPUTES

UNCLAS SARAJEVO 001310

SIPDIS


SIPDIS

EUR/SCE (FOOKS,RIEHL),EB/IFD/OIA (ROSELI)
ZAGREB FOR THOMAS KELSEY

E.O. 12958: N/A
TAGS: EINV CASC KIDE OPIC PGOV BK
SUBJECT: BOSNIA INPUT TO 2006 REPORT ON INVESTMENT DISPUTES
AND EXPROPRIATION CLAIMS

REF: STATE 60294

BOSNIA AND HERZEGOVINA

The United States government is aware of one (1) claim of
U.S. persons that may be outstanding against the Government
of Republika Srpska (GRS),a sub-state of the State of Bosnia
and Herzegovina.


1.
a. Claimant A
b. 2001
c. Claimant A submitted a bid in 2000 for four
wood-processing companies in a privatization tender by the
GRS. The tender required all bids to include a deposit fee
as a condition of tender, but none of the bidders submitted
the required fee. Despite this failure by the bidders, the
GRS unsealed the bids. Claimant A contends that unsealing
the bids contituted acceptance under the rules of the tender,
and that because it submitted the highest bid, it won the
tender. The GRS disagreed, and sought to conduct a new
tender looking for bids that met the deposit requirement.

Claimant A obtained a GRS court injunction in 2001 against
the GRS Directorate for Privatization (DfP) prohibiting a
second tender. Claimant A also sought a court order
requiring the GRS DfP to respect the results of the original
tender. In July 2001, the then-GRS Prime Minister sent
Claimant A a letter offering to declare Claimant A winner of
the bid in exchange for Claimant A's dismissal of all pending
court actions. While Claimant A agreed in principle to this
idea, it never droped its litigation, thereby failing to meet
the GRS government's demands. In October 2005 Claimant A
lost its court case, but is attempting to appeal. Claimant A
has evaluated the current net value of the companies as
negative, but estimates that if it were allowd to assume
ownership and implement its investment plans, the value of
the companies could rise to over $10 million.

Claimant A formally requested U.S. Government advocacy on its
behalf in January 2004, although the request did not meet USG
standards for tender advocacy. Embassy and Department staff
nevertheless have met on many occasions with different GRS
Prime Ministers as well as BiH Prime Minister Terzic to
encourage them to resolve the status of the companies. A
one-year management contract for one of the four plants that
Claimant A signed in December 2004 has expired and has not
been extended due to disagreements between Claiman A and GRS
over each side's compliance with the contract terms.
Claimant A is now also pursuing assets in the RS
wood-processing sector through the bankruptcy process.

List of Claimants:

Claimant A: Certified Balkan Beech, Inc. (d/b/a
BalkanAmerica)
U.S. Citizen
No Privacy Act Waiver
MCELHANEY