2007 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION

UNCLAS BELGRADE 000984

SIPDIS

DEPARTMENT FOR EB/IFD/OIA AND L/CID

SIPDIS

E.O. 12958: N/A
TAGS: KIDE EINV EFIN CASC PREL SR MW
SUBJECT: 2007 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION

REF: STATE 55422


1. Below is the submission for the 2007 report on investment
disputes and expropriation claims in Serbia. This cable contains
additional information on property restitution cases reported to the
Embassy since June 2006. There are developments on several of the
cases and three new property restitution claims. All of the
expropriation claims listed below are by U.S. persons who were not
U.S. citizens when the claims arose.


2. Begin text:

SERBIA

The Embassy is aware of one claimant's two ongoing investment
disputes and 30 claims of U.S. persons - who were not U.S. citizens
when the claims arose - related to nationalized property that are
outstanding against Serbia.

INVESTMENT DISPUTES

SERBIA


1.

a) Claimant A

b) 2004

c) On May 19, 2003, Claimant A, a U.S. travel and tourism company,
purchased 70 percent of a Serbian tour operator through a
privatization tender. In addition to the sale price, under the
Share Purchase Agreement (SPA) Claimant took on responsibilities for
future investments of USD 44.33 million and social support to
workers and the community of USD 0.555 million. Claimant agreed to
invest USD 660,000 by June 30, 2004 and was also obliged to increase
its performance bond from USD 2.2 million to USD 9.7 million as a
guarantee for year two investments by July 1, 2004, according to the
SPA.

In mid May 2004, Claimant requested from the Agency for
Privatization a modification of the SPA to decrease
the investment obligation for the second year based on complications
with securing financing, citing as justification bad press about a
conflict with small shareholders and employees and a March 2004
announcement by the new Serbian government that a large number of
past privatization deals (including the one involving Claimant)
would be reviewed by the Anti-Corruption Council. The Agency denied
Claimant's request to amend the SPA, and on August 6, 2004 cashed
performance bonds in the amount of USD 2.2 million. In September
2004, Claimant announced a breach of its SPA with the Privatization
Agency because of the Agency's action against the performance bonds.
On March 21, 2005, Claimant sent the Privatization Agency a
contract termination notice. In April 2005, Claimant submitted the
case to the International Court of Arbitration in Paris. On July 14,
2005, the Privatization Agency terminated the SPA with the Claimant
due to failure to meet obligations. According to the Law on
Privatization, when a buyer fails to meet contractual obligations,
the offered property is transferred to the Share Fund and is
prepared for privatization again.

On April 20, 2007 Cyprus-based Acciona Investments Limited became
the new owner of the Putnik travel agency by acquiring the
government's 70 percent stake for EUR 38 million on the Belgrade
Stock Exchange.

On May 4, the International Court handed down a decision in favor of
Claimant. He was awarded USD 12.685 million plus interest, which
covers his USD 5.2 million purchase price, USD 1.6 million in
partial return of investments, return of the excursion vessel
"Sirona", USD 2.2 million for reimbursement of the first bank
guarantee cashed by the privatization agency, and USD 82,500 for
arbitration costs.

In light of the Court's decision, Claimant is now in discussions
with the government about a possible settlement, although the
government has said it will contest the arbitration decision in
local courts.

Claimant A also has a second investment dispute with the Government
of Serbia. Claimant purchased a second tourist agency on September
16, 2003 for USD 1.1 million with an investment obligation of USD 9
million and a social program to support workers worth USD 300,000.
In February 2006, company workers staged protests in the city of
Nis, site of the agency's hotel properties, calling for cancellation
of Claimant's purchase agreement. That same month, the
Privatization Agency extended the deadline for fulfillment of
obligations under the SPA by another 90 days. The Agency annulled
the contract on June 30, 2006, although Claimant contends that he
made the necessary investments.

The claimant appealed to the International Court of Arbitration in
Paris on April 28, 2006; hearings in the case are just beginning.


PROPERTY EXPROPRIATIONS

SERBIA


2.

a) Claimant B

b) December 1958

c) All property is located in Belgrade. Building one: seven
ground floor stores, nine one-bedroom apartments, four two-
bedroom apartments, six studio apartments, and one separate
room, with yard. Building two: building has been demolished,
currently used as parking lot, former building consisted of
seven ground floor stores, 11 one-room apartments, four one-
bedroom apartments, six two-bedroom apartments, and one four-
bedroom apartment. Building three: seven ground floor stores,
three one-bedroom apartments, eight two-bedroom apartments,
three three-bedroom apartments; Building four: three ground
floor stores, one one-bedroom apartment, seven two-bedroom
apartments, one three-bedroom apartment, three studio
apartments; Building five: family home with yard.

All property was nationalized as a result of the Law on
Nationalization in 1958.

By appealing to the Ministry of Finance and the Privatization
Agency, the Claimant has been trying to prevent the sale of
the property as a part of the Serbian government's privatization
process. In response to attempts
to include some of Claimant's properties in privatization
auctions, the Embassy sent a diplomatic note to the Ministry
of Foreign Affairs in 2003 asking the Ministry to work with
other relevant government agencies to postpone any steps to
offer the Claimant's properties for sale until a law on
restitution is passed that provides a legal mechanism for
adjudicating ownership claims. Our understanding is that the
claimant's property, currently used as a parking lot, was
purchased by Hypo-Alpe-Adria Bank. Between 2002 and 2007 the
Embassy sent a number of letters to local government officials,
Hypo-Alpe-Adria Bank and the Serbian government in support of the
Claimant's efforts to prevent the sale of his property and
construction on the site. Despite Embassy intervention,
Hypo-Alpe-Adria began construction on the claimed property.
Claimant B filed a legal action before the Supreme Court of Serbia
on January 4, 2007, along with an appeal to the same court for
urgent adjudication of this case, filed on March 15, 2007. In
support of his appeal, the Embassy sent a diplomatic note to the
Ministry of Justice requesting the Ministry to ensure an expeditious
resolution of the case in order to protect the undeveloped status of
the property pending the passage of the restitution law.

Post does not have an estimated value of the property.

Claimant regularly provides updates to the Embassy on the
status of the various claims. Latest information was
received in April 2007.



3.

a) Claimant C

b) 1945

c) The property consists of the following:
Piece of land in the center of the spa resort "Divcibare",
warranty deed 166/38, which was given to the spa by the
authorities for use and occupancy. Real property in
Belgrade, located at Mekenzijeva 87, consisting of four
residential apartments, two commercial units. Real property
at Boulevard Oslobodjenja, consists of a two-story building
with five one-bedroom, two two-bedroom apartments, and two
commercial units, and another building with two apartments.

The property was nationalized while owned by the grandfather of
Claimant.

Post does not have an estimated value of the property.

Last contact was in January 2005.


4.
a) Claimant D

b) 1948

c) All property is located in Kolari, Smederevo, comprising
an agricultural mill and 50 hectares of land.

The property was confiscated as a result of the law on
nationalization of private industry.

Estimated value is USD 1,000,000.

Last contact was in September 2004.



5.

a) Claimant E

b) 1959

c) Property consists of four-story building in Makedonska 11-
13, a five-story building at the corner of Brace Jugovica 23
and Skadarska 2, and the building site in Lomina 10.

The property was confiscated as a result of the Law on
Nationalization.

Estimated value is $3,031,000.

Last contact was in May 2006.


6.

a) Claimant F

b) 1945

c) All property is located in Belgrade; consists of several
commercial units at Terazije 16.

The property was nationalized as a result of the Law on
Nationalization.

Post does not have an estimated value of the property.

Last contact was in March 2006.


7.

a) Claimant G

b) 1945

c) Property is located in Belgrade, on Terazije square, and in the
Kolubara region.

Post does not have an estimated value of the property.

The property was nationalized as a result of the Law on
Nationalization.

Claimaint regularly provides updates to the Embassy on the
status of the various claims. Latest information was
received on February 22, 2007.


8.

a) Claimant H

b) 1956

c) Property is located in Belgrade, consists of one building
at Svetogorska 6-8; the building includes a large garage and
two small shops.

The property was confiscated as a result of the Law on
Confiscation.

Post does not have an estimated value of the property.

Last contact was in April 2005.


9.

a) Claimant I

b) April 30, 1961

c) Property is located in Belgrade, at Kralja Petra 6,
building which includes a historical Belgrade restaurant.

The property was nationalized as a result of the Law on
Nationalization.

Post does not have an estimated value of the property.

Last contact was in March 2006.


10.

a) Claimant J

b) 1961

c) Property is located in Belgrade.

The property was nationalized as a result of the Law on
Nationalization.

Post does not have an estimated value of the property.

Last contact was in April 2005.


11.

a) Claimant K

b) 1948

c) Property is located in Belgrade and the spa town of
Vrnjacka Banja.

The property was nationalized as a result of the Law of
Nationalization.

Post does not have an estimated value of the property.

Last contact was in September 2004.


12.

a) Claimant L

b) 1945

c) Property consists of a brewery located in Valjevo.

The property was confiscated as a result of the Law on
Nationalization.

Post does not have an estimated value of the property.

Last contact was in August 2004.


13.

a) Claimant M

b) 1945

c) All property is located in Belgrade, except some
agricultural properties (mostly vineyards) in Smederevo and
Paracin. Hotel "Srpski kralj" was severely damaged by the
German bombings of Belgrade in 1941 and subsequently
nationalized and razed by the Communist authorities. The
remaining vacant lot is located on Rajiceva Street; usage rights to
most of the parcel were granted to a private foreign company which
has begun preparations for construction while a smaller portion of
the property is used
intermittently as a coffee terrace.

The "Old Mill" Flour Milling Complex, encompassing half a dozen
separate buildings in downtown Belgrade, was damaged by the German
bombings in 1941, confiscated in 1945, plundered of all equipment
and remained an empty shell for almost 50 years, used as an illicit
warehouse. The Belgrade Savski Venac municipality sold the property
to a private construction company which plans soon to begin
construction on the property. The claimant has filed complaints with
the municipality and with the Public Prosecutor's office, alleging
numerous irregularities surrounding the sale of that claimed
property. The Embassy has held numerous meetings and sent letters
to appropriate public officials in support of the claimant.

Weifert Brewery, majority-owned, confiscated in 1945 and
subsequently renamed "Beogradska Industrija Piva", still
remains in a working condition. In spring 2007 the brewery was
offered for sale via a privatization tender, and press reported that
a foreign consortium won. Claimant is protesting the results of
that tender. The Embassy has held numerous meetings and sent letters
to appropriate public officials in support of the claimant.


Several large office and apartment buildings in the center
of Belgrade.

Family house in Bircaninova 21.

All property was confiscated as a result of the Law on
Confiscation in 1945.

Claimant has appealed to the Ministry of Finance, Ministry for
Capital Investments, Privatization Agency, and the Supreme Court of
Serbia as well as to local government authorities to prevent the
sale of the nationalized property as a part of privatization
process; Post does not have an estimated value of the property.

Claimant regularly provides updates to the Embassy on the
status of the various claims. Latest information was
received in June 2007.


14.

a) Claimant N

b) 1945

c) Property, the Hotel "Excelsior", located in a
favorable location in downtown Belgrade.

All property was confiscated as a result of the Law on
Confiscation in 1945.
Claimant has appealed to the Ministry of Finance and
Privatization Agency to prevent the sale of the nationalized
property as a part of privatization process; Post does not
have an estimated value of the property.

Last contact was in 2004.


15.

a) Claimant O

b) 1962

c) Property is located in Belgrade.

All property was confiscated as a result of a political
process against the Claimant. The property consisted of a
house located at Janka Prmrla Vojka St. 6 in Belgrade,
business space in Perlez (near Zrenjanin),money, car and
gold.

Claimant has been trying to recover his property through
several court proceedings for years. Claimant has filed a
rehabilitation claim with the District Court in Novi Sad, which, if
positively decided, will allow for expungement of the
politically-motivated convictions.

Post does not have an estimated value of the property.

Last contact was in May of 2007.


16.

a) Claimant P

b) 1946

c) Property is a building located at Maglajska 21, Belgrade.

All property was confiscated as a result of a political
process against the father of the claimants, who was tried in
absentia by the Special Military Court IV Yugoslav Army and
sentenced to life imprisonment.

Claimants have been trying to recover the property through
several court proceedings for several years.

Post does not have an estimated value of the property.

Last contact was in October 2005.


17.

a) Claimant Q

b) 1950

c) Property is located in Knic, near Gornji Milanovac. It
comprises a farm, on which a cold storage plant was built and
is currently occupied by the food-processing factory "Takovo"
from Gornji Milanovac.

The property was confiscated as a result of a political
process against the grandfather of the Claimant, who was an
active supporter of an anti-communist movement.

It is unknown whether the Claimant has tried to recover the
property through the legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in October 2005.


18.

a) Claimant R

b) 1948

c) It is a printing and publishing house "Privredni pregled"
(aka "Slobodan Jovic") located at Stojana Protica 52
Belgrade; and a separate building, consisting of five
apartments, at Dubljanska 82, Belgrade.

The property was nationalized, from the parents of the
Claimant, under the Law on Nationalization in 1948.

It is unknown whether the Claimant has tried to recover the
property through the legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in February 2004.


19.

a) Claimant S

b) 1945

c) Property consists of a confiscated industrial property,
"Ratko Pavlovic-Niteks" in Nis, Serbia.

The property was confiscated as a part of the Confiscation

Law in 1945.

It is unknown whether the Claimant has tried to recover the
property through the legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in May 2006.


20.

a) Claimant T

b) 1946

c) Land which is currently occupied by the Akcionarsko Drustvo
(AD)"Sokolac" in
Novi Becej, Serbia. We do not have information on how much
land this entails.

The property was confiscated as a part of the Agricultural
Reform in 1946.

The Claimant has tried to recover the property through the
legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in March of 2005.


21.

a) Claimant U

b) 1946

c) Agricultural land, at the village of Pacir in Backa
Topola, Serbia. We do not have information on how much land
this entails.

The property was confiscated as a part of the Agricultural
Reform in 1946.

It is unknown whether the Claimant has tried to recover the
property through the legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in February 2005.


22.

a) Claimant V

b) 1945

c) Property is a confiscated family house located at Milosa
Obrenovica 1, Bajna Basta, Serbia.

The property was confiscated from the father of the
Claimant as a part of the Confiscation Law in 1945.

It is unknown whether the Claimant has tried to recover the
property through the legal system of Serbia.

Post does not have an estimated value of the property.

Last contact was in February 2003.


23.

a) Claimant W

b) 1945

c) The property consists of two buildings. One of them
currently encompasses the entire site where Slavija,
Makenzijeva and Prote Mateje Streets meet; the area is used
as a large open-air parking lot. The second building is a
residential building on Brace Nedica 22, Belgrade.

The property was confiscated, from the father of the
Claimant, who was proclaimed an "enemy of the state".
As the Government of Serbia passed the Law on Rehabilitation in May
2006, the Claimant has filed a rehabilitation claim with the
District Court in Belgrade.

Post does not have an estimated value of the property.

Claimant regularly provides updates to the Embassy on the
status of the various claims. Latest information was
received in April 2007.


24.

a) Claimant X

b) 1945

c) Property consists of three parcels in Knez Danilo Street
with a building, and what was previously large brick factory
in the area of Zvezdara in Belgrade.

The property was confiscated from the father of the Claimant.

The Claimant has registered the property as a restitution
claim with the Republican Property Directorate in accordance
with the Law on Registration.

Post does not have an estimated value of the property.

Last contact was in February 2006.


25.

a) Claimant Y

b) 1945

c) Property consists of a building containing office space in
Maksima Gorkog Street 13, and land in Uzicka Street 14.

The property was confiscated from the father of the Claimant.

The Claimant has registered the property with the Republican
Property Directorate in accordance with the Law on
Registration.

Post does not have an estimated value of the property.

Last contact was in March 2006.


26.
a) Clamant Z

b) 1945-1958

c) Property consists of the following: entire building with
several smaller buildings and land in Maksima Gorkog St. 93;
building and land in Jovana Cvijica St. 84; buildings and
land in Kajmakcalanska St. 2 and Zarka Zrenjanina St. 33;
land in Vasina St. 16, various agricultural properties in the
vicinity of Curug in Vojvodina.

The property was confiscated, from the father and grandfather
of the Claimant.

The Claimant has registered the property with the Republican
Property Directorate in accordance with the Law on
Registration.

Post does not have an estimated value of the property.

Last contact was in April 2006.


27.

a) Clamant Z1

b) 1959

c) Property consists of a building containing an apartment
and office space in Bulevar JNA 221.

The property was confiscated from the father of the Claimant.

The Claimant has registered the property with the Republican
Property Directorate in accordance with the Law on
Registration.

Post does not have an estimated value of the property.

Last contact was in November 2005.


28.

a) Claimant Z2

b) 1947

c) Property consists of a building and land, located in the
most prestigious area in Belgrade on Uzicka Street in
Dedinje.

The property was confiscated from the Claimant's mother, late
Princess Olga Karadjordjevic.

The Claimant has registered the property with the Republican
Property Directorate in accordance with the Law on
Registration.

Post does not have an estimated value of the property.

Last contact was on October 4, 2006.

New cases


29.

a) Claimant Z3

b) 1946

c) Property consists of a house with land at Bulevar Mira 24,
Belgrade. The property was confiscated, from the father of the
Claimant, who was proclaimed an "enemy of the state".

The Claimant has registered the property with the Republican
Property Directorate in accordance with the Law on
Registration.

Post does not have an estimated value of the property.

Last contact was in October 2006.


30.

a) Claimant Z4

b) 1958

c) Property consists of a house with land, a pharmacy, and another
two commercial spaces, at Bela Crkva. The property was confiscated
from the Claimant's father.

Post does not have an estimated value of the property.

Last contact was in March 2007.


31.

a) Claimant Z5

b) 1977

c) Property consists of a house located in Cacak. The property was
expropriated from the Claimant's mother.
Claimant has appealed to the Ministry of Finance, and the Supreme
Court of Serbia. Embassy has sent letters to appropriate public
officials and had a meeting at the Ministry of Finance in support of
the claimant.

Post does not have an estimated value of the property.

Last contact was in June 2007.




Claimant A: Uniworld Holdings
Claimant B: Marko Rakocevic and Janet Kostrevski
Claimant C: Ivan Vasic
Claimant D: Milica Markovic
Claimant E: Jelena Glisovic-Rasic
Claimant F: Aleksandar Djordjevic
Claimant G: Sofija Dimic-Ilic
Claimant H: Marija Stojadinovic-Shoup
Claimant I: Vladimir Pavlovic
Claimant J: Milica Skinner
Claimant K: Dimitrije Djordjevic and Jelena Markovic
Claimant L: Nikola Djurdjevic
Claimant M: Bogdan Veljkovic
Claimant N: Mila Petkovich
Claimant O: Lazar Dragin
Claimant P: Stefanie Avsenek
Claimant Q: Radmilo Djokic
Claimant R: Boris Ivezic
Claimant S: Zora Mikler
Claimant T: Christian Sauska
Claimant U: Stevan Geza Silbiger
Claimant V: Milena Trickovic
Claimant W: Olivera Carlson
Claimant X: Zoran Cupic
Claimant Y: Nikola Vulkovic
Claimant Z: Sanja Popovic Spinelli
Claimant Z1: Zoran Dordevic
Claimant Z2: Princess Elizabeth Karageorgevich

New Claims:
Claimant Z3: Branka Borisavljevic, Verra Morgan, and Danka Schmidt
(sisters)
Claimant Z4: Dusan Pokorni
Claimant Z5: Slobodan and Dusan Vucicevic (brothers)

POLT