TURKEY: 2008 REPORT ON EXPROPRIATION AND INVESTMENT

UNCLAS ANKARA 001086 DEPT FOR EEB/IFD/OIA - HGOETHERT, KBUTLER AND L/CID - GSWINEY, CHOLLAND DEPT PASS USTR SIPDIS E.O. 12958: N/A TAGS: EINV KIDE OPIC PGOV CASC TU SUBJECT: TURKEY: 2008 REPORT ON EXPROPRIATION AND INVESTMENT DISPUTES REF: STATE 43784 ¶1. The following is Embassy Ankara's submission for the 2008 report to the U.S. Congress on expropriation claims and investment disputes, providing an update on the two ongoing cases reported in ¶2007. ¶2. Claimant Data: -- Claimants A are Victor and Kristy Bedoian, both U.S. citizens. They filed a Privacy Act Waiver in 2001. Victor Bedoian told us that he "technically" has a 95 percent share in the Turkish company owning the real estate in dispute, but that there are also six other partners in the venture. -- Claimants C are U.S. companies with build-operate-transfer (BOT) and transfer-of-operating-rights (TOR) contracts in dispute (company, location, value of contract in USD millions): C1. AES (BOT project),Eskisehir, 165, Gas-fired Power Plant C2. GE (BOT project),Atam Elektrik, 195, Gas-fired Power Plant C3. NRG (TOR project),Seyitomer, 200, Coal-fired Power Plant C4. NRG (TOR project),Kangal, 125, Coal-fired Power Plant ¶3. Begin text of 2007 Report: The United States is aware of two claims of U.S. persons against the Government of Turkey. ¶1. a) Claimants A b) 2001 c) Claimants A purchased and renovated a hotel and restaurant in Van for approximately $750,000 in 2001. Claimants A had been unable to operate their property, however, due to persistent police harassment and obstruction by local government authorities. In 2004, administrative courts decided against Claimants A in their suit to obtain a residence permit and an operating permit for the hotel. In early 2005, a Van court dismissed a civil case initiated by Claimants A, in which they sought to annul the transfer of title to a hotel which they claim was sold without their knowledge or consent. In September 2005, Claimants A lost their appeal of the decision in the civil case in the Turkish courts, which was upheld by the court in Van in February 2006. This was their last option for appeal in the Turkish legal system. They have now started the process to appeal this decision under a "cancellation of rights" case at the European Court of Human Rights, in which they have also appealed the permit decisions. As of June 2008, the claimants have still not received a response from the European Court of Human Rights regarding their petition, and we understand that they remain in the United States. ¶3. a) Claimants C b) 2000 - 2001 c) In 2001, the Turkish Government cancelled 46 contracted (but not yet built) power projects based on the build-operate-transfer (BOT) and transfer-of-operating-rights (TOR) models. Turkey's constitutional court ruled in 2002 that the Turkish Government must either honor the contracts or compensate the companies involved. Claimant C4 filed an international arbitration case with the International Chamber of Commerce (ICC),which ruled in favor of the company but did not include any financial compensation. Claimants C1 - C3 did not apply to arbitration for their disputes. The Turkish partners of C1 and C2 chose to pursue arbitration and won their case. Since no U.S. firms chose to pursue further legal action, post considers these cases settled and will not include it in future reports. Wilson