NICARAGUA: BILATERAL REVIEW OF SECTION 527

UNCLAS MANAGUA 001120 SENSITIVE SIPDIS STATE FOR WHA/CEN, EB/IFD/OIA, AND L/CID STATE ALSO FOR WHA/EPSC E.O. 12958: N/A TAGS: EINV ECON NU SUBJECT: NICARAGUA: BILATERAL REVIEW OF SECTION 527 REFS: A) SECSTATE 81714, B) MANAGUA 883, (C) MANAGUA 998, (D) 07 MANAGUA 426, (E) 01 MANAGUA 2313, (F) MANAGUA 287 SUMMARY -------------- ¶1. (SBU) In a July 29 letter to Foreign Minister Samuel Santos announcing her decision to grant Nicaragua a Section 527 waiver for 2008, the Secretary included a benchmark that required Nicaragua to participate in a bilateral review to discuss a growing number of issues adversely impacting the resolution of U.S. claims, including the government's wholesale dismissal of claims during the 2007-08 waiver period (Ref A). Post recommends that a delegation of WHA, EEB, and L officials visit Nicaragua in mid October to conduct a bilateral review of how Nicaragua is processing claims subject to Section 527 of the Foreign Relations Authorization Act of FY1994/1995. BILATERAL REVIEW -------------- ¶2. (SBU) In a letter to Foreign Minister Santos on July 29, the Secretary granted an annual waiver to Nicaragua based upon progress made during the previous twelve months. With specific reference to the Attorney General's administrative dismissal of 146 claims previously accepted as legitimate claims, the Secretary requested that the U.S. and Nicaraguan governments conduct a general bilateral review of claims under Section 527 of the U.S. Foreign Relations Authorization Act of FY1994/1995. ¶3. (SBU) We recommend that this bilateral review address the following concerns: -- the administrative processes and criteria used by the Attorney General to dismiss U.S. claims for lack of documentation proving ownership or that a property had ever been confiscated; -- the criteria by which the Attorney General has dismissed U.S. claims under Decrees 3/1979 and 38/1979 (which legalized the confiscation of property belonging to the Somoza family and their "close allies"); -- progress on resolving U.S. claims for property controlled by the Government (including the military); -- administrative fairness and transparency in determining compensation; -- U.S. claims languishing in Nicaraguan courts; and -- communication and cooperation between our two governments for the purpose of resolving outstanding claims. Administrative Dismissals -------------- 
 ¶4. (SBU) In November 2007, Attorney General Estrada initiated an administrative process whereby he could unilaterally dismiss claims. During the latter half of the 2007/2008 waiver year, he dismissed 146 U.S. claims: 98 claims under Decrees 3 (1979) and 38 (1979),and 48 where the claimant lacked documentation. We need to know more about the criteria being used to dismiss claims for lack of documentation. ¶5. (SBU) Past administrations have accepted supporting documentation as conclusive for claims that Attorney General Estrada is now saying is inconclusive. Unfortunately, time and a turbulent history are on Estrada's side. During the Sandinista revolution and the ensuing civil war, many original titles and deeds were lost, stolen, or destroyed. For this reason, Nicaraguan law allows claimants to present property tax receipts, utility bills, personal mail, as well as statements from witnesses to show ownership. ¶6. (SBU) To date, we have refused to accept the dismissal of these 146 cases because the criteria have not been clear, and because we did not believe that claimants had been given adequate time to appeal. We strongly suspect that Attorney General Estrada thinks that he has stumbled on a convenient way to dispose of claims. We also suspect that, to dismiss claims under Decrees 3 (1979) and 38 (1979),he is referring to some sort form of political blacklist created by the Sandinista National Liberation Front (FSLN) which is organic in nature. CLAIMS UNDER GON CONTROL -------------- ¶7. (SBU) Two performance benchmarks listed in the Secretary's letter of July 29 relate to progress on claims for properties under the control of the government and the military. Of 54 U.S. claims in this category, 17 involve the government and 37 involve the military. Progress has been painfully slow. During the 2007-2008 waiver period, only one claim for a property under government control and no claim for a property under military control was resolved (Ref B). In the previous waiver year, only one claim for a property under military control and no claim for a property under government control was resolved (Ref C). We need to make more progress in this area. LACK OF TRANSPARENCY WHEN IT COMES TO COMPENSATION -------------- -------------- ¶8. (SBU) Fair compensation is becoming an important issue. Attorney General Estrada is seeking to reduce the amount claimants receive in a number of ways, including low balling property appraisals, refusing payments for improvements made, and making "take it or leave it" offers. Estrada's stated desire to limit the amount that individual claimants receive in compensation fits neatly with the government's overall effort to reduce the amount paid out in any given year. ¶9. (SBU) Nicaraguan law requires the government to determine the value of a property based on appraisals made by the Nicaraguan Institute for Territorial Surveying (INETER). In May, a claimant provided us with a document from Attorney General Estrada instructing INETER to use one appraisal table to calculate property taxes and another (with lower values) to calculate compensation. Meanwhile, claimants complain to us that the offers are based on historical rather than market values. However, we know of nothing in Nicaragua law that says that compensation must be based on "fair market value." ¶10. (SBU) The Office of Assessment and Indemnification (OCI), responsible for determining compensation for confiscated property, recently redrafted regulations to prevent the government from paying for improvements to land unless the improvements were duly registered with the Land Registry, or claimants can produce receipts showing payments for improvements made. Often the improvements, such as a fence built by the owner, still stand. Without proof of payment, however, the government will not offer compensation. ¶11. (SBU) Attorney General Estrada has also asserted that the law does not require him to negotiate compensation, i.e., he can place a "take it or leave it" offer on the table and call a claim resolved. In April, Estrada provided us with a list of 42 claimants with offers on the table. Only 18 accepted. For the rest, Estrada deposited bonds in an escrow account and walked away, calling the claim resolved. We are not sure for how long these bonds will stay on deposit. A number of claimants have told us that they will refuse compensation until they get what they think is a fair value. Without negotiations, this is unlikely to happen. CLAIMS AWAITING A COURT DECISION -------------- ¶12. (SBU) Law 278/1997 instructs the government to pursue the return of property confiscated under statutes 85/1990 and 86/1990, also known as the "pinata" laws. The former Sandinista government passed the pinata laws on the eve of its departure from power in 1990, to provide the legal basis for new titles and deeds to confiscated property that it had transferred to political supporters, or "pinateros." We are aware of 93 claims belonging to 60 U.S. citizens awaiting court decisions that would result in the return of property retitled under the discredited "piata" laws. Some court cases have languished for more than ten years. At our working group meeting in July, government officials informed us that Attorney General Estrada had decided that he would no longer assert the rights of these claimants in court, leaving it to the claimants to individually pursue their cases (Refs D and E). Contrary to the intent of Law 278/1997, Estrada has told us that he intends to protect the rights of current occupants, mostly original "pinateros," who are the "legitimate beneficiaries" of the pinata laws. (Ref F). ¶13. (SBU) The majority of U.S. claimants are unaware that the government has abandoned their court case, much less that the Attorney General will now side with the current occupants. Recourse for claimants in Nicaraguan courts is greatly complicated by systemic irregularities. Many judges are beholden to the politicians who appointed them. Moreover, the Nicaraguan judicial system is widely believed to be corrupt. Frequently, judicial decisions seem to be based on questionable interpretations of the law. In June 2008, one judge concluded that a U.S. claimant lost the right to her property because she never challenged the legitimacy of the title held by the occupying party. Without government support, we find it difficult to believe that claimants who pursue their cases in the courts will receive a fair hearing. BILATERAL COOPERATION -------------- ¶14. (SBU) We continue to press for unfettered communication with working level officials for the purpose of resolving U.S. claims. To date, written correspondence is restricted to the Ambassador and Attorney General Estrada. Except for monthly meetings, we are not permitted to meet, call, or draft correspondence to Nicaraguan working level officials. During the monthly meeting in July, GON officials told us that that they would consider meeting with us outside of the monthly meetings to work on longstanding, complex claims. We hope this is the case as it would begin to reestablish normal working relations with our counterparts. RECOMMENDATION -------------- ¶15. (SBU) We recommend that officials from WHA, EEB, and L compose a delegation to visit Nicaragua in October to conduct a bilateral review of claims under Section 527 that includes topics that we mention here. We believe it appropriate that a WHA Deputy Assistant Secretary lead the delegation and be the counterpart to Attorney General Estrada. We believe that a bilateral review will clarify Nicaraguan policy and administrative processes, as well as stress the importance to the Nicaraguan government of providing fair and equitable compensation to U.S. claimants. CALLAHAN