UAE 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION

UNCLAS SECTION 01 OF 02 ABU DHABI 000600

SENSITIVE
SIPDIS

DEPARTMENT FOR NEA/ARP (MASILKO) EEB/IFD/OIA (GOETHERT,BUTLER) AND
L/CID (PEARSALL)

E.O. 12958: N/A

TAGS: EINV CASC KIDE OPIC PGOV AE

SUBJECT: UAE 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION
CLAIMS

REF: STATE 49477


1. (U) Pursuant to the requirements of Section 527 of the FY 94-95
Foreign Relations Authorization Act (FRAA),Embassy Abu Dhabi has
compiled a list of U.S. citizen expropriation claims and investment
disputes involving the Government of the United Arab Emirates. The
Embassy is aware of two ongoing claims of United States persons
against an Emirate-Level Government and one past claim. Please see
paras. 2-5 for details of these claims. The information is business
proprietary.


2. (U) a. Claimant A

b. 2005

c. Claimant A originally informed the Embassy of an issue of
non-payment to U.S. pharmaceutical companies by the United Arab
Emirates (UAE) Ministry of Health in May 2005. At that time,
Claimant A requested no Embassy involvement. Subsequently, in May
2006, Claimant A requested U.S. Embassy assistance. The Embassy
facilitated contacts with both the Ministry of Finance and the
Ministry of Health. As of early July 2007, Embassy understood from
Claimant A that almost all payments have been made. One U.S.
pharmaceutical company is still pursuing payment on about USD 3
million in older claims and has made some progress. As of early
June 2009, this firm reports a final payment of approximately USD
272,000 is expected soon and no USG assistance is needed.


3. (U) a. Claimant B

b. 2005

c. Claimant B signed an agreement for a property development with a
Government of Dubai investment company in July 2005 and made an
initial payment of USD 2.7 million. On October 13, 2005, Claimant B
approached the Consulate General to seek assistance in obtaining an
extension of time to make a second payment of USD 25 million on the
land. The Consul General obtained two extensions to October 27,

2005. Claimant B did not make the payment by October 27, 2005.
Claimant B subsequently contended that the Dubai company was aware
that there was a protected archeological site on the property that
Claimant B was not made aware of until later in the project. The
question of payment, therefore, was dependent on satisfactory
resolution of the archeological site issue. The Dubai company
contends the archeological site was not an issue when Claimant B
failed to make the payment. At some point, the Dubai company
advised Claimant B that it was in violation of the terms of the
contract as a result of nonpayment and terminated the agreement. In
May 2006, Claimant B met with the Dubai company and discussed
alternative sites and price reduction as a means of compensation.

The Embassy and Consulate General have made repeated efforts to
mediate between Claimant B, the Dubai company, and the Dubai
Government and to urge the Dubai Government to negotiate a
settlement. The former Ambassador raised the issue with Dubai
Ruler/UAE Vice President Sheikh Mohammed bin Rashid Al-Maktoum on
behalf of Claimant B and the Consul General and current Ambassador
have raised repeatedly the issue with senior Dubai government
officials. The issue has also been raised in meetings with UAE
Government officials in the context of ongoing trade discussions.

The Executive Chairman of the Dubai company told Embassy in July
2005 that Claimant B violated its contract, and that Claimant B
should pursue its claims through the court system, which continues
to be the position of the Dubai company. In August 2007, Claimant B
filed for international arbitration. The July 2008 liability phase
was won by Claimant B, and the damages phase scheduled for April

2009. In October 2008, the April 2008 cancellation of Claimant B's
free zone contract (i.e., local business registration) became
public. A Dubai court subsequently halted the arbitration
proceedings as Claimant B no longer exists as a local entity.


4. (U) a. Claimant C

b. 2005

c. Claimant C is an American citizen member of a financial advisory
company registered to do business in Dubai. In July 2004, Claimant
C contracted to act as a financial advisor to another non-U.S.
company for all matters related to a development consultancy
agreement with the Dubai Municipality. In November 2004, the
company entered into a consultancy agreement with the Dubai
Municipality regarding the Dubai Light Rail Transit (LRT) system,
including the marketing of at least 22 plots of land adjacent to the
proposed path of the LRT, development of investment strategies, and
raising funds to finance the project. In October 2005, Claimant C

ABU DHABI 00000600 002 OF 002


and other non-U.S. citizen company officers (a UK national, a Sri
Lankan, and an Emirati) were detained by Dubai police for
interrogation on verbal accusations of misrepresentation, fraud, and
bribery. Claimant C claims he was coerced into transferring USD 4.5
million to Dubai police and to write a post-dated check of USD 6
million (which equaled the payments he had received for his work on
the LRT). He was released from detention after 17 days, but his
passport was confiscated. He was arrested again in May 2006 and
held for a further nine days. The Dubai RTA, which took over the
responsibilities of the Dubai Municipality with regard to the LRT,
notified the Company of its decision to terminate the Development
Consultancy Agreement, which led to a failure of the company to make
payments to Claimant C.

Claimant C and the non-U.S. company have been represented by at
least two attorneys in Dubai and by a prominent American law firm
based in Washington, DC. In addition, there has been extensive
intervention by Embassy, Consulate General, and Department officials
in an attempt to bring the case to a resolution. Claimant C has
also been represented by a U.S. law firm. In March 2007, Claimant
C's U.S. passport was returned and he was allowed to leave the
country, but has subsequently returned to Dubai to pursue other
business interests. Although the dispute appears to be settled, the
Embassy has no information on the details of the financial
settlement although the company partners are reported to have
re-incorporated their organization in the United States. (Comment:
Post has no evidence of any contact with Claimant C since 2007. End
Comment.)


5. (SBU) Claimant A -- Pharma Gulf with the remaining U.S. company
being Pfizer; Claimant B -- Capital Partners/McKinley Reserve;
Claimant C -- Vafa Valapour


6. (U) Post's point of contact is EconChief Susannah Cooper
(cooperse@state.gov).