ETHIOPIA: 2009 REPORT ON INVESTMENT DISPUTES AND

UNCLAS SECTION 01 OF 04 ADDIS ABABA 001339 SIPDIS DEPARTMENT FOR EEB/IFD/OIA HEATHER GOETHERT, KIMBERLY BUTLER, AND PATRICK PEARSALL DEPT OF COMMERCE WASHDC FOR ITA MARIA RIVERO DEPT OF TREASURY WASHDC FOR REBECCA KLEIN E.O. 12958: N/A TAGS: EINV KIDE CASC OPIC PGOV ET SUBJECT: ETHIOPIA: 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION CLAIMS REF: A. STATE 49477 ¶B. 2008 ADDIS ABABA 1691 ¶1. The United States Government is aware of seven (7) claims by U.S. persons which may be outstanding against the Government of Ethiopia (GOE). There is one new reported claim. ¶2. Included in these claims are three (3) disputes involving the confiscation of property by current U.S. citizens who were not U.S. citizens at the time of expropriation. These cases involve Claimants B, C, and D and stem from the confiscation of property during the Derg military regime, which reigned from 1974 to 1991. There have been two (2) recent cases of expropriation reported by U.S. citizens under the current government. The remaining two (2) cases involve contractual investment disputes. ¶3. The GOE confiscated many assets within Ethiopia during the Ethiopian-Eritrean border conflict of May 1998-June 2000. During this time, the GOE deported tens of thousands of persons identified as Eritrean nationals, and in many cases confiscated their assets to pay for outstanding loans. In 2000, Ethiopia and Eritrea agreed to the creation of the Ethiopia-Eritrea Claims Commission to address property claims arising out of the border conflict. The Embassy and the Department of State provide information about the Claims Commission and other assistance to these Claimants, when appropriate. Additionally, in May 2009, the GOE approved a directive calling for Eritrean citizens to reclaim any property seized during the Ethiopian-Eritrean conflict. No cases resulting from the Ethiopian-Eritrean border conflict were reported to the Embassy during 2005-2009. This conflict delayed Claimant B's case, as he was deported from Ethiopia during claim resolution discussions; however, his claim originated in 1977 and was not a direct result of this conflict. ¶4. Note: The GOE's Privatization and Public Enterprises Supervising Authority (PPESA) was formerly known as the Ethiopian Privatization Agency (EPA) and the GOE's Agency for Government Housing (AGH) was formerly known as the Rented Houses Administration (RHA). For the purposes of this report, PPESA and AGH will be used throughout to represent both itself and its predecessor agency. End Note. �00A; ¶5. a. Claimant A b. 1987 c. Claimant A, a U.S. Citizen, entered into an agreement with the Ethiopian Development and Hotels Corporation (EDHC) for the design and construction of an extension to the Addis Ababa Hilton Hotel in ¶1983. Two associated firms were also involved in the agreement. Although construction was completed and premises were handed over in 1986, due to disagreements over the contract, payment was not rendered to the construction firm until 1996. Payment to Claimant A for design and professional services remains outstanding. At Claimant A's request, the U.S. Embassy contacted the GOE on numerous occasions to request resolution of this outstanding claim. The then-U.S. Ambassador raised this issue in March 2000 with Ethiopia's Tourism Commissioner, a former board member on EDHC. The Commissioner reasserted his willingness to help but neglected to arrange a meeting between Claimant A's local representatives and EDHC officials. For the past eight years, Claimant A has neither contacted the Embassy nor requested additional U.S. Government assistance. ¶6. a. Claimant B b. 1977 c. Claimant B was not a U.S. Citizen at the time of expropriation by the communist Derg government in 1977. The property is a liquor and alcohol factory in Addis Ababa which supplies alcohol to other factories and retail distributors around Ethiopia. This property has since been consolidated under one GOE entity with four additional properties around Addis Ababa, including three distilleries and one office. The Privatization and Public Enterprises Supervising Authority (PPESA) determined that the property qualified for compensation or restitution under Proclamation No. 110/1995. In 1998, a valuation study was conducted and the Claimant was offered either compensation for his share of the entity or the option to buy out the GOE's share of the entire entity. Following an interruption of the processing of the case due to the Ethiopian-Eritrean border conflict leading to the Eritrean Claimant's deportation from Ethiopia in 1999, a subsequent ADDIS ABAB 00001339 002 OF 004 proclamation was passed (No. 193/2000),which precludes restitution of certain properties. Based on this proclamation, the Board of Directors of PPESA determined that the Claimant was only eligible for compensation, not restitution. PPESA notified the Claimant of the offer in 2002. Claimant B has refused to accept the compensation claim, insisting that restitution should still be offered. The compensation claim was valued by PPESA at approximately $370,000, but has since been reduced to approximately $106,000 based on an additional valuation. In May 2009, the GOE approved a directive calling for Eritrean citizens to reclaim any property seized during the Ethiopian-Eritrean conflict. Since then, PPESA passed the Claimant's case on to Ministry of Foreign Affairs to review the decision under the regulations of this new directive. Over the past several years, Embassy officers have raised the issue in meetings with the Prime Minister, the General Manager and Deputy General Manager of PPESA, the Vice President of the World Bank's Multilateral Investment Guarantee Agency (MIGA),and officials at the Ministry of Foreign Affairs. Embassy officers have also discussed the case on a number of occasions with Claimant B. PPESA has provided documentation to Embassy officers on the case, including official correspondence from PPESA to Claimant B. This information states the compensation claim offered by PPESA as well as the principles on which the valuation was calculated. Embassy officers have also met with MIGA, who confirmed that the valuation of the property was done in accordance with MIGA principles. The Finance Minister stated in writing his willingness to discuss the valuation figure with the Claimant. Claimant B did not contact the Embassy from 2005 through early 2009. Embassy officers have met with the Claimant on almost a weekly basis from March 2009 through May 2009. The Ambassador met with the PPESA General Manager in April 2009 to request that they allow Claimant B to re-acquire his property. Claimant B subsequently obtained legal counsel to assist him in his dealings with the GOE. Embassy officers currently have a request in with PPESA's General Manager for another meeting to discuss this matter. ¶7. a. Claimant C b. 1975 c. Claimant C was neither a U.S. Citizen nor the owner at the time of expropriation by the communist Derg government in July 1975. The property is a building containing a hotel, cafe, and laundromat in Addis Ababa established by Claimant C's father. In April 1991, PPESA indicated that the hotel's asset was valued at $1.8 million, out of which the GOE's share of the asset was worth $760,000. The Claimant's assessment of the GOE's share was $99,000. In 1999, Claimant C became the legal heir of the property following his father's death. Claimant C disputed the amount to be paid to the GOE for several years, but finally paid it and took delivery of the property in April 2007. New problems emerged when Claimant C requested the title for the property. Without the title, the claimant cannot secure financing for property renovations. The GOE's Agency for Government Houses (AGH) claimed that it still held ownership rights to the cafe and laundromat. Claimant C contested this claim, stating that the two businesses were part of the building's original blueprint and were never transferred to a third party. PPESA offered to compensate Claimant C for the two businesses he allegedly re-acquired in 2007 or suggested that Claimant C negotiate with AGH to pay them rent for these businesses. Claimant retained legal counsel to assist with acquisition of the property title. Over the past several years, Embassy officers have discussed the case with the Claimant, PPESA, and other GOE officials. In April 2009, the Ambassador met with the PPESA General Manager to urge the GOE to issue Claimant C the property title as soon as possible. PPESA informed the Ambassador that the GOE was reviewing the matter and thought that a decision would be returned for Claimant C in the near future. Embassy officers currently have a request in with PPESA's General Manager for another meeting to determine if there has been a decision in this matter. ¶8. a. Claimant D b. 1976 c. Claimant D was neither the owner nor a U.S. Citizen when the property was expropriated by the Derg government in 1976. The property includes a machine shop and garage as well as a truck company that was originally owned by the Claimant's father, a Greek Citizen. Claimant D, who became a dual U.S.-Greek Citizen in 1998, ADDIS ABAB 00001339 003 OF 004 originally tried to resolve his claim through a MIGA-GOE agreement, whereby MIGA would help facilitate resolution of claims by foreign nationals. Claims by citizens of the United States and Greece were not covered by this agreement since other bilateral agreements were in place. MIGA was not successful in this case, and the agreement has since expired. Claimant D subsequently applied for assistance under a 1985 U.S.-Ethiopian claims agreement. However, according to the U.S. Department of Justice he was ineligible, since he was not a U.S. Citizen at the time the claim arose or at the time of the 1985 agreement. In 2007, Claimant D sought assistance from Embassy officials. The GOE asserted that this claim should be covered by the 1985 U.S.-Ethiopia claims agreement referred to above, and therefore, the agreement relieves the GOE of any obligations in this matter. In late 2007, Claimant D requested Embassy support to urge the Ministry of Finance and Economic Development (MOFED) to correct its assertion about Claimant D's eligibility under the 1985 claims agreement and request that the Ministry work with the Claimant on a settlement. In January 2008, Claimant D informed the Embassy that the Greek Embassy was pursuing the matter with the GOE. Claimant D requested the Embassy to stand down temporarily in advocating for his case since the Greek Embassy was taking the lead. The Embassy has not had any contact with Claimant D since early 2008. ¶9. a. Claimants E and F b. 2007 c. Claimants E and F were U.S. Citizens at the time of the alleged confiscation of an 85-hectare farm inherited from the late father of Claimant G by the Bora Wereda administration (local government) of the Oromia Regional Government. Claimant E (legal co-owner and representative of his three brothers residing in the United States who were entitled as heirs) managed this 85-hectare farm along with Claimant F who is a co-investor. The Claimants presented an investor certificate issued by the Ethiopian Investment Agency and copies of income tax receipts paid through December 2007. The Claimants allege that they were forcibly removed from the farm at gunpoint by the Eastern Oromia Administration, Bora Wereda Officials, and the local farmer's association leadership. The Claimants estimated the confiscated property to be worth about $16 million. The property is comprised of: 17 hectares of ready-to-harvest land planted with vegetables, fruits and food crops; 3.5 hectares of seedling nursery; a residential building; a barn; 37 live cattle; generators; irrigation pumps; a pesticide sprayer; and a variety of farm tools and supporting equipment. There is no official or third-party valuation of the land in question. The Claimants appealed to regional and national authorities in order to find administrative solutions to this matter, but have not had success to date. They asked the Embassy to delay involvement until they exhaust every available avenue. Claimants E and F last contacted the Embassy in March 2008. ¶10. a. Claimant G b. 2008 c. Claimant G was a U.S. Citizen at the time of the claimed expropriation of his land and other properties. Claimant G returned to Ethiopia in 2005 to partake in commercial farming in the Amhara regional state. The property confiscated includes 400 hectares of land and farming equipment (tractors, generator sets, etc.) and recent harvest years' production of sesame seeds. The Claimant reported to the Embassy that the 400 hectares were leased to him by the Amhara National Regional State Land Administration Bureau in August 2005 for 15 years. The land is in Gonder, in the Wereda of Quara, which is along the international border with Sudan. The Claimant alleged that Sudanese government troops ransacked his residence, burned his house and farm, kidnapped his workers and relatives, and removed everything from his farm without compensation. He appealed for assistance at the local and federal authority levels, but authorities simply denied the occurrence of the incident. Claimant G feared for the life of his workers and relatives allegedly kidnapped by Sudanese troops from his farm as well as his wife and two siblings when he reported this incident. This Claimant asked for the Embassy's intervention in this matter only after he exhausts his efforts at the federal level. The Embassy suggested that the Claimant retain legal counsel to follow-up on the matter and provided a list of attorneys. The ADDIS ABAB 00001339 004 OF 004 Embassy has not had contact with the Claimant since May 2008. ¶11. a. Claimant H b. 2008 (new claim) c. The Addis Ababa Police Commission signed a contract with Claimant H, a U.S. Citizen, to supply 30 BMW police cruiser motorcycles. Claimant H delivered the motorcycles in October 2008 after a six-month delay. The Addis Ababa Police Commission assessed an approximately $53,000 penalty to Claimant H for the delayed delivery. The penalty came in the form of withholding Claimant H's performance bond deposit it paid upon award of this tender. Claimant H alleged that the product delivery delay was beyond its control and is seeking the return of its deposit based on the contractual terms that make exception for these instances. Claimant H stated that it incurred a processing delay because it was unable to secure a bank letter of credit based on Ethiopia's severe shortage of foreign exchange. This delay caused the products to miss the shipping departure date of the Ethiopian Shipping Lines' vessel traveling to Ethiopia. The GOE requires all imports to be transported by Ethiopian Shipping Lines. Claimant H approached the Embassy seeking assistance to reclaim its bond deposit. Embassy officers have met with and held discussions with several officials from the Addis Ababa Police Commission, the Federal Police, and the Mayor of Addis Ababa himself. Embassy efforts have been unsuccessful to date and the last contact we had with Claimant H was in February 2009. ¶12. List of Claimant's Names: Claimant A: Ed Reidel, WBTL Associates, U.S. Citizen when the dispute arose Claimant B: Berhane Gebremedhin, National Alcohol and Liquor Factory, not/not a U.S. Citizen when the expropriation claim occurred Claimant C: Bisrat Seifu, Hotel d'Afrique, not/not a U.S. Citizen when the expropriation claim occurred Claimant D: Paul Constantinou, not/not a U.S. Citizen when the expropriation claim occurred Claimant E: Yared Eshetu H. Giorgis, U.S. Citizen when the expropriation claim occurred Claimant F: Hagos Girma, U.S. Citizen when the expropriation claim occurred Claimant G: Tilahun Tedla, U.S. Citizen when the expropriation claim occurred Claimant H: Alemayehu (Alex) B. Ayalew, New York International Business, PLC, U.S. Citizen when the dispute arose Note: Post is not aware of any signed Privacy Act Waivers involving the Claimants listed in this report. End Note. YAMAMOTO