Identifier
Created
Classification
Origin
09ASTANA1038
2009-06-18 02:23:00
UNCLASSIFIED//FOR OFFICIAL USE ONLY
Embassy Astana
Cable title:
KAZAKHSTAN: 2009 INVESTMENT DISPUTES REPORT UPDATE
how-toVZCZCXRO6782 OO RUEHSL DE RUEHTA #1038 1690223 ZNR UUUUU ZZH O 180223Z JUN 09 FM AMEMBASSY ASTANA TO RUEHC/SECSTATE WASHDC IMMEDIATE 5638 INFO RUCNCIS/CIS COLLECTIVE 1683 RUCNCLS/ALL SOUTH AND CENTRAL ASIA COLLECTIVE RUEHZL/EUROPEAN POLITICAL COLLECTIVE RUEHBJ/AMEMBASSY BEIJING 1056 RUEHKO/AMEMBASSY TOKYO 1759 RUEHUL/AMEMBASSY SEOUL 0727 RHEBAAA/DEPT OF ENERGY WASHDC RUCPDOC/DEPT OF COMMERCE WASHDC RUEATRS/DEPT OF TREASURY WASHDC RUEAIIA/CIA WASHDC RHEFAAA/DIA WASHDC RHEHNSC/NSC WASHDC 1241 RUEKJCS/SECDEF WASHDC 1157 RUEKJCS/JOINT STAFF WASHDC RHMFIUU/CDR USCENTCOM MACDILL AFB FL RUEHAST/USOFFICE ALMATY 1627
UNCLAS ASTANA 001038
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/IFD/OIA, L/CID
STATE PLEASE PASS TO OPIC
E.O. 12958: N/A
TAGS: PGOV EINV CASC KIDE OPIC KZ
SUBJECT: KAZAKHSTAN: 2009 INVESTMENT DISPUTES REPORT UPDATE
REF: STATE 49477
UNCLAS ASTANA 001038
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/IFD/OIA, L/CID
STATE PLEASE PASS TO OPIC
E.O. 12958: N/A
TAGS: PGOV EINV CASC KIDE OPIC KZ
SUBJECT: KAZAKHSTAN: 2009 INVESTMENT DISPUTES REPORT UPDATE
REF: STATE 49477
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) This cable constitutes post's response to reftel. The
United States Government is aware of one (1) claim by United States
persons against the Government of Kazakhstan (GOK).
3. (SBU) a. Claimant A
b. 1996
c. Although it has faced a number of regulatory issues, Claimant A
has had two disputes that raise expropriation concerns.
Claimant A's dispute on electricity deliveries with the state-owned
power transmission monopoly (now known as KEGOC) and the GOK began
in 1996. Claimant A ultimately signed two memoranda of
understanding (MOUs) with KEGOC and the GOK, outlining how the
dispute would be resolved. Claimant A, however, considered KEGOC to
be in breach of some of the contracts arising from the MOUs. KEGOC
and the GOK submitted the case to international arbitration.
Claimant A prevailed in a December 2007 ruling, and the Kazakhstani
side paid it compensation, which appears to have resolved the
matter.
Claimant A also asserts that discriminatory regulatory actions by
regional authorities amount to expropriation. According to the
Claimant, a regional government - with the support of some officials
in the central government - has forced the Claimant to choose
between lowering its rates (which would be politically expedient for
the local authorities) or facing severe regulatory actions.
Claimant A maintains that this is an example of improper tactics to
extract financial benefits from the Claimant. Claimant A also
complains of improper threats of criminal prosecution, which forced
Claimant A's expatriate manager to depart Kazakhstan. In April
2008, an Almaty court ruled in favor of local regulatory
authorities, levying a USD 148 million fine against Claimant A for
alleged anti-trust violations in its electricity sales. On May 30,
2008, Claimant A publicly announced it had completed the sale of its
ownership stake in a local power plant and coal mine to a
Kazakhstani company, though it would continue to serve as manager
and operator of the two facilities. While the sale was reportedly
very profitable for Claimant A, it appears to have been partly
motivated by Claimant A's regulatory problems with Kazakhstani
authorities.
On March 20, 2009, Claimant A announced that its contract for the
management of the coal mine and power plant had been terminated in
an early settlement it described as a "mutual decision that will
benefit both (parties)." Claimant A reports that a state-owned
Kazakhstani energy company continues to pursue Claimant A's
profitable hydropower concessions. Also in 2009, Claimant A's
expatriate manager was named in a civil lawsuit that seeks back
taxes from a long-defunct proprietary trading company.
The USG is in regular contact with Claimant A and has on multiple
occasions appealed to the Kazakhstani government in support of a
just and fair resolution of the company's disputes with the
authorities.
4. (SBU) Claimant A: AES Corp.
HOAGLAND
SENSITIVE
SIPDIS
STATE FOR SCA/CEN, EEB/IFD/OIA, L/CID
STATE PLEASE PASS TO OPIC
E.O. 12958: N/A
TAGS: PGOV EINV CASC KIDE OPIC KZ
SUBJECT: KAZAKHSTAN: 2009 INVESTMENT DISPUTES REPORT UPDATE
REF: STATE 49477
1. (U) Sensitive but unclassified. Not for public Internet.
2. (SBU) This cable constitutes post's response to reftel. The
United States Government is aware of one (1) claim by United States
persons against the Government of Kazakhstan (GOK).
3. (SBU) a. Claimant A
b. 1996
c. Although it has faced a number of regulatory issues, Claimant A
has had two disputes that raise expropriation concerns.
Claimant A's dispute on electricity deliveries with the state-owned
power transmission monopoly (now known as KEGOC) and the GOK began
in 1996. Claimant A ultimately signed two memoranda of
understanding (MOUs) with KEGOC and the GOK, outlining how the
dispute would be resolved. Claimant A, however, considered KEGOC to
be in breach of some of the contracts arising from the MOUs. KEGOC
and the GOK submitted the case to international arbitration.
Claimant A prevailed in a December 2007 ruling, and the Kazakhstani
side paid it compensation, which appears to have resolved the
matter.
Claimant A also asserts that discriminatory regulatory actions by
regional authorities amount to expropriation. According to the
Claimant, a regional government - with the support of some officials
in the central government - has forced the Claimant to choose
between lowering its rates (which would be politically expedient for
the local authorities) or facing severe regulatory actions.
Claimant A maintains that this is an example of improper tactics to
extract financial benefits from the Claimant. Claimant A also
complains of improper threats of criminal prosecution, which forced
Claimant A's expatriate manager to depart Kazakhstan. In April
2008, an Almaty court ruled in favor of local regulatory
authorities, levying a USD 148 million fine against Claimant A for
alleged anti-trust violations in its electricity sales. On May 30,
2008, Claimant A publicly announced it had completed the sale of its
ownership stake in a local power plant and coal mine to a
Kazakhstani company, though it would continue to serve as manager
and operator of the two facilities. While the sale was reportedly
very profitable for Claimant A, it appears to have been partly
motivated by Claimant A's regulatory problems with Kazakhstani
authorities.
On March 20, 2009, Claimant A announced that its contract for the
management of the coal mine and power plant had been terminated in
an early settlement it described as a "mutual decision that will
benefit both (parties)." Claimant A reports that a state-owned
Kazakhstani energy company continues to pursue Claimant A's
profitable hydropower concessions. Also in 2009, Claimant A's
expatriate manager was named in a civil lawsuit that seeks back
taxes from a long-defunct proprietary trading company.
The USG is in regular contact with Claimant A and has on multiple
occasions appealed to the Kazakhstani government in support of a
just and fair resolution of the company's disputes with the
authorities.
4. (SBU) Claimant A: AES Corp.
HOAGLAND