PANAMA: 2009 REPORT ON INVESTMENT DISPUTES AND

UNCLAS PANAMA 000481 SIPDIS SENSITIVE FOR STATE WHA/CEN - SINGER FOR STATE EB/IFD/OIA - GOETHERT AND BUTLER FOR STATE L/CID - PEARSALL E.O. 12958: N/A TAGS: CASC ECON EFIN ENIV KIDE PGOV PM OPIC SUBJECT: PANAMA: 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION CLAIMS This message is Sensitive But Unclassified. Please Handle Accordingly. ¶1. (U) Below is Embassy Panama's input for the congressionally mandated annual report on investment disputes as contemplated in Section 527 of the FY 94-95 Foreign Relations Authorizations Act. The United States is aware of one case in which United States citizens have an outstanding claim against the Government of Panama. There are no new cases since Embassy Panama's filing of the 2008 report. ¶2. (SBU) Last Update: 12 June 2009 a. Claimant A b. 2005 c. In 1998, Claimant A invested $11 million for a Panamanian energy company's equity and arranged for the company to receive a $17 million bank bridge loan convertible into bonds. Claimant A alleges that both the equity and debt investments are subject to equal value tax credits under Panamanian Law No. 28 of 1995. In March 2005, the Vice-Minister of Finance notified Claimant A that the sale of the original $11 million in stock was not subject to any tax benefits. Claimant A has taken the matter to arbitration under the U.S.-Panama Bilateral Investment Treaty. POST ACTION: Previously, Post had urged the current GOP government to resolve the tax credit dispute promptly and fairly. The matter is in arbitration. Post will raise the issue with appropriate members of the new GOP government which takes office on July 1. Post remains in contact with Claimant A and is monitoring the matter. On June 8, 2009, Claimant A's lawyer stated the case is still in arbitration and that there is no indication that the current government will resolve the case. However, Claimant A's attorney states that the in-coming government has indicated a willingness to settle. List of Claimants: Claimant A: Corporacion Panamena de Energia S.A. (70% interest held by U.S. controlled companies, Unisource Energy Corporation and Electric Machinery Enterprises Inc.) STEPHENSON