2009 REPORT ON INVESTMENT DISPUTES AND

UNCLAS SECTION 01 OF 05 STATE 049477 E.O. 12958: N/A TAGS: CASC EINV KIDE OPIC PGOV SUBJECT: 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION CLAIMS: REQUEST FOR EMBASSY SUBMISSION REF: 2008 STATE 43784 ¶1. This is an action request. -------------- SUMMARY AND ACTION REQUEST -------------- ¶2. Action Request: Pursuant to the requirements of Section 527 of the FY 94-95 Foreign Relations Authorization Act (FRAA),the Department must prepare an annual, non-public report to Congress on U.S. citizen expropriation claims and certain other investment disputes involving foreign governments/economies. The next report is due October 1, 2009. Given the challenges inherent in trying to complete a tasking over the summer transfer period, Posts/AIT are requested to review prior reporting and update the 2008 report with information on any new disputes through June 1, 2009. Updated reports are due by June 15, 2009. Posts/AIT should report all investment disputes where a U.S. citizen alleges there has been an expropriation. Inclusion of a claimin the report does not necessarily mean a country/economy is or will be targeted for Section 527 Sanctions, nor does it commit the USG to any particular course of action to achieve its resolution. We request that all Posts/AIT reply; if there are no investment disputes that would be candidates for inclusion in this report, Posts/AIT should send a response stating that. The report is not released to the public. This tasker has been cleared with all regional bureaus, S/ES, and the Interagency. ¶3. Posts/AIT are requested to e-mail EB/OIA (Heather Goethert and Kimberly Butler) as soon as possible, identifying the names, phone numbers and e-mail addresses of both the primary point of contact at post on issues relevant to the Report and his or her backup. We will respond to each message with the 2008 Report for that country/economy and, if needed, a sample 527 submission conforming to proper format and drafting guidelines. Posts/AIT should submit the 2009 submission by cable and e-mail (see paras 6-8). Points of contact for this tasking are Heather Goethert (EB/IFD/OIA) goetherthg@state.gov (202) 647-8988, Kimberly Butler (EEB/IFD/OIA) butlerkm@state.gov (202) 736-4907, and Patrick Pearsall (L/CID) pearsallpw@state.gov (202)776-8970. -------------- SECTION 527 -- "HELMS AMENDMENT" -------------- ¶4. On April 30, 1994, President Clinton signed into law Section 527 of the FY 1994-95 FRAA, commonly referred to as the Helms Amendment. The Helms Amendment prohibits bilateral assistance, and requires the President to instruct the U.S. Executive Directors of multilateral development banks and international financial institutions to vote against financial assistance (except humanitarian),to any country/economy whose authorities have: -- Nationalized or expropriated the property of any United States person (see definitions in paras 14 and 15); -- Repudiated or nullified any contract with any United States person; or -- Taken any other action which has the effect of seizing ownership or control of the property of any United States person; Unless, within three years after the date on which the claim was filed, the authorities have: -- Returned the property; -- Provided adequate and effective compensation; -- Offered a domestic procedure providing prompt, adequate and effective compensation in accordance with international law; or -- Submitted (or offered to submit) the dispute to binding international arbitration; Or unless certain other limited exceptions apply. The Secretary of State may waive the prohibitions on assistance on national interest grounds. ¶5. Given the potential ramifications of Section 527, it is critical that Posts/AIT respond promptly and comprehensively to this action cable. We emphasize that this information will not commit the USG to any particular course of action to achieve a resolution of outstanding claims, nor does it necessarily mean any particular country is or will be targeted for Section 527 Sanctions. The USG has invoked Section 527 against only one country -- Nicaragua -- every year since 1994, and in each year, sanctions against Nicaragua have been waived by the The Secretary of State. History demonstrates, that despite the invocation of 527 Sanctions against only one country to date, the reactions of foreign governments to the threat of the use of Section 527 sanctions confirms the USG view that this is an effective tool to persuade countries to resolve longstanding investment disputes and implement economic reforms. -------------- GENERAL INSTRUCTIONS -------------- ¶6. Section 527 requires the Department to submit an annual report of all U.S. citizen expropriation claims of which the USG is aware. To provide information for this report, all Posts/AIT are requested to provide information on recent developments such as case status and recent USG actions. If a case listed in the 2008 report has been resolved to the satisfaction of the U.S. investor, that fact should be noted. If a case is new, that should also be noted. If Post/AIT is not aware of any claims/disputes, the response should state that fact. Please use the format indicated in para 15 below, and highlight all changes by using MSWord "track changes" to identify edits, which will simplify editing in the Department. We request that Posts/AIT include developments through June 1, 2009, and respond by June 15, 2009, by sending their submission in by e-mail and cable. For significant new investment disputes, or for significant events in cases already reported that occur after June 1, Posts/AIT are instructed to provide an update by cable and e-mail. Please use the EINV tag as well as the program tag "KIDE" (Investment Disputes and Expropriations). ¶7. For multiple-mission countries/economies, embassies should respond on behalf of all constituent posts, unless other arrangements are worked out locally. Posts covering multiple countries/economies should report separately on all countries to which the relevant ambassadors are accredited. We ask that Posts/AIT coordinate their responses among various country team elements, including consular sections and representatives at post of other agencies that may have relevant information (e.g. Treasury, Commerce, USAID, and USDA). ¶8. In preparing the report, the Department will make the final determinations, eliminating cases that do not meet the requirements of the law and adding any unreported cases which posts may not be aware of but which have come to our attention and meet the requirements of the law. EB/IFD/OIA will coordinate review of the report with L, H, CA, the regional bureaus, and interagency. If you have questions on these instructions, please contact Ms. Goethert (contact information provided in para 3),or OIA Deputy Director Greg Hicks (202) 736-4365. -------------- WHAT TO REPORT -------------- ¶9. Our goal in the report is to be inclusive. Posts/AIT should report all cases involving an investment dispute or an expropriation without compensation. See definitions in paragraphs 11 and 12. Posts/AIT should not report disputes that involve private parties only, or trade disputes involving such issues as customs valuations or slow payment on contracts. However, Posts/AIT should report disputes over the terms and conditions of contracts with a foreign government/economy, such as a concession agreement for oil, timber, mineral or other resources, or contracts with independent power producers and providers of telecommunications services. ¶10. Posts/AIT should include cases that have been resolved since the last report, and note the settlement in the case history. In the introduction to the report, we explain that it includes numerous claims of which the bona fides have not been fully verified and that inclusion of a claim does not necessarily mean a country/economy is or will be targeted for Section 527 sanctions. -------------- DEFINITIONS -------------- ¶11. For reporting purposes, an "investment dispute" means any dispute between a U.S. person and a foreign government (including regional and local governments and state-owned or controlled enterprises) relating to real, personal, or intangible property or other commercial interests, including cases of alleged expropriation of property. We remind posts that "intangible property" may include contract rights, patent trademark copyrights or other intellectual property rights. ¶12. For these purposes, the term "expropriation" is defined as a foreign government/economy (1) nationalization or confiscation of property, (2) repudiation or nullification of a contract, or (3) taking of other action, including the imposition or enforcement of any discriminatory taxes, duties, or other encumbrances, that have the effect of seizing ownership or control of property. When in doubt of whether the dispute would classify as an expropriation, Posts/AIT are instructed to include the dispute in their report. The Department will make the final determination. ¶13. A "U.S. person" means a U.S. citizen or corporation, partnership, or association not less than 50 percent beneficially owned by United States citizens or corporations. (NOTE: in cases where it is unclear that a claimant qualifies under this definition, we encourage posts to report the case with as much detail as possible and, as mentioned in para 7, the Department will make the final determination. END NOTE) ¶14. COMMENT: Posts/AIT are required to report on claims by U.S. persons who were U.S. citizens when the claim arose. Posts/AIT are also asked to report on claims of U.S. persons who were not U.S. citizens when the claim arose if the claim has received special attention from Posts/AIT, the Executive Branch, or Congress, or is otherwise noteworthy. Posts/AIT should also report cases such as a U.S. company that purchases a non-U.S. company with an outstanding claim. Posts/AIT should note such a transaction in their reports. END COMMENT. -------------- FORMAT FOR CASE DESCRIPTIONS -------------- ¶15. This format reflects requirements of Section 527 of the Foreign Relations Authorization Act: (A) Claimant designation: Claimant A, Claimant B, etc. Do not provide claimant's name in this location (see para 16). (B) Year or approximate year when the dispute arose: date of expropriation, date when contract nullified/repudiated, etc. (C) Case history: one or two paragraphs, including USG and foreign government/economy actions taken, if any, to resolve dispute. Please include in narrative style the following information: -- Location and description of the property; -- Circumstances of dispute, i.e., what agency/agent of a foreign government/economy was involved, how, and why dispute arose, including date of expropriation or when dispute arose; -- Status of dispute, including claimant's attempts to pursue local remedies; -- Estimated value in U.S. dollars, according to AmCit claimant; differing estimates of value, if any, along with sources of estimates and reasons for differences (Note: all values in the report should be in U.S. dollar amounts in the following format: $123,456); and -- Approximate date when information was last received on claim. -------------- PREPARE A SEPARATE LIST OF CLAIMANTS' NAMES -------------- ¶16. Due to provisions of the Privacy Act, the Report contains few names of claimants. Most claimants are identified as "Claimant A, Claimant B," etc. Posts/AIT should provide their updates in the same format and provide a list of the claimants' names separately from the actual information provided about the claim, for example, at the end of the cable and e-mail, as follows: Claimant A: Skuteonost Neni Realita, LTD. Claimant B: Erin and Paul's Furniture, INC. Claimant C: John Smith ¶17. In this list, Posts/AIT should also report on the citizenship of the claimant at the time of the taking, whether the claimant has signed a Privacy Act Waiver, when it was signed, and whom the waiver covers. This list is critically important for identifying disputes reported to the Department by other means and for other purposes. The list is for official use only and will not be part of the report to Congress. Even without the identifications list, the report is "business proprietary information" furnished only to Congress and not available in whole or in part to the public. -------------- SPECIAL INSTRUCTIONS -------------- ¶18. To Managua: Please follow the procedure used in 2008, in which post prepared a comprehensive annex with details of claims. Please send via e-mail the completed annex by June 15 to Ms. Goethert. ¶19. To Posts/AIT in countries/economies that have reached a claims settlement agreement with the United States: Posts/AIT are not required to report any claim that has been extinguished pursuant to a government-to-government claims settlement agreement. For purposes of this instruction, Posts/AIT should consider the following types of claims extinguished: for Albania, claims arising prior to March 10, 1995; for Bulgaria, claims arising prior to July 2, 1963; for Cambodia, claims arising prior to Oct. 4, 1994; for China, claims arising prior to May 11, 1979; for the Czech Republic and Slovakia, claims arising prior to Jan. 29, 1982; for Egypt, claims arising prior to Oct. 27, 1976; for Ethiopia, claims arising prior to Dec. 19, 1985; for Germany, claims arising from GDR confiscations prior to Oct. 18, 1976; for Hungary, claims arising prior to March 6, 1973; for Poland, claims arising prior to July 16, 1960; for Romania, claims arising prior to March 30, 1960; for Vietnam, claims arising prior to Jan. 28, 1995; and for countries formerly part of Yugoslavia, claims arising prior to Nov. 5, 1964. (NOTE: although there may be individual claims that were not extinguished pursuant to these agreements, the Department is already aware of such claims and Posts/AIT need not report them. END NOTE) ¶20. The following 88 countries were included in the 2008 Report, however, the report is not limited to only these countries: ¶1. Albania ¶2. Angola ¶3. Antigua and Barbuda ¶4. Argentina ¶5. Azerbaijan ¶6. Bangladesh ¶7. Belarus ¶8. Belize ¶9. Benin ¶10. Bolivia ¶11. Bosnia and Herzegovina ¶12. Brazil ¶13. Bulgaria ¶14. Canada ¶15. Central Africa Republic 16 China ¶17. Comoros ¶18. Congo, Republic of ¶19. Costa Rica ¶20. Croatia ¶21. Cuba ¶22. Cyprus ¶23. Czech Republic ¶24. Democratic Republic of Congo ¶25. Dominican Republic ¶26. Ecuador ¶27. Egypt ¶28. Eritrea ¶29. Ethiopia ¶30. Gabon ¶31. Georgia ¶32. Germany ¶33. Ghana ¶34. Greece ¶35. Guatemala ¶36. Guyana ¶37. Haiti ¶38. Honduras ¶39. India ¶40. Indonesia ¶41. Iran ¶42. Iraq ¶43. Italy ¶44. Jamaica ¶45. Jordan ¶46. Kazakhstan ¶47. Kenya ¶48. Korea, Republic of ¶49. Kosovo ¶50. Laos ¶51. Latvia ¶52. Lebanon ¶53. Liberia ¶54. Madagascar ¶55. Mauritius ¶56. Mexico ¶57. Moldova ¶58. Montenegro ¶59. Mozambique ¶60. Nepal ¶61. Nicaragua ¶62. North Korea ¶63. Oman ¶64. Pakistan ¶65. Panama ¶66. Peru ¶67. Philippines ¶68. Poland ¶69. Romania ¶70. Russia ¶71. Rwanda ¶72. Serbia ¶73. Slovak Republic ¶74. Slovenia ¶75. Sri Lanka ¶76. St. Christopher (Kitts) and Nevis ¶77. St. Vincent and the Grenadines ¶78. Turkey ¶79. Turkmenistan ¶80. Uganda ¶81. Ukraine ¶82. United Arab Emirates ¶83. United Kingdom ¶84. Uzbekistan ¶85. Venezuela ¶86. Yemen ¶87. Zambia ¶88. Zimbabwe ¶21. Minimize considered. CLINTON