VZCZCXYZ0000
RR RUEHWEB

DE RUEHZP #1112/01 1841353
ZNR UUUUU ZZH
R 031353Z JUL 07
FM AMEMBASSY PANAMA
TO RUEHC/SECSTATE WASHDC 0731
INFO RULSDMK/DEPT OF TRANSPORTATION WASHDC
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS PANAMA 001112 
 
SIPDIS 
 
SIPDIS 
 
FOR STATE WHA/CEN - TELLO 
FOR STATE EB/IFD/OIA - GOETHERT 
FOR STATE L/CID - MCDONALD 
 
E.O. 12958: N/A 
TAGS: CASC ECON EFIN ENIV KIDE PGOV PM OPIC
SUBJECT: PANAMA: 2007 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
REF: STATE 55422 
 
¶1.  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.  Test is keyed to reftel. 
 
The United States is aware of one claim of United States 
citizens that may be outstanding against the Government of 
Panama.  Two other cases previously reported, discussed 
below, have been removed from Post's list of active cases. 
There are no new cases since Embassy Panama's filing of its 
2006 report. 
 
¶2.  Last update:  27 April 2006 
a.  Claimant A 
b.  1999 and 2000 
c.  Following the 1998 energy market privatization, Claimant 
A, a majority-owner of an electricity generator, assumed 
existing contracts between government power generation 
entities and private distributors.  When energy spot prices 
fell below the contract prices, the Energy Regulatory 
Commission in December 1999 unilaterally altered the 
contracts between the generation and the distribution 
companies.  Claimant A estimated damages of $9 million. 
Claimant A has 16 court cases (filed in 2000 and completed in 
2003) awaiting rulings by the Panamanian Supreme Court. 
 
POST ACTION:  At Post's request, the Ministry of Industry and 
Commerce (MICI) agreed in principle to reinstitute a 
bilateral investment committee to provide a general forum for 
resolution of pending disputes before the Panamanian 
judiciary.  In Claimant A's case, Post never received the 
requisite advocacy questionnaire to proceed with further 
advocacy.  Moreover, as Claimant A has not requested any 
further advocacy and given that it sold its interest in the 
electricity generator to a French energy concern in February 
2007, Post wil remove Claimant A from its list of active 
cases. 
 
¶3.  Last Update: 14 June 2007 
a.  Claimant B 
b.  2005 
c.  In 1998, Claimant B invested $11 million in a Panamanian 
energy company's equity and arranged for the company to 
receive a $ 17 million bank bridge loan convertible into 
bonds.  Claimant B 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 B that the sale of 
any of the original $11 million in stock was not subject to 
any tax benefits.  Claimant B has taken the matter to 
arbitration under the U.S.-Panama Bilateral Investment 
Treaty.  Claimant B is also in litigation with various 
Panamanian banks regarding payment of its bridge loan. 
Claimant B has been seeking assistance from various USG 
agencies in this matter, and has requested Post to intercede 
on its behalf and arrange meeting with high-level GOP 
Ministers. 
 
POST ACTION:  Post has urged the GOP to resolve the tax 
credit dispute promptly and fairly, but given that the matter 
is in arbitration, plans no further action.  Post remains in 
contact with Claimant B and is following the matter. 
 
¶4.  Last update: 3 May 2006 
a.  Claimant C 
b.  1999 
c.  Claimant C owns the only private property in the former 
Canal Zone.  The property was purchased in 1921.  The GOP 
claimed the property became Panamanian federal property as 
provided for by the Panama Canal Treaty of 1977. Claimant C 
asserted that Senator Robert Dole entered a letter into the 
Congressional record recognizing Claimant C's ownership of 
the property. 
 
POST ACTION:   On September 15, 2006, Post informed Claimant 
C that tenants and owners of property in the former Canal 
were permitted to retain use of their property subject to 
payment of a reasonable price (in the case of individuals or 
businesses) or minimal (in case of non-profit organizations) 
to the GOP.  Since the GOP had no record of Claimant B 
availing itself of this right during the applicable period 
(until 1999), the GOP is entitled to possession of the 
property without payment.  Post will remove Claimant C from 
its list of active cases. 
 
 
List of Claimants: 
 
Claimant A: Ashmore Energy International (former majority 
shareholder of Bahia Las Minas) 
Claimant B: Corporacion Panamena de Energia (70% interest 
held by U.S. controlled companies, Unisource Energy 
Corporation and Electric Machinery Enterprises Inc.) 
Claimant C: Sojourners Lodge of the Ancient and Free Masons 
Eaton