VZCZCXRO8601
RR RUEHDE
DE RUEHAD #0600/01 1660906
ZNR UUUUU ZZH
R 150906Z JUN 09
FM AMEMBASSY ABU DHABI
TO RUEHC/SECSTATE WASHDC 2598
INFO RUEHDE/AMCONSUL DUBAI 8311

UNCLAS SECTION 01 OF 02 ABU DHABI 000600 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR NEA/ARP (MASILKO) EEB/IFD/OIA (GOETHERT,BUTLER) AND 
L/CID (PEARSALL) 
 
E.O. 12958: N/A 
 
TAGS: EINV CASC KIDE OPIC PGOV AE
 
SUBJECT:  UAE 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION 
CLAIMS 
 
REF: STATE 49477 
 
¶1.  (U) Pursuant to the requirements of Section 527 of the FY 94-95 
Foreign Relations Authorization Act (FRAA), Embassy Abu Dhabi has 
compiled a list of U.S. citizen expropriation claims and investment 
disputes involving the Government of the United Arab Emirates.  The 
Embassy is aware of two ongoing claims of United States persons 
against an Emirate-Level Government and one past claim.  Please see 
paras. 2-5 for details of these claims.  The information is business 
proprietary. 
 
¶2.  (U) a.   Claimant A 
 
b. 2005 
 
c.  Claimant A originally informed the Embassy of an issue of 
non-payment to U.S. pharmaceutical companies by the United Arab 
Emirates (UAE) Ministry of Health in May 2005.  At that time, 
Claimant A requested no Embassy involvement.  Subsequently, in May 
2006, Claimant A requested U.S. Embassy assistance.  The Embassy 
facilitated contacts with both the Ministry of Finance and the 
Ministry of Health.  As of early July 2007, Embassy understood from 
Claimant A that almost all payments have been made.  One U.S. 
pharmaceutical company is still pursuing payment on about USD 3 
million in older claims and has made some progress.  As of early 
June 2009, this firm reports a final payment of approximately USD 
272,000 is expected soon and no USG assistance is needed. 
 
¶3.  (U) a.   Claimant B 
 
b.  2005 
 
c.  Claimant B signed an agreement for a property development with a 
Government of Dubai investment company in July 2005 and made an 
initial payment of USD 2.7 million.  On October 13, 2005, Claimant B 
approached the Consulate General to seek assistance in obtaining an 
extension of time to make a second payment of USD 25 million on the 
land.  The Consul General obtained two extensions to October 27, 
¶2005.  Claimant B did not make the payment by October 27, 2005. 
Claimant B subsequently contended that the Dubai company was aware 
that there was a protected archeological site on the property that 
Claimant B was not made aware of until later in the project.  The 
question of payment, therefore, was dependent on satisfactory 
resolution of the archeological site issue.  The Dubai company 
contends the archeological site was not an issue when Claimant B 
failed to make the payment.  At some point, the Dubai company 
advised Claimant B that it was in violation of the terms of the 
contract as a result of nonpayment and terminated the agreement.  In 
May 2006, Claimant B met with the Dubai company and discussed 
alternative sites and price reduction as a means of compensation. 
 
The Embassy and Consulate General have made repeated efforts to 
mediate between Claimant B, the Dubai company, and the Dubai 
Government and to urge the Dubai Government to negotiate a 
settlement.  The former Ambassador raised the issue with Dubai 
Ruler/UAE Vice President Sheikh Mohammed bin Rashid Al-Maktoum on 
behalf of Claimant B and the Consul General and current Ambassador 
have raised repeatedly the issue with senior Dubai government 
officials.  The issue has also been raised in meetings with UAE 
Government officials in the context of ongoing trade discussions. 
 
The Executive Chairman of the Dubai company told Embassy in July 
2005 that Claimant B violated its contract, and that Claimant B 
should pursue its claims through the court system, which continues 
to be the position of the Dubai company.  In August 2007, Claimant B 
filed for international arbitration.  The July 2008 liability phase 
was won by Claimant B, and the damages phase scheduled for April 
¶2009. In October 2008, the April 2008 cancellation of Claimant B's 
free zone contract (i.e., local business registration) became 
public.  A Dubai court subsequently halted the arbitration 
proceedings as Claimant B no longer exists as a local entity. 
 
¶4.  (U) a.  Claimant C 
 
b.  2005 
 
c.  Claimant C is an American citizen member of a financial advisory 
company registered to do business in Dubai.  In July 2004, Claimant 
C contracted to act as a financial advisor to another non-U.S. 
company for all matters related to a development consultancy 
agreement with the Dubai Municipality.  In November 2004, the 
company entered into a consultancy agreement with the Dubai 
Municipality regarding the Dubai Light Rail Transit (LRT) system, 
including the marketing of at least 22 plots of land adjacent to the 
proposed path of the LRT, development of investment strategies, and 
raising funds to finance the project.  In October 2005, Claimant C 
 
ABU DHABI 00000600  002 OF 002 
 
 
and other non-U.S. citizen company officers (a UK national, a Sri 
Lankan, and an Emirati) were detained by Dubai police for 
interrogation on verbal accusations of misrepresentation, fraud, and 
bribery.  Claimant C claims he was coerced into transferring USD 4.5 
million to Dubai police and to write a post-dated check of USD 6 
million (which equaled the payments he had received for his work on 
the LRT).  He was released from detention after 17 days, but his 
passport was confiscated.  He was arrested again in May 2006 and 
held for a further nine days.  The Dubai RTA, which took over the 
responsibilities of the Dubai Municipality with regard to the LRT, 
notified the Company of its decision to terminate the Development 
Consultancy Agreement, which led to a failure of the company to make 
payments to Claimant C. 
 
Claimant C and the non-U.S. company have been represented by at 
least two attorneys in Dubai and by a prominent American law firm 
based in Washington, DC.  In addition, there has been extensive 
intervention by Embassy, Consulate General, and Department officials 
in an attempt to bring the case to a resolution.  Claimant C has 
also been represented by a U.S. law firm.  In March 2007, Claimant 
C's U.S. passport was returned and he was allowed to leave the 
country, but has subsequently returned to Dubai to pursue other 
business interests.  Although the dispute appears to be settled, the 
Embassy has no information on the details of the financial 
settlement although the company partners are reported to have 
re-incorporated their organization in the United States. (Comment: 
Post has no evidence of any contact with Claimant C since 2007.  End 
Comment.) 
 
¶5.  (SBU) Claimant A -- Pharma Gulf with the remaining U.S. company 
being Pfizer; Claimant B -- Capital Partners/McKinley Reserve; 
Claimant C -- Vafa Valapour 
 
¶6.  (U) Post's point of contact is EconChief Susannah Cooper 
(cooperse@state.gov).