VZCZCXRO8616
PP RUEHAG RUEHAST RUEHDA RUEHDBU RUEHDF RUEHFL RUEHIK RUEHKW RUEHLA
RUEHLN RUEHLZ RUEHNP RUEHPOD RUEHROV RUEHSK RUEHSR RUEHVK RUEHYG
DE RUEHBM #0397/01 1660917
ZNR UUUUU ZZH
P 150917Z JUN 09
FM AMEMBASSY BUCHAREST
TO RUEHC/SECSTATE WASHDC PRIORITY 9599
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC PRIORITY

UNCLAS SECTION 01 OF 03 BUCHAREST 000397 
 
SENSITIVE 
 
DEPT FOR EUR/CE ASCHIEBE, EEB/IFD/OIA HGOETHERT AND KBUTLER, AND 
L/CID DMORRIS AND PPEARSALL 
STATE PLEASE PASS TO USTR 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: EINV CASC KIDE OPIC PGOV RO
SUBJECT: ROMANIA: 2009 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
REF: STATE 49477 
 
¶1.  (U) Summary:  The United States Government is aware of eight (8) 
outstanding investment disputes and expropriation claims brought by 
United States persons or corporations that may be pending against 
the Government of Romania (GOR).  There are no new cases since last 
year's report.  Post recommends dropping one case (Claimant G in the 
2008 report) because the claimant actually has received title to the 
property.  At the time of last contact the claimant was trying to 
correct errors in the property title, but because claimant was 
granted the title it no longer qualifies as an expropriation case. 
Post has removed this claimant from the current report.  Claims 
previously reported that are subject to the 1960 claims settlement 
agreement between the U.S. and Romania are no longer included in 
this report.  Names/titles of claimants are listed in paragraph 10. 
End Summary. 
 
¶2. (U) a. Claimant designation:  Claimant A 
b. Year dispute arose:  1990 
c. Case history: In the 1970s, Claimant A entered into a reinsurance 
agreement with the Romanian state-owned insurance company ADAS.  In 
1990, the Romanian Government dissolved ADAS and created two new 
companies, ASTRA and ASIROM.  ASIROM was privatized.  ASTRA remained 
a state-owned company and denied any liability regarding Claimant 
A's contract with ADAS.  An arbitration panel awarded Claimant A USD 
650,000 in 1993.  ASTRA refused to recognize the legitimacy of the 
arbitration panel and to make any payments. 
 
Claimant A sued to enforce the award in an Ohio District Court.  In 
1999, the District Court ruled that after ADAS was dissolved, its 
obligations were assumed by ASTRA.  The district court awarded 
Claimant A over USD 922,000, which included the original arbitration 
award plus interest and legal costs.  The amount owed to Claimant A 
continues to increase to include additional interest and legal costs 
associated with enforcing the arbitration award.  Claimant A 
recovered USD $39,000 in 1999 and USD $185,000 in 2000 by garnishing 
funds held for ADAS/ASTRA in the United Kingdom. 
 
In September 2002, the Ohio District Court ruled that the Government 
of Romania was the alter-ego of ASTRA/ADAS and that the 1999 
judgment against ASTRA/ADAS could be executed against the GOR. 
Following this decision, Claimant A sued Banca Comerciala Romana 
(BCR), Romania's state-owned bank and the only Romanian state-owned 
entity with assets in the United States, in the U.S. District Court 
for the Southern District of New York in March 2004, claiming that 
BCR is the alter-ego of the GOR and must pay Claimant A its 
remaining damages.  In preparation for privatization on December 
2005, BCR transferred the file to the Romanian Authority for State 
Assets Recovery (AVAS) to administer the asset recovery dispute. 
The claim is still outstanding.  Embassy's last contact with 
Claimant A was in 2007. 
 
¶3. (U) a. Claimant designation:  Claimant B 
b. Year dispute arose:  1981 
c. Case history:  In 1981, Claimant B signed a purchase agreement 
with state-owned firm Masinexportimport, using irrevocable letters 
of credit.  Claimant B rejected the goods, alleging that they did 
not meet the quality standards specified in the purchase agreement. 
Claimant B sued Masinexportimport in U.S. Federal District Court in 
¶1982.  In 1991, the District Court determined that Masinexportimport 
was an instrumentality of the Romanian Government and it owed 
Claimant B USD $1.5 million in damages.  Because neither 
Masinexportimport nor the GOR paid the claim, the Claimant took the 
case to the International Court of Arbitration.  No decision has 
been rendered.  Masinexportimport claims that Claimant B lost the 
right to execute the claim after three years, and therefore no 
longer has a legal basis for its claim under Romanian law. 
 
¶4. (U) a. Claimant designation:  Claimant C 
b. Year dispute arose:  2001 
c. Case history: Before the 1989 Romanian Revolution, Constanta Oil 
Terminal was owned by the GOR.  By government decision in 1990, the 
oil terminal was privatized as a commercial company and listed on 
the Bucharest Stock Exchange.  Claimant C purchased 11.66 percent of 
the shares in the Oil Terminal.  In 2001, the GOR transferred 
certain pipeline assets owned by the Oil Terminal to state 
ownership.  The owners were not compensated for this transfer.  The 
expropriated pipeline assets were valued at more than USD 20 million 
and constituted approximately 80 percent of the company's capacity 
for transporting oil.  After the expropriation, the Oil Terminal was 
forced to enter into a concessionary agreement with the GOR to use 
the pipeline assets that the Claimant had previously owned.  The 
Bucharest Stock Exchange suspended trading of the shares in the Oil 
Terminal, and the stock lost 50 percent of its value. 
 
 
BUCHAREST 00000397  002 OF 003 
 
 
In 2003, the Claimant submitted an application to the European Court 
of Human Rights (ECHR) against GOR based on the pipeline asset 
expropriation and the Claimant's failure to obtain compensation 
through action in Romanian courts.  The ECHR accepted Claimant C's 
case in 2007 and requested that the GOR draft an official position 
paper, with the aim of reaching an amicable solution.  At last 
report the submission of the GOR's position paper was still pending, 
but this cannot be confirmed as the Claimant has not been in contact 
with the Embassy regarding the dispute for the last two years. 
 
¶5. (U) a. Claimant designation:  Claimant D 
b. Year dispute arose:  2000 
c. Case history:  Claimant D purchased a Romanian company in a 
debt-for-equity swap and received government assurances that its 
overpayment would be applied to future taxes.  Elections in 2000 
resulted in a change of government, and, according to the investor, 
the new government refused to honor its predecessor's commitments. 
The company filed for bankruptcy in 2004.  As of June 2009, the 
judicial liquidator has organized 40 auctions for sale of assets. 
According to the liquidator, Claimant D consists of a company and 
individual creditor.  Both have received partial compensation from 
these actions (the former approximately USD $1.3 million and the 
latter USD $1.01 million).  Both are still owed the following 
amounts: approximately USD $19 million and USD $7.497 million, 
respectively.  Further public auctions are planned.  The Claimant 
has not been in contact with the Embassy regarding the dispute. 
 
¶6. (U) a. Claimant designation:  Claimant E 
b. Year dispute arose:  2003 
c. Case history:  In November 2003 Claimant E acquired a majority 
stake in a Romanian company that produced explosives and fertilizer. 
 The privatization contract governing the acquisition included as a 
precondition the fulfillment of the debt-for-equity swap of 
company's arrears to energy companies.  The GOR claims to have 
received the Claimant's written waiver of the precondition.  Because 
of overdue debts, the Romanian company was put under judicial 
reorganization under Romanian insolvency law. 
 
In 2005, the GOR terminated the privatization contract and seized 
the Claimant's shares, contending that the Claimant was in breach of 
contract.  The Claimant filed for international arbitration with the 
ICSID on July 16, 2007.  The tribunal was constituted in November 
2007 and held a first session in December 2007.  According to ICSID 
public reports, the tribunal was reconstituted on April 28, 2009 and 
remains pending.  The Embassy's last direct contact with the 
Claimant was in 2007. 
 
¶7. (U) a. Claimant designation:  Claimant F 
b. Year dispute arose:  2004 
c. Case history:  In 2004 Claimant F acquired through a 
privatization contract an off-road vehicle manufacturing company. 
The GOR moved to release the company from past budgetary arrears as 
agreed in the privatization contract.  Because of unsettled 
non-budgetary arrears to state-owned energy companies, the company 
was put under judicial reorganization under Romanian insolvency law. 
 Having failed to get an amicable resolution of the issues, the 
Claimant announced its intent to file for international arbitration 
with ICSID, but has not yet done so.  In the meantime, AVAS has 
tendered and sold assets of the plant to local companies.  The 
Embassy's last contact with the Claimant was in 2007. 
 
¶8. (U) a. Claimant designation:  Claimant G 
b. Year dispute arose:  2001 
c. Case history:  Claimant G filed for compensation in 2001 for two 
properties located in Bucharest.  The properties had been taken from 
her family in 1970 and the structures were demolished.  The Claimant 
is the adoptive daughter and sole legal heir of the properties' 
original owner.  The Claimant's claim was forwarded in 2002 to the 
Bucharest City Hall.  In 2004, Bucharest City Hall issued a 
notification that the Claimant had not adequately proven she was the 
original owner's legal heir.  The Claimant appealed this decision, 
as well as a subsequent denial notification, to the High Court of 
Cassation and Justice in the same year.  The Court ordered the City 
to recognize the claim and pay compensation.  No such compensation 
has been paid as of June 2008.  The case is still pending. 
 
The Claimant's attorney alleges that she was asked to pay a bribe in 
order to obtain a decision favorable to the Claimant.  The Claimant 
called the Romanian Embassy in Washington, D.C. and was advised not 
to pay the bribe.  After declining to pay the alleged bribe, the 
Claimant received a denial letter from the Mayor's office based on 
"lack of evidence of legal inheritance."  The Claimant filed a 
complaint with the National Anticorruption Department (DNA) and 
appealed the decision to the Supreme Court.  The Supreme Court 
repealed the decision of the City Hall and ordered that City Hall 
 
BUCHAREST 00000397  003 OF 003 
 
 
re-examine the claim.  The Embassy's last contact with the Claimant 
was in August 2008. 
 
¶9. (U) a. Claimant designation:  Claimant H 
b. Year dispute arose:  1973 
c. Case history:  Claimant H filed a notification with the Timisoara 
City Hall in November 2001, requesting restitution of a house and 
land in Timisoara (total of 900 sqm) taken by the state in 1963.  In 
June 2006, the Timisoara City Hall issued a decree ("Disposition") 
number 1690, stating that the Claimant is entitled to compensation 
as the property could not be returned "in integrum."  The property 
in question belonged to an owner who acquired it by property 
exchange in 1973, when the state nationalized her property in order 
to expand the local radio station and moved her into the property 
formerly owned by the Claimant's family.  The current owner also had 
to pay the state a certain amount of money in addition to turning 
over the nationalized property.  The Timisoara City Council 
recommended compensation up to Euro 400,000, the amount indicated by 
the Claimant.  The City offered the Claimant compensation in the 
form of shares of the State Property Fund, but the claimant wanted 
restitution in the form of another property of equal value.  The 
Claimant sued the Timisoara City Council, lost the case in the lower 
court, and filed an appeal in April 2008.  The Embassy's last 
contact with the claimant was in August 2008. 
 
¶10. (SBU) Claimant A:  General Star National Insurance Company 
Claimant B:  S&S Machinery Corporation 
Claimant C:  Broadhurst Investments, Ltd (New Century Holdings) 
Claimant D:  Wisconsin Turning Systems represented by creditors- 
PALCROM LLC U.S. and Patrick Cherone 
Claimant E:  S&T Oil Equipment and Machinery Ltd. 
Claimant F:  Cross Lander 
Claimant G:  Maria Grigorescu 
Claimant H:  Andrew Scheer 
 
GUTHRIE-CORN