VZCZCXYZ0002
PP RUEHWEB

DE RUEHEG #1199/01 1790519
ZNR UUUUU ZZH
P 280519Z JUN 09
FM AMEMBASSY CAIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 2983
INFO RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY

UNCLAS CAIRO 001199 
 
SENSITIVE 
SIPDIS 
 
DEPT FOR EB/OIA HEATHER GOETHERT AND KIMBERLY BUTLER 
DEPT FOR NEA/ELA 
 
E.O. 12958: N/A 
TAGS: ECON EINV CASC KIDE OPIC PGOV EG
SUBJECT: 2009 SECTION 527 REPORT FOR EGYPT 
 
REF: STATE 49477 
 
¶1. (SBU) The following report is provided in response to 
reftel request for information on investment disputes and 
expropriation claims: 
 
¶2. (SBU) The United States Government is aware of four (4) 
claims of U.S.persons that may be outstanding against the 
Government of Egypt (GOE): 
 
¶1.     a. Claimant A 
 
       b. 2001 
 
c. In June 2001, the Alexandria Governorate took 
approximately 6,000 square meters from Claimant A's land (on 
which a factory had been built) to widen the adjoining 
highway.  The Governorate's ensuing construction work also 
damaged a wall and some property.  As a result of this 
action, Claimant A made a request to the Governorate for 
compensation of approximately $390,000, for the seized land 
and physical damage.  The compensation case proceeded 
smoothly at first.  However, during the final stages of the 
compensation process in late 2003, the Governorate informed 
Claimant A that it did not have legal title to the entire 
property (despite documentation to the contrary), and thus 
had no right to compensation for the land taken for the 
highway. 
 
      The Governorate officials further informed Claimant A 
that it had no right to expand operations, sell the land or 
engage in any legal proceedings involving the land, and that 
the Governorate would file a lawsuit against Claimant A to 
reclaim the land.  As a result of the dispute, Claimant A was 
unable to expand operations and meet growing export orders. 
After the U.S. Embassy participated in a meeting with 
Claimant A and GAFI, the GOE investment authority, GAFI 
established a technical committee to review the issue.  In 
March 2005 GAFI officially confirmed Claimant A's ownership 
of the land and notified the Governorate, which then offered 
compensation of less than the $390,000 requested by Claimant 
¶A.  Later in 2005, the Ministry of Housing assessed the value 
of the land based on 2003 prices.  Claimant A disputed this 
assessment, and was informed by the Governorate that the land 
could only be re-assessed after three years.  Claimant A's 
CEO met with the Governor to try to resolve the matter. 
Claimant A was informed by the Governorate that negotiations 
could only be conducted directly between the Governorate and 
Claimant A's headquarters.  The parties are currently working 
on continuing negotiations. 
 
      In December 2006, Embassy and APP staff met with the 
new Governor, appointed in 2006, to discuss the case.  The 
Governor instructed his staff to look into the case.  The 
Embassy advised the claimant of this meeting and asked the 
claimant to follow up directly with the Governor's office. 
The claimant reports no additional progress, as the Governor 
referred the case to the Deputy Governor, who referred it to 
Alexandria Higher Committee for Evaluating the Price of Land, 
affiliated to the Ministry of Housing, for an opinion.  The 
opinion still has not been rendered.  In discussions with the 
claimant, post suggested the possibility of pursuing 
compensation in kind (e.g., tax concessions, etc.) rather 
than monetary compensation.  Claimant seemed agreeable to 
this approach. 
 
      Claimant terminated the manufacturing portion of its 
operation in Egypt in June 2008 and now uses its facilities 
in Egypt for trading only.  Despite the downsizing, Claimant 
still considers the dispute unresolved and has not received 
any new offers of compensation from the Governorate. Claimant 
has not provided any additional information on this case to 
Post. 
 
¶2. a. Claimant B 
 
      b. 1992 
 
c. Claimant B was awarded a contract in 1989 to refurbish a 
GOE-owned hotel in the Ain Sokhna area.  Claimant B had spent 
several million dollars by 1992 and was ready to inaugurate 
the project when the then-Ministry of Public Enterprise 
informed Claimant B that the contract was null and void. 
Both parties agreed to arbitration, which resulted in a 
favorable ruling for Claimant B.  Nonetheless, the Ministry 
of Public Enterprises continued to demand that Claimant B 
surrender the assets and took the matter to court. The court 
initially refused to hear the case on the grounds that the 
original contract stipulated that in case of legal dispute 
both parties would seek arbitration.  The Ministry appealed 
the decision and the appellate court agreed to hear the case 
on the grounds that the arbitration decision was never 
executed.  Claimant B petitioned against the appellate 
court's decision and no further court action was taken. 
Claimant B has reportedly removed operations from Egypt, and 
Claimant B has not been in touch with the Embassy in at least 
five years. 
 
¶3. a. Claimant C 
 
      b. 1998 
 
c. Claimant C secured a $6.2 million, 4-year contract with 
the then-Ministry of Trade and Supply to provide both 
technical assistance to the Egyptian Export Development 
Center and export-promotion support to Egyptian companies. 
The money was allocated from the Ministry of International 
Cooperation through local currency proceeds generated from a 
USAID cash transfer program.  Claimant C began providing 
training, and an initial payment of $1.6 million was due in 
March 1998.  In June 1998, Claimant C received only a partial 
payment of $560,000 and the Egyptian Export Development 
Center, under the successor Ministry of Economy and Foreign 
Trade (now the Ministry of Trade and Industry) subsequently 
cancelled the contract and all future services to be 
provided, claiming services already provided were of 
unsatisfactory quality.  No other payments were made, and the 
Egyptian Export Development Center was closed in 2002.  The 
Embassy raised the issue numerous times with various 
officials, including the former Prime Minister but the GOE 
took no further action. 
 
      The Embassy repeatedly advised Claimant C to pursue 
arbitration, but Claimant C continued to seek a political 
solution. The Ministry of Trade and Industry indicated in 
discussions with Embassy officials that a new export 
promotion center was opening and that Claimant C was welcome 
to submit a new proposal to provide services.  Claimant C, 
however, sought a written response from the Ministry of Trade 
and Industry to Claimant C's contention that the previous 
contract is still valid.  Claimant C last contacted the 
Embassy in 2006 requesting assistance in obtaining a written 
response. Post has been unable to obtain any recent 
information on the case. 
 
¶4. a. Claimant D 
 
      b. 2004 
 
c. The Egyptian National Air Navigation Services Company 
(NANSC), part of the Egyptian Ministry of Civil Aviation, 
contracted with Claimant D to supply seven surveillance 
radars to be installed in seven different locations across 
Egypt.  Prior to the final stages of the contract, the 
Egyptian authorities seized the company's $3.4 million 
performance bond, claiming performance deficiencies in the 
supplying of proper documentation, spare parts, and test 
equipment. The Embassy has been involved in discussions 
between the parties and has raised the dispute up to the 
level of the Prime Minister.  In August 2004, a mediation 
committee was set up between the GOE and Claimant D to 
resolve the issue.  However, NANSC terminated the committee 
before a decision was reached, and did not respond to 
solutions offered by Claimant D at the end of 2004 in the 
pursuit of a negotiated settlement.  In January 2005 the 
Minister of Civil Aviation decided to resort to official 
arbitration after meeting with the senior management of 
Claimant D.  In February 2005, Embassy officials approached 
the then-Ministry of Foreign Trade and Industry to press for 
resolution of the issue, but did not receive a response. 
Arbitration was to have begun in 2006 but did not. In 2008 
claimant informed the Embassy that NANSC has requested 
additional information regarding spare part availability, to 
which the claimant responded. At that point, the Claimant 
repeated its request to meet with NANSC to resolve the 
dispute but received no response. Claimant did not respond to 
Post request for additional information on this case. 
 
¶3. (SBU) Claimant list: 
 Claimant A:  Colgate Palmolive 
 Claimant B:  H and H Enterprises 
 Claimant C:  International Trade and Marketing (ITM) 
 Claimant D:  Northrop and Grumman Electronic Systems 
 
 
¶4. (U) Embassy point of contact for this report is Acting 
Economic Counselor John Speaks (E-Mail: speaksjt@state.gov, 
Tel. 011-20-2-2797-2685) 
SCOBEY