VZCZCXYZ0028
RR RUEHWEB

DE RUEHKB #1018 2261327
ZNR UUUUU ZZH
R 141327Z AUG 07
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 3677
INFO RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS BAKU 001018 
 
SIPDIS 
 
SIPDIS 
 
STATE FOR EUR/CARC, EB/IFD/OIA, L/CID, USDOC FOR 
4201/ITA/MAC/DSTARKS 
 
E.O. 12958: N/A 
TAGS: ECON EINV KIDE PGOV AJ
SUBJECT: AZERBAIJAN: 2007 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
REF: STATE 55422 
 
¶1. (U) Sensitive but unclassified.  This cable contains 
proprietary business information and should be handled 
accordingly. 
 
¶2. (U) This cable responds to request in reftel for 
information on current business disputes and 
expropriation claims for inclusion in the Department's annual 
report to Congress required by the FY94-95 Foreign 
Relations Authorization Act. 
 
¶3. (SBU) Embassy reports the following cases: 
 
a.  Claimant A 
 
b.  2004 
 
c.  Claimant A is an airline based in Georgia that served 
regional routes to Azerbaijan, Armenia, and Russia (Sochi and 
Minvodi).  Claimant A had a commercial agreement with AZAL, 
the Azerbaijani flag carrier, governing frequency of flights 
and fares on its Baku-Tbilisi route.  AZAL admitted that 
beginning in March 2004 it sold tickets below the negotiated 
price under the "political" direction of both Azerbaijani and 
Georgian presidents, which claimant A contended was a 
violation of the commercial agreement. 
 
Claimant A stopped flights to Baku on September 2, 2004 on 
grounds that the route was no longer profitable given 
AZAL's actions.  In October 2004 Claimant A ceased operations 
entirely, allegedly due to the failure of its 
Baku-Tbilisi route.  In November 2004 the GOG sent 
notification to Claimant A of the potential withdrawal of 
its license if the company failed to resume flights.  In 
December 2004, the GOG officially withdrew Claimant A's 
license. 
 
In previous years, the U.S. Embassy in Baku held multiple 
meetings with AZAL and Azerbaijani Civil Aviation Authority 
(CAA) officials, which included an observation of direct 
talks between Claimant A and AZAL airline representatives. 
The Embassy also raised this issue with the Minister of 
Economic Development and the President's Office.  The Embassy 
is not aware of any legal action taken within Azerbaijan to 
date with respect to this claim, and we therefore have not 
taken any action during the reporting period. 
 
a.  Claimant B 
 
b.  1996 
 
c.  Claimant B established a joint venture with the City of 
Baku to develop a piece of property and build a trade 
center.  Claimant B claims that the then-Mayor of Baku 
transferred title of a piece of property to the joint 
venture in 1996.  Claimant B claims that its subsequent 
efforts to develop the property were frustrated by the 
refusal of the City to issue necessary permits for 
construction.  Claimant B has been unable to gain access 
to the property, and the current Mayor of Baku denies that 
title to the property was ever transferred to the 
joint venture. 
 
The U.S. Ambassador met with the Mayor and Claimant B 
partners in May 2004 to move forward discussion of the 
claims.  In early 2006, Claimant B partners reported to the 
Embassy some progress in pressing their claims to 
Azerbaijani government officials.  As a result, in March 2006 
the Embassy accompanied Claimant B partners to 
several meetings with government of Azerbaijan officials, 
including the mayor of Baku, Minister of Communications, and 
Minister of Economic Development.  Following these meetings, 
Claimant B partners reported that some progress had been made 
toward resolving the dispute and that government officials 
appeared to be more interested in a resolution of the issue. 
 
¶4. (SBU) Claimant A is Caucasus Airlines.  The report of 
Claimant A's case is unchanged from the past year, as the 
Embassy has received no additional information regarding the 
claim.  Claimant B is the Baku World Trade Center Joint 
Venture.  The report of Claimant B's case is unchanged from 
the past year, as the Embassy has received no additional 
information regarding the claim. The Embassy has not 
approached these firms to request a privacy waiver for the 
purposes of this cable. 
DERSE