VZCZCXYZ0008
RR RUEHWEB

DE RUEHMS #0790/01 2311232
ZNR UUUUU ZZH
R 191232Z AUG 07
FM AMEMBASSY MUSCAT
TO SECSTATE WASHDC 8629

UNCLAS MUSCAT 000790 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
FOR NEA/ARP, EB/IFD/OIA, L/CID 
 
E.O. 12958: N/A 
TAGS: CASC EINV KIDE OPIC PGOV MU
SUBJECT: OMAN RESPONSE TO SECTION 527 REQUEST 
 
REF: STATE 55422 
 
¶1. (U) In response to reftel request, Embassy submits one case 
involving the Omani government that was brought to our 
attention by a U.S. citizen who works for a Bahraini-based 
company involved in the dispute. 
 
¶2. (U) Case summary.  The United States Government is aware 
of one claim against the Government of Oman that has been 
settled in favor of the claimant on appeal.  In 1998, the 
claimant formed a partnership with Omani interests to 
construct a hatchery and marine service center.  The 
claimant, which received assurances from the government that 
it could commence operations, produced its first harvest in 
¶2002.  Prior to this first harvest, the government informed 
the claimant that the company would have to vacate the land. 
The claimant pursued legal recourse to recover $54 million in 
actual investment and 10 years' estimated net profits.  It 
won a decision against the government in January 2006 in the 
amount of $500,000.  Both parties appealed the decision.  The 
appellate court upheld the initial decision in December 2006. 
 The claimant has found the amount of compensation to be 
insufficient and is considering pursuing this case further 
with the government. 
 
¶3. (SBU) Background.  In 1998, the claimant, Bahrain-based 
DevCorp, in partnership with the Shanfari family (35%), Grand 
Cayman-based Sea Farms International (25%), Yusuf bin Alawi 
(10%), and the Dhofar Group (5%), formed Oman International 
Shrimp Company (OISC) to begin a hatchery and marine service 
center at the Duqm site.  OISC collected its first harvest in 
July 2002. 
 
¶4. (SBU) Prior to this harvest, the Ministry of Agriculture 
and Fisheries notified OISC on October 13, 2001, that they 
would have to vacate the site in order to construct the Duqm 
port.  On July 21, 2003, the Ministry of Finance issued a 
decision stating that no other site would be available for 
OISC to transfer its operations.  OISC, in turn, sued the 
Ministry of Finance in 2003 for damages in the amount of 21 
million Omani rials ($54 million).  This amount represents 
actual investment by the company, as well as an amount of 10 
years' loss of net profits, as calculated by KPMG.  While 
acknowledging that it did not have a lease for the land, OISC 
claimed that it had received assurances from the Ministry 
that it could develop a shrimp farm on the land, with a land 
lease to be forthcoming.  It retained Trowers and Hamlins as 
its counsel. 
 
¶5. (SBU) On January 3, 2006, the Administrative Court found 
both the Ministry of Finance and the Ministry of Agriculture 
and Fisheries liable in the amount of 189,971 RO ($494,000). 
In the decision, the court upheld the principle of 
"estoppel," whereby entities are estopped from benefiting 
from their own breach of promises.  OISC claims, however, 
that the judgment is insufficient, as the amount represents 
less than 1% of the damages sought, and only 15% of the 
actual audited costs of the project. 
 
¶6. (SBU) OISC appealed the case, claiming that it is due 21 
million RO.  The ministries appealed the case as well, 
claiming that no compensation should be awarded.  The 
appellate court consolidated all three cases into one, and on 
December 26, 2006, issued a decision upholding the lower 
court's ruling.  In its decision, the appellate court 
affirmed the damage estimates calculated by the 
administrative court-appointed engineering expert, while 
refuting the claims made by OISC for additional compensation 
based on (1) the lack of a formal land lease; (2) the fact 
that some costs incurred were for the purpose of conducting a 
feasibility study (which all companies have to prepare, 
whether or not they win the contact); and (3) that the 
interest claimed by OISC does not have legal merit under 
Oman's commercial law. 
 
¶7. (SBU) OISC is considering further courses of action, 
including the possible submittal of a letter to Sultan Qaboos 
bin Said, Oman's head of state.  An OISC representative, who 
is a U.S. citizen, believes that the Sultan would favor the 
company's position if he knew of the case. 
 
¶8. (SBU) Comment.  The Ambassador discussed this case with 
Minister of National Economy Ahmed bin Abdul Nabi Macki in 
July 2006.  Macki was closely familiar with the case, and 
noted that he had tried to reach a settlement with the 
company before it took his Ministry to court.  He pledged 
then to honor the court's decision when reached, and 
subsequently the Ministry issued a check to OISC in the 
amount that was awarded by the appellate court.  Of further 
note is that Yusuf bin Alawi is the Minister Responsible for 
Foreign Affairs.  To our knowledge, he has not been active in 
the deliberations of this case.  End Comment. 
 
 
GRAPPO