VZCZCXRO1573
RR RUEHLN RUEHVK RUEHYG
DE RUEHKB #0593/01 1760501
ZNR UUUUU ZZH
R 240501Z JUN 08
FM AMEMBASSY BAKU
TO RUEHC/SECSTATE WASHDC 5549
INFO RUCNCIS/CIS COLLECTIVE
RUCPDOC/DEPT OF COMMERCE WASHDC

UNCLAS SECTION 01 OF 02 BAKU 000593 
 
SIPDIS 
SENSITIVE 
 
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: 2008 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
 
¶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. 
 
a. Claimant C 
 
b. 1996 
 
c. According to Claimant C, during the mid-1990s Claimant C 
purchased over 150,000 tons of cotton from the Government of 
Azerbaijan through the state-owned cotton-ginning business 
"Agroincom."  Three contracts were successfully delivered. 
In 1996, however, Agroincom defaulted on a portion of a 
fourth contract.  After repeated failed attempts to resolve 
the situation, in 1998 an international arbiter ordered 
Agroincom to pay USD 7.7 million.  To date, no payments have 
been made by the Government of Azerbaijan. 
 
 
BAKU 00000593  002 OF 002 
 
 
¶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.  Claimant C is Cargill. Over the past 
24 months Claimant C has been actively seeking payment from 
the Government of Azerbaijan for its long-standing debt. 
DERSE