VZCZCXYZ0001
PP RUEHWEB

DE RUEHSJ #0577/01 1892103
ZNR UUUUU ZZH
P 082103Z JUL 09
FM AMEMBASSY SAN JOSE
TO RUEHC/SECSTATE WASHDC PRIORITY 1019
INFO RUEHZA/WHA CENTRAL AMERICAN COLLECTIVE PRIORITY
RUEATRS/DEPT OF TREASURY WASHINGTON DC

UNCLAS SAN JOSE 000577 
 
SIPDIS 
 
DEPT FOR EEB/IFA/OIA AND L/CID 
PLEASE PASS TO TREASURY FOR SSENICH 
 
E.O. 12958: N/A 
TAGS: EINV ECON CASC KIDE OPIC PGOV CS
SUBJECT:  COSTA RICA 2009 SECTION 527 REPORT 
 
REF:  STATE 49477 
 
¶1. Embassy San Jose provides its information for the 2009 Section 
527 Report on Investment Disputes and Expropriation Claims in 
paragraph 2.  Information on each claimant appears in paragraph 3. 
Text in MS Word track changes format has been e-mailed to 
EEB/IFD/OIA and L/CID per reftel. 
 
¶2.  The United States Government is aware of five (5) outstanding 
claims of United States persons against the Government of Costa Rica 
(GOCR).  Two (2) cases are longstanding, one (1) case was added last 
year while two (2) cases are new. 
 
------ 
CASE 1 
------ 
 
a.  Claimant A 
 
b.  1996 
 
c.  Claimant A alleges that, in 1983, the GOCR expropriated 
extensive ranchland owned by Claimant A.  The GOCR held the land for 
nine years, after which it returned the property.  Claimant sued the 
GOCR to obtain compensation for income lost during the nine-year 
period.  The court ordered an appraisal, which detemined that 
Claimant A suffered a loss of USD 11 million.  The GOCR balked at 
the amount and refused to proceed with the claim.  Over the course 
of ten years, Claimant, with support from the Embassy, attempted to 
reach a negotiated settlement with the GOCR while also pursuing the 
matter in Costa Rican courts. 
 
The highest civil court in Costa Rica ("Sala Primera") recently 
affirmed a lower courts' decision in the case, awarding nothing to 
Claimant A.  The court felt that the claimant failed to show that 
the governments' expropriation order caused specific damage, noting 
the lack of audited accounting records underlying the appraised 
estimate of loss and the claimant's successful sale of a portion of 
the property during the nine years the GOCR held an outstanding 
expropriation notice over the property.  The claimant has now 
exhausted judicial due process in Costa Rica.  Claimant A submitted 
the case for consideration by the InterAmerican Human Rights 
Commission in 2008.  The Commission did not accept the case. 
 
------ 
CASE 2 
------ 
 
a.  Claimant B 
 
b.  2002 
 
c.  In 1998, Claimant B, an American oil company, was granted a 
concession for offshore exploration. When the previous 
administration of President Abel Pacheco entered office in 2002, it 
announced that it would not allow such offshore oil exploration. 
Claimant B sought damages for the cancellation of his concession 
contract.  In various rulings over the past several years, Costa 
Rican courts ruled in favor of the claimant at times and the GOCR at 
other times. 
 
Following a decision for damages in favor of the Claimant, the GOCR 
responded in January 2005 by declaring the Claimant in breach of 
contract for non-performance.  In April 2005, the Claimant responded 
to the breach of contract charge by countersuing the GOCR.  In its 
countersuit, the Claimant asserted that its alleged non-performance 
was caused by delay caused by the original GOCR finding that the 
environmental impact studies were inadequate. 
 
In 2008 the Claimant believed himself to be in bona fide discussions 
to sell the concession to another firm with the aquiescence of the 
GOCR.  The Embassy simultaneously witnessed both public and private 
manifestations by then Minister of Environment and Energy, Roberto 
Dobles, in favor of petroleum exploration in Costa Rica. 
Nevertheless, in late 2008 the Claimant received unequivocal word 
that the GOCR would not facilitate the Claimant's sale of the 
concession to another firm.  In March 2009, following Roberto 
Dobles' resignation, President Arias apparently reversed his 
administration's previous position in favor of petroleum exploration 
in a public statement on March 23, 2009.  However, Arias also denied 
that such a position or policy reversal had taken place.  The 
Claimant continues to seek compensation in Costa Rican courts. 
 
------ 
CASE 3 
------ 
 
a.  Claimant C 
b.  2008 
 
c.  The Embassy has received a number of complaints from U.S. 
citizens who claim that the GOCR has expropriated a 75-meter strip 
of valuable beachfront property in "Las Baulas" National Park 
extending along approximately six kilometers of Playa Grande and the 
smaller beaches of Playa Ventanas and Playa de Jesus in Guanacaste 
Province.  Valuation of the land is contentious since "Las Baulas" 
National Park is contiguous to the booming beach town of Tamarindo 
and the subject properties are among the few in Costa Rica with 
beachfront title. 
 
The dispute arose when, in 2004, the Procurator General (Prosecutor 
General) issued a novel interpretation of the 1995 law creating "Las 
Baulas" National Park.  Claimants read the law to provide that the 
marine park land extended 125 meters seaward of the high-tide mark, 
but the Prosecutor General interpreted the law to apply 125 meters 
above the high-tide mark.  Since the first 50 meters of all Costa 
Rican beaches are public dominion, the dispute is over the next 75 
meters of privately owned land.  In May 2008, the Constitutional 
Chamber of the Supreme Court decided that the Procurator General's 
interpretation was valid.  This meant that the local municipality of 
Santa Cruz's previously issued building permits in the disputed zone 
were suspended. 
 
The beaches within "Las Baulas" National Park are recognized as 
important nesting beaches in the Pacific basin for the endangered 
Leatherback Turtle (or "Baula" in Spanish).  The strip of land at 
issue is behind the area of the beach where the turtles nest and is 
meant to provide a small buffer between any development and the nest 
sites.  The landowners contend that a strict zoning ordinance would 
protect the area just as well as confiscation without depriving 
landowners of their properties.  While initial expropriation orders 
seemed to focus inordinately on lands belonging to foreign owners, 
it now appears that Costa Rican landowners are being affected as 
well. 
 
The Embassy received a signed petition from five US citizens who are 
currently appealing confiscation orders affecting their property.  A 
sixth US citizen, the longtime owner of a hotel on the beach, 
contacted the Embassy separately.  We are told that additional US 
citizens have been, or will be, affected by this issue.  One of the 
petitioners informed the Embassy that neighbors within 300 meters of 
each other have received wildly disparate court appraisals of USD 13 
per square meter (/m2), USD 200/m2, USD 500/m2, USD 800/m2 and USD 
850/m2.  As a reference, six kilometers of beach with 75 meters of 
expropriated land at USD 800/m2 would carry a value of USD 360 
million dollars.  It is not clear if the GOCR has the reserves or 
budget for such a purchase, which is a major reason that the 
claimants have repeatedly proposed a strict zoning ordinance applied 
to development on their lands as an alternative to confiscation. 
 
In December 2008 the Constitional Chamber of the Supreme Court 
issued a significant new ruling formalizing the previous suspension 
of building permits in the 75-meter zone and establishing a 
500-meter buffer zone around the entire park (not just the 75-meter 
strip) in which construction is temporarily suspended.  The buffer 
zone will remain in place until the GOCR, (primarily SETENA, the 
agency in charge of environmental impact studies), conducts a 
thorough study of the park and its surroundings to determine the 
necessary level of protection.  The court order specified a 
six-month study period (which elapsed June 16, 2009) for completion 
of the study.  The court will then have to review the study and 
mandate its interpretation. 
 
The Embassy will continue to actively monitor this issue. 
 
------ 
CASE 4 
------ 
 
a.  Claimant D 
 
b.  2009 
 
c.  Claimant "D" asserts that he is currently under judicial order 
which could result in imprisonment as a consequence of development 
of  a widely-praised and ecologically sensitive privately operated 
tourist park.  The claimant states that his company constructed the 
extensive riverside trails -- which are a park attraction -- in 1998 
and 1999, declared the park a "Private Nature Reserve," and 
implemented a management plan in accordance with Ministry of 
Environment and Energy (MINAE) guidelines.  MINAE officials were 
involved in the process from the beginning.  The claimant asserts 
that differences in interpretation of the relevant law led to 
examination of the built trails by the Tribunal Ambiental, the 
senior administrative body charged with resolving environmental 
issues.  The claimant states that the tribunal declared the trails 
to be legal. 
 
The claimant asserts that the Attorney General's office chose to 
pursue a criminal case against the Claimant.  The court ordered the 
removal of the trails in an October 2007 ruling; the claimant 
refused to do so, thus risking jail time.  The claimant states that 
the presiding judge made biased comments against foreign developers 
during the trial.  The claimant also states that SETENA, (the 
department of MINAE in charge of environmental impact studies) 
recently wrote a letter stating that the sentence should be reversed 
and the trails should remain in place.  The claimant remains in 
disobedience of the judge's order to demolish the trails. 
 
The claimant argues that this case reveals a disconnect between 
Costa Rica's judicial system and its system of administrative laws 
and controls.  By the claimant's account, the judiciary pursues the 
developer, not the officials, when a law is allegedly broken based 
on advice or guidance from the officials.  This leaves the developer 
at a loss as to how to proceed. 
 
------ 
CASE 5 
------ 
 
a.  Claimant E 
 
b.  2009 
 
c.  Claimant E asserts that the Attorney General accused the 
claimant of failing to request a mining permit for earth removal at 
a riverside tourist development.  The claimant asserts that he 
obtained the proper permitting.  The claimant states that he went 
through "extensive permitting with three different agencies who all 
visit(ed) the property and none of them even mention(ed) that I 
would need a mining permit, most probably because excavating the 
lakes has nothing to do with mining."  The claimant states that 
MINAE officials came up with the "mining" argument after MINAE 
issued all permits and the work was completed.  The claimant notes 
that the first court to try the case found the claimant innocent and 
ordered the state to pay all expenses in the case.  He states that 
the Attorney General's office appealed that innocent verdict and had 
it overturned.  The claimant states that the appeals court sentenced 
him to one year in prison and that he is also currently exposed to a 
one million dollar fine. 
 
------------------- 
CLAIMANT IDENTITIES 
------------------- 
 
¶3.  Identities of the five claimants follow below: 
 
-- Claimant A:  Rancho Gesling, S.A. 
 
-- Claimant B:  Harken Energy Corporation/MKJ 
 
-- Claimants C:  Brett Berkowitz, Glenn Gremillion, John Gill, Greg 
Rogers and Wayne Cates (petitioners).  Louis Wilson,(hotel owner). 
 
-- Claimant D:  Lee Banks, Peace Gardens 
 
-- Claimant E:  Lee Banks, Savegre River 
 
HENIFIN