VZCZCXRO8228
OO RUEHDBU RUEHFL RUEHKW RUEHLA RUEHNP RUEHROV RUEHSL RUEHSR RUEHTRO
DE RUEHTU #0473/01 1961712
ZNY CCCCC ZZH
O 151712Z JUL 09
FM AMEMBASSY TUNIS
TO RUEHC/SECSTATE WASHDC IMMEDIATE 6544
INFO RUEHZL/EUROPEAN POLITICAL COLLECTIVE IMMEDIATE
RUCNMGH/MAGHREB COLLECTIVE IMMEDIATE
RUEHOT/AMEMBASSY OTTAWA IMMEDIATE 0249

C O N F I D E N T I A L SECTION 01 OF 02 TUNIS 000473 
 
SIPDIS 
 
FOR M, NEA, L 
 
E.O. 12958: DECL: 07/15/2019 
TAGS: ASCH AMGT PREL TS
SUBJECT: COURT ISSUES JUDGMENT AGAINST AMERICAN SCHOOL; 
SEIZURE OF ASSETS COULD ENSUE QUICKLY 
 
REF: A. TUNIS 461 
     ¶B. TUNIS 456 
     ¶C. TUNIS 339 AND PREVIOUS 
 
Classified By: Ambassador Robert F. Godec, reasons 1.4 (b) and (d) 
 
¶1.  (U) This is an action cable -  see paragraph 7. 
 
¶2.  (C) Summary and Action Request:  A Tunisian court ruled 
July 14 in favor of the Ministry of Finance stating that the 
American Cooperative School of Tunis (ACST) owes 9.1 million 
Tunisian dinars in taxes, ignoring the negotiated settlement 
in principle between the USG and the GOT lowering that figure 
to TD 4.126 million.  The court decision was issued in record 
time, and the court chose to skip over a series of normal 
conciliation procedures.  Local lawyers say the speed of the 
court's actions is unprecedented for this kind of case.  Once 
the final written judgment is issued, which can happen at any 
time, the Ministry of Finance will be free to seize the 
school's assets irrespective of any appeal.  We need to raise 
the pressure on the Tunisians. We recommend that the 
Department call in Ambassador Mansour and inform him that: 
 
-- the GOT must honor the tax agreement it negotiated; 
 
-- the GOT must reply in writing to our many demarches and 
proposed texts; and 
 
-- if the GOT proceeds to move to seize ACST assets or to 
reinstate the TD 9.1 million tax bill then suspension of FMF 
military assistance as well as additional steps with 
important repercussions on our bilateral relations will occur. 
 
The Ambassador will also raise this issue with the Foreign 
Minister at a meeting scheduled for July 17 and brief 
friendly ambassadors on the current situation.  End Summary 
 
---------------------------- 
Judgment Issued Against ACST 
---------------------------- 
 
¶3.  (SBU) The American Cooperative School of Tunis learned 
July 15 that a Tunisian court decided on July 14 that the 9.1 
million Tunisian Dinars (USD 6.8 million) tax bill presented 
by the Ministry of Finance in March was immediately 
enforceable.  The Ministry has pursued a case against the 
school despite an agreement in principle that was negotiated 
in May that lowered the bill to TD 4.126 million and applied 
new taxes to the school effective July 1.  Instead of 
responding to multiple requests to negotiate the remaining 
issues, the future status of the school and unilateral 
attempts by the GOT to change its lease, the Tunisians 
unleashed the Ministry of Finance to seek the original sum. 
Implementation of the agreement has been held up by the GOT's 
unwillingness to respond concretely to our multiple efforts 
both here and in Washington to resolve those issues. 
 
------------------------- 
Draft Agreement Delivered 
------------------------- 
 
¶4.  (SBU)  Most recently, the Embassy provided a full draft 
bilateral agreement (cleared by the Department) on July 10 
that incorporates the tax agreement, status and lease issues. 
 Immediately previously, July 8, the Ministry of Finance 
attempted to order to school to sign a settlement document 
sight unseen no later than July 9, saying the text would be 
presented at the time of signature.  Otherwise the previously 
agreed terms would no longer have standing.  In a two hour 
meeting with Embassy and school representatives that day, the 
Director General of Fiscal Affairs rejected the USG position 
that all issues need to be settled saying that he viewed the 
issue from the narrow legal point of view that the initial 
downpayment of the taxes (20 percent of the TD 4.126 million) 
needed to be paid with a certified check that day, otherwise 
the court would reimpose the TD 9.1 million tax bill.  He 
rejected any linkage between the tax issues and the other 
issues the school faces.  The Ambassador raised the issue 
with Minister of State Ben Dhia July 9 and discussed it with 
the Prime Minister July 10 (refs A and B).  He will raise the 
issue with the Foreign Minister at a meeting already 
scheduled for July 17 and brief ambassadors of friendly 
countries on the current situation. 
 
--------------------- 
New Lease Threat Made 
--------------------- 
 
 
TUNIS 00000473  002 OF 002 
 
 
¶5.  (SBU)  Separately, on June 30, the Ministry of Public 
Land sent a letter demanding that ACST agree to a rent 
increase from TD 16,000 a year with an annual 5 percent 
increase to TD 90,500 a year effective next March with an 
annual 7 percent increase.  The letter stated that if the 
school did not agree by July 14, then its lease would not 
continue effective July 16, 2010.  The school responded on 
July 14 that it was willing to raise its rent to TD 30,000 a 
year but sought to maintain the 5 percent annual increase. 
The Ministry's letter in effect moved up the deadline from 
its March letter to mid-July.  Previously it had called for 
negotiations to be completed by the end of the calendar year. 
 Mid-June, the school informed the ministry that it had no 
desire to change its lease terms in response to the March 
letter. 
 
-------------------------------- 
Seizure Could Happen at any Time 
-------------------------------- 
 
¶6.  (C) The GOT has put itself in the legal position of being 
able to seize the school's assets at any time.  We do not 
know if it intends to proceed but it now has the legal right 
to do so.  In practical terms, the school has about TD 
100,000 in the bank locally, with the rest of its cash in the 
United States.  We are working to implement contingency plans 
in place to move copies of the school's vital records onto 
the Embassy compound in advance of any seizure to prevent 
them from being lost.  Seizure of the school would have 
serious consequences within the American and expatriate 
community and may result as well in the reimposition of a 
hold on the school's funds by its American bank.  It appears 
that the GOT has decided to in effect repudiate the draft 
agreement and ignore the lease and status issues by 
attempting to bypass the USG and force the school to succumb 
to direct pressure.  As the Department is aware, the school 
does not have the TD 9.1 million being sought.  Any 
enforcement of the court order would effectively close the 
school by bankrupting it. 
 
¶7.  (C) Recommendation:  We believe the Department should 
call in Ambassador Mansour and deliver a stern message as 
follows: 
 
--  The United States wants a negotiated settlement of all 
the issues concerning ACST. 
 
--  We have previously reached an agreement in principle on 
the tax issues.  We do not understand why the Government of 
Tunisia is ignoring that agreement by pursuing ACST in the 
courts.  The court decision to reimpose a bill that the GOT 
has already negotiated is unacceptable and raises strong 
questions as to whether the GOT negotiated in good faith. 
 
--  The Government of Tunisia has refused to reply to our 
multiple demarches and proposed texts to close this matter 
and to resolve the status and lease issues that remain.  We 
have not received any written replies despite multiple 
meetings both in Tunis and in Washington.  The most recent 
text submitted, on July 10, needs to be acted on immediately. 
 
--  Any action to seize any assets of ACST or to reimpose a 
9.1 Million Tunisian dinar bill will result in the immediate 
suspension of all FMF military assistance as well as 
additional steps that will have important repercussions on 
our bilateral relations.  The current court case must be 
suspended by the GOT and we must move immediately to conclude 
a bilateral agreement before serious damage to our bilateral 
relationship results. 
 
End Recommendation 
Godec