US embassy cable - 05KUWAIT2231

UNCLAS KUWAIT 002231 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR EB/IFD/OIA/JPROSELI AND L/CID/JNICOL 
 
E.O. 12958: N/A 
TAGS: EINV, EFIN, CASC, PGOV, KIDE, KU, OPIC 
SUBJECT: KUWAIT INPUT FOR 2005 REPORT OF INVESTMENT 
DISPUTES AND EXPROPRIATION CLAIMS 
 
REF: STATE 70014 
 
This cable is sensitive but unclassified; please protect 
accordingly.  Not for internet distribution. 
 
1.  (U) As requested reftel, post is submitting the following 
update for inclusion in the 2005 Report on 
Investment Disputes and Expropriations Claims. 
 
2.  (U) A.  Claimant Designation: Claimant A vs. Kuwait 
Ministry of Finance, Offset Department. 
 
3.  (U) B. Year When Dispute Arose:  The dispute arose on 
October 5, 1997 and is ongoing. 
 
4.  (U) C. Case History:  Claimant A acted as the third party 
broker for various offset obligors under the Ministry of 
Finance's Offset Program.  Claimant A's business plan for an 
offset project was approved by the Ministry of Finance's 
Offset Department (formerly known as the Program Executive 
Office) in a letter dated January 24, 1996.  As a condition 
of the approval letter, Claimant A had to fulfill certain 
requirements as instructed by the Offset Department, such as 
providing the names of offset obligors within a four-month 
period, completing feasibility studies, establishing a local 
project company and obtaining approval for its project from 
the Ministry of Electricity and the Ministry of Water and 
Public Works.  Claimant A fulfilled all of its obligations, 
but in an October 5, 1997 letter from the Undersecretary of 
the Ministry of Finance, Claimant A's business plan was 
revoked due to a "technical default" and the Ministry 
threatened to apply penalties under the Offset Program.  The 
Offset Department claimed that Claimant A failed to meet the 
four-month deadline for naming the committed obligors. 
 
5. (U) Case History, Continued:  After several attempts for 
an amicable resolution to this issue, Claimant A filed a case 
in the Kuwaiti Court of First Instance against the Ministry 
of Finance's Offset Department.  The claim amount was 
approximately USD ten million.  The court ruled against 
Claimant A on October 31, 1999.  Claimant A appealed on 
January 22, 2000, and the Court of Appeals overturned the 
lower court's ruling on June 17, 2001.  The Court of Appeals 
returned the case to the Court of First Instance, which in 
turn referred the case to the Ministry of Finance's Experts 
Department in May 2002, to calculate the damages owed to 
Claimant A.  The Experts Department set damages at 1,386,609 
Kuwaiti dinar (about US$4.6 million).  However, the Court of 
First Instance refused to enter the case for final judgment, 
saying it disagreed with the Experts Department's 
recommendation.  On October 31, 2004, the Court of Appeals 
reversed the Court of First Instance's refusal to enter the 
case for final judgment, ruling in favor of Claimant A and 
supporting the Experts Department's recommendation.  The 
Ministry of Finance has appealed the Court of Appeals' 
decision, and the case is now pending before the Court of 
Cassation.  Claimant A expects a final ruling by the end of 
October 2005. 
 
6.  (SBU)  Separate List of Claimants' Names:  Claimant A -- 
Middle East Networks, Ltd. 
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