US embassy cable - 05ANKARA3396

UNCLAS SECTION 01 OF 02 ANKARA 003396 
 
SIPDIS 
 
DEPT PASS USTR FOR LISA ERRION 
DEPT FOR EB/IFD/OIA 
 
E.O. 12958: N/A 
TAGS: EINV, KIDE, TU 
SUBJECT: 2005 REPORT ON INVESTMENT DISPUTES/EXPROPRIATION 
CLAIMS 
 
REF: STATE 70014 
 
1.  Claimant data: 
 
Claimants A are U.S. citizens Victor and Kristy Bedoian. 
They filed a Privacy Act Waiver in 2001 allowing information 
to be shared with family, friends, members of Congress, the 
press, the general public and the following individuals: 
Sally or Pat Killoran, William Wolfe, Michael or Stacy 
Shelton.  Victor Bedoian reported that he "technically8 had 
a 95 percent share in the company involved in the dispute 
over the hotel property.  However, there are six other 
partners in the venture. 
 
Claimant B is PSEG Global/North American Coal, which has a 
contract for a coal-fired power plant that has not been 
implemented. 
 
Claimants C are U.S. research-based pharmaceuticals companies. 
 
Claimant D is Toreador Resources Corporation. 
 
Claimant E is Toreador Resources Corporation. 
 
Claimant F is Motorola. 
 
2.  Begin text of 2005 report: 
 
The United States is aware of (6) claims of U.S. persons 
against the Government of Turkey. 
 
1. a.  Claimants A 
 
b.  2001 
 
c.  In early 2005, a Van court dismissed a civil case 
initiated by Claimants A, in which Claimants A sought to 
annul the transfer of title to a hotel which they claim was 
sold without their knowledge or consent.  In 2004, 
administrative courts decided against Claimants A in their 
suit to obtain a residence permit and an operating permit for 
the hotel.  Claimants A are appealing the decision in the 
civil case in the Turkish courts, and are appealing the 
permit decisions in a case filed with the European Court of 
Human Rights.  They have filed a complaint against the judge 
in the civil case, alleging that the judge ignored relevant 
evidence and that the judge was biased and may have been 
bribed.  Claimants A had purchased and renovated a hotel and 
restaurant in Van for approximately USD 750,000 in 2001, but 
had been unable to operate it due to persistent police 
harassment and obstruction by local government authorities. 
Claimant has been denied a residency permit, which was used 
as the basis for denying operating permits for his hotel and 
restaurant. 
 
2. a.  Claimant B 
 
b.  2000 - 2001 
 
c.  In 2001, the Turkish Government cancelled 46 contracted 
(but not built) power projects based on the 
build-operate-transfer (BOT) and transfer-of-operating-rights 
(TOR) models.  Only PSEG pursued arbitration.  Turkey's 
constitutional court ruled in 2002 that the Turkish 
Government would have to either honor the contracts or 
compensate the companies involved.  In line with the 
Constitutional Court ruling, the Ministry of Energy and the 
Treasury Undersecretariat released on May 24, 2002 a joint 
statement indicating that the GOT would seek as soon as 
possible a negotiated settlement with those BOT/TOR companies 
that have signed contracts.  To date, the Government has not 
commenced negotiations with the companies or provided 
compensation.  Claimant filed an international arbitration 
case with the International Center for the Settlement of 
Investment Disputes (ICSID) at Washington D.C under the 
bilateral investment treaty against the GOT in April 2002, 
claiming USD 300 million compensation for actual expenses and 
estimated profit loss since 1995.  Claimant received a 
tribunal decision for the jurisdictional phase in June 2004. 
The hearing for determining monetary damage is scheduled for 
April 2006 (sustentative-merit phase). 
 
3. a.  Claimants C 
 
b.  2000 
 
c.  In January 2005, the Turkish Ministry of Health issued a 
regulation providing limited data exclusivity protection for 
confidential and costly pharmaceutical test data.  However, 
 
SIPDIS 
the regulation falls short of WTO Agreement on Trade-Related 
Aspects of Intellectual Property (TRIPS) requirements by 
allowing generic copies to rely on the innovators, test data 
on applications filed between 2000 and 2004, and by limiting 
protection to pharmaceuticals with valid patents in Turkey. 
In its Special 301 submission, the Pharmaceuticals Research 
and Manufacturers Association claimed that 70 
TRIPS-infringing copy products have been approved between 
2000 and 2004, and that an additional 200 are in the Health 
Ministry review process.  PhRMA claims that lack of data 
exclusivity cost its members in Turkey about USD 146 million 
in sales annually. 
 
4. a.  Claimant D 
 
b.  1997 
 
c.     Since 1997, the Turkish Government has not allowed 
repatriation of profits (up to the amount of investment) by 
oil companies under Article 116 of the 1954 Petroleum Law, 
which protected foreign investors from the impact of lira 
depreciation.  Two foreign petroleum companies, including 
Claimant D, obtained a Danistay (Council of State) decision 
upholding Article 116, which had been challenged by Turkish 
Government auditors in the Court of Public Accounts. 
However, the Danistay decision was reversed on appeal (by the 
Treasury), and the companies have asked for a reconsideration 
of this reversal, which is the last judicial recourse in 
Turkey.  The Claimant has submitted its case to the European 
Court of Human Rights.  Claimant is hoping that the pending 
new Petroleum law will include a provision for honoring past 
commitments. 
 
5.    a. Claimant E 
 
b.    2004 
 
c.    Claimant E maintains that the Ministry of Energy 
Petroleum Affairs and TPAO (the state oil company) illegally 
canceled Claimant,s application for a Black Sea exploration 
license, in the zone adjacent to Claimant,s recent natural 
gas discovery.  Claimant alleges that TPAO was illegally 
awarded the license after relinquishing for non-performance 
of drilling obligations.  Claimant has taken the case to 
Turkey,s Danistay (Council of State), seeking to gain the 
license for which it applied and claiming discriminatory 
treatment, and therefore a &taking8 of the rights that 
would have been bestowed under the license.  Claimant claims 
that the Danistay is stalling on a decision pending enactment 
of a new petroleum Law. 
 
6. a. Claimant F 
 
b. 2001 
 
c. Claimant lent nearly USD 2 billion to Telsim Mobil 
Telekomunikasyon Hizmetleri, a private firm.  In 2001, Telsim 
defaulted on the loan.  In 2004, the Turkish State Deposit 
Insurance Fund (TMSF) seized Telsim to recoup debts owed by 
its owners,  Claimant won judgments against Telsim,s owners 
in U.S. and U.K. courts in 2003.  Telsim launched several 
arbitration cases at the Zurich Chamber of Commerce in 2002, 
prior to the Turkish Government,s seizure of the company. 
Claimant filed a demand for arbitration against the Turkish 
Government at ICSID in Washington in October 2004. 
EDELMAN