US embassy cable - 05BOGOTA6340

UNCLAS SECTION 01 OF 02 BOGOTA 006340 
 
SIPDIS 
 
STATE FOR EB/IFD/OIA/JPROSELI, AND L/CID/JNICOL 
 
E.O. 12958: N/A 
TAGS: KIDE, EINV, EFIN, PGOV, CASC, CO 
SUBJECT: 2005 REPORT ON INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS 
 
REF: SECSTATE 77014 
 
1.  This is post,s response to reftel request for the 2005 
report on U.S. citizen expropriation claims and other 
investment disputes involving the Government of Colombia.  It 
is worth noting that the two cases in the 2005 report are 
being decided through normal judicial action or in 
transparent negotiations with the claimants. 
 
COLOMBIA 
 
2.  The United States Government is aware of two (2) claims 
of United States Persons against the Government of Colombia, 
one of which one has been resolved. 
 
I.    A.    Claimant A 
 
B.    1984 
 
C.    The claim is based on Claimant A,s reported 1982 
discovery of the Spanish galleon San Jose.  In accordance 
with Colombian law, Claimant A registered the coordinates of 
the discovered ship with the Colombian Government and 
negotiated with the Government of Colombia for a contract to 
salvage the galleon over a two year period of time. 
 
Claimant A maintains that under Colombian law in place at the 
time of the discovery of the San Jose, Claimant A had a right 
to approximately 50 percent of the property salvaged. 
Claimant A also claims that a 1984 Presidential decree and a 
1996 law, which stipulated that Claimant A could only receive 
5 percent of any treasure salvaged from the site, were 
expropriatory acts because they illegally reduced Claimant 
A,s share of the salvaged property.  The Colombian 
Government has consistently maintained that Colombian law 
existing at the time Claimant A reported its coordinates 
granted Claimant only a 5 percent finder,s fee. 
 
Three 1994 Colombian court cases support Claimant A,s 
claims.  1) On March 10, 1994, the Constitutional Court 
(Colombia,s higher court on Constitutional matters) struck 
down as unconstitutional the 1984 Presidential decree.  2) On 
July 6, 1994, a district court established that Claimant A is 
entitled to a 50 percent discoverer,s share of any treasure 
recovered from the site, a decision upheld on appeal by the 
district superior court March 7, 1997.  The Government of 
Colombia has appealed this decision.  3) On October 12, 1994, 
another district court issued a sequestration order requiring 
any treasure salvaged from the sites to be held by the court 
pending resolution of the dispute. 
 
At Claimant A,s request, State Department officials have 
repeatedly raised the possibility of a negotiated settlement 
with Colombian Government officials since 1995.  The 
Colombian Government agreed in mid-1998 to discuss an 
out-of-court settlement with Claimant,s attorneys.  In April 
1999, Claimant,s lawyers met in Washington with the chief 
counsel of the Colombian Presidency and representatives of 
the Colombian Embassy. 
 
In February 2004, a Colombian court agreed with the Colombian 
Government,s argument that the Colombian people owned the 
estimated $US5 billion treasure.  The tribunal denied 
Claimant,s aspiration to half of the property.  The 
tribunal,s decision came after a Bogota court,s recent 
rejection of a UNESCO convention on undersea cultural 
heritage, which backed Spain,s claims to its sunken galleons 
around the world.  However, this decision will not have a 
practical effect until the Colombian Constitutional Court 
decides on a pending appeal filed by Claimant A .  The 
Constitutional Court has delayed ruling on this issue several 
times, initially expected for June 2004, but now delayed 
until the second half of 2005.  The Government of Colombia is 
not interested in any further negotiations until the 
Constitutional Court issues a decision. 
 
II. 
 
A.    Claimant B 
 
B.    2004 
 
TermoEmcali is a 234 MW, natural gas-fired combined cycle 
power station located near Cali, and supplies power to the 
Emcali utility.  The project,s majority owner is an 
affiliate of Claimant B.  TermoEmcali bondholders include 
some of the largest global financial institutions -- 
including pension funds, insurance companies and investment 
banks. 
 
On March 6, 2003, the Colombian Federal Government, which 
took control of Emcali in 1998, announced it had issued a 
resolution halting all payments to Emcali creditors, 
including those associated with the TermoEmcali power 
facility.  The federal government action caused TermoEmcali 
to default on its bonds. 
 
On December 28th, 2004, Emcali and the bondholders reached a 
restructuring agreement with the Colombian authorities. 
Separately the Colombian authorities reached an agreement 
with local creditors of TermoEmcali.  The agreements allowed 
local creditors to receive their payments and gave them 
approval rights over any subsequent debt restructuring 
agreement. 
 
On February 16th the local creditor executive committee 
rejected a proposed restructuring agreement and asked to 
delay negotiations with the TermoEmcali project for an 
additional 10 years. On April 21st, ThermoEmcali filed a 
lawsuit challenging certain payments mandated by the December 
28th decision of the Superintendent concerning local 
creditors. 
 
The Committee of Emcali Creditors met again on May 17 and 
agreed to allow payments to ThermoEmcali to be deposited in a 
fiduciary account pending the restructuring of the debt 
agreement.  The Committee also extended the deadline for 
restructuring negotiations until October.  The GOC indicates 
that the case should be favorably resolved by the 31st of 
October. 
WOOD