US embassy cable - 05SANTODOMINGO3930

UNCLAS SECTION 01 OF 02 SANTO DOMINGO 003930 
 
SIPDIS 
 
DEPT FOR EB/IFD/OIA/JPROSELI, L/CID/JNICO; 
USDOC FOR 4322/ITA/MAC/WH/CARIBBEAN BASIN DIVISION 
USDOC FOR 3134/ITA/USFCS/RD/WH; TREASURY FOR M WAFER 
 
E.O. 12958: N/A 
TAGS: CASC, DR, EFIN, KIDE, PGOV, EINV, Reports 
SUBJECT: DOMINICAN REPUBLIC: 2005 INVESTMENT DISPUTES AND 
EXPROPRIATION CLAIMS REPORT 
 
REF: A. 05 STATE 70014 
     B. E-MAIL KENDRICK OR MEIGS/MCISAAC 
     C. SEARBY 
 
1. This cable provides the 2005 Investment Disputes and 
Expropriation Claims Report for the Dominican Republic. 
 
2. The United States Government is presently aware of 18 
claims (including 5 new ones for 2005) by U.S. 
persons/entities against the Government of the Dominican 
Republic (GODR).  There has been considerable progress in 
resolving the many of the cases that have languished for 
years.  A USAID-sponsored consultant has been working with 
the Dominican Government to implement a system for evaluating 
and resolving claims through the use of bonds.  In 1999, Law 
104-99 was passed, offering to claimants whose disputes arose 
on or before August 16, 1996, the option of circumventing the 
traditional method of claim resolution (at the "Bienes 
Nacionales"), and instead to seek compensation from a 
specially appointed Commission, provided the claimants are 
willing to accept payment in bonds. 
 
3. Action on resolution of claims stopped when the Fernandez 
administration took office in August, 2004.  Office of Public 
Credit within the Ministry of Finance is responsible for 
expropriations and investment disputes; it has had four 
directors in less than a year.  This high turnover rate with 
the change in administration has delayed consideration of 
claims.  Embassy Santo Domingo sees no movement even now, 9 
months in the administration. 
 
4. The Embassy continues these expropriation and investor 
dispute cases with the Dominican Government on a regular 
basis, and all information provided herein was last updated 
in June 2005.  Details of the new claims follow: 
 
 
14.a) Claimant M (NEW 2005) 
 
b)    1992 
 
c)    Claimant M owned 400 m2 of land bordering the road to 
the Santo Domingo Las Americas Airport, the land was 
expropriated by the Dominican Government in the 1990's for 
highway expansion.  Claimant M's claim is being held up in 
the Ministry of Finance-Office of Engineering.  In order for 
Claimant M to receive compensation, the Office of Engineering 
must evaluate the claim and then pass it to the Office of 
Public Credit for payment.  The Office of Engineering has had 
the paperwork since April 2002.  The Embassy contacted the 
Office of Engineering in June, 2005, asking the staff to look 
into the matter and pass the paperwork on to the Office of 
Public Credit for payment.  The claim is worth around 400,000 
Dominican pesos or about 14, 000 USD. Note: Claimant M had a 
previous case involving an expropriation under similar 
circumstances that was settled in 2004. 
 
15.a) Claimant N (NEW 2005) 
 
b)    2003 
 
c)    Claimant N is involved in a contractual dispute with 
the Dominican Procuraduria General de la Republica (Attorney 
General) concerning a telephone system for Dominican prisons. 
(Note: this is a system similar to those used in U.S. Federal 
Bureau of Prisons.)  Claimant N's company, in partnership 
with a California-based equipment maker, is having trouble 
activating the system in the prisons due to bureaucratic 
delay in the Dominican Procuraduria.  His telephone equipment 
has already been installed in the central offices of the 
Procuraduria General and the Najayo, Puerto Plata and La 
Victoria prisons. 
 
In 2004, when representatives Claimant N went to activate the 
equipment at the central office, they were informed they 
could not operate the equipment until they had a letter of 
authorization from the Procuraduria's office.  Claimant N has 
invested over $150,000 and is currently losing $7,000 a month 
waiting for the Procuraduria to sign the appropriate letter. 
Claimant N signed a contract with the Dominican Government on 
Sept 4, 2003.  A new presidential administration began on 
August 16, 2004 and appears reluctant to honor the agreements 
of the previous administration.  The Embassy has met with the 
Deputy Attorney General for Prisons the Dominican 
telecommunications regulating agency of behalf of Claimant N. 
 
16. a)      Claimant O (NEW 2005) 
 
b)    2005 
 
c.)   On May 7, 2004, Claimant O and the company he 
represents signed a contract with the Dominican Government 
(Corporacion Dominicana de Empresas Estatales - CORDE) 
granting Claimant O the right to exploit a government-owned 
salt mine in the area of Las Salinas, Province of Barahona, 
for a period of 25 years.  Claimant O alleges the Dominican 
Government is not honoring the contract and is denying his 
company access to the area.  Claimant O has invested money in 
equipment and has made other investments including 
contractual payments and tax payments to the Dominican 
Government.  The contract requires Claimant O to invest U.S. 
$1.5 million in the mine over the first five years of the 
contract and then U.S. $150,000 USD every year thereafter. 
Claimant O has been unsuccessful in his attempts to obtain 
meetings with government officials. 
 
A new presidential administration began on August 16, 2004 
and appears reluctant to honor the agreements of the previous 
administration.  The Dominican Government has sent this 
contract to a newly established government ethics commission 
for review.  The Embassy has contacted the Dominican 
Government's commission several times, as well as the General 
Director of Mining, to advocate on the behalf of Claimant O. 
 
17. a)      Claimant P (NEW 2005) 
 
b)    2002 
 
c.)   Claimant P entered a contract with Unidad Corporativa 
Minera (UCM, a government-owned entity closed in 2004) to 
determine the economic viability of sulphate based gold 
reserves at the Pueblo Viejo mine.  UCM contracted Claimant P 
to conduct an environmental study, fish assessment, tailings 
dam sitings and an overall technical review.  The job was 
finished in June 2002, but UCM failed to pay Claimant P more 
than U.S. $125,0000.  Embassy officials have been in contact 
with UCM and the Director General de Mineria. Obtaining 
payment from the Dominican Government has been difficult in 
part because the UCM no longer exists and the changing of 
officials at the Office of Public Credit has slowed 
processing. 
 
18. a)      Claimant Q (NEW 2005) 
 
b)    2002 
 
c.)   Claimant Q is currently involved in a legal dispute 
with the Anabalca Shipyard Company (50% owned by the 
Dominican Navy), the company he contracted to repair his 
tugboat.  Anabalca is holding his tugboat as collateral for 
$40,000 in repairs performed after the tugboat experienced 
transmission problems.  Claimant Q claims Anabalca did not 
correct the transmission problem and he refuses to pay for 
the services Anabalca has provided.  The case is currently 
before the Dominican Court of First Instance in Santo 
Domingo.  Claimant Q's tugboat has been in the Port of Las 
Calderas, Province of Peravia, since June 2001.  Embassy 
officials have raised this issue with the managers of the 
Anabalca Shipyard and the Dominican Armed Forces. 
 
Claimant N:       Carlos Langa 
Claimant O:       Gabelle Prison Telephones- Ruben Cerezo 
Claimant P:       Pedro Antonio Martinez, Agregados del Lago, 
S.A 
Claimant Q:       Pincock, Allen & Holt, subsidiary of 
HartCrowser 
Claimant R:       Tugboat Linda W- Gene Martin 
MEIGS