US embassy cable - 05LIMA4033

UNCLAS SECTION 01 OF 02 LIMA 004033 
 
SIPDIS 
 
SENSITIVE 
 
DEPT FOR WHA/AND, WHA/EPSC, EB/IFD/OFD, EB/CBA, EB/IFD/OIA 
TREASURY FOR OASIA/INL, DO/GCHRISTOPOLUS 
COMMERCE FOR 4331/MAC/WH/MCAMERON 
USTR FOR BHARMAN/DWEINER 
 
E.O. 12958: N/A 
TAGS: EINV, ECON, ETRD, PGOV, PE 
SUBJECT: ANOTHER ATPDEA DISPUTE NEAR RESOLUTION 
 
REF: A) LIMA 2017  B) LIMA 995 
 
1.  (SBU) Summary.  According to GOP's Commercial Dispute 
Coordinator, Aurelio Loret de Mola, the Luz del Sur/PSEG 
dispute should be resolved shortly, pending SUNAT valuation 
of any back taxes owed by the company.  The remaining ATPDEA 
cases -- Engelhard, Princeton Dover, and LeTourneau -- are 
still unresolved.  The Superior Court issued its ruling, 3-2 
against both Engelhard and Princeton Dover in August; both 
companies have appealed to the Constitutional Court.  On 
LeTourneau case, Loret de Mola appears close to providing 
the company with the GOP's final monetary offer of 
approximately $10 million.  LeTourneau continues to insist 
that a third-party assessment be used to determine the 
market value of the expropriation and will likely not accept 
the GOP's offer.  End Summary. 
 
Luz del Sur:  Light at the End of the Tunnel 
-------------------------------------------- 
 
2.  (SBU) According to the GOP's Commercial Dispute 
Coordinator Aurelio Loret de Mola and company 
representatives, the Luz del Sur dispute is on the verge of 
being fully resolved.  The Tax Court issued a ruling on July 
26 that accepted the CONATA revaluation of the U.S. 
company's assets (Ref A).  The Tax Court instructed SUNAT to 
use that valuation to determine any back taxes that Luz del 
Sur owes.  Loret de Mola informed us that the amount should 
be minimal, probably less than $150,000.  He also noted that 
SUNAT would not appeal the Tax Court ruling; SUNAT also told 
the local Luz del Sur general manager that it would not 
appeal.  The final step is for SUNAT to issue its 
resolution, which we are told should be ready shortly. 
 
Cases in Appeal 
--------------- 
 
3.  (SBU)  Engelhard:  In mid-August, the Superior Court 
issued its final ruling, 3-2 against the company, denying 
there were violations of due process.  The company was 
notified in late August of the decision, and it filed its 
last appeal to the Constitutional Court on September 14. 
Engelhard, in its final appeal, continues to claim that its 
rights and due process had been violated.  The 
Constitutional Court will take at least two months to rule, 
if the case is expedited. 
 
4.  (SBU) Princeton Dover: In early August, the Superior 
Court issued its final ruling, 3-2 against Princeton Dover. 
Princeton Dover filed its appeal with the Constitutional 
Court on August 8.  The company seeks to overturn the ruling 
of the Tax Court, which refrained from issuing a resolution 
until after the criminal case concludes. 
 
 
5.  (SBU) Princeton Dover and Engelhard await whether their 
local executives will be included in the criminal case; 
according to the Princeton Dover representative, the judge 
is nearing a decision to begin a trial (after nearly 5 
years) and determine who of the more than 200 accused will 
be included. 
 
LeTourneau:  Challenges Remain 
------------------------------ 
 
6.  (SBU)  Loret de Mola is working with a local consulting 
firm, MacroConsult, to calculate the GOP's final 
compensation offer for LeTourneau.  MacroConsult is using 
the 1968 LeTourneau letter, signed by then Vice President 
Walter Knowles, which stated that the total value of the 
road constructed was 38 million soles oro (approximately $10 
million in market prices) as the basis for the compensation 
rate (ref A).  Loret de Mola predicts that the final offer 
will total approximately $10 million, including interest. 
 
7.  (SBU) LeTourneau continues to argue that the GOP should 
not/not use the 1968 letter as its basis for compensation. 
According to LeTourneau, the letter bases its calculation on 
a 1967 appraisal, which was done before LeTourneau completed 
the road and three years before the actual expropriation. 
The company has sent several emails to Loret de Mola, 
emphasizing the need for a transparent process and re- 
suggesting that a panel of independent experts be convened 
to determine the scope and value of the work performed by 
LeTourneau in 1968 and how to translate that value into 
market prices.  LeTourneau's attorney informed Econoff on 
September 12 that the company would not accept any GOP offer 
that was not fair and transparent. 
 
Comment:  One Step Closer 
------------------------- 
 
8.  (SBU) After discussions with Luz del Sur/PSEG, we are 
confident that SUNAT will act quickly to resolve this case, 
perhaps in the next few weeks.  The three remaining cases 
will take more time.  Loret de Mola is encouraging the 
Constitutional Court to expedite both the Engelhard and 
Princeton Dover cases.  Even with expeditious treatment, we 
do not expect a ruling within the next two months.  The 
LeTourneau case is another thorny problem - we fully expect 
LeTourneau to refuse the GOP's final offer, claiming that 
$10 million does not adequately reflect the value of 
LeTourneau's work. 
 
STRUBLE