US embassy cable - 05SANTODOMINGO4778

UNCLAS SANTO DOMINGO 004778 
 
SIPDIS 
 
DEPT FOR EB/IFD/OIA, JAMES ROSELLI, WHA/EPSC EDUARDO 
MARTINEZ, EB/CBA, WHA/CAR; DEPT PASS USAID 
 
E.O. 12958: N/A 
TAGS: DR, EFIN, ENRG, EINV, BEXP 
SUBJECT: DOMINICAN REPUBLIC:  EL PASO SETTLES DISPUTE WITH 
CARIB CONSULT 
 
1. U.S. firm El Paso International recently resolved the 
dispute in which Dominican firm Carib Consult was petitioning 
the Dominican Supreme Court to ignore international 
arbitration rulings and to uphold a lower court judgement 
against El Paso.  The Embassy has been actively involved in 
the case since it began in 1995. Jorge Alvarez, director of 
Global Power Central America and Caribbean of El Paso 
International wrote to the Ambassador on October 14 to 
express thanks for Embassy involvement. 
 
2.  The lawsuit began as a dispute between Coastal Technology 
Dominicana, S.A (Coastal, a subsidiary of El Paso 
Internationl) and NICOR International Corporation (NICOR), 
which had provided consulting services judged by Coastal to 
be inadequate. Dominican firm Consultores de la Cuenca del 
Carib, S.A. (Carib Consult) subsequently acquired the rights 
of NICOR and vigorously pursued them in Dominican courts, 
alleging a contract violation by Coastal. 
 
3.  At issue was performance under a two-year contract signed 
in 1993 concerning collaboration on energy projects in the 
Dominican Republic.  This agreement provided that any dispute 
between the two would be resolved via the International Court 
of Arbitration (ICC).  In 1995, after the contract ended, 
Coastal brought 48 percent of the shares of the Compania de 
Electricidad de Puerto Plata (CEPP), the main supplier of 
electricity in the Puerta Plata region of the Dominican 
Republic.  Carib Consults claims this purchase was a 
violation of contract and sued for damages.  Plaintiffs 
originally sought USD$11 million in damages, a sum that rose 
over time to USD$42 million.  In 2001 a neutral arbitrator 
from the ICC issued a "final award," finding that Coastal had 
not broken the terms of the contract and was not liable for 
any damages.  The Dominican Republic aceded to the New York 
Convention on Arbitration and Mediation after this date. 
Carib Consult pursued the case in the Dominican court system 
and obtained favorable rulings in the lower courts.  In 2004 
at the request of Carib Consult a judge placed a lien against 
El Paso assets, blocking bank accounts holding about USD$5 
million dollars.  El Paso's attorneys appealed to the 
Dominican Supreme Court.  The court has not yet considered 
the appeal, and with the reported settlement, it probably 
will not do so. 
 
4.  In 2004 Embassy officers demarched the Foreign Ministry 
concerning the implications of the case, stressing the 
potential contradictory message that would be posed for 
investors if the Supreme Court did not take into account the 
country's obligations under the New York Convention. The 
Ambassador visited the CEPP plant in 2005 and spoke in favor 
of El Paso's interpretation of the contracts. 
 
5.  El Paso representatives were not at liberty to provide 
details of the settlement but they assured Embassy officer 
that the lien on El Paso assets has been lifted. 
KUBISKE