08TBILISI972, 2008 INVESTMENT DISPUTES REPORT FOR GEORGIA

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Reference ID Created Released Classification Origin
08TBILISI972 2008-06-10 14:27 2011-08-30 01:44 UNCLASSIFIED Embassy Tbilisi

VZCZCXYZ0001
RR RUEHWEB

DE RUEHSI #0972/01 1621427
ZNR UUUUU ZZH
R 101427Z JUN 08
FM AMEMBASSY TBILISI
TO RUEHC/SECSTATE WASHDC 9621
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC

UNCLAS TBILISI 000972 
 
SIPDIS 
 
STATE FOR EUR/CARC, EEB/IFD/OIA AND L/CID 
 
E.O. 12958: N/A 
TAGS: EINV PREL PGOV KIDE OPIC CASC GG
SUBJECT: 2008 INVESTMENT DISPUTES REPORT FOR GEORGIA 
 
REF: STATE 43784 
 
1.  Post submits the following information in response to 
reftel request for information on investment disputes. 
 
2.  A. Claimant A 
 
    B. Year dispute arose: 2006. 
 
    C. Case History: Claimant A and his partners purchased 
the shares of a company that owns a defunct garment factory 
in Tbilisi.  Claimant A intends to redevelop the factory 
building and real estate to create a shopping complex.  The 
factory was privatized by the state and a private Georgian 
company was set up to own it in 1998.  After that, the shares 
were sold to a Georgian investor.  Claimant A's partnership 
purchased the shares of the company in 2005 from the Georgian 
investor.  According to the claimant, the Georgian government 
now claims that the company was privatized with the help of 
bribes paid to corrupt ministry officials in 1998.  It also 
claims that the company owes an undetermined amount of back 
taxes.  Because of the problems with the original 
privatization, the shares of the company were attached by 
attorneys representing the government in 2006.  Claimant A 
succeeded in having that attachment released.  However, as a 
result of the tax problem, the assets of the company were 
frozen by order of the Prosecutor General of Georgia in 2007. 
 Claimant A asserts that the freezing of the assets is 
wrongful and estimates damages as USD 1 million.  In October 
2007, Embassy Tbilisi arranged and attended a meeting between 
Claimant A and the Deputy Minister of Economic Development. 
Subsequently, the Ministry and Claimant A reached an 
agreement that released the assets of the company and 
permitted development of the property to proceed.  In April 
2008, Claimant A informed the Embassy that the Tax Department 
of the Ministry of Finance had refused to issue a routine 
extract of the corporate register that Claimant A's company 
needed to support its appearance in court in the tax dispute. 
 Embassy Tbilisi discussed the matter with the First Deputy 
Minister of Finance in May 2008 and as of the date of this 
report is waiting for an explanation of why the extract 
cannot be issued. 
 
3.  A. Claimant B 
 
    B. Year dispute arose: 2004. 
 
    C. Case History: Claimant B asserts that she is the owner 
of 4.5% of a Georgian cigarette manufacturer ("the company"). 
 According to the claimant, in September 2004 the owner of 
another 10 percent of the shares of the company (a private 
citizen) obtained control of the remaining 90 percent of the 
shares of its shares, including those owned by Claimant B, by 
using an allegedly forged power of attorney.  A civil case 
was filed in 2004 to reverse the transactions that resulted 
in the loss of the loss of Claimant B's interest in the 
company.  Claimant B states that no final judgment has been 
rendered in the civil case, after repeated postponements of 
hearings.  Georgian prosecutors have refused to prosecute the 
alleged forgers of the power of attorney.  According to the 
claimant, a conviction in the criminal case is essential 
under Georgian law for proof of the fact of forgery in the 
civil case.  Claimant B states that judges and prosecutors 
involved in the civil and criminal cases are being 
manipulated by Georgian Government officials, to Claimant B's 
detriment and for the benefit of the private party who now 
controls the company.  In spring 2007, Embassy sought 
guidance from the Department.  Because the company is 95.5 
percent owned by a Canadian citizen, the company was advised 
to contact the Canadian Embassy in Ankara.  Claimant B was 
advised of this in May 2007. 
 
4.  A. Claimant C 
 
    B. Year dispute arose: 2008 
 
    C. Case History: Claimant C is the part owner of a 
Georgian corporation that owns an office building and land in 
Tbilisi.  In August 2007, the Georgian corporation signed an 
agreement to sell the property to a company controlled by 
another foreign investor.  The agreement was terminated by 
Claimant C and the other company brought suit for damages in 
the Tbilisi City Court.  The plaintiff obtained a pre-trial 
lien on Claimant C's property for USD 10 million.  Claimant C 
has been unable to convince the trial court to release the 
lien, and judgment in the case has been delayed since August 
2007.  Claimant C alleges that its opponent has admitted 
having undue influence over the judge in the case that allows 
him to delay the proceedings indefinately.  Claimant C states 
that it has other evidence of corruption or undue influence 
over the judge.  Embassy Tbilisi has assisted Claimant C to 
bring its allegations of corruption to the attention of the 
Prosecutor General.  Claimant C and the Embassy are working 
to secure a meeting with the Prosecutor to discuss the case 
and request an appropriate investiga
tion. 
 
5.  A. Claimant D (note: post does not believe the investor 
in this case meets the definition of a "U.S. investor" 
contained reftel, because it is not at least 50 percent owned 
by U.S. citizens, but is a wholly-owned subsidiary of a 
Netherlands corporation.  Facts of the case are provided for 
the department's information.) 
 
    B. Year dispute arose: 2005 
 
    C. Case History: Claimant D is a corporation incorporated 
in Florida.  Claimant D states that it is wholly owned by a 
Netherlands corporation, and post believes that Claimant D is 
not, repeat not, at least 50 percent owned by U.S. citizens, 
per the definition of U.S. person in para 13 of reftel. 
Claimant D alleges that in 2002 it was owed USD 26 million 
for deliveries of natural gas from Russia to Georgian 
state-owned entities.   It states that in 2003 it assigned 
its claims to a Georgian state-owned company in return for 
USD 13 million, with a guarantee of payment from the Georgian 
government.  It alleges that the USD 13 million was not paid 
by the debtor and that the GOG has failed to honor the 
guarantee.  It also alleges that the GOG failed to fulfill 
all the terms of a purchase agreement for a state-owned 
chemical company.  Claimant D states that it has filed an 
arbitration on May 7 at the International Center for the 
Settlement of Investment Disputes under the U.S.-Georgia 
bilateral investment treaty (BIT) and the Netherlands-Georgia 
BIT, based on claims arising from the purchase of the 
chemical company. 
 
6.  Claimant A: Francis Hunnewell, an American citzen, who is 
a partner in the U.S. partnership Eljan Holdings, Ltd., which 
is owner of Gibraltar registered Lanner Holdings, Ltd., which 
is owner of the shares of the Maudi company.  Post has no 
privacy act waiver signed by claimant. 
 
Claimant B: Muna Pirrin, an American citizen. Post has no 
privacy act waiver signed by claimant. 
 
Claimant C: Joel Golevensky, an American citizen and 
shareholder in the Georgian company Basel Group, LLC.  Post 
has no privacy act waiver signed by claimant. 
 
Claimant D: Itera International Energy LLC, incorporated 
under Florida law, a wholly owned subsidiary of Itera Group, 
NV, incorporated in the Netherlands. 
TEFFT

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