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IRAQ: A.P. Moeller Seeks Dismissal of Lawsuit Amid Security Threat

The lawsuit, the first to be brought against a foreign company since Saddam Hussein was removed from power in 2003, threatens to discourage other investors from spending money in Iraq, further slowing reconstruction efforts since the war.

by Andy Critchlow Bloomberg
July 14th, 2005

July 14 -- A.P. Moeller-Maersk A/S, the world's biggest container-shipping company, asked an Iraqi judge to drop a case brought by the government over unpaid fees because of security threats at the court in the nation's south.

The Copenhagen-based company said its Iraqi lawyer was advised by the magistrate to skip a July 5 hearing at a court in Safwan, close to the Kuwaiti border, where Maersk is charged with mismanaging the country's second-largest port, Khor Az Zubair.

``He found it recommendable'' to seek a dismissal of the case because of ``hostilities in and around the court,'' Allan Poul Rosenburg, Maersk's Middle East manager of corporate affairs, said in an e-mail response to Bloomberg questions on July 12.

The lawsuit, the first to be brought against a foreign company since Saddam Hussein was removed from power in 2003, threatens to discourage other investors from spending money in Iraq, further slowing reconstruction efforts since the war. International donors have paid only $6 billion of the $33 billion promised to Iraq, the state's foreign ministry said last month.

Iraqi Deputy Transport Minister Atta Nabil Atta declined to comment on Maersk's failure to show up at the hearing. ``Security in the south is much better than Baghdad,'' he said in a telephone interview from Baghdad on July 12, and declined to comment on the lawsuit.

The Middle East's fifth-largest oil producer, Iraq ships all its oil exports, about 1.4 million barrels a day, from Persian Gulf terminals located within six miles of the disputed port.

Maersk Refused to Pay

Maersk, which won a U.S. army contract to manage the Khor Az Zubayr port in 2003, denies the allegations of mismanagement. Maersk stopped paying a 7 percent levy for all freight handled between September 2004 and March 2, 2005, after the government withheld a $15,000-a-day fee for operating the port, the company said on May 22. Iraq said it stopped paying because Maersk failed to supply accounts on the freight handled.

Because of such cases ``multinational companies will draw down their exposure to Iraq,'' said Toby Dodge, 39, senior Middle East analyst at the London-based International Institute for Strategic Studies and author of Iraq's Future: The Aftermath of Regime Change.

U.S. Judge T.S. Ellis ruled on July 11 that legislation designed to help the federal government prosecute cases of corporate fraud in Iraq through informants didn't apply to contracts awarded by the L. Paul Bremer-led Coalition Provisional Authority, which stepped down in June 2004, the New York Times reported yesterday.

The paper said the decision could derail some pending lawsuits, citing Alan Grayson, a lawyer involved in a suit against security company Custer Battles for a contract in Iraq.

Riots

A.P. Moeller was forced to abandon the disputed port, located on Iraq's Shatt al-Arab waterway, after local villagers rioted in March. The company says it's owed $3.5 million by Iraq for operating the port and equipment it was forced to abandon.

The office of U.S. special inspector general for Iraq reconstruction, Stuart Bowen, said in a report to Congress in April that his office is investigating 34 separate cases of ``irregularities'' in the U.S.-managed contracts, including instances of ``fraud, bribery and bid rigging.'' Maersk is not a part of that probe.

Bowen audits the Iraq Project and Contracting Office, which manages the $18.4 billion Congress appropriated for rebuilding Iraq.

The U.S. embassy in Baghdad said on March 16 that it was working with companies including Maersk, Raytheon Co. and London- based Global Risks Strategies to help secure money they claimed was owed by Iraq's transport ministry.

Iraq's Atta said the government has resolved outstanding debts with Raytheon and ``is close to concluding talks with Global on the $17 million it's owed.''

Iraq's economy, which depends on the Khor Az Zubayr and Umm Qasr ports on the Shatt al-Arab waterway for sea trade, has been slow to recover since the U.S.-led invasion, with almost 30 percent of the workforce unemployed, according to the World Bank.





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