Message-ID: <28254131.1075851037440.JavaMail.evans@thyme> Date: Wed, 9 Feb 2000 22:08:00 -0800 (PST) From: richard.shapiro@enron.com To: steven.kean@enron.com Subject: Stamp Tax Dispute Mime-Version: 1.0 Content-Type: text/plain; charset=us-ascii Content-Transfer-Encoding: 7bit X-From: Richard Shapiro X-To: Steven J Kean X-cc: X-bcc: X-Folder: \Steven_Kean_Oct2001_2\Notes Folders\Attachments X-Origin: KEAN-S X-FileName: skean.nsf FYI- Terry is trying, at least with me. ---------------------- Forwarded by Richard Shapiro/HOU/EES on 02/10/2000 06:04 AM --------------------------- Terence H Thorn@ENRON_DEVELOPMENT 02/10/2000 12:17 AM To: Richard Shapiro@EES cc: Subject: Stamp Tax Dispute We used the BIT threat once before when they tried to re-trade TGS's rates in violation of the sales agreement. George Wasaff can give you all of the details. This time we may have to go all of the way and litigate. Tax issues in Argentina have also killed trading. The problem is that the constitution empowers the states with all kinds of taxing authority so if you want changes in policies you have to have a constitutional amendment. You can imagine the eagerness of politicians to take on that battle. I will be setting up some quality time with you the week of the 21st. Again, congratulations. This is an exciting and complex part of the world and I can't think of anyone better to bring some focusand results here. ---------------------- Forwarded by Terence H Thorn/ENRON_DEVELOPMENT on 02/10/2000 12:10 AM --------------------------- Robert C Williams 02/09/2000 02:44 PM To: Terence H Thorn/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT cc: Michelle Blaine/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT, Laurie Lee/ENRON_DEVELOPMENT@ENRON_DEVELOPMENT Subject: Stamp Tax Dispute Terry, here is the summary of the dispute. Let me know if you would like any additional information, or if would would like me to put this into memo form. Argentine law imposes a stamp tax on written contracts. In the past several years, the provincial governments of several of the provinces have, in an effort to raise desperately needed revenues, adopted a new and broader interpretation of the tax's application. These provinces--Rio Negro, Neuquen, and Santa Cruz--have sought to apply this interpretation retroactively, resulting in the imposition of staggering assessments. For TGS, the Enron company (40% owned) most affected, the assessments total $153 million in taxes, $172 million in interest, and $208 million in fines. (See attached chart for breakdown). To date, court challenges to the taxes have been unsuccessful. TGS has pending before the Argentine federal Supreme Court an application to declare the taxes unconstitutional and unlawful, but the Court has, as yet, not acted. Meanwhile, the provinces are free to attempt to collect the taxes, by levy if necessary. The federal government has, in documents filed in another case, expressed the view that the imposition of stamp taxes in the manner folowed by the provinces is illegal. Energas has also expressed its view that the taxes are illegal. The federal Supreme Court, however, has recently denied an application (filed by another company) to enjoin collection of the taxes. On November 23, 1999, Enron notified the federal government that it regarded the imposition of these taxes as in violation of the Bilateral Investment Treaty between Argentina and the U.S. Since that notification, representatives of Enron and the government have held several meetings. Substantive discussions, however, have not yet begun. The Treaty mandates a six-month cooling off period before arbitration can be initiated. If the negotiations with the government are unsuccessful, Enron intends to file an arbitration with the International Center for the Settlement of Investment Disputes (ICSID) in Washington, D.C. By way of information, Endesa currently has an arbitration underway at ICSID challenging the taxes, presumably under a BIT between Spain or Chile and Argentina.