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Israeli Businessmen Released As Part of Tramex Settlement

By Ernest Petrosyan
Monday, December 5
Georgian President Mikheil Saakashvili pardoned Israeli Businessmen Ron Fuchs and Zeev Frenkiel, after reaching a consensus on a multi-million dispute. The consensus between the businessmen and the Georgian government has apparently “saved USD 70 million”.

The Georgian government had been embroiled in a dispute concerning cancelled oil pipeline contracts with a private company called Tramex that goes back to the early 1990s. The Georgian side had been ordered to pay Tramex, represented primarily by Fuchs, USD 98.1 million for lost investment. With Georgia refusing to pay, a further twist occurred when Fuchs and Frenkiel were arrested in Batumi for attempted bribery. All the while, according to Georgian Deputy Justice Minister, Tina Burjaliani, the total sum to be paid by Georgia increased up to USD 110 million – apparently adding fines for non-payment. Now though, with a deal reached with Tramex, including the release of the businessmen, Georgia has saved about USD 70 million and will pay USD 37 million.

“Upon a request from the Israeli government and personally from the Israeli President, also taking into consideration the convicts’ age and their health conditions the Georgian President decided to pardon them,” said the president’s spokesperson Manana Manjgaladze.

The businessmen were detained in October 2010 in Batumi for an attempt to bribe government representatives. Later on, in April, 1, 2011, Tbilisi city court announced the final verdict sentencing businessmen Frenkiel to 6 years and 6 months and Fuchs to 7 years imprisonment. The businessmen were also liable to pay fines to the Georgian state budget: Frankiel USD 60,000 and USD Fuchs 300,000.

The businessmen have been insisting on their innocence, saying that charges against them were fabricated, attributing their detention to the Georgian government’s refusal to pay USD 98.1 million owed to them as ordered by a court of international arbitration.

The case involving Fuchs, Greek national Ioannis Kardassopoulos, and the Georgian government goes back to 1991 when the company Tramex, represented by these two shareholders, entered Georgia's energy sector. Tramex established a joint initiative with the Georgian state oil company to develop oil pipeline networks. The permit was cancelled in 1996 when Georgia established the Georgian International Oil Corporation, which eventually reached an agreement with an international consortium to build an oil pipeline to transport oil from Azerbaijan to the west via Georgia and Turkey. Since then Tramex and the Georgian authorities were trying in vain to settle the dispute over cancelled contracts, involving possible compensation for the company. In March, a 2010 London-based international tribunal ruled that Georgia unlawfully expropriated investments from Tramex and ordered Georgia to pay USD 98.1 million. In November 2004, the Georgian government denied the claims of Fuchs and Kardassopoulos leading to the two filing two separate suits against Georgia in the International Center for Settlement of Investment Disputes (ICSID), part of the World Bank group.