(a) Unsatisfied Holding in Favor of Insured. The Insured has
submitted a claim of wrongful calling to the dispute resolution procedure
contained in the underlying contract, the procedure yields a holding in
favor of the Insured, and notwithstanding the Insured’s best efforts to
enforce the holding, the Agency fails to pay the Insured the amount
awarded within three months of the date of the holding. ...

With its notice of Claim, Uniworld provided documentation that the guaranty
was posted, that it was called, and that the issuing bank paid the Agency and
reimbursed itself by drawing against Uniworld’s security (Ex. 3). In this case,
the decisional procedure has yielded a holding in favor of Uniworld, yet the
Agency has failed to pay the amount awarded, and more than three months have
passed. Indeed, the Agency has taken active measures to postpone payment of
the award and, most recently, to set aside the holding. Serbian counsel for
Uniworld have described in detail the steps that Uniworld has taken to enforce
the award and the efforts that the Agency has made to avoid payment. The
Government of Serbia has recommended in writing that the Agency and Putnik
honor the Award, and the American ambassador has written to the minister of
finance urging compliance with the Award. Supporting documentation is
attached as Ex. 4.

The determination as to whether the insured investor materially breached the
underlying contract (which would justify calling the guaranty) or whether the
beneficiary wrongfully called the guaranty is determined in this case by the
holding that was reached in the arbitration to which Uniworld, the Agency and
Putnik agreed to submit any dispute under the SPA. OPIC’s response to
Uniworld’s notice of Claim took that position, in explaining why the initial
submissions were being treated as a notice of Claim only, because a valid claim
could be made only after satisfying one of the provisions of Article 2.01.
(Ex.3).

Under the four other conditions described in Section 2.01, there would be no
holding at the time of an OPIC claim determination, and so OPIC itself would
have to determine both that the condition applied and that the Insured had not
materially breached the underlying contract. In. this case, by awarding
compensation to Uniworld, the Panel held that it was the Agency and Putnik
that breached the underlying contract, at least in the sense that the actions that
they took under color of specific provisions of the underlying contract violated
the chosen substantive law of the contract,

The exclusion contained in Section 2.02 does not apply, nor does any of the
limitations contained in Section 3.02 nor does any of the amendments contained
in Article VI of the OPIC Contract.

Compensation Amount: Uniworld is entitled to compensation in the amount of
$1, 980,000.


IV. Conclusion

For the foregoing reasons, OPIC concludes that the claim of Uniworld is valid and
that Uniworld is entitled to compensation in the amount of the insured portion of the
guaranty that was wrongfully called, namely, $1,980,000.

OVERSEAS PRIVATE INVESTMENT CORPORATION

By: \
Robert Mosbacher, Jy
President and CEO

Date:



July 31, 2005), Second, the Panel ordered Putnik to return Uniworld’s investment of $
1,619,214 with interest of 3.25% from May 17, 2005 and the ship Sirona, which was
assigned to Putnik. Third, the Panel held the Agency liable to reimburse Uniworld
$2,200,000 plus 3.25% interest from April 19, 2005 for the wrongful calling of the first
performance bond. (See Award, pp. 4-5.) The third arbitrator disagreed with the
majority decision to hold the Agency and Putnik jointly and severally liable for return of
the purchase price of the shares, and she declined to sign the Award. See Award, pp.11-
13,

The OPIC Contract covers only the wrongful calling of the performance bond by
the Agency. On that issue, the Panel reached a holding in favor of Uniworld. .. The
Panel’s reasoning was based on Serbian legal principles applicable to contractual
relationships, rights and remedies. These principles are similar to concepts in Anglo-
American law of duties of good faith and fair dealing in contract relationships and the
avoidance of unjust enrichment. Although the Bank’s payment of the performance bond
was proper, the Agency could not retain the funds in light of the termination of the SPA.
The bond’s purpose was to ensure Uniworld’s performance. Since the SPA was
terminated, Uniworld had no obligation to perform and the bond served no purpose. The
Panel ruled that, as part of an accounting upon termination of the SPA, the Agency would
have been entitled to retain funds to cover any actual damages resulting from termination.
However, because the Agency failed to file a timely request for compensation of
damages under ICC Rules of Arbitration, the Panel awarded Uniworld the entire amount
of the first performance bond ($2,200,000) with 3.25% interest from the date on which
Uniworld filed the claim (April 19, 2005). See Award, pp.87-91 and, generally, 71-91.

If. The Contract

The OPIC Contract (attached as Ex. 3) is a Policy of Guaranty Insurance, written
on Form PGT 1-87 Guaranty PL (Revised1/02). It covers an investment in the form of a
performance guaranty against the risk of wrongful calling The issues to be resolved in
determining the Claim is valid are: whether an event occurred that is within the scope of
coverage; what amount of compensation is due; and whether Uniworld has complied with
its duties under the OPIC Contract.

Scope of Coverage: Pursuant to Article IT of the OPIC Contract, compensation is payable
Jor the wrongful calling of Uniworld’s performance bond by the Agency.

In relevant part, Section 2.01 of the OPIC Contract provides:

Compensation is payable, subject to the exclusion . . . and limitations .. .
, if any portion of the guaranty is called, and the Insured has not
materially breached the underlying contract and has sought but not
received indemnification from the Agency, provided one of the
following conditions also pertains . . .


The amount of compensation is determined by the Award.
The relevant provisions of the OPIC Contract provide:

Section 3.01.1: “In the case of claims under Section 2.01(a), OPIC shall
Pay compensation to the Insured in the amount of the insured portion of
the unsatisfied holding.”

Section 3.02 Limitations: “Compensation shall not exceed: ...
(b) The maximum amount which could be received by the Insured
without breaching Section 5.01.3.”

Section 5.01.3 Duties: Self-Insurance. “The Insured shall continue at all
times to bear the risk of at least 10% of any loss.”

These provisions together establish OPIC’s liability in the amount of 90% of the face
amount of the bond, namely, $1,980,000. Uniworld has certified that it has received no
compensation from any other source (Ex.6).

None of the amendments contained in Article VI of the OPIC Contract is applicable.

Compliance with Duties: Uniworld has complied with its duties under the OPIC Contract
to OPIC’s satisfaction.

Notice Requirement

Section 5.01(9) of the OPIC Contract provides:

Compulsory Notice: “The insured shall notify OPIC promptly of any
acts or threats to act in a manner which may come within the scope of
wrongful calling coverage (Article II) and shall keep OPIC informed as
to all relevant developments.”

Section 4.09 of the OPIC Contract provides:

“Notices must be in writing, and shall be effective when received.
Notices may be given to the Insured at the address on the title page (unless
changed in writing)...”

As of the effective date of the OPIC Contract, operational difficulties had
arisen, and Uniworld was attempting to negotiate amendments to the SPA, but
there is no indication that the Agency had threatened to call the first
performance bond.


MEMORANDUM OF DETERMINATIONS
Claim of Uniworld Holdings, Ltd. for Wrongful Calling of a Performance Bond
Republic of Serbia
Contract of Insurance No. F448

1 Claim

Uniworld Holdings, Ltd (“Uniworld”), a holding company organized under the
laws of California, purchased an OPIC policy of guaranty insurance (the “OPIC
Contract”) covering the wrongful calling of Uniworld’s outstanding performance bond
posted in connection with its purchase of 70% of the socially-owned capital of the Joint
Stock Tourist Company Putnik AD Beograd, Serbia Montenegro (“Putnik”).

The Agency for Privatization of the Republic of Serbia (the “Agency”) organized
the public tender sale to Uniworld. The parties concluded the Agreement on Sale and
Purchase of Socially Owned Capital by Public Tender (the “SPA” or the “underlying
contract”) on May 19, 2003. The SPA required Uniworld to make scheduled investments
in Putnik certified by an audit company (KPMG), and to provide three bank guarantees.

Uniworld timely delivered to the Agency the first performance bond issued by
Raiffeisen Bank for $ 2,200,000.00. KPMG certified that Uniworld had made the
scheduled investment, but the Agency found the report unsatisfactory in form. KPMG
submitted a revised report, but the Agency then disputed KPMG’s conclusion. On
August 5, 2004, the Agency sent Uniworld notice of failure to submit the second
performance bond and demanded its submission by August 13, 2004. On August 5,
2004, however, the Agency also called the first performance bond. The Agency cited as
reasons: (1) failure to make timely delivery of the second performance bond; and (2)
failure to meet the investment commitment. Ultimately, the parties terminated the SPA.

On April 19, 2005, Uniworld submitted the dispute, including the issue of
wrongful calling, to ICC arbitration, as provided in the SPA, On April 27, 2007, by
majority vote, the arbitral panel reached a holding in favor of Uniworld, requiring, among
other things, that the Agency refund to Uniworld the entire sum of the first performance
bond, with 3.25% interest from the date on which Uniworld filed for arbitration. The
Agency has failed to pay, nothwithstanding Uniworld’s efforts to enforce the holding,
and, on January 29, 2008, Uniworld filed an application for compensation (the Claim”)
under the OPIC Contract.

OPIC finds that the Claim is valid and that the Insured is entitled to compensation
in the amount of $ 1,980,000 (90% coverage of the $ 2,200,000 performance bond).

IL. Factual Background


On May 19, 2005, Uniworld notified OPIC in writing of its intent to make a
claim for the wrongful calling of the performance bond in August 2004, which had taken
place more than nine months earlier. OPIC acknowledged receipt of that notice in June
2005, and Uniworld’s Serbian counsel provided additional details in August of 2005.
OPIC attempted to respond to Uniworld by mail at the address on the title page of the
OPIC Contract, but OPIC’s letter of October 28, 2005 was returned to sender. The
substance of OPIC’s letter was that success of a claim under the OPIC Contract would
depend on the outcome of arbitration. (See Ex. 3). Although Uniworld never received
the letter, it did submit the dispute to arbitration and the Panel found in its favor. The US
embassy promptly informed OPIC of the outcome. Uniworld made an application for
compensation on January 29, 2008 (Ex. 5).

Through means other than the written notice required by the OPIC Contract,
OPIC had actual knowledge of the allegedly wrongful calling, the arbitration, the holding
in favor of Uniworld, the Agency’s resistance to paying, Uniworld’s efforts to enforce the
award, and the American embassy’s efforts on behalf of Uniworld. Under the totality of
these circumstances, OPIC has waived non-compliance with the notice provisions of the
OPIC Contract.

Continuing Eligibility

Section 5.01(2) of the OPIC Contract requires that the Insured at all times remain
eligible for OPIC insurance. To be an eligible investor, a corporation must be created
under the laws of the United States and more than 50% of both the total interest and of
each class of shares must be beneficially owned by citizens of the United States.
Uniworld is a holding company organized under the laws of California, and the
California Secretary of State has certified Uniworld’s good standing. Uniworld has
represented that Serba Ilich, sole shareholder of Uniworld, is a U.S. citizen, both in
Uniworld’s original application for insurance and a certificate provided in connection
with this Claim (Ex.6).

Other duties

Uniworld has complied with its other duties pursuant to Section 5.01 of the OPIC
Contract, including preservation of remedies against the Agency.

None of the amendments contained in Article VI of the OPIC Contract applies.


In making its determination, OPIC has treated the factual determinations of the arbitral
panel in the award rendered in the Investor's favor against the Agency and Putnik in ICC
Case No. 13798/AVH (the “Award”) as accurate, as they are binding upon the parties
according to the SPA. A certified English translation of the Award is attached as Ex. 1.

Putnik SPA

On May 19, 2003, Uniworld concluded the SPA with the Agency and Putnik,
thereby acquiring 70% of Putnik for the purchase price of $ 5,200,000. Under the SPA,
Uniworld committed to invest $ 44,332,500 over a period of five years in accordance
with an agreed upon investment plan. At the end of each year, the SPA required
Uniworld provide a certificate from an audit company verifying that the yearly
investment conformed to contract specifications. The SPA also obligated Uniworld to
provide the Agency with three successive performance bonds. Uniworld posted the first
bond, in the amount of $2,200,000 on June 23, 2003, valid until July 31, 2005.
Documentation relating to the issuance and calling of Uniworld’s performance guaranty
is attached as Ex. 2.

Political Context

As described in correspondence following Uniworld’s notice of the Claim (Ex. 2),
Uniworld faced significant hostility in conducting Putnik’s business. Under a new
coalition government, privatizations became politically sensitive because of the resulting
job losses and because of policy differences within the coalition government as to the
pace of economic reform, including demands that past privatizations be reviewed. The
slowing of privatization and reform led to criticism from the World Bank. The head of
the Agency was dismissed. The general politicization of the privatization process, to the
detriment of the investment climate, is described in publicly available sources; e.g., State
Department Background Notes for Serbia and Montenegro (December 2004), Economist
Country Risk Service Report for Serbia, (August 2004, November 2004, March 2008).

Putnik, in particular, became a target of attack by the media and minority shareholders
(Putnik employees and retirees) who tried to obstruct Putnik’s management. The
supervisory ministry recommended that the Agency consider amendment of the SPA to
take into account the difficult operating atmosphere, but the Agency refused. Among the
amendments that Uniworld requested were extension of the period in which investment
had to be made and relief from the requirement to post performance bonds. The parties
engaged in negotiations to amend the SPA, but they agreed to no written terms. (Award,
pl):

Dispute regarding failure to fulfill investment obligations
The SPA obligated Uniworld to invest, for the first investment year, a total of $

4,437,500. KPMG certified Uniworld’s investment of $ 4,441,000 in cash and other
items ($ 2,306,000), and the ship “Sirona,” valued at $ 2,335,000. But the Agency


disputed a number of investments included in the calculation and recognized investment
in the amount of $ 2,114,740 only.

KPMG Report

KPMG submitted certification of Uniworld’s compliance with the investment
requirements on June 28, 2004, but KPMG reported that the structure of the investment
differed from the schedule set forth in the SPA. On July 16, 2004, the Agency sent notice
to Uniworld that the KPMG report was incomplete because it did not list the source of
assets from which Uniworld financed the investment. KPMG then submitted a corrected
version of its report and an explicit statement of Uniworld’s compliance with the relevant
SPA provisions. The Agency’s dispute over the KPMG report is described in the Award
at pages 17-20 and 75-78.

Failure to Submit the Second Performance Bond

On August 5, 2004 the Agency sent Uniworld notice of failure to submit the
second performance bond, which, according to the SPA, was to have been posted on or
before July 1, 2004, and extended the deadline through August 13, 2004. Yet, on the
same day, the Agency requested collection of the first performance bond from Raiffeisen
Bank, citing as one of the reasons for doing so, failure to submit the second performance
bond. Notwithstanding the KPMG report, the Agency also denied that Uniworld had met
its investment obligations during the first period.

Termination of the SPA

On March 21, 2005, Uniworld attempted to terminate the SPA. The next day, the
Agency notified Uniworld it had failed to fulfill its investment commitments for the first
year of the agreement. The parties met in April, 2005 but could not resolve their dispute.
Uniworld then submitted a request for arbitration seeking (1) return of the purchase price
with interest; (2) return of its $ 4,441,000 investment with interest; and (3) return of
$2,200,000 for the payment of the first bank guarantee with interest. On July 1, 2005, the
Agency notified Uniworld that, unless it withdrew its request for arbitration and gave
evidence that it would provide a second performance guaranty, the Agency would
terminate the SPA. It did so on July 8, 2005, referring to a new privatization law that had
entered into force the previous month and exercising remedies under it. See Award, pp.
22-24,

Arbitration

A decision was reached on April 27, 2007 by majority vote of the three
arbitrators. The arbitration panel (“the Panel”) awarded Uniworld over $ 12 million.
First, the Panel found the Agency and Putnik jointly and severally obligated to reimburse
Uniworld the purchase price of Uniworld shares ($ 5,200,000 with 3.25% interest from