Siemens 2009 Annual Report Download - page 270

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 Reports Supervisory Board /
Managing Board  Corporate Governance  Management’s discussion and analysis  Consolidated Financial Statements
 Consolidated Statements of Income  Consolidated Statements of Income
and Expense Recognized in Equity
 Consolidated Balance Sheets  Consolidated Statements of Cash Flow
among the 93 named defendants. During the second quarter
of fiscal 2009, process was served upon Siemens S.A.S. France
and Siemens A.Ş. Turkey.
As previously reported, Siemens had filed a request for arbitra-
tion against the Republic of Argentina (Argentina) with the In-
ternational Center for Settlement of Investment Disputes (IC-
SID) of the World Bank. Siemens claimed that Argentina had
unlawfully terminated its contract with Siemens for the devel-
opment and operation of a system for the production of iden-
tity cards, border control, collection of data and voters’ regis-
ters (DNI project) and thereby violated the Bilateral Investment
Protection Treaty between Argentina and Germany (BIT).
Siemens sought damages for expropriation and violation of
the BIT of approximately US$500 million. Argentina disputed
jurisdiction of the ICSID arbitration tribunal and argued in fa-
vor of jurisdiction of the Argentine administrative courts. The
arbitration tribunal rendered a decision on August 4, 2004,
finding that it had jurisdiction over Siemens’ claims and that
Siemens was entitled to present its claims. A hearing on the
merits of the case took place before the ICSID arbitration tribu-
nal in Washington in October 2005. A unanimous decision on
the merits was rendered by the ICSID arbitration tribunal on
February 6, 2007, awarding Siemens compensation in the
amount of US$217.8 million on account of the value of its in-
vestment and consequential damages, plus compound inter-
est thereon at a rate of 2.66% since May 18, 2001. The tribunal
also ruled that Argentina is obligated to indemnify Siemens
against any claims of subcontractors in relation to the project
(amounting to approximately US$44 million) and, further-
more, that Argentina would be obligated to pay Siemens the
full amount of the contract performance bond (US$20 million)
in the event this bond was not returned within the time period
set by the tribunal (which period subsequently elapsed with-
out delivery). On June 4, 2007, Argentina filed an application
for the annulment and stay of enforcement of the award with
the ICSID, alleging serious procedural irregularities with re-
spect to the DNI project. An ad hoc committee was formed to
consider Argentina’s application. On June 6, 2008, Argentina
filed an application for a reversal of the ICSID’s decision and a
stay of enforcement of the arbitral award with the ICSID alleg-
ing the discovery of new, previously unknown facts that would
have decisively affected the award. Argentina relied on infor-
Civil litigation
As already disclosed by the Company in press releases,
Siemens AG is asserting claims for damages against former
members of the Managing and Supervisory Board. The Com-
pany bases its claims on breaches of organizational and super-
visory duties in view of the accusations of illegal business
practices that occurred in the course of international business
transactions in the years 2003 to 2006 and the resulting finan-
cial burdens for the Company. Siemens gave the respective
former members of its Managing and Supervisory Board the
opportunity to declare their willingness to reach a settlement
until mid-November 2009. As requested by law, the settle-
ments between the Company and individual board members
are subject to approval by the Annual Shareholders’ Meeting.
Furthermore, the Company reached a settlement agreement
with its directors and officers (D&O) insurers regarding claims
in connection with the D&O insurance of up to €100. These
settlements will be submitted to Siemens AG’s shareholders
for approval at the next Annual Shareholders’ Meeting on Jan-
uary 26, 2010. In the event that individual former members of
the Managing and/or Supervisory Board are not willing to
agree on a settlement and/or the Annual Shareholders’ Meet-
ing does not approve individual settlements, the Company will
pursue legitimate claims – if necessary – in court against for-
mer members of the Managing and Supervisory Board.
As previously reported, an alleged holder of Siemens American
Depositary Shares filed a derivative lawsuit in February 2007
with the Supreme Court of the State of New York against cer-
tain current and former members of Siemens’ Managing and
Supervisory Boards as well as against Siemens as a nominal
defendant, seeking various forms of relief relating to the alle-
gations of corruption and related violations at Siemens. The
alleged holder of Siemens American Depository Shares volun-
tarily withdrew the derivative action in September 2009.
As previously disclosed, in June 2008, the Republic of Iraq filed
an action requesting unspecified damages against 93 named
defendants with the United States District Court for the South-
ern District of New York on the basis of findings made in the
“Report of the Independent Inquiry Committee into the United
Nations Oil-for-Food Programme.” Siemens S.A.S. France,
Siemens A.Ş. Turkey and OSRAM Middle East FZE, Dubai are