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Social services

News

World Bank pushed to open up Bolivia water arbitration

17 September 2002

On 29 August non-governmental groups sent an angry letter to the World Bank Group demanding public access to its “secret trade court” which is to rule on a dispute between an American transnational company and Bolivia. The letter spells out concerns about the World Bank’s role in a water privatisation deal in which Bechtel took over the public water company in Bolivia’s third largest city, Cochabamba.

Bechtel is now demanding $30m in compensation after popular protests forced them to withdraw from the contract. Campaigners say that the World Bank faces clear conflicts of interest in this case and should open up the activities of its arbitration arm to public scrutiny. The International Centre for the Settlement of Investment Disputes, the forum for the arbitration, is a little-known arm of the World Bank Group founded in the 1960s to facilitate the settlement of investment disputes between governments and foreign investors. It operates from World Bank premises and is run by the World Bank’s Senior Legal Counsel who oversees the creation of ad hoc panels of experts to decide on each case brought before it.

The 300 organisations which endorsed the letter argue that “the World Bank/ICSID should not be handling this case [because] it was the World Bank itself which directly forced the government of Bolivia to privatize the water system of Cochabamba, making privatization a condition for both debt relief and funds for water system expansion”. They point out that World Bank President James Wolfensohn directly appointed the President of the arbitration tribunal that will decide the case, undermining its independence and perceived objectivity.

The letter also argues that Bechtel’s subsidiary Aguas del Tunari has taken its case to ICSID on the basis of a “bogus claim” that it was registered in Holland at the time of the deal. Furthermore the company’s public statements about the Tucuman water concession are also “fraudulent”, leading to campaigners demanding to see all documentation filed by the company to the panel.

Campaigners are also demanding that the ICSID tribunal for the Cochabamba case:

  • allow affected individuals and organizations to participate;
  • travel to Bolivia to receive testimony;
  • make hearings completely open to the public.

They complain that “urgent public matters are decided behind a shroud of secrecy, without full information and without any of the opportunities for public vigilance and participation that are the basis for public legitimacy”. In this they are echoing the sentiments in the World Bank’s latest World Development Report which specifies that “competent institutions pick up signals about problems, balance interests fairly and efficiently in formulating policies, and execute policies in an accountable fashion. [They] fail when some groups, lacking assets and voice, are excluded from participation.”

ICSID is set to have its first hearing on the case in mid-September. It is possible that, if its proceedings are conducted in the open, the World Bank panel may not make the taxpayers of South America’s poorest country pay compensation. There is hope: two years ago ICSID dismissed the claims of another transnational water company, Vivendi, following a mass non payment campaign by local residents in Tucuman, Argentina.

Company seeks compensation after Bolivians force re-nationalisation Bretton Woods Update 27

Bechtel vs. Bolivia campaign, Democracy Center

Letter to World Bank, 300 NGOs, Aug 2002

What is ICSID?

The International Center for the Settlement of Investment Disputes was established in 1966 to facilitate the settlement of investment disputes between governments and foreign investors.In 2001 ICSID had forty-four active cases before it. ICSID is legally independent of the other, better-known parts of the World Bank Group, but in practice is tightly linked:

  • ICSID is based in the World Bank’s Washington DC headquarters
  • The ICSID Secretary General is the World Bank’s Senior Legal Counsel
  • The World Bank President is chairman of the ICSID Administrative Council
  • Country Governors for the World Bank sit on ICSID‘s Administrative Council
  • All ICSID member countries are also members of the Bank
  • The ICSID Secretariat is financed from the World Bank’s budget

More ICSID background