MIGA role in Ethiopian Nestlé claim unclear

28 January 2003

In what must rank as one of the greatest PR gaffes in corporate history, Nestlé demanded $6m from the Ethiopian government as compensation for the nationalisation in 1975 of a company that Nestlé subsequently purchased in 1986. Oxfam’s campaign against the claim has focused on the fact that a multinational company with sales of $59bn and pre-tax profits of over $6bn last year refused to accept even a $1.6m compromise from a country facing its most severe famine in 20 years.

Stinging from a barrage of criticism, the company announced in late December that it would accept the compromise deal and donate the $1.6m to famine relief. Defending its actions, Nestlé Chief Executive Peter Brabeck said, “We do think it’s important for the long-term welfare of the people of Africa that their governments demonstrate a capacity to comply with international law.” Campaigners reject this logic, continuing to call on the company to drop the claim altogether.

Relatively unnoticed in the media melée has been the role of MIGA, the World Bank’s Multilateral Investment Guarantee Agency. At the government’s request, MIGA and Ethiopia signed a Memorandum of Understanding in October 2000 designating the agency the official mediator for resolution of claims resulting from expropriatory actions taken under the Mengistu government totalling some $500 million.

In 2001, Ethiopian authorities handed the Nestlé issue over to MIGA. According to Nestlé, the process “was an initiative of the Ethiopian government”. What is unclear is what role may have been played by MIGA in convincing the Ethiopians that settling such claims would be good for attracting foreign investment.

At the time Oxfam leaked the story to the press, the costly negotiations had been bogged down in technical points, such as deciding which exchange rate to use to calculate the amount of the claim. A World Bank spokesperson was quoted as saying that “$1 million in our opinion is justifiable. But this is not the point of view of Nestlé. They are trying to get as much as they can.” The Ethiopian government might want to ask how effective MIGA‘s negotiating skills have been on their behalf. Perhaps they would do better to put Oxfam on retainer.

Nestlé to plough debt money into Ethiopian aid, The Guardian

MIGA press release

MIGA contact: Moina Varkie

Oxfam campaign

MIGA attacked by NGOs and Congress, Bretton Woods Update 24

Guyana sued over nationalization debt, Bretton Woods Update 31

Nestlé réclame 6 millions de dollars à l’Ethiopie, Le Monde