Bechtel, a global engineering and construction company based in San Francisco, today reached agreement with the government of Bolivia, dropping a legal demand for $50 million after a revolt over privatizing water services in the city of Cochabamba forced the company out of Bolivia in April 2000.
Bechtel and its chief co-investor, Abengoa of Spain, had been seeking $25 million in damages and $25 million in lost profits in a case filed before a World Bank trade court, the International Centre for Settlement of Investment Disputes (ICSID).
Following four years of international public protest aimed at the companies, Bechtel and Abengoa agreed to abandon their case for a token payment.
"Multinational corporations want to turn everything into a market," said Oscar Olivera, a leader in the Bolivian water revolt. "For indigenous people water is not a commodity, it is a common good. For Bolivia, this retreat by Bechtel means that the rights of the people are undeniable."
Bechtel said today in a statement that the corporations were held blameless in the dispute. "The government of Bolivia and the international shareholders of Aguas del Tunari declare that the concession was terminated only because of the civil unrest and the state of emergency in Cochabamba and not because of any act done or not done by the international shareholders of Aguas del Tunari, which include the Bechtel, Befesa, Abengoa of Spain, and Edison corporations," the company said.
The concession agreement dates from September 3, 1999, when the government of Bolivia approved Aguas del Tunari as the concessionaire to provide water services to the city of Cochabamba.
On April 10, 2000, the concession was terminated because of the civil unrest, giving rise to a dispute between Bolivia and Aguas del Tunari.
In 1997, the World Bank made privatization of the public water system of Bolivia’s third largest city, Cochabamba, a condition of the country receiving further aid for water development.
That led, in September 1999, to a 40 year concession granted to a company led by Bechtel in a process with just one bidder. Within weeks of taking over the city’s water, Bechtel’s Bolivian company, Aguas del Tunari, raised rates by more than 50 percent and in some cases even higher.
The water price hikes were met with angry public protest. Cochabamba, a city of about 500,000 people, was shut down by general strikes three times.
In an effort to protect the Bechtel contract, the Bolivian government declared a state of martial law and began arresting protest leaders at their homes in the middle of the night.
An unarmed 17 year old boy was shot and killed by Bolivian Army personnel. At least 175 others were injured.
In April 2000, Bechtel was forced to leave the country and the water company was returned to public ownership.
In November 2001, Bechtel and its associates filed their case with ICSID at the World Bank. The ICSID process bars the public and media from being present at its proceedings or disclosing who testifies.
The company filed the case with ICSID under a bilateral investment treaty between the Netherlands and Bolivia. Although Bechtel is a U.S. corporation, its subsidiary established a presence in the Netherlands in order to make use of the treaty.
The rules in the Dutch-Bolivian treaty are similar to those in the North American Free Trade Agreement and the proposed Free Trade Area of the Americas.
For four years, citizen groups waged a global campaign to pressure Bechtel to drop the case. Protesters closed down Bechtel’s San Francisco’s headquarters twice. Company officials were bombarded by critical e-mails.
Citizen groups from 43 nations endorsed a legal petition to the World Bank demanding that the case be opened to public participation.
"This settlement demonstrates the power of public participation," said attorney Martin Wagner of Earthjustice, a nonprofit, public interest law firm based in Washington, DC. Wagner drafted the 2002 legal petition on behalf of Bolivian civil society leaders demanding public participation in the Bechtel case.
"Unfortunately, hundreds of foreign investor challenges against developing countries remain pending and more will be filed as the United States and others continue to force governments to give foreign corporations special privileges," Wagner said. "We must continue to tear down the walls of secrecy and exclusivity in international commercial arbitrations like this one."
"This is the first time that a major corporation like Bechtel has had to back down from a major trade case as the result of global citizen pressure," said Jim Shultz, executive director of The Democracy Center in Cochabamba, and a leader of the global effort.
"It should signal to corporations contemplating similar legal actions that they should be prepared to defend those actions in the court of global public opinion," Shultz said, "not just behind closed doors at the World Bank."
Sarah Anderson, of the Washington, DC Institute for Policy Studies, who helped coordinate U.S. civil society pressure on Bechtel to settle the lawsuit, has her eye on preventing similar confrontations in the future. "The challenge now," she said today, "is to build on this momentum to press for new trade and investment rules that promote democracy and sustainable development rather than the narrow interests of large corporations."
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