In 1997 the World Bank informed Bolivia that it was making additional aid for water development conditioned upon the government privatizing the public water systems of two of its largest urban centers, El Alto/La Paz and the city of Cochabamba. In September 1999, in a secret process with just one bidder, Bolivia’s government turned over Cochabamba’s water to a company controlled by the California engineering giant, Bechtel.
Within a few weeks, Bechtel’s company raised water rates by an average of more than 50%, sparking a citywide rebellion that has come to be known as the Cochabamba Water Revolt. In April 2000, following a declaration of martial law by the President, the army killing of a seventeen-year-old boy (Victor Hugo Daza), and more than a hundred wounded, the citizens of Cochabamba refused to back down and Bechtel was forced to leave Bolivia.
Eighteen months later Bechtel and its co-investor, Abengoa of Spain, filed a $50 million legal demand against Bolivia before a closed-door trade court operated by the World Bank, the International Centre for Settlement of Investment Disputes (ICSID). For four years afterwards Bechtel and Abengoa found their companies and corporate leaders dogged by protest, damaging press, and public demands from five continents that they drop the case.
On January 19, 2006 Bechtel and Abengoa representatives traveled to Bolivia to sign an agreement in which they abandoned the ICSID case for a token payment of 2 bolivianos (30 cents). This was the first time that a major corporation has ever dropped a major international trade case such as this one as a direct result of global public pressure, and it set an important precedent for the politics of future trade cases like it.
Timeline and Summary of Key Events
- In November 1999, Cochabamba’s citizens began to protest the privatization of their water system and up to 200 percent increases in water rates initiated by Aguas del Tunari (Bechtel, Edison, Abengoa). In April 2000, Aguas del Tunari was thrown out of Bolivia and replaced by a public company.
- In November of 2002, Aguas del Tunari initiated a case for a minimum of $50 million against the Bolivian government, in the International Centre for Settlement of Investment Disputes (ICSID), a mechanism of the World Bank, the same institution that forced Cochabamba to privatize its water system as a condition for a loan package in 1997.
- The $50 million claim was not only for the recovery of investments, which are estimated at less than a million dollars, but also for estimated lost future profits due to the annulment of the contract with Cochabamba.
- The process and content of the case against Bolivia in ICSID was kept secret. Under ICSID rules, neither the people of Cochabamba nor the press had the right to access to case proceedings.
- In August of 2003 more than 300 organizations from 43 countries, including Bolivia, sent an International Citizens Petition demanding that the case be transparent and open to citizen participation. ICSID rejected the petition.
- The case garnered international attention and activists in Bolivia, the U.S., and around the world engaged in campaigns to pressure the companies to drop the case, and to bring international attention to the World Bank and its actions.
- On October 21, 2005 ICSID ruled that it had jurisdiction in the case of Aguas del Tunari vs Bolivia, and would proceed with hearing the case. Defense of the ICSID case has cost the Bolivian government $1 million in legal fees over the past three years.
- On January 19th 2006, Aguas del Tunari’s main shareholders Bechtel and Abengoa agreed to drop their case in ICSID for a token payment of 2 bolivianos (.30 USD). Sources directly involved in the settlement negotiations cited continued international citizen pressure as the reason the companies decided to drop the case.
What is ICSID?
- ICSID, created in 1966, is a mechanism of the World Bank that provides conciliation and arbitration in disputes between countries and investors of World Bank members.
- In the case of Aguas del Tunari vs Bolivia, the tribunal was composed of three people: one named by Aguas del Tunari, one named by Bolivia, and one designated by the World Bank. The arbitration proceedings of ICSID are closed to the public and to the press and the tribunal operates outside of national laws. The judges in each case define the norms that will apply and determine their own procedures. Their decisions are unappealable and if a country does not comply with the tribunal’s ruling, it is subject to economic sanctions.
- The Bilateral Investment Treaty between Bolivia and the Netherlands, written in 1992, designated ICSID as the mechanism for resolution of disputes between member states and investors. In 1999, Aguas del Tunari changed its residence to Amsterdam in order to have recourse to this agreement.
The Significance of the Case: Larger than Water and Larger than Bolivia
The case of Bechtel vs. Bolivia has serious importance far beyond just Bolivia. It has implications for trade cases being launched worldwide by multinational corporations against governments and their people.
- In the last several years, the quantity of cases brought by multinational corporations in international commercial tribunals has increased exponentially through new free trade and investment agreements and through institutions such as the World Trade Organization. These tribunals have become legal mechanisms through which multinational corporations evade domestic laws and disrupt democratic processes.
- Many of the challenges filed in these commercial tribunals have been against laws and actions of governments to regulate in the public interest. The vast majority of the rulings in these cases have been in favor of multinational corporations and against issues of public welfare. Rulings in international commercial courts have resulted in the elimination of important health and environmental laws and have forced governments to pay millions of dollars in fines and sanctions. If the Andean Free Trade Agreement between the U.S., Bolivia, and other Andean nations goes into effect, it will create another similar supranational tribunal that could generate more challenges to Bolivian laws.
- One clear example: in May 2005, an ICSID tribunal ruled in favor of the U.S. company CMS Energy in its challenge against the Argentine government on charges of “expropriation and discriminatory treatment.” The case demands compensation for the Argentine government’s conversion of energy tariffs from pesos to dollars during the peso devaluation of 2002. The Argentine government now must pay CMS Energy $133 million dollars.
- Bechtel and its partners had investments in different parts of the world, including contracts for reconstruction in Iraq. In many cases their activities are in conflict with the wishes of local populations regarding just, accessible, and responsible management of services and resources.
- In the case of Bechtel vs. Bolivia social movement and citizen groups around the world signaled that they are able to battle these cases, not just in the closed-door forums favored by corporations, but also in the larger forum of world public opinion. It signals that corporate leaders need to be prepared to defend their actions personally, including before their friends and neighbors, as well as before the media, local governments and other venues for citizen action.
- Bolivia is party to 23 Bilateral Investment Treaties (BITS), which allow for multinational companies to appeal to ICSID in the case of disputes between foreign investors and the Bolivian State. The New Bolivian Constitution states that all foreign investments are subject to national law and jurisdiction. So Bolivia must renegotiate existing BITS as well as reconsider involvement in future free trade agreements that include similar mechanisms. Brazil, which has a similar constitutional provision, has avoided negotiating agreements that include international dispute mechanisms.
Summary of International Solidarity Actions
The Case of Bechtel vs. Bolivia
April 2000-December 2005
An international solidarity network of individuals and organizations from more than 43 countries worked with Bolivians to initiate actions around the world following April 2000 t o promote the case of the Bolivian people against Bechtel and Aguas del Tunari. These protests took place in the streets of the United States, the Netherlands, and Spain and through online activity. They include the following:
- April 2000: The Democracy Center documents Bechtel as the majority owner of Aguas del Tunari
- April 2000: Email protest sent by 500 people from around the world to the CEO of Bechtel demanding the company’s withdrawal from Cochabamba
- April 2000: Solidarity protests in San Francisco at Bechtel headquarters
- February 2002: Dutch activists put a sign up on the street of Bechtel’s headquarters in the Netherlands, renaming it Victor Hugo Daza Street for the 17 year-old killed in the Water War protests in 2000
- July 2002: San Francisco’s Board of Supervisors approves a resolution calling on Bechtel headquarters to renounce the case with Bolivia
- September 2002: A protest that blocked the entrance to the Bechtel headquarters in San Francisco leads to the arrests of 15 people.
- September 2002: An international citizens petition, signed by 300 organizations from 43 countries, is filed with the World Bank demanding that the Bechtel-Bolivia case be opened to public scrutiny and participation
- February 2004: Activists in Washington DC protest at the house of Aguas del Tunari’s President, Michael Curtin, to demand that Bechtel and its associates drop their case against Bolivia.
- December 2004- January 2005: More than 300 people sent emails to the headquarters of Abengoa, the Spanish company that owns 25% of Aguas del Tunari, to request that they drop the case
Articles and reports by the international press about the Bolivia-Bechtel case have appeared in numerous foreign publications and media including:
- The New York Times
- The New Yorker
- The San Francisco Chronicle
- Public Broadcasting System (PBS)
- Bill Moyers
- Documentaries, including: Thirst, The Corporation, Leasing the Rain