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Bechtel Drops $50 Million Claim to Settle Bolivian Water Dispute

From: Environment News Service <>

Bechtel Drops $50 Million Claim to Settle Bolivian Water Dispute

SAN FRANCISCO, California, January 19, 2006 (ENS)
- 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.

Water protesters pour into the streets of Cochabamba. (Photo courtesy Nadir)
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
Bolivia¹s 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 city¹s water, Bechtel¹s 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.

Bolivian Army and water privatization protesters face off in Cochabamba.
(Photo courtesy Nadir)

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

For four years, citizen groups waged a global campaign to pressure Bechtel
to drop the case. Protesters closed down Bechtel¹s San Francisco¹s
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

"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

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."