The Bechtel Corporation was handed a powerful victory last week, when a secretive trade court announced that it would not allow the public or media to participate in or even witness proceedings in which Bechtel is suing the people of Bolivia for $25 million. Aguas del Tunari, a subsidiary of the California-based engineering giant, is suing South America’s poorest nation over the company’s failed effort to take over the public water system of Bolivia’s third largest city, Cochabamba. After taking over the water system in 2000, the company imposed massive water rate hikes, which resulted in widespread protests countered by military force that killed one person and wounded 175 others.

Oscar Olivera, a leader of the coalition of Bolivian peasants, workers and others that formed in opposition to Bechtel, said, “Now the World Bank is not only imposing its ideas and programs on us, it is also preventing the people affected from participating in a case that directly affects our lives. This is profoundly undemocratic.”

Bechtel’s legal action is being heard by the International Center for the Settlement of Investment Disputes (ICSID), a tribunal administered by the World Bank that holds all of its meetings in secret. Bechtel is suing Bolivia for the profits it claims it would have made from the water privatization scheme had the rate hike protests not led to its unplanned departure from the city of Cochabamba in April 2000. (See background story at PBS.org)

The President of the tribunal arbitrating the case responded last week to a petition filed by Oscar Olivera and a coalition of other Bolivian citizens and public interest organizations seeking to participate in the case. (View the petition) The President’s letter asserted that the tribunal had no power to permit affected citizens to participate, a stance inconsistent with other arbitral tribunals and U.S. courts, where interested parties are regularly allowed to submit “friend of the court” briefs. The letter also indicated the tribunal’s rejection of the groups’ requests that documents and hearings in the case be open to the public. (View the letter denying access) The tribunal is comprised of one member appointed by AdT, one appointed by the Bolivian government, and a third – the tribunal’s president – appointed by the President of the World Bank.

“The panel explicitly rejected all of our requests for public participation in this closed-door process,” said Martin Wagner, an attorney for the US-based law firm, Earthjustice. “It is inexcusable that a panel considering an issue as fundamental as the right to water should be able to exclude the very people whose rights will be affected by the case.”

According to Sarah Anderson, Director of the Global Economy Project at the Institute for Policy Studies in Washington, DC, “There has been an outpouring of international support for the Bolivian petitioners in this case. So many people have become familiar with such investor-state lawsuits from the NAFTA experience and they see them as one of the most extreme examples of excessive power granted to corporations.”

REQUESTS FOR PUBLIC PARTICIPATION DENIED

In August 2002, a coalition of citizens’ organizations from around the world requested in a letter to the tribunal (View letter and signatories) that the panel make all of the documents and meetings in the case public, that it travel to Bolivia to receive public testimony, and that it allow Bolivian civic leaders to be an equal party to the case. The tribunal’s response to the petition serves as a rejection of this request as well.

“The ICSID Tribunal’s decision reveals structural deficiencies in the ICSID arbitration system,” said Marcos Orellana an attorney for the Center for International Environmental Law (CIEL). “By failing to recognize its power to allow affected citizens to participate in the case, the Tribunal’s decision would allow corporations such as Bechtel to manipulate and compromise the integrity of international arbitration, as well as countries’ ability to protect the public welfare.”

The legal team representing the Bolivian petitioners includes California-based Earthjustice and the Washington, DC-based Center for International Environmental Law (CIEL), both of which have been involved in attempts to intervene in similar investor-state lawsuits filed under the North American Free Trade Agreement (NAFTA).

“The World Bank’s secret trade court has now made it absolutely clear that it wants to continue doing its work behind closed doors, without pubic scrutiny or participation by the people expected to pay Bechtel off,” said Jim Shultz of the Bolivia-based Democracy Center. “Neither the public nor the media will be allowed to know when the tribunal meets, where it meets, who it hears from, or what they say. This secrecy is just a preview of what communities in the U.S. can expect under the proposed FTAA [Free Trade Area of the Americas, an extension of NAFTA]. Local governments from Alaska to Chile will be dragged before secret panels as multinational corporations, like Bechtel, seek to undo local environmental, health, worker and consumer protections, branded as barriers to free trade.”

AFTERMATH OF A REVOLT AGAINST WATER PRICE HIKES

In the late 1990s the World Bank forced Bolivia to privatize the public water system of its third-largest city, Cochabamba, by threatening to withhold debt relief and other development assistance. In 1999, in a process with just one bidder, Bechtel, the California-based engineering giant, was granted a 40-year lease to take over Cochabamba’s water, through a subsidiary the corporation formed for just that purpose (“Aguas del Tunari”).

Within weeks of taking over the water system, Aguas del Tunari imposed huge rate hikes on local water users. Families living on the local minimum wage of $60 per month were billed up to 25 percent of their monthly income. The rate hikes sparked massive citywide protests that the Bolivian government sought to end by declaring a state of martial law and deploying thousands of soldiers and police. More than a hundred people were injured and one 17-year-old boy was killed. In April 2000, as anti-Bechtel protests continued to grow, the company’s managers abandoned the project.

Aguas del Tunari filed the legal action against Bolivia last November, demanding compensation of $25 million, a figure that represents far more than the company’s investment in the few months it operated in Bolivia. The action also aims to recoup a portion of the company’s expected profits from the project. 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 recently 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 NAFTA and the proposed Free Trade Area of the Americas.