World Blank

More and more people are learning, through experience or through burgeoning campaigns, about the inhumanity of water privatization campaigns in the Global South. The story, re-enacted across the world, never loses its sting: the IMF and World Bank pressure governments to sell off publicly-run water systems; for-profit corporations from the North step in; within weeks, water bills skyrocket to unaffordable levels.

A new phenomenon has started pushing across the horizon, bringing hope to those who feared that water commodification had become the bleak, inevitable future of the developing world. Civic demonstrations in countries like Bolivia, Argentina, South Africa and Ecuador have succeeded in chasing corporations away from public water.

But these protests have come at significant costs. In Bolivia, the government responded to protests against an agreement which went so far as to privatize rainwater in the province of Cochabamba with brute force and a martial lockdown. In the ensuing bedlam, a 17-year-old boy was killed when police catapulted a tear gas canister into his head. Bechtel, the company which had secured the contract for the privatization, finally chose to withdraw in the face of such strong opposition.

To add insult to injury, Bechtel, which had hiked water rates an average of 50% virtually overnight, sued the Bolivian government for $25 million -- a figure far greater than what they invested. Following a principle becoming more common in the age of “free-trade” treaties, they sued for the projected profits they would now not realize.

Forbes Magazine ranks billionaire CEO Riley Bechtel as the 51st richest man in America. Minimum-wage Bolivian families live on less than $1,000 a year. Bechtel Corporation’s annual revenue is about $14 billion, a figure which exceeds Bolivia’s by roughly 600%. Bechtel grosses over $38 million in earnings in a single day. According to reports by the Democracy Center, $25 million goes far enough in Bolivia to pay a year’s salaries for 3,000 rural doctors or 12,000 public school teachers. In Cochabamba, that sum could have supplied 125,000 new families with water service.

The World Bank has had an active hand in administering this fiasco. The Bank’s (and the IMF’s) structural adjustment programs paved Bechtel’s way into Bolivia, and the Bank in fact “recommended” privatization of water provision in Cochabamba.

Now it turns out that Bechtel is suing the Bolivian government at a World-Bank-housed arbitration agency called the International Center for Settlement of Investment Disputes (ICSID) -- the fifth and least-known part of the Bank.

ICSID tries to maintain a semblance of independence from its parent organization. A blurb on its website states, “ICSID is an autonomous international organization. However, it has close links with the World Bank. All of ICSID's members are also members of the Bank. The expenses of the ICSID Secretariat are financed out of the Bank's budget, although the costs of individual proceedings are borne by the parties involved.”

ICSID insists on its impartiality and its freedom from World Bank influence. But the organization’s very existence is rooted in the World Bank Group. ICSID employees also note they don’t actually preside over the cases, they simply provide venues and resources while the parties choose the judges. The snag is that when the parties disagree on their selection of arbitrators, they each end up picking one, and the World Bank president picks the third. This process yields predictable results.

ICSID formed in 1966, for the purpose of mediating disputes between countries and foreign nationals. The court has a peculiar jurisdiction – it can only hear cases in which one of the parties is a nation, and the other is a “citizen,” meaning a person or a corporation, in some other country. In case this proposal actually sounds promising (in a utopia, Bolivia and its people could use ICSID to sue Bechtel), the fact of the matter remains that the court almost exclusively entertains suits directed from corporations at governments. ICSID is basically a one-way court.

There are two reasons for this. The first is that ICSID prohibits suits between individuals in one country and citizens or corporations in a different country. The people of Cochabamba can’t sue Bechtel directly. It’s virtually impossible to imagine Bolivians persuading their government to pursue legal action so long as the World Bank and IMF have a financial stranglehold on the nation; indeed there is no precedent for such a suit. Suing a multinational corporation of Bechtel’s stature would alienate Western lenders and investors, spelling economic and political strangulation for the Bolivian government. It would do their citizens no good to sue the American government, because no laws yet exist that hold governments liable for the wrongdoing of their businesses.

To start a case at ICSID, both parties must first consent to the mediation. Instead of establishing consent on a case-by-case basis (who would ever consent to being sued?), ICSID usually relies on consent clauses built into inter-governmental investment agreements. The U.S. has one such agreement (called a “bilateral investment treaty”) with Bolivia, and that treaty dictates when Bolivia can sue and be sued under international arbitration.

A coalition of NGOs including the Democracy Center, the Institute for Policy Studies, and EarthJustice have submitted a petition to ICSID requesting civil participation in the suit. If the petition is granted, Bolivian citizens and international interest groups will be able to submit paperwork to the court for its consideration in the arbitration. These briefs may not carry the same weight as the documents submitted by the actual parties, but at a minimum they give citizens some voice before the court. This petition is particularly important, because the Bolivian government may be reticent when it comes to disagreeing with investors, making them a poor advocate for their own people. No case at ICSID has been subject to as much scrutiny as Bechtel-vs-Bolivia; the campaign for civic participation is unprecedented and could be a major step in exposing the biased nature of the very secretive tribunals which operate in the contemporary global economy.

So long as ICSID is dominated by World Bank interests and headquartered on the same block, the odds of an objective outcome look rather grim. ICSID should instead be located alongside all the other international tribunals in The Hague, outside the meddling reach of the World Bank (and the U.S. government, for that matter). Instead of letting the World Bank cast the deciding vote when the parties disagree on who they want to mediate their dispute, that choice should be left to a disinterested international agency, perhaps one within the United Nations. And most importantly, ICSID’s jurisdictional rules need to be rewritten, because all Bolivians are party to a contract that controls their water, and all Bolivians should be party to the court that controls their fate.