Stop Telecom Italia

On 12 October 2007, Euro Telecom International (ETI), a wholly owned subsidiary of Telecom Italia S.p.A. and controlled y Italian and Spanish capital, initiated legal action against Bolivia.  Telecom Italia/ETI charges that the Bolivian Government’s attempts review past performance and initiate negotiations for increased control over the country’s primary telecommunications company had “destroyed” their investments – a patently exaggerated claim, as the company continues to operate and generate profits.

Telecom Italia/ETI initiated the process through an international arbitration panel, the International Centre for Settlement of Investment Disputes (ICSID), a controversial World Bank institution that provides multinational companies extraordinary powers to sue and constrains countries that pursue reform. Telecom Italia/ETI filed its case after Bolivia withdrew consent to have cases tried under ICSID jurisdiction on May 2nd, 2007 – yet ICSID has accepted the case anyway.

The case clearly highlights the international legal framework that has consolidated the rights of multinationals’ over the rights of citizens, indigenous peoples, developing countries and the environment, and undermining sovereignty and democracy, by making responses to popular demands for economic and social change an actionable offense.

Telecom Italia sues Bolivia: the issues

On 12 October 2007, Telecom Italia, through its shell company Euro Telecom International N.V. based in Holland, submitted a request for arbitration at the International Center for the Settlement of Investment Disputes (ICSID), a branch of the World Bank, claiming a violation of their rights under the Bolivia-Holland Bilateral Investment Treaty (BIT).

ICSID provides a forum for “settling” such disputes – often with disastrous effects for developing countries, and fairness in international law.  Using bodies like ICSID, and Bilateral Investment Treaties (BITs) or investment chapters in multilateral agreement like NAFTA or the Energy Charter Treaty, multinational corporations can file charges against governments and secure huge awards on sensitive public policy matters such as management of water systems (as in Bolivia or Tanzania); refusal of permits to dispose of toxic waste (as in Mexico), respect for indigenous lands (as in the US and Guatemala), or emergency measures to confront crisis (as in Argentina’s response to the economic and fiscal crisis of 2001). 

In ICSID and under the BITs, the rights of international investors trump the rights of affected nations.  International laws on human and indigenous rights, as well as the right to development, are systematically excluded, while the rights of investors are expanded to the extreme, limited only by the imagination of highly paid corporate lawyers.

What is ETI’s claim against Bolivia?

In 2006, Evo Morales, an Aymara farmer and union leader became Bolivia´s first indigenous president, elected by an unprecedented majority to carry out political program that, responding to popular demands, called for recovering control over state industries for the benefit of Bolivia´s impoverished indigenous majority.

In 2006, the Morales government reviewed the Telecom Italia/ETI privatization case, observing various non-compliances with regulations and indicating that taxes were owed on the capital draw-down transaction noted above.  In March and April 2007, the Morales government issued three executive orders: one created a commission to study and recommend proposals for recovering ENTEL for the public interest; another shifted management of ENTEL shares held in the name of adult Bolivians from foreign pension fund managers to public management in Bolivia; and one rolled back a previous decree that led to the questionable certification of ENTEL’s investments in Bolivia.  All were constitutionally sanctioned public actions, before which investors have effective local regulatory and legal remedies.

Telecom Italia/ETI, however, preferred to use ICSID – the preferred “playing field” of the multinationals and their corporate lawyers.  In their October 12, 2007, letter, Telecom Italia/ETI claimed that Bolivia’s actions had “destroyed the value” of its investment.  The charges are unfounded: to this day ENTEL continues operating, aggressively advertising, establishing products and services, generating revenue, and drawing profits via its dominant position in wireless and other telecom markets in Bolivia – hardly a “destroyed” investment.

So, what is at issue?  Some suggest Telecom Italia/ETI wants out of Bolivia for more lucrative markets elsewhere, and is using ICSID to leave with as much money as possible – resources that are vital for telecom development in Bolivia.  At ICSID, Telecom Italia/ETI can sue not only for alleged damages, but for lost “future” profits, which could mean a charge of hundreds of millions of dollars to the hemisphere’s most impoverished country.

In Bolivia, for the first time there is a democratically-elected government willing and able to examine how privatized operations have been managed, and make necessary adjustments that defend and promote the public interest.  This is what President Morales means by seeking “partners but not bosses” in relations with foreign companies.  Part of establishing relations between “partners” means re-establishing necessary balances – in this case, ensuring that resources generated in Bolivia are directed toward Bolivian development goals.

This is why on May 2, 2007, Bolivia announced its considered and legal withdrawal from the ICSID Convention, and is carefully reviewing its investment treaties with various countries.  With denunciation of the ICSID Convention, for administrative purposes Bolivia remained a member of ICSID until November 3, 2007.  However, drafters of the ICSID Convention and other legal experts have unequivocally stated that Bolivia’s consent to arbitration – absolutely necessary to establish ICSID jurisdiction over a case – ended May 2nd, when Bolivia quit ICSID.  This is common sense: from the moment Bolivia withdrew from the treaty, is was clearly and legally saying “enough”.  It is important to note that while Bolivia has clearly quit ICSID, it still offers national and international legal remedies to investors.

Nonetheless, in a desperate last minute move, ETI requested arbitration on 12 October 2007 under the Bilateral Investment Treaty between Holland and Bolivia, and ICSID accepted.  On October 31, 2007, the case was formally registered by Ana Palacios, Secretary General of ICSID and previous Spanish Minister for Foreign Affairs under Aznar’s government, despite the fact that Bolivia had denounced the Convention, and thus left the case clearly outside the jurisdiction of ICSID, months earlier.

In summary, the “dispute” consists of series of false or exaggerated charges, for which there are administrative and legal remedies available in Bolivia.  Telecom Italia/ETI wants out, and with millions in hand.  To get it, they have sought an international “facility” that is, in effect, the preferred tool of investors.  And the World Bank/ICSID is happy to oblige.

> See also history and context to Telecom Italia’s involvement in Bolivia