Telecom Italy/Telefonica vs. Bolivia: Corporate Power vs. People's Sovereignty

In April of 2007, the Bolivian government announced its intention of renegotiating the terms of privatization of telecom corporation Entel, which had benefited Italian company STET since 1995 (today Telecom Italia, in which Spanish corporation Telefonica has 10% of the shares). This is a strategic sector for the social and economic development. For this reason the government determined the need to have a greater participation in the company to manage it according to the public interest. Telecom Italia appealed to the Investment Protection Treaty signed between Bolivia and the Netherlands and the International Center of the Settlement of Investment Disputes (ICSID) a World Bank's secret arbitration panel, which has traditionally favored transnational corporations.

On April 23rd 2007, the Bolivian government ordered to transfer 47% of Entel's shares to the Ministry of Public Works. These shares belonged to Bolivian public pensions fund, ran by Zurich Financial Services and Prevision (AFP), a subsidiary of Spanish bank BBVA. The government began a negotiation with ETI Entel to buy 3% of its remaining shares in order to have 51% of owership in the company and to be able to manage it. Telecom Italia, through Euro Telecom International SV (ETI), a company registered in the Netherlands but directly controlled by the Italian transnational corporation, protested over a threat against its econonmic interests.

A month later, on May 2nd, 2007 the Bolivian government announced that it did not recognize the ICSID jurisdiction over its territory, something which had to enter into force after six months. On October 12th, 2007, just after the 6 months period expired, ETI filed a lawsuit against Bolivia before the ICSID and asked for the opening of an arbitration case to request compensations for the losses implied by the Bolivian decision and over the investments the company had supposedly made in the country. On October 31st, two days before Bolivia´s withdrawal from ISCID was officially announced, Ana Palacio (former Foreign Minister under José María Aznar administration) the then ICSID Secretary General, filed ETI's case and began the arbitration process, in which Bolivia refused to participate.

The case ETI vs. Bolivia before ICSID shows how the companies fail to comply with the national environmental and health laws in these countries, besides appealing to the ICSID, a body which lacks a democratic process. But on top of this, this case does not respect Bolivia´s sovereign decision of withdrawing from ICSID.

ETI claims that it invested millions of dollars in Bolivia and that it has improved its services. However, and despite not having obtained high profits, the company has failed to fulfill with tax payments in the country and it ows Bolivia over 100 million dollars (for unpaid taxes and for evading taxes when it was privatized).

Meanwhile, Entel's privatization has caused a large number of labor conflicts (working conditions worsened) and conflicts with the users (since the company failed to make the investments it had promised). It is worth noting that both Spanish company Telefónica, which has failed to take responsibility in this case (although it has 10% of the shares in Telecom Italia), and Telecom Italia, have a long record of social conflicts in Latin America, Spain and Italy.

A network of 11 organizations operating in Italy, the Netherlands, Spain, the US and Bolivia are filing this case before the Peoples' Permanent Tribunal, accusing four main actors: Telecom Italia, the government of the Netherlands, Telefónica and ICSID for having a negative impact on the right of the Bolivian people to a sovereign development and for acting in the economic interests of corporations with a clear corporate social responsibility.

Key issues: New Constitutionalism and privatization of Justice

Denouncing organizations: Observatorio de la Deuda en la globalización ODG (Cataluña, Estado Español), Transnational Institute/ Corporate Europe Observatory CEO/ SOMO (Holanda), Campaña por la Reforma de la Banca Mundial CBRM, Asud, Transform (Italia), Fundación Solón (Bolivia), Institute for Policy Studies (Estados Unidos)