British Gas gets ready to sue Bolivia

Time to mobilize solidarity and demand that they back off!

British Gas has formally initiated proceedings against the Bolivian government that could end up with Bolivia being taken to international court in 6 months time in January 2006. Along with the Spanish company Repsol and French company Total, British Gas stated that they were “initiating a period of formal negotiations based on reciprocal investment agreements between Bolivia and third-party States.”

The aim is to secure changes to the hydrocarbons law passed by Congress in May. The petrol companies are alleged to be arguing that the very modest changes in the law are equivalent to “expropriation” which is forbidden without substantial compensation under the various Bilateral Investment Treaties signed with France, Spain and the UK.

Their objections haven’t been publicly articulated since the passing of the law. However in a letter to Ms Finch in the UK, British Gas stated: “BG invested in Bolivia on the basis of mutual commitments supported by a framework which guaranteed a stable legal environment for foreign investors… The new Hydrocarbons law has radically changed that framework and BG… are in dialogue with the government to discuss ways in which the differences may be addressed since we expect Bolivia to respect the commitments it made to us:”

In other words, we are not prepared to accept changes to our contracts,even if they were democratically approved and will push for the government to back down to our demands.

It is thought that they both object firstly to the rise in taxes, but mostly to the change in the law which means that oil and gas resources now are the property of the State at the point of extraction. 

Up until the new law was passed, the gas and oil only legally belonged to the State whilst it remained in the ground. The reserves were the property of the companies as soon as they had been extracted. Whilst the change in the law doesn’t in practice mean any change to the multinational companies’ control of the transport and sale of gas and oil, it does allow the possibility that the State could exert more control in the future.

This in fact will be vital if the gas and oil reserves are to truly benefit Bolivia, but it is something that the multinational energy companies are determined to avoid.

The Bolivian Government has assured Congress that it will not accept any changes to the law, but says it hopes it can reach an “amicable resolution.” This looks highly unlikely as representatives of the petrol companies have publicly stated that they are prepared to go to arbitration to secure changes to the new contracts in order to protect their investments.

Moreover Bolivia is in a difficult position because during the 1990s it signed highly unfavourable investment treaties that invariably prioritise multinationals rights to profit over the Government’s right to assert sovereignty over its own resources. A fight is on the cards, and Bolivia is unlikely to win unless it has massive international solidarity.

Fortunately it has been shown that international solidarity can force companies to back down. Whilst they will be keen to secure changes to the law for their benefit, multinational companies also can not afford huge amounts of bad publicity. In November 2001, Bechtel, the privatized US water company that had been kicked out of Cochabamba by a popular uprising, filed a demand of $25 million against Bolivia at the International Center for Investment Settlement Disputes, which is likely to be the forum in which the petrol companies seek arbitration.  However a major global campaign eventually forced Bechtel to back down.   

Like many companies, British Gas in recent years has been keen to emphasise its corporate social responsibility. On their website, they are keen to talk about their “corporate responsibility,”  stating in their business principles that “Wherever we operate, we strive to make a positive and meaningful contribution to community activities and to behave in a socially responsible manner. We recognise that BG Group’s sustained commercial success is only possible in the presence of a healthy social environment. We always seek to support social and economic development in the communities where BG Group does business.”

Yet despite this rhetoric, they are trying to force the poorest country in South America to reverse modest changes to a hydrocarbons law which would increase resources to tackle poverty. They are trying to overturn a democratically-passed law to ensure their profits, which in 2004 increased by 22% to £1522 million. 

In October 2003, more than 60 people lost their lives in demonstrations calling for Bolivia to regain control of its vast natural resources which for centuries have been extracted and exported with little benefits for the vast majority of Bolivians. In May and June this year, hundreds of thousands of people sacrificed time and money to take to the streets saying that the modest gas law was not enough and that only nationalization of gas will ensure Bolivia’s long term economic future.

British Gas’s legal action is an action against the Bolivian people. The Bolivians need to democratically decide how the second largest reserves in Latin America should be used to tackle the huge levels of poverty and inequality in the country. Their decisions should not be confined by the actions of multinationals whose only consideration is profit. Our solidarity with Bolivians and our opposition to the legal actions of the companies could be crucial in the fight for a more just Bolivia.


Over the next few days, I will be looking at ways of getting an international campaign going against British Gas and potentially the other petrol/gas companies too. If you would like to get involved, or have ideas for the campaign please get in touch.


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