Barroso challenged on Telecom Italia

Dear President Barroso,

The undersigned, six civil society groups from Europe, call on you to act immediately to stop Commission officials from continuing to intervene on behalf of Telecom Italia in its efforts, via the International Center for the Settlement of Investment Disputes (ICSID) and the New York State Court, to extract excessive and unwarranted compensation for the renationalisation of the Bolivian telecommunications company ENTEL, much to the detriment of the Bolivian people.

Through a letter dated February 27, 2008 to yourself from the European Telecommunications Network Operators’ Association (ETNO), Telecom Italia has requested the European Commission intervene in the conflict between Telecom Italia and the Bolivian state [1]. Via an access to document request to the European Commission it has become clear that the Commission, in response to ETNO and Telecom Italia’s request for assistance, is taking an active role in support of Telecom Italia [2]. We believe the Commission’s intervention on behalf of the company to be inappropriate, given Telecom Italia’s seriously flawed record in Bolivia.

Telecom Italia’s subsidiary Euro Telecom Italia, until recently, owned a controlling share of the Bolivian telecommunications company ENTEL. The government of Evo Morales renationalised the company on April 23, 2008 after Euro Telecom Italia consistently failed to meet investment requirements and pay taxes and fines relating to the non-payment of taxes [3].

As a result of these failures the Bolivian government entered into negotiations with Euro Telecom Italia in 2007 with a view to providing an appropriate amount of compensation (based on the underinvestment and avoided taxes) in return for regaining a controlling share of ENTEL. Euro Telecom Italia, unhappy with this state of affairs, chose instead to initiate a case at the World Bank’s International Center for the Settlement of Investment Disputes, an unaccountable, secretive and corporate-friendly arbitration arena which Bolivia has renounced. In the context of the case at ICSID the Italian transnational corporation has now moved to freeze the assets of ENTEL using the New York State Court.

The Bolivian government last week accused Euro Telecom Italia of moving $90 million out of Bolivia to foreign accounts owned by ENTEL, it is not clear whether this happened prior to, or after the renationalisation of the ENTEL.

We consider Euro Telecom Italia’s actions to be absolutely unjustifiable, abusive and self-serving. Bolivia has always shown willingness to negotiate directly with Telecom Italia and to provide a justifiable amount of compensation for the renationalisation of ENTEL. However, Telecom Italia has and continues to pursue a policy of aggressive litigation in order to obtain excessive amounts of compensation, which in the case of ICSID could even include “lost future profits”. We call upon you to end the Commission’s support of these egregious actions against the Bolivian government and its people.

It should be noted that this issue falls within the wider context of a more general flaw in the Commission’s trade and investment policies which have become increasingly and narrowly identified with the interests of large EU based corporations. The ‘Global Europe’ strategy consolidates this defective approach. We also take this opportunity to encourage a fundamental rethink of this strategy which, although beneficial to profit lines of corporations, is at odds with the EU’s professed goal to want to improve the lives of the world’s poorest people.

Yours sincerely,

Oliver Shykles

Corporate Europe Observatory (CEO), Friends of the Earth International, World Development Movement, The Cornerhouse, Transnational Institute and Campagna per la Reforma della Banca Mondiale.

 

Notes:

[1] Further access to document requests to the Commission have been denied; the Commission argues that this because of the litigation taking place at ICSID and also taxation litigation taking place in the Bolivian courts. However, a list of 14 relevant documents, though not the actual documents themselves, was provided which expose the Commission’s deep involvement with Telecom Italia on this issue.

[2] On April 11, 2007 Reuters reported that Martin Selmayr, a spokesperson for Commissioner Viviane Reding said, “The Commission is following [the Bolivian government’s plan to nationalise ENTEL] with a lot of concern. We are monitoring the situation very carefully.” Selmayr also expressed concern that the Bolivian government’s plans would, “put Telecom Italia’s investment at risk.”

[3] ENTEL was fined due to the non-payment of taxes amounting to $645 million. Euro Telecom Italia has also failed to meet other investment conditions, for example, it reneged on an obligation to provide a telecommunications infrastructure to rural communities containing more than 350 people.