Bolivia ordered to compensate UK power company
By Andres Schipani in Cartagena
Financial Times, 2/02/2014
Bolivia must pay $41m in compensation to UK-based power generator Rurelec for the nationalisation of its assets after an international court order on Saturday that will give hope to other companies seeking payouts from the country’s government.
The Andean country’s first indigenous President, Evo Morales, ordered Rurelec’s Bolivian assets and those of France’s GDF Suez to be seized at the “thunderous request of the people” on May Day in 2010.
The country faces costs of up to $1.87bn from current investment disputes, including Rurelec, according to information from the office of Bolivia’s prosecutor-general.
Rurelec waited almost two years for a financial settlement on its seized assets but then in March 2012 it submitted a claim for some $142m to the Permanent Court of Arbitration in The Hague based on an independent valuation that was double the book value of its 50.01 per cent stake.
Back then the country’s vice-president, Álvaro García Linera, called the sum “abuse and overbearingness”. Still, a year later Rurelec took the Bolivian government to court over the seizure of its assets.
“I am happy this is over,” Peter Earl, chief executive of Rurelec, told the Financial Times, adding that the decision is binding. But even if the award is higher than the $33.7m the company paid to acquire its controlling stake in the Guaracachi power plant in 2006, it is only a portion of the claim sent to arbitration panel.
“I am disappointed the tribunal had put a really high risk premium attached to Bolivia,” he says, referring to an impoverished country that has seen its gross domestic product tripling to some $30bn in recent years thanks to a “well managed economy.”
This is the first arbitration award granted by an international court against the Andean country, according to the company. Resource nationalism has been a constant since Mr Morales came to power in January 2006, bringing a number of the industries into state hands in his quest to redistribute wealth.
Although some companies have opted to go through the World Bank arbitration body, for investors, Bolivia could prove hard to bring to account because it pulled out of that organisation in 2007, saying it had always favoured the interests of multinational corporations. In many cases, companies have to either settle or appeal to bilateral treaties, such as Rurelec did.
“Bolivia wants to be seen to be acting fairly and in accords with their treaty obligations,” said Mr Earl, particularly as the government has been placing bonds internationally since 2012 and has pledged to industrialise an economy highly dependent on commodities.
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