Just before the end of last year, on 29 December 2012, President Evo Morales of Bolivia signed Supreme Decree No. 1448 whereby the Government of Bolivia took control of four private-owned electricity companies[1]:

  • Electricidad de La Paz (Electropaz);
  • Empresa de Luz y Fuerza Eléctrica de Oruro, Sociedad Anónima (ELFEO);
  • Compañía Administradora de Empresas Bolivia, Sociedad Anónima (CADEB); and,
  • Empresa de Servicios, Sociedad Anónima (EDESER).

Majority stakes thereof belonged at the time of the expropriations to Iberbolivia de Inversiones, Sociedad Anónima, a company subsidiary of Spanish energy company Iberdrola[2]:

  • Electropaz: 89.05%;[3]
  • ELFEO: 92.84%;
  • CADEB: 93.49%; and,
  • EDESER: 89.39%.

According to Supreme Decree No. 1448, these four companies are going to be controlled from now onwards by Bolivia through state-owned Empresa Nacional de Electricidad (ENDE). Soon after the Decree was rendered, heavily armed policemen took control of Electropaz’s headquarters in the capital of Bolivia, La Paz, so that the transfer of control to ENDE could take place.[4]

The Government of Bolivia has pledged to pay just compensation for these expropriations. The Decree sets out that an independent company shall establish the price to be paid by Bolivia in a 180-day period from the date of expropriation.

As these expropriations have affected a Spanish company, Spain’s Ministry for Foreign Affairs and Cooperation issued a communiqué on 29 December 2012 in which it lamented the decision taken by the Bolivian Government and called for an assessment of the value of the expropriated assets “with completely objective criteria.”[5]

This kind of direct expropriation is not new in South America. For example, on 1 May 2012 Bolivia seized electricity company Transportadora de Electricidad, expropriating it to Spanish energy company Red Eléctrica Española (REE). Press reports indicate that compensation has still to be paid to REE by Bolivia.[6]

In addition, on 16 April 2012 Argentina’s President Cristina Fernández announced the expropriation of a majority stake at oil company YPF that belonged to Spanish oil company Repsol.[7] According to ICSID’s website, a request for arbitration has been filed with the Centre on 18 December 2012.[8]

Finally, it is interesting to recall that in January 2012 Bolivia denounced the BIT signed with Spain in 2001.[9] The BIT is nonetheless in force for a further 10 years since the date of denunciation for all investments made before January 2012. Article 5 of the BIT contains provisions in the event of expropriations that include payment of prompt, adequate and effective compensation (Hull doctrine).[10] And Article 11 grants Spanish investors in Bolivia (and, reciprocally, Bolivian investors in Spain) the right to pursue international arbitration (ICSID under both the Washington Convention and the 1978 Additional Facility Rules and ad hoc arbitration under the UNCITRAL Rules of Arbitration) in the event of a persisting dispute against the State. We have to recall that Bolivia also denounced the ICSID Convention on 2 May 2007.[11]

We hereby invite all readers to share their reflections about this hot issue.


[1] Information available at the website of the Vice President of the Plurinational State of Bolivia: http://www.vicepresidencia.gob.bo/Gobierno-nacionaliza-Electropaz (in Spanish). Publication of Supreme Decree No. 1448 in the Bolivian official journal is still pending at the time of writing this post (http://www.gacetaoficialdebolivia.gob.bo/normas/listadonor/11; in Spanish).

[2] Iberdrola reportedly holds a 63.398% stake in Iberbolivia de Inversiones. US giant General Electric and Swedish telecommunications company Ericsson reportedly also hold minority stakes therein through a fund. See http://economia.elpais.com/economia/2012/12/29/agencias/1356804697_769350. html (in Spanish).

[3] Spanish bank Banco Santander reportedly holds a 10% stake in Electropaz. See http://economia.elpais.com/economia/2012/12/29/agencias/1356804697_769350. html (in Spanish). However, this stake seems not to have been expropriated by the Government of Bolivia.

[8] See ICSID’s list of pending cases at http://icsid.worldbank.org.

[10] See Frank G. Dawson and Burns H. Weston, “‘Prompt, Adequate and Effective’: A Universal Standard of Compensation?”, 30 Fordham L. Rev. 727 (1962).

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