Bolivia Pulls Out of World Bank Trade Court

It is an institution little known outside the world of international corporate attorneys, but it can assert power greater than national governments. It is called the International Centre for Settlement of Investment Disputes (ISCID), a secretive trade court operated by the World Bank in Washington.

This week three Latin Governments began the process of unraveling its powers. At a summit meeting the governments of Bolivia, Venezuela, and Nicaragua announced that they were ending their participation in ICSID. They are pulling out. The move is an important event in the evolving politics of global trade.

ICSID is the same trade court handpicked by the U.S. Bechtel Corporation, in its unsuccessful effort to sue Bolivians for $50 million in the aftermath of the Cochabamba Water Revolt that ousted the company. The ICSID process is highly secretive. The public and the media aren't allowed to know when or where case tribunals meet, who testifies or what they say. An international pressure campaign waged by more than 300 groups in 43 countries eventually led Bechtel officials to drop their case in January 2006, for a token payment equal to thirty cents. Read more about the case here.

The three Latin American governments declared at a summit in Merida, Venezuela, "[We] emphatically reject the legal, media and diplomatic pressure of some multinationals that ... resist the sovereign rulings of countries, making threats and initiating suits in international arbitration."

The Washington-based Institute for Policy Studies and Food & Water Watch just released a report analyzing how the World Bank/ICSID dispute resolution process "has given global companies unprecedented power to undermine governments’ authority to protect human rights and natural resources and pursue national development strategies." That report can be read here.

The ability of Bolivia and the other countries to completely disengage from ICSID still remains in some doubt. What binds Bolivia to the World Bank trade court is not Bolivian law but a whole set of bilateral trade agreements with other countries that invoke ICSID as the agreed to mechanism for arbitration. According to one attorney familiar with the process, many of those agreements allow for dispute resolution to take place through other mechanisms that are less secretive and more balanced in terms of national rights. However, other agreements only invoke ICSID as the arbiter and in those cases Bolivia will have to negotiate new arrangements.

In a world of tightening global economic rules, most written to favor corporations just like Bechtel, ICSID has become a major policeman. To be sure, governments and investors will not always see eye to eye on things after contracts are signed and disputes will need to be settled fairly. But that should not be a license to do so in secret, hidden even from those who will bear the cost, in cash, or in the repeal of important environmental and consumer protections.

Saying "hasta la vista" to ICSID is a step toward reclaiming sovereignty and it should not come us a surprise if other countries start to follow Bolivia's lead.