Repsol Rattles a Saber

Here's an event that watchers of Bolivian oil and gas politics have been keeping their eye on – the threat of legal action by one or more of the foreign oil companies doing business here, as a result of the May 1 decree seeking to recover control of the nation's oil and gas.

Yesterday Repsol, the Madrid-based oil giant and one of the key corporate players here, went public with such a threat. Here's a link to today's article in Los Tiempos.

The provocation for the company's threat is not the decree itself, but related action by the Bolivian government, investigating Repsol for fraud in connection with a contract by which it sells Bolivian gas and oil to a Brazilian firm at suspiciously low prices. Repsol says the deal is legal. Bolivian authorities aren't convinced and on Friday undertook a search of the company's local subsidiary, Andina.

Repsol, whose Bolivian heads have also personally been the subject of legal investigation, issued a statement from its Madrid headquarters: "These repeated and unjustified actions obligates Repsol to take legal action in all of the forums of independent justice, national and international, in defense of its rights and those of its employees."

The threat of international legal action hangs like a Sword of Damocles over Bolivia's head, not just in oil and gas cases but in potential cases over mining and water privatization as well. The Repsol threat raises the same two questions that all the other possible cases do – How afraid should Bolivia be? Is the threat so dangerous that the new government should trim back its plans?

There are three important points to make here:

1. While the Bolivian government clearly needs to take note of the threat, it also needs to recognize that companies are going to threaten to take legal action even if they haven't decided to actually do so. "We are going to sue!" is in the same camp as, "We are going to leave the country and stop doing business here!" Sometimes if I tell my kids I am going to ground them I really am about to and other times I am just trying to get their attention. Bolivia, like adolescents, needs to get good at telling the difference.

2. While Repsol left unclear what specific legal forum they might resort to if they do, what is clear is that they have some options heavily weighted to their advantage. A favorite of multi-national corporations, for example, is the International Centre for Settlement of Investment Disputes (ICSID) based at the World Bank. Operating behind closed doors, in Washington, in English, and with both the media and citizens totally excluded from the process, ICSID was designed for global corporations and it works for them well in legal disputes with countries like Bolivia.

3. If Repsol does take legal action against Bolivia, whether for investigating corruption or for the government's plan to recover control of its energy resources, the Spanish company had better be ready for a battle that goes well beyond paying its lawyers. If it wants a preview, Repsol need look no farther than the experience of Bechtel and what happened when it sought to sue Cochabambinos after the April 2000 water revolt that kicked out the company. Bechtel's legal demand ($50 million after making investments of less than $1 million) became such a huge media and political albatross around its neck that the California mega-corporation finally tossed in the towel for a token payment of two shiny new 1 Boliviano coins last January.

The Democracy Center helped lead that fight worldwide and we have already met with activists in Spain who are ready to take the fight to Repsol, in the same fashion, if need be.