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Darcey O'Callaghan
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Water Company Biwater to Get Nothing from Tanzania, International Court Rules

Washington, D.C. – An international tribunal has ruled that transnational water company Biwater is entitled to nothing from Tanzania. That’s $20 million short of what the UK-based corporation wanted.

“Biwater failed the people of Tanzania, yet it had the audacity to run to an international trade court to try to get millions of dollars off of its mismanaged scheme to profit from water,” said Wenonah Hauter, executive director of Food & Water Watch. “This is fitting justice.”

The International Center for the Settlement of Investment Disputes, part of the World Bank, ruled that the Tanzanian government did breach Biwater’s investor rights by cancelling its contract with the company’s local subsidiary. However, that didn’t amount to anything financially. The subsidiary, City Water Services, was broke and had failed to meet key obligations of the privatization agreement it signed in 2003 to manage the water system of the country’s capital, Dar es Salaam. In short, the contract would have been cancelled sooner or later. The government chose the former by ending the deal in 2005.

"This ICSID ruling in favor of Tanzania is a major victory for all those who are fighting water privatization around the world,” Hauter said. “Biwater's behavior in Tanzania is an example of the intrinsic conflict between the profit-driven motives of private corporations and service provision of the most essential human need."

The International Monetary Fund and the World Bank essentially blackmailed Tanzania into privatizing water services in exchange for aid, debt relief and loans. Indeed, Biwater gained a foothold in Tanzania largely because of investment treaty between the eastern African country and the UK.

But this is not the first batch of bad Biwater news. In early January 2008, just days after it sought permission to sell shares of its Cascal subsidiary on the New York Stock Exchange, the International Arbitration Tribunal ordered the company to pay Tanzania’s water authority nearly $8 million. That court found that City Water Services had violated the contract almost from its outset in 2003 and had failed on all performance guarantees.

“I said it then and I’ll repeat it now,” Hauter said. “Biwater benefited from a non-competitive contract process and financial backing from the World Bank, but it still managed to mismanage the project.”

For more background on Biwater and the Tanzanian case, please visit www.foodandwaterwatch.org/water/waterprivatization/africa/tanzania