Bolivia settles bitterly-contested arbitration with Telecom Italia; UK power company prepared to pursue arbitration over power generation nationalization

November 25, 2010

Source: IAReporter

By Luke Eric Peterson

An Italian telecoms firm, Telecom Italia, has walked away from a bitterly-fought arbitration with the Plurinational State of Bolivia with $100 Million (US) in compensation, as well as certain service-provision plans for the future.

Telecom Italia had sought some $250 Million (US) following the 2007 nationalization of its investments in the Bolivian telecoms firm Entel.

Telecom Italia’s Dutch subsidiary, EuroTelecom International, insisted upon suing Bolivia at the Washington-based International Centre for Settlement of Investment Dispute, rather than in an ad-hoc arbitral proceeding. The choice of the ICSID venue angered Bolivian officials who protested that the case should not proceed due to Bolivia’s having withdrawn from ICSID in 2007.

As previously chronicled by IAReporter, the two sides struck an apparent deal in 2009 to shift the case out of ICSID and into a less politically-contentious (for Bolivia) ad-hoc arbitral proceeding.* However, Bolivia later renounced this deal, and alleged that a key official exceeded her authority by brokering the move from ICSID (and a waiver of Bolivia’s jurisdictional objections to the expropriation claim). Bolivia turned up the heat this autumn, when it sought an injunction from a U.S. Federal Court in an effort to halt the pending ad-hoc arbitration proceedings.**

Notwithstanding that the injunction bid might not have arrested the arbitration, Bolivia’s increasingly aggressive tactics across the broader number of its international arbitration cases*** may have encouraged Telecom Italia to take partial compensation and draw a line under the dispute.

In a recent announcement, Telecom Italia says that the $100 Million US settlement will end all litigation related to the Entel controversy. In addition, the company and Bolivia touted the fact that Entel Bolivia will purchase some international wholesale services from members of the Telecom Italia corporate family “through multi-year commercial contracts valued at US$16 million that will be underwritten by the parties within the next few days.”****

The law firm Cleary Gottlieb represented the claimant. Bolivia is represented by Dechert LLP.

UK firm and US subsidiary threaten claim over power generator nationalization

In other Bolivian developments, the UK power company Rurelec PLC has announced that it may pursue international arbitration over compensation owed as a result of the May, 2010 nationalization of its interests in a Bolivian power generation company, Guaracachi.****

The firm, and its U.S. subsidiary, Guaracachi America Inc (“GAI”), filed so-called “notices of dispute” earlier in the year, and the mandatory waiting period prescribed under Bolvia’s investment protection treaties with the U.S. and U.K. has since expired.

The firm has retained the law firm Freshfields to provide advice.

* For our past reporting on the Telecom Italia arbitration see this link:

** For our recent reporting on Bolvia’s move to enjoin the arbitration see this link:

*** For a broader report on Bolvia’s handling of its international arbitration cases see this link:

**** See Telecom Italia’s press release here:

***** See Rurelec’s announcement here: