Criticism of the million-dollar compensation by the Mexican government to multinational company, Abengoa


June 21, 2013

A collection of ecological and social action groups – Ecologistas en
Acción, l’Observatori del Deute en la Globalització (ODG), el Col-lectiu
Respostes a les Empreses Transnacionals (RETS) y Enginyeria Sense
Fronteres (ESF) – have rejected the decision of the International Centre
for Settlement of Investment Disputes (ICSID) to compensate the Spanish
multinational Abengoa for impeding the use of a hazardous waste deposit
that was planned to be installed in Mexico.  The plant, located near a
protected area and less than 500m from an indigenous community, had been
subject to massive rejection and aversion from the municipality where it
was to be located.

The Mexican government had recently recognised the need to compensate
Befesa, ex-subsidiary of the energy multinational Abengoa, for the refusal
on behalf of the municipality of Zimapán (in the state of Hidalgo, Mexico)
to issue a usage license for a hazardous waste deposit located 2km from a
Natural Reserve and less than 500m from an indigenous community.  The
local mayor, acting in his executive capacity, decided not to issue the
license following local protests, which warned of the dangerous impacts of
the plant and highlighted national and international campaigns of support
for local groups.

Following the blockage of the operation of the waste deposit, on the 22nd
of September 2009, the Spanish multinational, together with the Spanish
Development Funding Company – in Spanish, Compañía Española de
Financiación del Desarrollo (COFIDES) – brought a suit against the Central
American nation in the International Centre for Settlement of Investment
Disputes (ICSID), a body affiliated to and dependent on the World Bank.
The resolution of the case has sentenced Mexico to the payment of a sum
estimated at between 42 and 45 million dollars, money which could be
better used for social and environmental objectives.

For the organizations involved, this resolution is more evidence of the
power of multinational corporations regarding the social and environmental
rights of local communities, in support of neoliberal globalization and
ideology.  The appeal was lodged outside the normal process outlined in
the bilateral treaty signed between the Spanish and Mexican governments in
1995, which allows multinational corporations to bring suits against
signatory countries before international arbitration tribunals of dubious
transparency and equality, such as ICSID, and evading normal legal

These types of legal mechanisms, known as Dispute Resolution between
Investors (foreign) and States, are usually included in Bilateral
Investment Treaties and Free Trade Agreements, and have been criticised as
their resolutions are usually found to favor multinational companies, and
their mere existence belies the pressure placed on implicated countries to
not improve social and environmental legislation.

The case of the hazardous waste plant of Zimapán is one example of this
issue.  Despite concealing information regarding the dangers of the plant
and never having consulted the local community, Abengoa has tried to
pressure the municipality into following their plans, diminishing the
social and environmental rights of the community.  This is not the first
time that Abengoa has used this strategy.  Following the water dispute in
Cochabamba, Bolivia – result of a disproportionate increase in fees –
Abengoa brought Bolivia before the ICSID.

Worse still is the fact that the Spanish Government, through COFIDES, has
supported the suit of Abengoa in ICSID, as it shows that their principal
concern lies with multinational companies.  In a time in which the public
sector is suffering funding cuts, the Spanish executive is using public
resources for the economic benefit of a small, privileged sector.  The
money used to defend Abengoa could be used to support social services,
instead of dedicating these funds to violate social and environmental
rights of communities in foreign countries.

For these reasons, the organizations here cited show their support with
the Municipality of Zimapán, and the movement ‘We are all Zimapán’ (in
Spanish, ‘Todos somos Zimapán’) to resist the hazardous waste plant.  At
the same time, they urge Befesa-Abengoa and COFIDES to relinquish the
money demanded by ICSID.  Finally, they demand that the Mexican and
Spanish governments revoke the Bilateral Investment Treaty signed in 1995.