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Maryknoll Office for Global Concerns signs letter to Suez shareholders,

asking for an end to legal disputes over water

May 2006 

On May 5, 2006 Suez (a company that has been involved in water privatization in a number of impoverished countries) held its annual shareholder meeting in Paris, France. U.S. shareholder Boston Common Assets lent its proxy to enable the statement below to be read and delivered during the Suez shareholder meeting. The letter asks Suez to end immediately spurious legal proceedings brought against Argentina over water issues before the World Bank-affiliated International Center for the Settlement of Investment Disputes; the letter also makes a number of demands regarding the provision of water in communities in Argentina and Bolivia, two of the places that Suez operates.

Released May 5, 2006

Open letter to all Suez shareholders, the Suez Board of Directors, and Suez Chief Executive Officer Gerard Mestrallet:

We, the undersigned organizations from around the world, write this letter to demand that Suez immediately end the legal proceedings and withdraw all claims brought before the World Bank-affiliated International Centre for the Settlement of Investment Disputes (ICSID).

The legal claims of Suez have no ethical foundation and are merely designed to threaten governments and to protect the unjust and illegitimate earnings of the company and expand its profits. Around the world Suez has placed profit over the human right to water by raising water rates, cutting off the water of people unable to pay, refusing to extend services to poor neighborhoods, violating water quality standards, and contaminating public waters.

All Suez cases pending before ICSID should be immediately terminated. These include the following cases: 

Aguas Provinciales de Santa Fe S.A., Suez, Sociedad General de Aguas de Barcelona S.A. and Interagua Servicios Integrales de Agua S.A. v. Argentine Republic (Case No. ARB/03/17) Amount: US$310 million

Aguas Cordobesas S.A., Suez, and Sociedad General de Aguas de Barcelona S.A. v. Argentine Republic (Case No. ARB/03/18) Amount: US$100 million

Aguas Argentinas S.A. Suez, Sociedad General de Aguas de Barcelona S.A. and Vivendi Universal S.A. v. Argentine Republic (Case No.ARB/03/19) Amount: US$1.7 billion

 
TOTAL AMOUNT: US$2.11 billion


Suez, a multinational corporation with total revenues in 2005 increasing nine percent to EUR 41.5 billion, should not be using ICSID to demand payments of US$2.11 billion from a country like Argentina whose debt is already more than 75 percent of GDP. Increasing Argentina’s debt with spurious legal claims like those Suez has filed with ICSID would only further deprive the country of needed social investments in basic services such as education, health care and clean water.


We respectfully demand that Suez drop all ICSID legal claims and refrain from filing all such cases in the future.


APPENDIX I

Specific demands regarding Suez concession in Santa Fe

1. Suez should withdraw the claims that it has presented in ICSID. Suez requested that the operation bonds be in pesos, which was conceded, but it is then hypocritical to try to dollarize the consumer water rates, especially as the entire contract was originally in pesos except for the bonds.

2. Suez should return the 13.85 percent tariff increase charged to consumers since 4-28-99. This tariff increase was supposed to be set aside for projects to expand service into the poorest neighborhoods, which never happened. Although the grantor postponed certain projects in accordance with its obligations, Suez was never authorized to withdraw from the concession without completing these projects.

3. Suez should pay legal compensation to the residents of Villa Gobernador Galvez who during the summers of 2003, 2004, and 2005 suffered from general lack of water pressure, and for the third of the city who had their water service completely cut off.

4. Suez should pay legal compensation to the residents that requested water meters from 2002 onwards and whom were systematically ignored by the company in order to continue to charge them for higher rates.

5. Suez should pay legal compensation to the city of Rosario for the deterioration of public roads, because Suez did not fulfill its contractual obligation to rehabilitate the central water main, which caused the streets to flood after regular precipitation.

Specific demands regarding Suez concession in La Paz/El Alto, Bolivia

The Bolivian social movement demands that the company Aguas del Illimani Sociedad Anónima (AISA), subsidiary of Suez, abandon its concession in the cities of La Paz and El Alto without demanding legal compensation and without suing the Bolivian state. The company should recognize that for each million dollars that the State must spend in legal fees or settlements, there are at least 7,000 poor families living in the most abandoned regions who do not have potable water or sewage.

The partners of Suez should know that a large amount of the investments that the company made in the cities of La Paz and El Alto were done with financial contributions from the residents themselves. And the worst is that in all the process of evaluation of investment, there was no financial audit. There was no transparency in the bookkeeping for the company’s investments, given that it was company managers and trustees themselves who did the external audit.

Specific demands regarding Suez concession in Cordoba, Argentina

The water concession in Cordoba, Argentina has been, since 1997 in the hands of Aguas Cordobesas, subsidiary of SUEZ ONDEO, and the current composition of shareholders is Suez, Aguas de Barcelona (AGBAR) 56 percent, Banco de Galicia 12 percent and Grupo Roggio Invesora 16 percent. After a long process of renegotiation the company imposed on the province of Cordoba a law passed December 28, 2005 that extended the contract for 27 years more and granted Suez a consumer rate increase of 100 percent to 500 percent or even more in some cases, dividing the city into seven zones according to criteria that made the operation most profitable for the company. This unjust rate structure was disguised as a cross-subsidy that would benefit the poorest sectors of society. The neoliberal government of the Province of Cordoba, working closely with the company, then granted Suez a pardon for its non-payment of taxes from 2002 to 2006 and an extension for two years beyond the date of renegotiation (from 2006 to 2008).


The new tariff structure and the unjust conditions of the contract ensured that its practical application would be impossible. However, when it appeared that this law would be forced into effect in 2006 the Popular Commission for Reclaiming Water organized a succession of mobilizations and neighborhood assemblies that caused the government and the company to concede and withdraw the tariff increases. The Governor was forced to revise his proposal reducing the increase to between 15 percent and 18 percent and to substitute this tariff hike with a subsidy of 9,600.000 pesos annually for the next two years. However the Law 9279 that originally authorized the consumer rate hike and the concessions to Suez has, at this time, still not been repealed although the withdrawal of Suez in an orderly fashion has been announced.


Noncompliance with the original contract (July 1997 to December 2005)

The contractual offer presented by Suez was conditioned (contrary to the terms outlined in the request for bid documents) in such a way as to permit unilateral alterations by the company which enabled it to decide independently on projects, quality levels, etc. and outline goals and objectives without identifying the means.

The system of treatment and purification of the water implemented by Suez was inadequate and dangerous in relation to the health of the population and generated trihalometano that has carcinogenic effects. The situation was so serious that event the official consultant disqualified Suez because of the unilateral conditions in the contract and the water treatment purification system proposed.

Although Suez promised to reduce consumer water rates this obligation was avoided by changing water bills from bi-monthly (every two months) to monthly in such a way as to double water rates. This was a way of dollarizing the payments.

Suez avoided necessary rehabilitation of the water system by reducing the water pressure of the network in large areas around the city.

Suez denied responsibility for years to integrate into the network marginalized neighborhoods that were poorly served by cooperatives or small private businesses.

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