(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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72 OECD area by European companies. [...] Traditional FDI patterns were the result of European investors’ preference for large and protected markets. Notably in the automobile and chemical industries, the size and growth of markets provided the major stimulus to FDI in the MERCOSUR region. Multinational companies used FDI mainly to overcome import barriers.” 179 While in 1991 only three European corporations where among the top ten Argentine companies, in 1999 there where already seven: YPF Repsol, Telefónica, Telecom, Supermercados Norte, Shell, Supermercados Discos and Carrefour. 180 Particularly in the business sectors, which were privatized and primarily sold to foreign corporations, like telecommunications, aviation, water and wastewater market, energy and gas, the highest percentual layoffs were implemented through firings and outsourcing in Argentina as a result of the privatizations. In terms of employee numbers, setting the index of 1990=100 shows that in 1998 the index in the telecommunications sector fell to 51, in aviation to 44, in the water and waste water sector to 52, in gas to 48 and in the energetic sector to 30. 181 According to these numbers no new jobs were created through FDI in Argentina in the nineties, instead jobs were cut. The liberalized drinking water market had turned out to be an especially sensitive area in the nineties. Between 1991 and 1999 one third of the Argentinian potable water market, which covers the water supply of nearly 60 percent of the population, was privatized. 182 The biggest takeover was the acquisition of Obras Sanitarias de la Nación (OSN) by Aguas Argentinas, of which the French Suez-Lyonnaise des Eaux holds 39.93 percent, Aguas de Barcelona holds 25.01 percent (of which Suez is the majority shareholder, next to the Spanish Endesa with 11.64% 183 ), the French Vivendi holds 7.55 percent and the British Anglian Water 184 holds 4.25 percent of the shares. 185 In 1993 Aguas Argentinas had agreed to invest 4 billion US-dollars to improve the infrastructure and expand the water pipe and sewerage systems. In exchange the Argentinian government accepted that the company’s personnel would be cut by 47% (from 7,600 to 4,000). 186 179 Ibid., p. 231. 180 Catalano, José: Las negociaciones MERCOSUR-Unión Europea: una visión desde la sociedad civil, preliminary version, December 2002, p. 34. 181 Ibid., p. 37. 182 UNCTAD: FDI AND DEVELOPMENT: The case of privatization-related services, TD/B/COM.2/EM.14/2, p. 11. 183 http://www.agbar.es/eng/nt/ntea001.htm. 184 Anglian Water is part of AWG Plc, where, among others, the Deutsche Bank AG holds shares amounting to 4.24 %. See: http://www.hemscott.co.uk/equities/company/cd02043.htm. 185 http://www.aguasargentinas.com.ar/frameset_aguas.html. 186 UNCTAD: FDI AND DEVELOPMENT: The case of privatization-related services, TD/B/COM.2/EM.14/2, p. 11.
Initially, Aguas Argentinas lowered the rates by 26.9%, but by 2001 the rates had increased by more than 100 percent. According to its board of directors between 1993 and 2001 the company had invested 1.7 billion US-dollars and had achieved an average profit rate of 23 percent during the 1990s as compared to 7-8 percent in the water industry in the United States and the United Kingdom. 187 While the company claims to have connected nearly 2 million people to the water system and 1.15 million to the sewer network between 1993 and 2001, the provincial government argues that 3.5 million people within Aguas Argentinas’ potential clients still lack water and sewage services. 188 In light of the financial crisis in Argentina, in 2002 the government abolished the “convertibility” systems that had pegged the Peso, i.e., the company’s profits could no longer be converted to the Dollar at an even parity. This led Aguas Argentinas and its Argentine subsidiaries to file complaints together with their European mother firms at the International Center for Settlement of Investment Disputes (ICSID), on the basis of the bilateral investment agreement between France and Argentina, which was signed on July 3, 1991 and came into force March 3, 1993. In addition, Argentina, at the same time as Chile and Bolivia, already ratified the ICSID-Convention, which constitutes another juridical basis for foreign investors. But as a complaint at an ad-hoc-arbitration court takes some time, Suez saw itself obligated to write-off 500 million US-dollars in its 2002 consolidated balance sheet. 189 The French Vivendi sued the Republic of Argentina alleging “violations of the BIT’s provisions on fair & equitable treatment and against expropriation without compensation” 190 in the case of its subsidiary Compañia de Aguas del Aconquija S.A. from the Tucuman region (ICSID Case N° ARB/97/3). 191 The Enron subsidiary Azurix also filed a complaint against the Republic of Argentina with the ICSID on October 23, 2001 (ICSID Case N° ARB/01/12) concerning its water concession contract. This wave of dispute cases initiated by private investors against the Republic of Argentina is not restricted to the water sector only, but also extends itself to the gas and energy sectors, where, e.g., the Belgian-French corporation Total Fina Elf has demanded a compensation of one billion US-dollars, filing with the ICSID, due to the freezing of “hydrocarbons prices and derivates, plus the devaluation of the Argentine currency” in the course of the Argentine crisis in 2002. 192 The Electricité de France, 187 Ibid. 188 Ibid. 189 Ibid. 190 Peterson, Luke Eric (International Institute for Sustainable Development – IISD): Research Note: Emerging Bilateral Investment Treaty Arbitration and Sustainable Development, August 2003, p. 9. 191 Tawil, Guido Santiago (M.& M.Bomchil, Buenos Aires): Investor-State-Arbitration : A hot issue in Latin America, 2002, p. 2. 192 Mercopress, November 11, 2003. 73
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Christian Russau Enforcement of int
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Preface Since the end of 1999 the C
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(EU) and the Common Market of the South (MERCOSUR)? - FDCL

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