This case was heard at the International Centre for the Settlement of Investment Disputes (ICSID). In 2003, a subsidiary of Biwater, City Water Services, took on a water privatisation contract in Dar es Salaam. The Tanzanian government cancelled the contract after less than two years, citing City Water Services’ failure to meet the targets set in the contract. One of City Water’s parent companies, controlled by Biwater, launched this legal action alleging its investor rights had been breached and sought damages from the Tanzanian government. The Tribunal has found that while technical breaches of Biwater’s investor rights did occur, Biwater was not entitled to compensation because the breaches were worth zero in monetary value and that the termination of the contract was inevitable.
The policy of water privatisation was imposed on Tanzania via a series of conditions set by the International Monetary Fund and the World Bank in return for aid, debt relief and cheap loans. The UK government supplied millions in aid to support the wider Tanzanian privatisation programme.
The World Development Movement has campaigned against the use of aid money to push water privatisation policies in developing countries for many years and it has been following this case closely.
Benedict Southworth, the World Development Movement’s director said:
“This is a good day for the people of Tanzania and an embarrassing day for Biwater. Biwater has been incredibly greedy to think that the government of Tanzania owed them $20 million when it was clear that their subsidiary was kicked out of Tanzania for not fulfilling its contract. In papers revealed during this tribunal, Biwater’s own chairman talks of ‘corporate failure all the way to Dorking’ where Biwater has its HQ.
“Questions remain however over whether Biwater and its UK shareholders will honour the debts of City Water Services and pay the £3 million plus £500,000 that the Tanzanian authorities were awarded in January 2008 in a separate case. Biwater at the very least owes the people of Tanzania an apology and the UK government, should formally end support for water privatisation as a ‘solution’ to the global water crisis.
“Tanzania is one of the poorest countries in the world and it is clear that water privatisation was a failed policy pushed by the World Bank in return for debt relief. Hopefully now, the government of Tanzania can put the Biwater water privatisation fiasco behind it and focus on making the much-needed improvements to water and sanitation in Tanzania.”
Mussa Billegeya from the Tanzanian Association of NGOs said,
"The whole process of privatising water services in Dar es Salaam was opposed by civil society here. However, under pressure from the World Bank, the government of Tanzania moved on with the privatisation. The subsequent failure of this policy and now the legal case should be a lesson to the World Bank, aid donors and governments that privatisation is not a solution for problems in developing countries. In fact, this failure has added a burden to a country that is already struggling to reach its international poverty targets on access to water."
Fact Box about the case, Biwater, the UK government and Tanzania
- Tanzania is ranked as the 159th poorest country in the world according to the United Nations
- The UK government gave nearly £10 million in aid to support the whole privatisation programme in Tanzania between 1998-2004; £273,000 of this funded a pop song promoting the benefits of privatisation
- 98 per cent of the funds to support the water privatisation in Dar were to be spent in the areas where the richest 20 per cent of the population lived.
- The Tanzanian government gave several reasons when it cancelled the contract in May 2005, including the collapse of the contract re-negotiations. City Water Services had breached a number of provisions in the contract including the failure to deposit the appropriate funds to help connect new communities to water services.
- This case was heard at ICSID which is part of the World Bank. It mediates between countries and private investors. The case was heard behind closed doors when Biwater rejected an application for a public hearing.
- After City Water’s contract was cancelled, a new public corporation - Dar es Salaam Water and Sewerage Corporation - took over. The World Bank continued its loan despite the change in operator.
For more information, personal testimonies residents in Dar es Salaam in Tanzania, comment or to receive a copy of the media briefing please call Kate Blagojevic on 020 7820 4900 / 07711 875 345. ISDN available.