Tanzania Sued for $25 Million
Read our background memo on the Tanzania case before the World Bank court or Click here to download the PDF. Read our press release about Biwater paying $8 Million in the Tanzania Water Privatization Case here.

The corporations were much faster in hitting Tanzania with secret lawsuits in both the British High Court and the World Bank-based International Centre for Settlement of Investment Disputes (ICSID), claiming compensation for ‘future lost profits’ of $20-25 million.

World Bank-conditioned structural adjustment policies have left Tanzania’s infrastructure chronically under-funded. Less than 40% of the rural population and 70% of the urban population have access to piped water. The rest of the population must seek water from untreated sources. Women often walk up to 15 kilometers to fetch water of dubious quality. Cholera outbreaks are common. As a result the water sector alone was in need of investments in the range of US$600 million to provide water for all citizens.

With mounting responsibilities in the water sector, Tanzania’s only solution was to obey aid conditions and privatize the water system in the capital, Dar es Salaam. Tanzania received a World Bank loan of US$61.5 million in 2003, which required the country to pass enabling legislation, raise rates through increased cost-recovery and prepare for privatization of water. Additional funding was raised from other sources, such as the European Investment Bank and Agence Française de Développement; institutions not normally engaged in Tanzania, but institutions with strong connections to the European water corporations that were vying for a contract. The bulk of the funds for the project were raised through loans – funds that will have to be repaid by the Tanzanian people on top of the increased rates that followed privatization.

Read ActionAid's report on the Dar es Salaam privatization : “Turning off the Taps: Donor conditionality and water privatisation in Dar es Salaam, Tanzania”

A 10-year contract was signed with British Biwater and German Gauff Ingenieure – but ‘unprofitable areas’ – where the poor reside – were given to non-governmental organizations and not part of the area of the private responsibility.

While the two foreign corporations got the big slice of the pie – it was quickly apparent that they were still not able to live up to their contractual responsibility. The corporations neglected contract payments and did not make investments as required. Meanwhile water rates skyrocketed and residents grew increasingly unhappy with the service. The impact on poor residents was concerning from the outset.

The apparent collapse of the project became apparent in 2005 as the corporations continued to neglect installation of pipes to households, not making investments as required, declining water quality and decreasing revenues of the system. On May 24, 2005, the (then) water minister, Edward Lowassa, expelled the executives from the country. Papers carried the story of the failing flagship of water privatization.

The case of Dar es Salaam has once again proved that privatization of water is not a solution to solve the global need for access to water. But the struggle for water in Tanzania is not over. The corporations are using secret international courts to make Tanzania pay for its failure to perform. Read more about the legal wrangling.

Biwater v Tanzania: A Civil Society Perspective

Background on the Case

In 2005, the government of Tanzania canceled a water privatization deal with British-based Biwater, just two years into a ten-year contract. The controversial contract had excluded the poorest neighborhoods from service. Biwater responded to the cancellation by filing a claim with ICSID.

The case has received significant publicity, especially in Britain, where the newspaper The Observer ran the headline “UK water giant to sue debt-laden Tanzania.” Biwater complained to ICSID that the Tanzanian government’s release of documents had stoked media and NGO scrutiny and criticism and asked for a ruling that the parties be barred from disclosing correspondence exchanged between them and refrain from disclosing copies of pleadings to third parties.

The Tanzanian government opposed these moves by Biwater and argued for greater transparency in the conduct of the case. However, the tribunal ruled that in the absence of agreement between the parties they should refrain from disclosing minutes, records, documents produced by the opposing party, witness statements, expert reports and correspondence between the parties. While many of the documents will remain secret, the tribunal did agree to accept an amicus curiae brief from affected civil society organizations. The case is scheduled to be heard in April 2007.

Interview with Mussa Billegeya, (Tanzania Association of NGOs- TANGO)

How do Tanzanians feel about the ICSID case that the British company Biwater has filed against the government for US$25 million?
It isn’t clear for many Tanzanians what exactly happened beyond the failure of the water company. Most people in Tanzania don’t know anything about ICSID. They might know about World Bank conditionalities and trade agreements – this is something we in Tanzania have grown used to – and exploited by. We know that the international financial and trade systems don’t work in our favor. But, when Tanzanians hear about the Biwater case in ICSID they feel that it’s part of the global operation that works against poor countries, that works against their sovereignty. While most people do not know about the specifics of he case, they know it’s part of the system working against poor countries.

What is Biwater trying to achieve?
After Biwater defaulted on the contract – I remember in one of their press releases from 2005 – they said that the government of Tanzania took the property from them. They said that the government cancelled the contract. Biwater is trying to tell the world that it’s a political move by the government against their company. What they really wanted is to win the support of the outside world, and present the case as if they did a good job in Tanzania. Their story is that the government was at fault, not Biwater. They want money that they claim they lost when the contract was cancelled. But the real story for Tanzanians and residents in Dar es Salaam is quite different.

What happened when Biwater took over the water system in Dar es Salaam?
The water system was leased to a consortium, led by Biwater, in 2003. The intention was to improve the system. But Biwater never performed well under the terms of the contract. They were supposed to increase revenue, but they couldn’t collect the water fees. They didn’t even pay the lease fee to the government. They owed around US$ 3.5 million to the government in 2005. They did not contribute to a collection fund that was meant for the poorest people. They were doing almost none of what they were supposed to do. Biwater was supposed to inject $8.5 million of capital but they fell far short of that.

 

What did it mean to people in Dar es Salaam?
All the local NGOs had spoken out against the privatization before it even happened. Everyone on the ground had spoken out against it. There was no evidence that water privatization was going to work. But there was nothing we could do. It was part of the conditions from the World Bank. People didn’t feel that the project belonged to them. For most of the people absolutely nothing changed. It seemed like a waste of money. Many people were only getting water 1-2 times a month. I remember that there was a large outbreak of water borne diseases as people couldn’t access clean water. Now that the system has been returned to the public there’s more oversight and regulation. And more people are getting water.

Learn about the case Biwater v. Tanzania from a civil society perspective.