(By Damon Vis-Dunbar and Luke Eric Peterson)

A Chilean chemical firm has initiated arbitration proceedings at the International Centre for the Settlement of Investment Disputes (ICSID), claiming that its Bolivian mining company was expropriated, in breach of a Bolivia-Chile bilateral investment treaty.

Quimica e Industrial del Borax Limitada (Quiborax), which has a 50.99 per cent stake in the Bolivian mining company Non Metallic Minerals (NMM), saw its mining concession rescinded in the summer of 2004. NMM exploits the mineral ulexite in Salar de Uyuni, in the southern region of Bolivia.

Explaining the decision to rescind the mining concession, a Bolivian spokesperson was quoted in the trade publication Industrial Minerals as saying:

"The company has systematically withheld information from the national customs regarding taxes and for the purpose of auditing. Additionally, it was verified that the exports of ulexite declared by the company do not coincide with the cargo volumes transported. Due to this, there is evidence of economic damage to the Bolivian state."

NMM was given 30 days to hand over all "physical property" to the local governing department.

The Claimants deny these allegations and insist that their license was rescinded due to anti-Chilean sentiments which swelled in 2003, says Andres Jana Linetzky of the Chilean firm Alvarez, Hinzpeter, Jana & Valle, who has been retained as counsel for Quiborax.

This particular series of Bolivian protests in 2003 was sparked by a plan to export natural gas to the US through a pipeline that ran through Chile. Bolivia and Chile have long been uneasy neighbours, notes Linetzky, stretching back to 1879 when Chile blocked Bolivia's access to the Pacific.

Quiborox claims that public hostility was also directed towards its mining operations during this time, and that the administration of then President Carlos Mesa helped fan public opposition to Chilean businesses, leading eventually to a rescinding of NMM's operating license in 2004.

The arbitration was registered by the ICSID facility on February 6.

Recently, Bolivia reached a settlement with Aguas del Tunari in a much-publicized ICSID arbitration arising out of a failed water privatization in the city of Cochabamba. The settlement came on the heels of a ruling by the presiding tribunal which had upheld jurisdiction to hear the investor's claims under the Netherlands-Bolivia bilateral investment treaty. (See: "Bolivian water dispute settled, Bechtel forgoes compensation", ITN, January 20, 2006, available on-line at: http://www.iisd.org/pdf/2006/itn_jan20_2006.pdf)

The threat of other arbitrations has hung over Bolivia for more than a year, as a number of foreign energy firms have warned that changes to existing hydrocarbons contracts could trigger violations of bilateral investment treaties concluded by Bolivia. (See: "Lawyers keep powder dry as Bolivian election looms", ITN, Dec.14, 2005, available on-line
at: http://www.iisd.org/pdf/2005/itn_dec14_2005.pdf)

Sources:

ITN interviews

"Bolivian borates dispute", Industrial Minerals, August 2004