Chavez military move sees O-I summon Venezuela to tribunal

By Ben Bouckley

- Last updated on GMT

Bottle producing giant Owens-Illinois (O-I) is taking Venezuela to a World Bank Tribunal, after the socialist country’s hostile nationalisation of 2 of the company’s plants last October.

After the takeover of two sites by military personnel, O-I lost $329m (243m euros) and after failing to claw the funds back direct from Venezuela O-I has now filed a claim seeking compensation with The Netherlands-based tribunal.

The World Bank International Center for Settlement and Investment Disputes (ICSID) website shows that the claim was filed on Monday, and is just one of 20 that Venezuela - led by controversial president Hugo Chaves - is fighting.

O-I is only one of many big western companies that Chavez has upset during his 12 years as president, with major foreign operations in sectors such as oil also nationalised, in measures Chavez claimed would alleviate poverty.

In March 2009, Chavez ordered the seizure of 1,500 acres of land owned by Irish packaging producer Smurfit Kappa Cartons. He also announced government plans that year to copy packing technology developed by Tetra Pak, in a bid to reduce reliance on imports and foreign firms.

Worker exploitation denied

One reason Chavez gave for the takeover was that O-I had allegedly caused environmental destruction and exploited workers in Venezuela, claims emphatically denied by the firm.

An O-I spokeswoman told FoodProductionDaily.com: “Absolutely, we deny this. We actually received several commendations from the Venezuelan government leading up to the expropriation [of the factories], for our effective handling of the environment.

“So these claims came very much out of the leftfield for us. We have an exemplary record in the community so we were surprised by that.”

In late January O-I said it was still negotiating with the Venezuelan government about the expropriation, particularly in regard to compensation.

O-I said it would obey all national laws, but that no agreement had been reached with the Chavez administration over compensation for the facilities.

These negotiations came to nothing, and the spokeswoman said: We are seeking fair compensation for the assets or plants that were seized. We are not at liberty to discuss a particular compensation value at this point, because there is a process that needs to be worked through.”

Respect for ruling

But was O-I worried that Chavez might simply reject the tribunal finding, if it favoured the firm?

The spokeswoman said: “I obviously can’t speak for what the administration is going to do. It is our intention in asking for this arbitration under the bilateral investment treaty that The Netherlands has with Venezuela that this treaty will be honoured.”

“But I can’t really speak for what he [Chavez] or his administration will do as a result of this request. The claim has been made, and as you know, O-I is just one of companies that has been through this experience and has filed claims in the World Bank’s venue for these issues.”

The administration process could be lengthy, she admitted: “We’re prepared for a lengthy legal process. There are companies that have been going through this for 5 plus years.”

Related topics: Emerging Markets

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