Academic journal article Boston College International and Comparative Law Review

Globalization of Water Privatization: Ramifications of Investor-State Disputes in the "Blue Gold" Economy

Academic journal article Boston College International and Comparative Law Review

Globalization of Water Privatization: Ramifications of Investor-State Disputes in the "Blue Gold" Economy

Article excerpt

INTRODUCTION

Water is often perceived as an infinite natural resource. Unfortunately, the tragic reality is it maintains a fixed invariable volume with less than three percent consisting of fresh water.1 Never before has the inherent ten- sion of scarcity versus overconsumption in the relationship between man and water reached such a critical point.2 Accordingly, Earth's water supply faces many newfound demands and challenges in the years ahead.3

Water, Earth's "blue gold," is its most precious and essential commodity. It is fundamental to all aspects of drinking, eating, maintaining hygiene, and promoting population health. Water is basic to the preservation of most ecosystems and crucial to a safe and long lasting environment. Moreover, it is critical to several types of businesses and industries.4 It not only maintains social stability and environmental sustainability, but also fosters economic development across civilizations.5 Consequently, access to clean water has been recognized by the United Nations (UN) as a basic human right that every government is obligated to provide.6

The world of water services changed significantly in the late 1990s due to an extraordinary boom in global population growth.7 The sustained population increase sparked a need for water services expansion.8 Opportunities for investment in water services and sanitation infrastructure attracted tremendous support from a myriad of international financial institutions.9 These institutions unlocked a host of new business opportunities for the water services and sanitation industry to address traditional problems ranging from fresh water scarcity to inadequate investment in sanitation infrastructure to the inability of many public authorities to meet coverage needs.10 Coverage and accessibility, even at the most elementary level, necessitate functional water services and sanitation facilities.11

The inability of public authorities to provide coverage to their citizens prompted a rise in water-services privatization contracts between foreign investors and states, such that 10 percent of global consumers now receive their water from private companies.12 Today, a growing number of businesses are engaging with the water services industry.13 It is estimated that by 2025, annual spending on water infrastructure in OECD countries will exceed $1 trillion. 14 New technologies and the need for additional infrastructure investment will certainly increase demand in the market, potentially spawning billion dollar valuations. Such economic promise and opportunity largely explains why water has earned the moniker of Earth's "blue gold."

No international regime or regulatory body responsible for sanitation and water services exists. The growing execution of international investment treaties in the water sector, however, has resulted in the slow emergence of an international economic form of governance for cross-border sanitation and water services. This Article explores the increased role of investment treaties in the context of disputes and investment arbitration and provides the first exhaustive analysis of this burgeoning water regime.

Part I of this Article provides an introduction to the cross-border sanitation and water-services regime. Part II analyzes the typology of water services in international water disputes. Part III outlines a number of multimillion dollar water investment disputes as held by the World Bank International Center for Settlement of Investment Disputes (ICSID). Part IV affords an exhaustive review of the entire case law related to water service disputes and identifies recurring issues and scenarios present in classic "blue gold" disputes. Part V examines the three key investment principles that currently form the backbone of the emerging international economic governance of sanitation and water services. Finally, this Article concludes with outstanding issues and foreshadows potential concerns facing the "blue gold" regime in the years ahead. …

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