Case story

  • United Kingdom

OECD NCP UK - CBE vs. National Grid Transco

Zambia 2005

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Story

An African NGO, Citizens for a Better Environment (CBE), lodged a complaint under the Guidelines against National Grid Transco (NGT) in July 2003 in relation to the privatisation of Copperbelt Energy Corporation (CEC), formerly Copperbelt Power Company of Zambia Consolidated Copper Mines, which was acquired by Cinergy, a Zambian local management team and National Grid Transco.

CBE’s complaint alleged a number of breaches of the Guidelines, namely that:

  • During the negotiations for acquisition of CEC, NGT solicited (and, at vesting, obtained) concessions that tend to (a) disadvantage consumer interests on tariffs, (b) inhibit competition, (c) unduly stifle the taxation base and sustainable revenue management and (d) inhibit sound employment and industrial relations.

  • At vesting, NGT partnered with a Zambian local management team that some of whose members were in the Zambian government negotiating or technical-advisory team during the privatisation negotiations. These people did not declare their interest during the negotiations.

  • NGT has failed to take due account of the need to protect the environment, public health and safety.

The financial and tax incentives given to CEC are alleged to have resulted in an unstable macroeconomic environment by having increased the tax burden on the poor, having introduced discriminatory treatment and massive externalisation of funds. CEC’s monopoly in supplying electricity allegedly led to some mine operators being treated favourably while others have gone out of business. The complaint also alleged that CEC had failed to co-operate with its 350 employees to mitigate the effects of collective lay-offs despite the company’s wide profit margin.

Procedure

The complaint was lodged by CBE in July 2003. Initially, there was a delay while CBE supplied, at the request of the UK NCP, the specifics of its claims and supporting documentary evidence. This was provided by CBE in October 2003.

A copy of the complaint was provided to NGT on 21 July 2003 and the additional information by 14 October 2003.

NGT provided the NCP with a detailed response to the complaint on 7 November 2003. NGT asserted that the Guidelines had not been breached. NGT argued that since its investment in CEC came into force in November 1997, application of those provisions that came into existence during the 2000 revision of the Guidelines should be excluded.

NGT's response was sent to CBE on 17 November 2003. The NCP invited CBE to indicate, having reviewed the documentation, whether the response satisfied its concerns. If not, in line with the provisions of the Guidelines, the NCP would arrange a dialogue between the parties. Before requesting the NCP to arrange a dialogue, CBE indicated that it would prefer to seek clarifications from the Zambian government on a number of issues. Additionally, it wished to consult some other stakeholders. CBE would request a dialogue, if appropriate, in the light of these exchanges.

In its Final Statement, the UK NCP reports that it over the succeeding months, CBE was contacted on a regular basis by the NCP and gave several undertakings to keep the NCP informed on progress. CBE reportedly did not adhere to these undertakings, indicating that it was having difficulty in getting a response from the Zambian government.

Outcome

In March 2005, a NGT representative stated directly to the UK NCP at an OECD Watch multi-stakeholder event that the company was anxious to bring the case to a close. NGT was critical of the UK NCP for its lack of action.

In April 2005, the NCP wrote to CBE threatening to close the case. CBE replied challenging the fairness of such an action. CBE requested help in obtaining additional documentation from the Zambian parliamentary committee responsible for energy. Zambia does not have a Freedom of Information Act. Given the fact the NCP insisted on further information before the case could proceed, OECD Watch reports that CBE believed it unreasonable for the NCP to close the case.

In July 2005, the NCP closed the case citing "want of prosecution".

UK NCP statement

References

OECD Watch case story page: http://oecdwatch.org/cases/Case_34

Contributor(s): This article was modified by Kyle (3), Nicolaclayre (3), and Ejfturnbull (1).