Article Index

Secret Agreements

It is always tremendously difficult to unravel the wondrous and tortuous ways of Veolia & Co’s financial deals. The agreements concluded are for the most part secret. As a rule, the private partner contractually ensures that it will remain durably immune to public and lawful inspection. Even members of the Bundestag have no enforceable right to inspection. In 2000, 49,9% of the German capital city Berlin’s water services were sold to two Global Players of the water industry: RWE and Veolia. For four years, the deal appeared to be exemplary: almost two billions to fill the holes in the city’s budget, constant water prices, and the city remaining the majority shareholder. Then, however, the Berlin deputy Gerlinde Schermer, who at the time of the privatisation was a member of the economic commission, discovered secret clauses in favour of the private owners. The management of the service, for instance, was left in the hands of the Global Players, although they were only minority shareholders. Most of the Berlin deputies knew nothing of this when they endorsed the sale. Furthermore, the secret consortium agreement guaranteed to the buyers a profit of about 8% in addition to a guaranteed increase of same. Should the rate of return not be attained, the Berlin Senate would be held responsible to compensate. Consequently, in 2004, the city had to do without € 41,2 mio. The same year, the price of water increased by 15%, as it did in the following three years. In the course of the years, the land was being forced to renounce to part of its returns – otherwise, the private owners threatened to double the increase of the price of water. A ruling of the Berlin Constitutional Court stating that the expected size of the guaranteed revenue was illegal didn’t make any difference, as the consortium agreement stipulated that a compensation was due by the Berlin Senate also in the case of a subsequent court ruling – and so the pretentions of the Global Players, notwithstanding legal decisions, acts of parliament or democratic decisions, remained valid. A citizens’ initiative launched in 2007 by the Berlin Roundtable on Water and demanding the publication of the secret agreements, successful at first instance, was in the end declared illegal. Even through a referendum, the secret character of the agreements could not be put into question.