(Arbitration Watch) By Luke Eric Peterson

A handful of multinational energy firms are on the verge of sending notices of dispute to Bolivia - which would set in motion mandatory periods for consultations, after which the firms may turn to international arbitration
under investment treaties.

According to a source familiar with the pending notices of dispute, the foreign energy firms object to a series of actions, decrees and measures taken by the Bolivian Government in recent months, culminating in the recent
passage of a new Hydrocarbons law.  

In recent months, Bolivia has been roiled by social unrest as indigenous protestors have pushed for nationalization of Bolivian natural resources.

In response to political and social pressure, Bolivia's Congress passed a new Hydrocarbons Law last month, levying a new tax of 32% on hydrocarbons.

Two lawyers familiar with investments made by international energy firms in Bolivia, but who declined to be named due to confidentiality concerns, note that the tax, which will be added to existing royalty payments of 18%, raises the effective royalty rate to 50%, thus imperiling the profitability of existing investments in Bolivia's natural gas industry.

The new Hydrocarbons law also forces energy companies to enter into new contracts with the Government within a six month timeframe.

At least five foreign firms are understood to be mulling potential arbitral claims against Bolivia in the near term: Repsol YPF, British Gas, Total, Pan-American and Vintage Petroleum.

Earlier this month, social unrest led to the resignation of Bolivian President Carlos Mesa and to the appointment of a caretaker President, former Supreme Court Chief Justice Eduardo Rodriguez. Demands continue to be
made for the outright nationalization of the Bolivian gas industry.