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Nestle $6 Million Claim Against Ethiopia Provokes Controversy - 2002-12-21

The Swiss-based Nestle corporation has provoked a controversy by asking Ethiopia to pay compensation for the nationalization of a food company in the 1970s.

The story began in 1975, when Addis Ababa's then-military government nationalized the Ethiopian Livestock Development Company, the subsidiary of a German food group Nestle later acquired. In 2001, Nestle filed a $6 million claim against the Ethiopian government, saying it views payment for lost property as a matter of principle.

The action by one of the world's leading chocolate-makers has sparked outrage at Oxfam, a British-based development agency that has provided aid to Ethiopia. Oxfam policy analyst Sophia Tickell agrees Nestle is on solid legal ground. However, she said the company should drop its claim, since Ethiopia is in the midst of a severe drought and could face famine next year.

"We know, because we have a program in Ethiopia, firsthand, the implications and what is actually facing the 11 million people in Ethiopia who are facing extreme hunger at the moment," said Ms. Tickell. "We do not think this is a time that the Ethiopian government should be paying out any money from the country. They are very, very poor. This is the poorest country in the world."

Oxfam statements against Nestle may have led the Swiss corporate group to soften its stance a bit. On Friday, Nestle spokesman Francois Perroud said recouping $6 million had never been the company's final goal, but only a starting point for negotiations with Ethiopia. He said the company had been willing to negotiate all along and took a very dim view of what Mr. Perroud called a misleading media campaign by Oxfam.

"If Oxfam had bothered to contact us before launching a campaign which is based on wrong assumptions and a wrong understanding of the whole issue, they might have been told all of these things," he explained. "I think that what is important is that Nestle is quite willing to meet the Ethiopian government's situation. We are quite willing to be flexible regarding the amount of the claim. We are very flexible regarding the timing and very flexible with regard to modalities."

But pressure on the Swiss-based company may have had an impact. Nestle now says it might accept Ethiopia's offer of $1.5 million in compensation.

Oxfam points out the nationalization occurred 27 years ago and under a different government. The group says Nestle should simply let bygones be bygones and let Ethiopia feed its poor as best it can.