Representatives of Swiss food giant Nestlé and the Ethiopian government have signed an agreement reimbursing Nestlé approximately US$1.5m for a long-standing property claim on the part of Nestlé Germany.

The property, a meat processing business, had been nationalised in 1975 by the government then in power and sold to a private investor in 1998.

The Vevey-based company, which reported profits of $3.9bn in the first six months of 2002, was refusing to accept the $1.5m being offered by the government of Ethiopia, and was instead demanding the government pay the full $6m Nestlé believed it was owed.

International aid agencies such as Oxfam condemned Nestlé’s demands. "This is a company that has said publicly that one of the things it wants to do in the world is to help make poor people better off. This is a company that is trying to squeeze out of one of the poorest countries in the world $6m," Oxfam's director of policy in the UK, Justin Forsyth, was quoted as saying by BBC Online.

In response to the public outrage created by its demands, Nestlé was forced to hold an emergency meeting at its Swiss headquarters to assess damage to public relations.

The company then promised to invest any money it received from Ethiopia back into the country, but campaigners repeated calls for Nestlé to give up on its demand. "I hope that Nestle reconsiders and realises they don't need the money as much as Ethiopia. I hope they drop the issue altogether," Sophia Tickell, senior policy analyst at Oxfam, was reported as saying by the Guardian website.

Nestlé, however, remained firm that it was in Ethiopia’s best interest to pay up. "It is in the Ethiopian government's interest to reach a deal as a way to ensure continued flows of foreign direct investment in the country," Francois Perroud, a company spokesman, was quoted by the Guardian as saying. "We are flexible about the timing and the amount but we are not flexible about the principle."

As indicated in a statement by Nestlé CEO Peter Brabeck dated 23 December 2002, the settlement proceeds will be immediately contributed upon receipt to famine relief efforts in Ethiopia. The first proceeds of the settlement will be received within 30 days, and donations will be made to humanitarian organisations working with the Ethiopian government in providing emergency food aid.

For more information about Nestlé's claim, just-food members click here.