Telecom Italia, Europe's fifth-largest telecommunications company, will tomorrow ask a court in London to intervene in a dispute with the Bolivian government over the nationalisation of its holdings in the country, lawyers close to the case said.

In a bid to secure compensation from the Bolivian government, the Italian company will ask the Court of Appeal to freeze a bank account containing $49 million (£24.5 million) belonging to Entel, Bolivia's biggest provider of fixed line, broadband and mobile phone services.

Evo Morales, Bolivia's left-wing president, announced on May 1 that Entel would be returned to state control as part of an ongoing programme of nationalisation of key services such as energy, water and telecommunications. Telecom Italia owned a controlling stake in Entel through a Dutch holding company.

It is the second time this year that English judges have been asked to step in on behalf of a multinational company fighting to protect its investments in South America.

In March, the High Court overturned a record $12 billion (£6 billion) freezing order obtained by ExxonMobil against Venezuela after the US oil giant was forced to surrender majority control of its holdings to the state oil company Petróleos de Venezuela (PDVSA).

Telecom Italia paid $610 million (£305 million) for 50 per cent of Entel when it was privatised in 1995. However, it was accused by the Bolivian government of failing to live up to its investment promises and of not paying millions of dollars in taxes.

Telecom Italia denied these claims at the time as "trumped up" and "unfounded" and claimed that Mr Morales's government was violating international law.

It has sought compensation through the International Centre for Settlement of Investment Disputes (ICSID), an arbitration body linked with the World Bank. It has also applied to courts in New York and London to temporarily freeze Entel assets outside Bolivia.

Earlier this month, Mr Justice Andrew Smith, sitting at the High Court in London, refused on technical legal grounds to impose a freezing order on Entel's UK assets but the Court of Appeal agreed to an expedited one-day hearing of Telecom Italia's case.

Mr Morales, who has close ties to Venezuela's President Hugo Chavez and was elected in January 2006 partly on a platform of reprivatisation of former state assets, has already secured the return of oil and gas pipelines and refineries owned by Western companies such as Royal Dutch Shell.

But although Mr Morales has public support for his campaign, critics have warned that it could scare off foreign investment and leave his government, which can not fall back on Venezuela's vast oil and gas reserves, overstretched and unable to provide basic public services.

Telecom Italia could not be reached for comment.

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