The case analyzed in this article is very important, because it embodies the dispute resolution mechanism envisioned in three pending trade treaties (“Trust Me, Charlies Brown,” SLL, 6/16/15). From Don Quijones at wolfstreet.com:
A secluded private courthouse in Washington DC is currently the scene of a gargantuan legal battle that could have serious ramifications for all of us. Yet virtually nobody knows about it.
On one side of the battle is the tiny, poverty-crippled Central American nation of El Salvador; on the other is Pacific Rim, a Canadian mining company that was acquired by the Australian corporation Oceana Gold in 2013. At stake is the basic issue of who owns what in tomorrow’s world.
Putting Gold Before Water
In 2009, Pacific Rim filed a private lawsuit – what is referred to in the impenetrable jargon of modern globalism as an Investor-State Dispute Settlement (ISDS) – against the government of El Salvador for $301 million, equivalent to just over 2% of the country’s $24 billion GDP. As BBC World reports (in Spanish), the amount is equivalent to three years’ combined public spending on health, education and security.
The company argues that El Salvador unfairly denied its mining permit after it began an exploration process for gold mining, costing it hundreds of millions of dollars of “potential future profits.”
ISDS was originally intended to insulate investors from the costly consequences of expropriation, but it is now increasingly being used by companies to claim future profits foregone as a result of government legislation aimed at protecting the public, as well as to intimidate governments into changing or abandoning such legislation.
In the case of El Salvador, the government changed its mining legislation in order to safeguard the nation’s water supply. As Ciara Nugent writes in the Argentina Independent, a startling 97% of its water is currently unsuitable for human consumption, primarily as a result of the mining activities of companies like Pacific Rim. The miner’s proposed new project, due to take place in the northern San Isidro de Cabañas region, would have implied risks of contamination to the little water that remains:
In 2008 public outrage over the pollution of the San Sebastián river – which was left with a distinctive orange color after almost a decade of unchecked gold mining projects nearby – prompted then-president Antonio Saca to declare a temporary ban on issuing new mining permits.
It was a decision backed by public support: according to a survey published in July by the Central American University (UCA), just under 80% of Salvadorans continue to oppose mining in their country.
As Nugent notes, the threats to water access, the negative effects of mining activity on the environment and the will of the Salvadoran public, have no relevance in the arbitration panel’s deliberation. Instead, El Salvador’s case must rest on the government’s allegations that Pacific Rim had failed to deliver the required environmental tests and administrative steps of land acquisition to continue mining on its territory — something even the company itself now admits, the BBC reports.
According to Luis Parada, a coordinator of a team of lawyers defending El Salvador, “what is ultimately at stake is whether an overseas company can use the international arbitration system to force a sovereign state to change its laws. Or whether it’s the overseas investor who must comply with the laws of the country in which he has decided to invest.”
To continue reading: Corporation vs. Nation: The Ultimate Showdown
