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World Bank tribunal allows outrageous Pac Rim case to drag on

Posted Jun. 4, 2012 / Posted by: Kelly Trout

El Salvador’s environment and democracy remain under threat as tribunal takes jurisdiction under Salvadoran law rather than CAFTA

WASHINGTON, D.C. -- On Friday, June 1, a World Bank tribunal allowed an international legal attack on El Salvador’s environment and democracy to advance, accepting jurisdiction to rule on a lawsuit brought by multinational mining firm Pac Rim against the government of El Salvador.

In allowing the case to continue under a domestic foreign investment statute, the tribunal dealt a blow to Salvadoran activists engaged in a multi-year struggle to protect their water from mining pollution. The case centers on El Salvador’s refusal to grant a permit for a proposed gold mine in the Cabanas region. Pac Rim alleges that the permit denial violated its investor rights and is seeking tens of millions of dollars in compensation.

Pac Rim pursued an unusually clumsy strategy for attempting to gain jurisdiction under the Central American Free Trade Agreement and, as expected, the World Bank tribunal had no choice but to deny the mining company jurisdiction under CAFTA. But, in a move that surprised some observers, the tribunal accepted jurisdiction under El Salvador’s foreign investment law, which allows World Bank tribunals to decide such cases.

Erich Pica, president of Friends of the Earth, said, “Salvadorans fighting for a ban on environmentally destructive mining projects in the face of murder and intimidation were dealt another blow after a jurisdictional ruling in one of the world’s most contentious international investment disputes. The World Bank tribunal’s decision to accept jurisdiction under the terms of the foreign investment law threatens the environment, public health and a fragile democracy stressed by right-wing violence. It is a shame that the World Bank tribunal is allowing this unnecessary and divisive litigation to drag on."

On substance, the Pac Rim case is typical. Among 137 cases currently pending before the World Bank’s Centre for Settlement of Investment Disputes, 43 involve oil, gas or mining ventures. A large number of these cases will be tried on the merits and several are likely to result in crushing awards of money damages against developing countries that can ill afford to pay. For example, in a pending case, U.S. holding company Renco Group is seeking $800 million from Peru, even though its smelting operation at La Oroya is one of the most polluted industrial sites in the world.

Multinational oil and mining corporations are demanding that countries adopt one-sided investor provisions in domestic laws like El Salvador’s as well as in international treaties. Corporations are pushing for NAFTA/CAFTA-style investment provisions in the Trans-Pacific Partnership free trade agreement, which is currently under negotiation between the U.S. and eight other Pacific countries. These provisions allow multinational corporations to avoid accountability to national legislatures or courts for the environmental destruction and social injustices resulting from their investment projects, particularly in the developing world.

“The corporate model for international investment dispute resolution reflected in the El Salvador foreign investment law and U.S. trade agreements such as CAFTA must be replaced,” said Pica. “The Renco suit and dozens of other cases show that taxpayers, in the United States and abroad, can be forced to compensate rich investors for lost future profits and compliance costs resulting from environmental and other public interest regulations. It’s time to create a more just and environmentally responsible model for international trade and investment agreements. And, it’s time for the World Bank to stop facilitating these outrageous lawsuits through its International Center for Settlement of Investment Disputes.”

BACKGROUND INFORMATION ON THE PAC RIM CASE AGAINST EL SALVADOR

Pac Rim went to El Salvador to mine gold using an environmentally dangerous cyanide leach process, which threatened to poison the water supply of poor communities. Pac Rim's exploration activities affected local water streams in an already water-stressed country. Local activists fought back and several were murdered.

Despite the attacks on environmental and human rights defenders, a coalition of non-governmental organizations called La Mesa was formed to defend El Salvadorans’ rights to water, life and a healthy environment. La Mesa engaged in a democratic, social dialogue demanding a ban on metals mining in El Salvador. In response, the government decided to undertake a strategic environmental impact assessment of mining in the country. In the interim, Pac Rim was denied a permit, which is what led the company to sue.

Contact:
Kelly Trout, 202-222-0722, ktrout@foe.org
Prashanth Kamalakanthan, 202-222-0723, pkamalakanthan@foe.org

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Friends of the Earth fights to defend the environment and create a more healthy and just world. Our current campaigns focus on promoting clean energy and solutions to climate change, keeping toxic and risky technologies out of the food we eat and products we use, and protecting marine ecosystems and the people who live and work near them.

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