MAC: Mines and Communities

Protests in Canada over mining company suing El Salvador for $301 million?

Published by MAC on 2015-05-19
Source:, Catholic Register

Previous article on MAC: El Salvador groups accuse Pacific Rim of 'assault on democratic governance'

A petition has been started to convince the World Bank to throw out this deeply unpopular case.

How can a Canadian mining company sue El Salvador for $301 million?

BY Ella Bedard

19 May 2015

Friday morning, a delegation of anti-mining activists, along with one in a kangaroo costume, made a visit to the Toronto office of Industry Canada and the Department of Foreign Affairs, Trade and Development.

They were accompanied by a delegation from El Salvador, visiting as part of the Stop the Suits Tour, organized with MiningWatch Canada, SalvAide, the Mining Injustice Solidarity Network, the United Church of Canada and others. They were there to draw attention to a petition with over 175,000 signatures, asking mining company OceanaGold to drop its $301 million lawsuit against El Salvador.

The Canadian-Australian mining company wants El Salvador to pay for blocking the El Dorado gold mining project, and the protest aimed to draw attention to Canada's support for the policies that enable such action.

Speaking at the 25One Community offices in Ottawa as part of the delegation, Deputy Attorney of the Environment for El Salvador's Human Rights Prosecutor's Office Yanira Cortez painted a stark picture of the country's environmental conditions.

Whereas Guatemala has 40 per cent forest cover, El Salvador has only 13 per cent, two per cent of which is indigenous forest growth. According to Cortez, the country is entering into a period of severe water stress, with more than 90 per cent of surface waters contaminated.

With this crisis on the horizon, Salvadorans have been demanding a halt to all mining in the country. Over seven years, three successive Salvadoran governments have responded to these broad-based anti-mining movements by upholding a de facto moratorium on new metal mining projects.

Well before the moratorium was put in place, Canadian mining company Pacific Rim knew that it had failed to fulfill the requirements needed to obtain mining permits, but thought it could get its way through high-level lobbying. Then, in 2008, then-president Saca initiated the moratorium on new mining projects permits. That’s when the country found itself caught in a web of international corporate law and free trade agreements.

OceanaGold bought Pacific Rim in 2013 and has taken up the former company's mantle, continuing to pursue the $301-million lawsuit against El Salvador.

To put that amount of money into context, $301 million amounts to 5 per cent of El Salvador's total GDP. It is roughly equivalent to what the country budgets for three years of health, education, and security costs.

"For a country like El Salvador, a $301 million fine, there's no choice of whether or not to keep the policy," said CCPA Monitor's Senior Editor Stuart Trew, who also spoke at the Ottawa event. "If an investor panel says you can either get rid of the policy and allow the mine, or pay $301 million, that's extortion, that's not a choice."

What, exactly, do those kangaroos signify?

While the intricacies of international investment law can be hard to follow, the problem starts with the investor-state dispute settlement provisions (ISDS) included in most international trade and investment agreements.

Through these ISDS provisions, foreign investors have a right to seek damages if they feel that they are being denied fair treatment by their trading partners.

Pacific Rim was able to file a case against El Salvador with the World Bank's International Center for Settlement of Investment Disputes (ICSID), claiming that the company has violated a nondiscrimination clause of the U.S.-Dominican Republic Central America Free Trade Agreement (DR-CAFTA), which the Canadian mining company has tenuous claims under because it has some U.S. subsidiaries.

In its claim, the company also made reference to a Salvadoran investment law that permits foreign companies to take their disputes to ICSID. While the law has since been reformed to prevent other companies from using the ICSID in this way, the case is proceeding under this investment law because the ICSID ultimately ruled out the company's attempt to get the tribunal to claim jurisdiction under DR-CAFTA.

Overriding national court systems, cases like this one are heard by narrowly focused international arbitration tribunals that do not take into account the collateral damage of business; what MiningWatch is calling the kangaroo courts of international corporate trade.

"These international tribunals do not consider human rights in their judgements, only the value of future lost profits," Cortez explained. The legal counsel for the State of El Salvador tried to have Cortez testify before the tribunal. As a representative of the Departments of the Human Rights Ombudsman, she could have testified to the environmental impacts and human rights violations caused by mining, but their request was denied.

"They do not need to respect jurisprudence or precedent, they look only at what affects the laws will have on company," Cortez explained. "But they don't care what the company has done in the country."

While Labour and Environmental activists have found plenty of reasons to oppose free trade agreements, says Trew, no one really anticipated that the investor-state dispute settlement provisions buried in agreements like NAFTA and the CAFTA-DR would be used, as they increasingly are, to get around unfavourable domestic policies.

Mining Watch reports that as of 2013, 169 investor-state suits are being heard at the International Centre for Settlement of Investment Disputes, which oversees the tribunal processes for the CAFTA-DR agreement. That number is up from only 3 cases in 2000.
Roughly 35 per cent of those suits were brought by oil, gas, and mining firms and nearly 50 per cent of all 169 suits were against Latin American governments.

Canada is not immune

MiningWatch notes that the trend with NAFTA suits are similar. Over the last decade, the number of investor-state cases being filed between countries under the NAFTA agreement has doubled, and Canada is the target in roughly 70 per cent of those cases.

In an ongoing case, oil and gas company Lone Pine Resources filed a $250-million NAFTA lawsuit against Canada over Quebec's moratorium on fracking for oil and gas underneath the St. Lawrence River.

Paralleling the Salvadoran case against OceanaGold, Quebec is being charged with discriminating against its trade partner for putting environmental and health concerns above corporate interests.

"If all the pending tribunal cases against Canada are won, that will cost us $2 billion, or about what we'd need to spend on a universal child-care program," Trews explained. "And why is Canada sucking it up without fighting these? Because they have a vested interested in cases like OceanaGold vs. El Salvador," he added.

A growing number of countries, including Australia, Indonesia, and South Africa, are starting to look critically at ISDS provisions, refusing to sign new trade agreements with these provisions, or else letting them expire. With widespread protests against the provisions in Europe, it remains to be seen whether investment-state provisions will be included in the new EU-North American agreement.

The Salvadorian delegation presenting this week is here to warn Canadian about the hidden risks that trade agreements pose to human and environmental rights, to say nothing of national sovereignty. But they are also here to offer solidarity to another resource rich country made vulnerable by fast and loose free trade agreement.

"We are here to bring a warning that the same thing that is happening to us, is happening to you," warned Marcos Gálvez, President of the Association for the Development of El Salvador. "While we are here looking for your solidarity, we are also here to offer ours. This world has to change and another world is possible."

Ella Bedard is's labour intern and an associate editor at GUTS Canadian Feminist Magazine. She has written about labour issues for and the Halifax Media Co-op and is the co-producer of the radio documentary The Amelie: Canadian Refugee Policy and the Story of the 1987 Boat People.

El Salvador mining battle has lessons for Canada

By Michael Swan

The Catholic Register

20 May 2015

TORONTO - It’s taken six years and $12.6 million in legal fees, but El Salvador expects to learn before the end of this year whether it has to pay $301 million to a shell company whose sole purpose since 2009 has been to extract money from the country for a mine that never got built.
The case should be a wake-up call to Canadians, said El Salvador’s deputy attorney for the environment.

“It’s important for Canadians to realize that we face the same problems, the same risks with the way these companies proceed and the protections these companies enjoy under free trade agreements,” Yanira Cortez said.

Canada and El Salvador have been engaged in free trade talks for most of the last decade. Like other free trade agreements, it is expected to include investor protections that allow companies to sue national governments.

In a closed court in Washington, D.C., El Salvador has found itself defending its decision to place a moratorium on all hard rock mining in a dry, environmentally fragile country where 98 per cent of its waterways are already polluted. Pac Rim Caymen, a shell subsidiary of OceanaGold, claims it is owed $301 million that it would have earned if El Salvador had issued it an environmental permit and mining concession it believes would have followed.

OceanaGold is the new Australian owner of the former Canadian company Pacific Rim Mining, original parent to Pac Rim Caymen.
“That ($301 million) is the equivalent of the budget for three years of health, education and public security combined,” said Cortez. “We have the right to decide on our natural resources.”

Cortez has the backing of El Salvador’s Catholic bishops who have come out strongly against metal mining in the country.

“This type of mining development is very bad for the country. This is not development,” Bishop Alvaro Ramazzini said in 2011. “Ninety-nine per cent of the people will see no benefits whatsoever. The only people who profit from this are the transnational companies.”

Cortez’ trip to Canada was arranged by KAIROS, the social justice coalition of Canadian churches backed by the Canadian bishops and religious orders.

OceanaGold, listed on the Toronto Stock Exchange, claims the policy was an “arbitrary de facto ban on mining by President (Antonio) Saca — all via statements in the media.” The company launched its suit at the International Centre for Settlement of Investment Disputes, an arm of the World Bank, in 2009, claiming it had fulfilled the legal requirements for a mining concession and then suddenly had the rug pulled out from under it by a policy that wasn’t even part of the law.

The mining giant — with sales of $129.3 million in the first three months of 2015 and quarterly profits of $24.5 million — bases its claim on how much gold engineers estimate is under the ground at what would have been the El Dorado mine.

“The exploration licence for the El Dorado Project, which was issued by the El Salvador government under that country’s mining law, and which was supported by Pacific Rim’s discovery of valuable gold reserves, created a legal duty for the government to process the mining exploitation concession application,” OceanaGold spokesperson Andrea Atell wrote to The Catholic Register in an e-mail from Australia.

It’s true that El Salvador never issued an environmental permit after announcing its moratorium on all further mining development in May of 2007, but Pacific Rim couldn’t have been issued a mining concession even if it did qualify for the permit, said Luis Parada, El Salvador’s lead lawyer in Washington. The environmental permit was only one of three requirements for a mining concession. Pacific Rim didn’t own the land it wanted to mine and hadn’t completed a feasibility study, said Parada. Even its application for the permit was incomplete.

“Pacific Rim did not come even close to showing it had complied with the other requirements to get the concession,” said Parada.

The case was tried in Washington by a panel of three international arbitrators under El Salvador’s own mining and investment laws.

“Pacific Rim showed up to try to tell the Salvadorans what Salvadoran law was, or what they want it to be, without even bringing a single Salvadoran lawyer, without bringing a single Salvadoran expert. It is very arrogant,” said Parada.

The battle between company and country went beyond the court. Pacific Rim Mining, before it was acquired by OceanaGold, lobbied U.S. congress to block aid money to the country.

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