MAC: Mines and Communities

El Salvador - Commerce Group to seek CAFTA Arbitration

Published by MAC on 2009-06-16

Residents of the community of San Sebastián, in the province of La Unión, sued Commerce Group mining company in 2007 for polluting

On the heels of Pacific Rim's Notice of Intent to Seek CAFTA Arbitration (Dec 2008,) US-based Commerce Group Corporation has filed a similar Notice to sue the Salvadoran government under the Central America Free Trade Agreement-Dominican Republic ("CAFTA-DR").

In September 2006, the El Salvador Ministry of the Environment delivered to Commerce's El Salvadoran legal counsel its revocation of the company's environmental permits. Three months later the company filed two complaints with the El Salvadoran Court of Administrative Litigation of the Supreme Court of Justice. These legal proceedings are pending:

Residents of the community of San Sebastián, in the eastern province of La Unión, sued the Commerce Group mining company in 2007 for polluting numerous local rivers with iron, copper and aluminum and the products of acid drainage.


Commerce Group and San Sebastian Gold Mines Files Notice of Intent with Salvadoran Government
By voicesfromelsalvador
10th June 2009

Though the mining dispute between Pacific Rim Mining Corp and the Government of El Salvador has received the most attention over the past few years, another mining battle has been smoldering. On March 16, 2009 a joint venture of American companies, Commerce Group Corp. and San Sebastian Gold Mines, Inc. (Jointly - Commerce/Sanseb), filed a Notice of Intent to file claim under the Central American Free Trade Agreement (CAFTA-DR) against the government of El Salvador for not renewing their permit to mine gold and silver at the San Sebastian Gold Mine near Santa Rosa de Lima in the department of La Unión in El Salvador, approximately 12 miles from the Honduran border.

Commerce Group Corp. and San Sebastian Gold Mines, Inc. have been exploring and mining minerals in La Unión since 1968, though they halted operations in 1978 due to political unrest. In 1985 exploration of the San Sebastian mine resumed, and in 1987 the two companies formed a joint mining venture - Commerce/Sanseb. In 2006, however, the government did not renew Commerce/Sanseb's environmental permits, effectively denying them the right to continue mining. Commerce/Sanseb filed two complaints in 2006 with the El Salvadoran Court of Administrative Litigation of the Supreme Court, but the Court has failed to resolve the matter. As a result, they are now taking their claim to the international courts.

Commerce/Sanseb makes similar claims as Pacific Rim - that the Salvadoran government is discriminating against foreign mining companies in violation of Articles 10.3 and 10.5 of CAFTA-DR. They claim damages exceeding $100 million. The Salvadoran government has 90 days to settle the claim before Commerce/Sanseb can file for arbitration. As conditions to settle, Commerce/Sanseb is seeking $100 million in damages, as well as permission resume mining activities with the appropriate environmental permits that do not contain more strict conditions. The claims differ in that Commerce/Sanseb already had an exploitation permit when their renewal for environmental permits were denied, wihle Pacific Rim was still in the exploration phase, trying to secure an exploitation permit.

On their own, either of the Pacific Rim or Commerce/Sanseb are sizable claims that could, in a worst case scenario, cost the economically fragile country hundreds of millions of dollars. But these are not the only mining interests in El Salvador, and pending the outcomes of these suits, more claims could follow. Tribune Resources and Intrepid Minerals, for example, have been exploring mines in the department of Chalatenango, and faced tough resistance from civil society organizations, the Catholic Church, and the affected communities. They are surely monitoring these cases in planning their next steps. While the local and national governments have the right and appropriate means to either permit or deny mining activities, they must do so using administrative procedures found in the mining and environmental laws. If the international tribunal accepts the case filed by Pacific Rim or any cases filed by Commerce/Sanseb, and decides that the Saca Administration violated Salvadoran or international law, El Salvador may face many more suits in the future.

Other than stating that they will not grant Pacific Rim's mining permits, the new Funes Administration has remained silent as to how it will address the Pacific Rim and Commerce/Sanseb suits.

See Commerce Group Notice of Intent at:

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