On June 1, a tribunal of the World Bank's International Centre for the Settlement of Investment Disputes (ICSID) granted jurisdiction to Canada's Pacific Rim Mining Corp, allowing the final phase of the company's arbitration case against El Salvador to go forward. The tribunal dismissed objections filed by the Government of El Salvador, ruling that the case can proceed under El Salvador's own Foreign Investment Law. Since 2009, the Vancouver-based company has been seeking $100 million from El Salvador for having turned down the company a permit to mine gold in the northern region of Cabañas.

Since 2005, the rural communities around the proposed mining sites have organized a vibrant resistance movement to prevent the contamination of their water and land by the two tons of cyanide that Pacific Rim mining proposed to use daily to extract gold at El Dorado mine. El Salvador's National Roundtable Against Metallic Mining recently stated, "metallic mining, an industry that senselessly uses and contaminates water, is not viable in El Salvador, a small country with a high population density and a severe lack of water." Between 2009 and 2010, four environmental activists were murdered; political motivations have thus far been ignored in the investigations.

The tribunal dismissed Pacific Rim’s claim that the government of El Salvador had violated the rules of the Central America Free Trade Agreement (DR-CAFTA) on the grounds that the Canadian company—which moved a subsidiary from the Cayman Islands to Nevada in 2007, presumably to take advantage of the rights afforded corporations under CAFTA—did not have "substantial business activities" in the US.

However, the tribunal refused to waive millions in costs and legal fees that El Salvador has paid in order to defend itself against the CAFTA challenge; in legal fees alone, the government has paid over $5 million to date. El Salvador points out that this money which could have been used to educate 140,000 adults through the government's National Literacy Program.

In a defeat for El Salvador, the tribunal agreed to continue to hear the case based on Pacific Rim’s claim that El Salvador's government had violated its own Investment Law, approved in 1999 under the administration of President Francisco Flores of the right-wing party ARENA. Lisa Fuller of the US-based Committee in Solidarity with the People of El Salvador (CISPES) states, "This Investment Law is just like CAFTA and other so-called free trade agreements, in that countries like El Salvador must forfeit their own democratic processes in the name of attracting foreign investment, which is a hallmark of neoliberal economic policy."

Lori Wallach, director of Public Citizen's Global Trade Watch, added, "The fact that corporate attacks on a sovereign country’s domestic environmental policy before a foreign tribunal would even be possible—much less cost a country millions when a key element of the attack is dismissed – highlights what is wrong with our 'trade' agreement model."

Stated PacRim CEO Tom Shrake: "We look forward to proceeding to the final portion of the arbitration case to recover the value of the El Dorado asset. We are very confident in the merits of this case. The fact that it will proceed under the Investment Law alone rather than under both sets of investment protections has no impact on the case. What is relevant is the fact that we will continue to protect our company's rights with ICSID, at the World Bank. It is our hope the Government of El Salvador will put an end to this dispute and put her people and our industry back to work. Every mining concession in El Salvador has been expropriated, resulting in the loss of jobs, tax revenues and stability, as well as El Salvador's standing in the foreign investment community."

In response to the decision, the National Roundtable against Metallic Mining has called on President Mauricio Funes to eliminate chapter 15 of El Salvador’s Investment Law, which allows foreign corporations to bring suits against the government at the ICSID, as well as to push forward with a national ban on metallic mining. (Pacific Rim press release, June 5, via Energy Digital; CISPES, June 4)

See our last posts on El Salvador, Central America and regional struggles over water and minerals.

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