In a decision with implications for the national sovereignty of member states under US trade pacts, a World Bank tribunal has approved a Canadian mining company's controversial lawsuit against the government of El Salvador. In 2009, Pacific Rim Mining filed the suit under the rules of the US-Central America Free Trade Agreement (CAFTA), demanding hundreds of millions of dollars from the Salvadoran government, which rejected the Vancouver-based company's application for mining permits.

El Salvador's Ministry of the Environment and Natural Resources argues that Pacific Rim never completed the necessary process to obtain an exploitation permit, and local communities have demonstrated widespread opposition to the proposed El Dorado gold mine based on the environmental and public health risks of cyanide-leach mining.

On August 3, the International Center for the Settlement of Investment Disputes (ICSID) rejected the Salvadoran government's preliminary objections to the suit, which could have led to the dismissal of Pacific Rim's claim. Though this mechanism exists to avoid frivolous or coercive lawsuits, it is rarely, if ever, upheld in favor of a national government, suggesting a fundamental imbalance in favor of transnational corporations.

"It is outrageous that the government of El Salvador is under attack for protecting the health and safety of its people," said Alexis Stoumbelis, executive director of the Committee in Solidarity with the People of El Salvador (CISPES), which led protests in five US cities and outside Pacific Rim headquarters in Vancouver during the first round of ICSID hearings in May. "This is the ugly and fundamentally anti-democratic reality of free trade."

Free trade critics point to vague and far-reaching investor rights in CAFTA and other NAFTA-style trade agreements that allow foreign companies to contest national laws and government regulations through private arbitration. "The fact that an attack like this would even be possible highlights what is wrong with our current trade agreement model," said Lori Wallach, director of Public Citizen's Global Trade Watch.

Because Canada is not party to CAFTA, Pacific Rim filed the suit through a US-based subsidiary, which it acquired during its dispute with the Salvadoran government after CAFTA entered into force in 2006. The government of El Salvador has filed new objections to the ICSID's jurisdiction in this matter that center on Pacific Rim's change of nationality. (CISPES, Aug. 6)

See our last posts on El Salvador, Central America and the mineral cartel.

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