CAFTA: Mining for El Salvador's Gold -- In Washington

[Oscar]

Gouging CAFTA for El Salvador's Gold: Pacific Rim goes to Washington

www.ips-dc.org/articles/mining_for_el_s ... washington

Mining for El Salvador's Gold -- In Washington

An international tribunal gives the green light to a lawsuit brought
by two companies attempting to overcome strong public and government
resistance to their destructive gold mining.

August 11, 2010 · By Manuel Pérez-Rocha

Earlier this year, I had the opportunity to travel toCabañas, El
Salvador,to meet with some of the bravest and most successful
environmental activists in the world. Ordinary villagers in this
remote area of the country have joined with religious groups,
research centers, and others to take on the powerful international
mining companies that are seeking to plunder their country's gold. So
far, the activists have been winning this David-vs.-Goliath fight.
Two successive Salvadoran governments have denied permits for gold
mining on environmental and human health grounds.

Last week, however, these activists suffered a setback - not from
their own government, but from an obscure tribunal in Washington,
DC.Two transnational mining companies have used rules in the "free
trade" agreement between the United States and six countries in the
region to sue the government of El Salvador.They are demanding
hundreds of millions of dollars in compensation for the denial of
mining permits. The first company to file suit, [Canadian-
based]Pacific Rim,has just won the first stage of the proceedings
by overcoming the Salvadoran government's effort to get the case
thrown out on jurisdictional grounds.

The tribunal's decision to give the green light to this controversial
case should send shudders down the spines of advocates for the
environment, community rights, and democracy. The type of investment
rules employed by Pacific Rim to mine for gold in international
tribunals are contained in thousands of bilateral investment treaties
around the world and more than a dozen existing and pending U.S.
trade agreements. What's happening to El Salvador could happen almost
anywhere, despite the struggles of activists to defend their
environmental rights.

The Struggle for Resource Rights in El Salvador

TheNational Roundtable on Metallic Mining of El Salvador (La
Mesa)is a broad group of community organizations, human rights NGOs,
church groups, and research centers that have been working
courageously - several of their members have been murdered, and many
have received death threats - to prevent gold extraction in El
Salvador. Among other environmental impacts, this gold mining would
pollute the already-scarce water basins with cyanide. The European
Parliament recently banned this activity.
Last year, La Mesa succeeded in persuading the Salvadoran government
to halt gold extraction by denying permits to the Canadian-based
Pacific Rim and the U.S.-basedCommerce Group and Sebastian Gold
Mines (Commerce Group). The activists bolstered their case with
studies that demonstrate the lack of satisfactory environmental
impact assessments, in the case of Pacific Rim, and the already poor
environmental record of Commerce Group.
After being denied the permits, the companies took their quest for
gold to Washington. Both are suing El Salvador at the World Bank's
International Center for Settlement of Investment Disputes (ICSID).
They are demanding $100 million each in damages under the investment
chapter in the Central America-Dominican Republic-United States Free
Trade Agreement (CAFTA-DR), a treaty that went into effect in 2005
with seven signatories, including El Salvador.

First Round to Pacific Rim

The ruling of the ICSID tribunal last week was in response to the
Salvadoran government's arguments, presented in January 2010, which
invoked the CAFTA-DR rule that permits "a preliminary objection to
investors' claims to protect governments from frivolous, but costly,
trade pact investor suits."

El Salvador laid out three basic arguments:

1. Pacific Rim did not have the right to the mining concession.
Although the company had obtained an exploration permit, it did not
have an automatic right to extraction.
2. Pacific Rim did not provide adequate facts to back up its claim
that El Salvador had breached the company's right to National
Treatment and Most-Favored-Nation Treatment. These provisions are
designed to prevent discrimination against foreign investors in favor
of domestic investors, and there was no evidence that the government
would have granted the permits to a local mining company under
similar circumstances.
3. Pacific Rim did not have the right under CAFTA-DR to pursue its
claim through international arbitration because the company had
initiated a parallel claim under El Salvador's National Investment
Law.
The undemocratically appointed ICSID tribunal rejected these
arguments. On August 3, Pacific Rim President and CEOTom
Shrakeexpressed optimism that the ruling may prompt the Salvadoran
government to change its mind about the permits. "It is a positive
and crucial step in the CAFTA process for PacRim," Shrake said.
"We are, however, reticent to celebrate, as we believe a more
productive outcome is possible for both the Salvadoran people and
foreign investors. With this phase of the arbitration now completed,
we hope to resume a mutually beneficial dialogue with the government
of El Salvador to resolve the impasse."

Pacific Rim clearly wants to go for the gold and not just for
compensation from "damages" from the legal suit.

One Salvadoran group responded, however, that "the tribunal's
decision does not mean that Pacific Rim is necessarily any closer to
securing mining permits - only that their ICSID claims will live to
see another day."

Indeed, the Salvadoran government is continuing to fight the suit. On
August 3, the government questioned Pacific Rim's standing to bring
claims under CAFTA-DR, since it's not even a U.S. company. Based in
Vancouver, Canada, the company created a U.S. subsidiary in order to
take advantage of the investor rights under the U.S. trade agreement.
Governments are supposed to have the authority to deny the benefits
of such agreements to a foreign investor that does not have
"substantial business activities" in a country that is a party to the
agreement. The Salvadoran government also claims that Pacific Rim
changed its nationality years after the legal dispute arose, so it
can't invoke the free trade agreement regarding a pre-existing
dispute.

The Suits Continue

Following Pacific Rim's lead, U.S. company Commerce Group presented a
notice of intent to file a similar case against El Salvador in March
2009, and an ICSID tribunal was formed on July 1, 2010.
Commerce Group is notorious for alleged environmental violations
related to gold and silver mining projects that it operated in the
past in different localities in El Salvador. Several Salvadoran
organizations have repeatedly denounced the company and demanded that
the country's attorney general investigate charges that Commerce
Group has polluted the San Sebastían River, harming the people of the
locality ofSanta Rosa de Lima. One environmental study indicated the
presence of metals like aluminum, zinc, iron, manganese, and nickel
demonstrating the "presence of acidic drainage provoked by Commerce
Group, which affects mainly children and women." According to the
study, "60 percent of the population experiences symptoms of
weakness, fatigue, lack of appetite, nausea, yellowed skin, rashes
and mental confusion."

These environmental charges will not likely carry much weight at the
ICSID tribunal, however. The proceedings are based on compliance with
the CAFTA-DR investment rules -- national treatment, most favored
nation, minimum standard of treatment, and compensation for "indirect
expropiation" - and not compliance with environmental standards.

Impact on the U.S. Trade Debate
According to U.S.-based Public Citizen, the recent Pacific Rim ruling
is so controversial that it could help fuel demands for reforms of
international investment rules, not only in CAFTA-DR but also other
U.S. trade agreements.

As a senator and on the presidential campaign trail, Barack Obama was
critical of the existing trade and investment model. Obama opposed
the CAFTA-DR because it "does little to address enforcement of basic
environmental standards in the Central American countries and the
Dominican Republic." In 2008, during his campaign, Obama committed
to making changes in investment rules, responding to a questionnaire
on trade policy saying that "with regards to provisions in several
FTAs that give foreign investors the right to sue governments
directly in foreign tribunals, I will ensure that foreign investor
rights are strictly limited and will fully exempt any law or
regulation written to protect public safety or promote the public
interest."

However, the Obama White House is now pushing for congressional
approval of several trade agreements negotiated by the Bush
administration that contain investment rules nearly identical to
those in CAFTA-DR.

The gold mining cases against El Salvador should help reveal the
dangers of investment rules that elevate the narrow interests of
private foreign investors above those of the general public and the
environment. Civil society organizations and policymakers around the
world are exploring alternative approaches that would promote a more
equitable balance between corporate As La Mesa'sVidalina Moraleshas
put it:
"Pacific Rim has assailed our country, breaching environmental
requirements, undermining laws, provoking environmental damage,
economic losses, social conflict and corruption, and it should be
judged for that. But the roles have been inverted, and it is the
company that sues the country and the perpetrator who sues the
victim."

As a result, El Salvador, one of the poorest countries in the
hemisphere, must spend millions of dollars defending against two
expensive lawsuits in Washington, money that otherwise could have
gone toward poverty alleviation. This terrible irony makes a change
in those investment rules imperative.

= = = = = =

Pacific Rim CAFTA challenge against El Salvador begins - Council of Canadians

http://www.canadians.org/campaignblog/?p=3746

June 1, 2010
Mining Weekly reports that, “A hearing began on Monday in an arbitration case brought by (Vancouver-based) Pacific Rim Mining against the government of El Salvador, the company reported. The hearing, on the preliminary objection filed by the government in relation to the action brought by Pacific Rim, is scheduled to conclude on Tuesday. A decision on the matter is expected by September, the firm said. The hearing is taking place at the International Center for Settlement of Investment Disputes in Washington, DC.”

Last week, Grist reported that, “The World Bank will decide if the mining giant can pursue its greedy demands for payment under an industry-friendly trade rule that would force El Salvador to pay a huge penalty ($700 million) for blocking the project.”

THE THREAT TO WATER BY MINING OPERATIONS

The Council of Canadians has been tracking this case for more than two years.

MORE: http://www.canadians.org/campaignblog/?p=3746