Australian company sues El Salvador for its right to pillage

November 2, 2014
The National Roundtable Against Metallic Mining, or “La Mesa”, has led a powerful campaign against destructive mining in El

Australian-based company OceanaGold is suing El Salvador for US$301 million for its “right” to continue operating a gold mine that is destroying the Central American nation's water supply.

The El Dorado goldmine was originally owned by Canadian company Pacific Rim, which became a wholly-owned subsidiary of OceanaGold last year. The Australian company is continuing Pacific Rim's lawsuit, suing the Salvadoran government over a moratorium on mining permits.

In 2008, the right-wing National Republican Alliance (ARENA) government was forced by public demand to issue the moratorium.

Succeeding governments, including the left-wing government of Farabundo Marti National Liberation Front (FMLN) President Salvador Sanchez Ceren elected in March, have kept the moratorium in place, refusing to renew the company's mining licence.

The National Roundtable Against Metallic Mining, or “La Mesa”, has led a powerful campaign against destructive mining. It was responsible for winning the moratorium and hopes to ban all metallic mining in the country.

The livelihoods of people living along the river, and the safety of the entire country's water supply, are under threat by the damage already caused by the mine.

A water quality study by the Ministry of the Environment and Natural Resources in 2010 found that only 2% of the country's surface water was suitable for human use. Levels of cyanide in the water near El Dorado mine ― used to extract gold ― are nine times higher than the allowable limit. Tests also found levels of iron more than 1000 times above the limit.

With such dire effects, it is no wonder protests have been so fierce. Nine people have already been murdered protesting against the mine.

A Common Frontiers report found: “The company is accused of utilizing kidnapping, intimidation and even murder against community members opposed to the mining project. This was highlighted internationally in 2009 with the murder of Marcelo Rivera, Ramiro Rivera and Dora Alicia Recinos and her unborn child.”

Pacific Rim's first suit was pursued under the investor-state dispute settlement (ISDS) clause of the Dominican Republic-Central America Free Trade Agreement. ISDS clauses are common in free trade agreements and allow foreign companies to sue the host government.

The cases are heard by secret tribunals such as the International Centre for the Settlement of Investor Disputes (ICSID), overseen by the World Bank. The first suit was dismissed because Canada is not party to the free trade agreement.

Pacific Rim then refiled the $301 million lawsuit under a local Salvadoran law that was originally passed by the right-wing ARENA government, but which has been amended since. It allowed companies to use secret tribunals to sue the government.

Often, as with this case, companies will sue for the “loss” of potential profits. The Pacific Rim claim “alleges that the Republic of El Salvador wrongfully refused to grant environmental permits for its exploration and exploitation projects, which rendered [Pacific Rim's] mineral discovery in El Salvador worthless”.

ISDS essentially allows corporations to subvert a government's bid to protect its people and environment, all in the name of profits. ISDS disproportionately affects countries with extractive industries in the global South.

Manuel Perez Rocha from the Institute for Policy Studies said: “As of 2013, there were 169 cases pending at the International Centre for Settlement of Investment Disputes (ICSID) of which 60 (35.7%) were related to oil, mining, or gas.

“Latin American and Caribbean governments make up about 14% of all 158 ICSID member governments; yet are disproportionally impacted as they make up 79 (46.7%) of the 169 ICSID pending cases and 31 (51%) of the 60 current extractive industries cases.”

But even rich countries are not safe from ISDS. Australia is being sued by Philip Morris for its cigarrette packaging laws under an ISDS clause in an obscure Hong Kong trade agreement. One lawyer representing Philip Morris is David AR Williams, who also happens to be an ICSID judge.

Williams' connection to the corporate world is indicative of other ICSID judges. Indeed, the tribunal hearing the El Salvador case are just as worrisome.

One of tribunal member Brigitte Stern's previous rulings awarded Occidental Petroleum $2.3 billion against Ecuador. Guido Santiago Tawil's biography proudly boasts of being involved in the privatisation of Argentinian assets, “issues considered in Argentina as true milestones, like being the first contract of sale of electricity ... the first commercialization agreement for the supply of electricity”.

The Trans Pacific Partnership Agreement is a proposed deal being negotiated in secret by 12 Pacific Rim nations, including Australia. If implemented, it would be the biggest free trade agreement in the world. Negotiations have stalled, however, as some issues cannot be agreed on by all the member countries, such as the inclusion of ISDS.

An open letter to World Bank Presidet Dr Jim Yong Kim, signed by hundreds of groups from around the world, calls for the end of the ICSID. Referring to the El Salvador case, it says “local democratic institutions should prevail, not foreign corporations seeking to exploit natural resources”.

It urges the World Bank to “review the role of the International Center for the Settlement of Investment Disputes and to determine if it supports the Bank’s mission of ending poverty and promoting responsible and sustainable economic development”. There could only be one genuine conclusion from such a review ― the end of the ICSID.

“The Pacific Rim ICSID arbitration is a direct assault against democratic governance. We stand on the side of democracy.”

[Add your name to the "">global online petition to demand OceanaGold drop its lawsuit against El Salvador.]

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