Australian company sues El Salvador for right to mine

September 5, 2014
A protest in Sydney on September 5 against OceanaGold’s mining practices in El Salvador. Photo: Neville Spencer

People gathered outside the World Bank office in Sydney on September 5 to protest the bank’s involvement in an Australian mining company’s attempt to sue the government of El Salvador for US$301 million.

Pacific Rim, a Canadian company that was bought by Australian OceanaGold last year, applied to mine gold in northern El Salvador in 2004. The Salvadoran government refused it permission, arguing the company did not own or have rights to the land it proposed to mine, it did not have environmental permissions and it did not submit a final feasibility study for the project.

In the face of popular concerns about environmental destruction, water contamination and the human rights abuses often connected with mining, successive Salvadoran presidents have committed not to issue new metal mining permits since 2008.

In response, Pacific Rim launched its suit against the Salvadoran government in 2009 via the World Bank’s International Centre for the Settlement of Investment Disputes (ICSID).

ICSID is part of a trend in international institutions and trade agreements over recent years that give rights to international corporations to sue governments over any laws or actions that affect their ability to make profits. They take away from sovereign governments the right to make laws that might protect the environment or the health and livelihoods of their population where those things might reduce the profits of multinationals.

Australia has also been caught up in this trend. Tobacco giant Philip Morris has moved some of its investments to Hong Kong and is using a 1993 Hong Kong-Australia trade agreement to sue the Australian government over its plain packaging laws.

For poor countries, just the costs of trying to defend these cases can be onerous. El Salvador has already spent more than US$6 million on the Pacific Rim case.

El Salvador’s lawyer in the case, Luis Parada, said: “This case stands for the principle that a country does not have a legal obligation to change its laws to please a foreign investor; rather, it is the foreign investor who has the obligation to comply with the laws of the host state”, the Guardian reported on April 11.

The case is due to go to an ICSID hearing on September 15.

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