Gold mining company intends to bring claim against El Salvador
The Canadian gold mining company Pacific Rim today filed a notice of intent to bring an arbitration claim under the Central America Free Trade Agreement (CAFTA) against the government of El Salvador for the government's failure to grant Pacific Rim the permits necessary to proceed with its planned gold mine. The filing was announced in a company press release issued today.
In addition to issuing the press release, Tom Shrake, Pac-Rim's CEO, held a conference call with stock analysts today to explain the decision to commence the arbitration prcoess. The directions for listening to a recording of the call are in the press release.
During the call, Shrake stated that the arbitration claim would seek to recover Pac-Rim's investments in the country and "hundreds of millions of dollars in damages." According to Shrake, the local population and political leaders are in favor of the development of the mine, but the current national government was unexplainably unwilling to grant the mining permits. Shrake dismissed opposition based on environmental concerns stating that the gold mining "will be significantly less polluting than doing the laundry." He asserted that the opposition to mining is instigated by international NGOs as part of an anti-development agenda, and he specifically pointed at Oxfam America in this regard.
Pac-Rim will claim in an arbitration that the government of El Salvador is violating its own laws and international law. Arbitration under Chapter 10 of CAFTA requires the filing the initial notice of intent to arbitrate 90 days before the actual start of the arbitration. This provides a period of time for the parties to negotiate a resolution until March 2009, when it will be possible to commence the arbitration.
Shrake, the president and CEO of Pacific Rim, believes that a change of government may make a resolution of the issue possible.
Shrake told analysts that Pac-Rim has a several million dollar budget for legal costs of the arbitration. The company has retained the prominent Washington, D.C. law firm of Crowell & Moring. A lawyer from that firm who was on the call cited as precedent the case of MetalClad Corp. v. Mexico, an arbitration decision under a parallel provision of NAFTA. The Metalclad award found that Mexico had, through the actions of a local municipality, effectively expropriated the property of a U.S. investor that had secured all required permits from Mexican federal authorities to construct and operate a hazardous waste facility and that the U.S. firm was therefore entitled to recover $ 16.5 million (plus interest) directly from Mexico.
Some persons opposed to the Pac-Rim mining plans staged a demonstration last Friday, as described in an article from IPS: "A black coffin was consigned to the flames amid music and fireworks as dozens of people from Salvadoran communities that fear the impacts of gold and silver mining celebrated a "symbolic burial" of the Pacific Rim Mining Corporation, a Canadian-based company." The article goes on to describe many of the arguments being advanced by environmentalists and other opponents to the gold mine. For more on the conflict between Pac-Rim's promoters and the opposition, see this article in Upside Down World.
In 2005, I wrote about the arbitration provisions which are part of CAFTA and which submit each of the member countries to claims in front of international arbitration panels. The arbitration provision is designed to increase investor confidence in doing business in Central American countries by giving the investors a neutral forum to rule on disputes if a government wrongfully deprives them of their investment in a country. The provision in CAFTA and the parallel provision in NAFTA have been criticized as permitting multinational corporations to threaten enormous damage awards and costly arbitrations against governments who may enact environemntal or other regulations which impose costs on foreign investors and lessen the return on their investments.
For more on Pacific Rim and the overall gold mining issue in El Salvador, select the mining topic in the left hand column of the blog.
In addition to issuing the press release, Tom Shrake, Pac-Rim's CEO, held a conference call with stock analysts today to explain the decision to commence the arbitration prcoess. The directions for listening to a recording of the call are in the press release.
During the call, Shrake stated that the arbitration claim would seek to recover Pac-Rim's investments in the country and "hundreds of millions of dollars in damages." According to Shrake, the local population and political leaders are in favor of the development of the mine, but the current national government was unexplainably unwilling to grant the mining permits. Shrake dismissed opposition based on environmental concerns stating that the gold mining "will be significantly less polluting than doing the laundry." He asserted that the opposition to mining is instigated by international NGOs as part of an anti-development agenda, and he specifically pointed at Oxfam America in this regard.
Pac-Rim will claim in an arbitration that the government of El Salvador is violating its own laws and international law. Arbitration under Chapter 10 of CAFTA requires the filing the initial notice of intent to arbitrate 90 days before the actual start of the arbitration. This provides a period of time for the parties to negotiate a resolution until March 2009, when it will be possible to commence the arbitration.
Shrake, the president and CEO of Pacific Rim, believes that a change of government may make a resolution of the issue possible.
Shrake told analysts that Pac-Rim has a several million dollar budget for legal costs of the arbitration. The company has retained the prominent Washington, D.C. law firm of Crowell & Moring. A lawyer from that firm who was on the call cited as precedent the case of MetalClad Corp. v. Mexico, an arbitration decision under a parallel provision of NAFTA. The Metalclad award found that Mexico had, through the actions of a local municipality, effectively expropriated the property of a U.S. investor that had secured all required permits from Mexican federal authorities to construct and operate a hazardous waste facility and that the U.S. firm was therefore entitled to recover $ 16.5 million (plus interest) directly from Mexico.
Some persons opposed to the Pac-Rim mining plans staged a demonstration last Friday, as described in an article from IPS: "A black coffin was consigned to the flames amid music and fireworks as dozens of people from Salvadoran communities that fear the impacts of gold and silver mining celebrated a "symbolic burial" of the Pacific Rim Mining Corporation, a Canadian-based company." The article goes on to describe many of the arguments being advanced by environmentalists and other opponents to the gold mine. For more on the conflict between Pac-Rim's promoters and the opposition, see this article in Upside Down World.
In 2005, I wrote about the arbitration provisions which are part of CAFTA and which submit each of the member countries to claims in front of international arbitration panels. The arbitration provision is designed to increase investor confidence in doing business in Central American countries by giving the investors a neutral forum to rule on disputes if a government wrongfully deprives them of their investment in a country. The provision in CAFTA and the parallel provision in NAFTA have been criticized as permitting multinational corporations to threaten enormous damage awards and costly arbitrations against governments who may enact environemntal or other regulations which impose costs on foreign investors and lessen the return on their investments.
For more on Pacific Rim and the overall gold mining issue in El Salvador, select the mining topic in the left hand column of the blog.
Comments
Second, I don't have any criticism of Pac-Rim for resorting to a legal process established by a treaty signed by the government of El Salvador. The questions of whether Pac-Rim has complied with El Salvador's laws and whether the government is acting wrongly in denying the permit for exploitation is not something which should be decided in street protests. While I am not a fan of the CAFTA arbitration regime, I also recognize that El Salvador's court system is highly flawed.
Last point, the decision on whether or not to permit gold mining in the country is a decision for the people acting through their elected leaders. If they decide not to allow gold-mining, even if some would say that is a foolish decision, it is a decision a sovereign people can make. If, as Pac-Rim asserts, the people actually want mining but the current government through corruption or undue influence, is not acting in compliance with the law and the will of the voters, then that situation should be addressed. (But I'm not sure an international commercial arbitration is how it should be addressed).
1) could each of the various anonymii sign in under a separate ID. That way it would be easier to keep the points of view separate.
2) the fingers incident, although undoubtedly it does have a context as has been suggested - reference to post-civil war feuding sounds accurate - is only one among numerous quasi-violent incidents. Several major ES print media have reported that, whenever the two opposing mining factionls assemble in the same space, the 2 sides erupt into shouting, interrupting, leaping-to-the-feet-in-rage conduct within seconds, therefore it's useless to attempt a meeting.
3) both sides have paid their demonstrators, so subject is not worth raising.
4) Tim is an impartial, painstaking blog editor & journalist who does a professional job here, which is interesting because his calling lies elsewhere.
5) while it would be interesting to see the solicitors arbitrate this case - and the matter could constitute an important precedent because for the first time it involves side-stepping into CAFTA through the use of shadowy offshore shell companies - while it would be vaguely interesting to observe the solicitors argue this case, nevertheless it appears from timing of Pacific Rim's announcement that company has set this up as a short-life attempt to bully El Salvador into granting the golden ticket within the 90 days.
6) Pacific Rim does not have the money to pay Crowell & moring for the next several years of arbitration litigation. A potential buyer of Pacific Rim may already be paying this legal bill. Evidence is building that the buyer is Barrick.
I am personally convinced that the reason the Catholic church has come out against mining is not so much because mining is inherently bad or wrong, but because if the fight is lost and Oxfam goes away they (Caritas) will lose funding from the likes of Oxfam and other "charity" groups. All the good paying jobs for those that administer these "charities" will also go away. For this reason I think it absolutely necessary that everyone has to open their books and expose the hypocrisy.
I heard an excellent analogy about the mango tree. People don't throw rocks up into the mango tree if there isn't good fruit to knock down. If mining didn't have a lot to offer there wouldn't so many self serving people trying to get it stopped.
furthermore. today you wrote this:
"The same situation exists when the law prescribes a process and the government refuses to obey their own law. It is not a PacRim problem that the government refuses to live up to the promises made in the past."
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to the best of my knowledge, the existing el Salvador mining act distinguishes between exploration permits and exploitation concessions. The former do not automatically convert into the latter. Therefore it can't be said that "the government refuses to obey their own law."
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El Salvador is not unique in separating the exploration from the final operation permitting stage. Many countries do this. Many jurisdictions in Canada do this. Such a system offers a check-and-balance mechanism to the long-drawn-out procedure for developing a mine that presents risks of damage to the environment.
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turning now to your statement about the "promises" said to have been made by el Salvador, what promises were these? nothing exists on the record except Pacific Rim's numerous claims that el Salvador once upon a time promised them an operating permit. However, the company has never produced a signed document or even a letter from a senior Salvadoran official to this effect. The chairperson has told the media that Saca himself promised the permit personally, and to her ... but there's no proof of this. These are ghost promises. She is telling the media about her memories of what she believes the Salvadoran president and other officials were saying to her.
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To be fair, i am sure that many officials in el Salvador listened to the canadian mining company with great interest. The possibility of beneficial economic development was present, and still is present. Any government anywhere in the world would have entertained a reputable foreign miner's proposals with exceptional interest. Pacific Rim may have made a communication mistake in misinterpreting genuine interest as partisan commitment to its cause.
http://www.ipsnews.net/news.asp?idnews=45056
I see a major opportunity towards the development of El Salvador once GOES loses this claim, and lose it will. The putrefact and otherwise perfectly useless entity known as MARN will then have to become serious in its handling of permits.