Initial Win for Corporation in Trade Agreement Attack on Environmental Policy Poses Complications for Obama Administration as It Tries to Revive Korea FTA
WASHINGTON, D.C. – An international tribunal’s decision to allow a controversial suit against El Salvador under the 2005 Central America Free Trade Agreement (CAFTA) will fuel demands by many in Congress that the Obama administration alter the foreign investor terms in three North American Free Trade Agreement (NAFTA)-style trade pacts inherited from the George W. Bush administration and new pacts under negotiation, Public Citizen said today.
“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. “The same crazy investor rights are in Bush’s leftover trade deal with Korea that President Obama wants to move forward. Unless they fix Bush’s deal, the hundreds of Korean firms operating here would get new rights to skirt our court system and laws and use foreign tribunals to demand taxpayer compensation for laws that they do not like, just like Pac Rim is doing to El Salvador.”
Pacific Rim Mining Corp., a Canadian-based multinational firm, sought to establish a massive gold mine using water-intensive cyanide ore processing in the basin of El Salvador’s largest river, Rio Lempa. This proposed project as well as applications filed by various companies for 28 other gold and silver mines, generated a major national debate about the health and environmental implications of mining in El Salvador, a densely populated country the size of Massachusetts with limited water resources.[1] Leaders of El Salvador’s major political parties, the Catholic Church and a large civil society network expressed concerns. In the face of growing opposition, Pacific Rim never completed a feasibility study necessary to obtain an exploitation permit for its mine, called “El Dorado,” and in July 2008 ceased exploratory drilling.[2] In December 2008, the firm filed a claim under the Central America Free Trade Agreement (CAFTA), demanding hundreds of millions in compensation from one of the hemisphere’s poorest countries. Meanwhile, in El Salvador, the mining debate continues. Intimidation and threats against civic groups have escalated. In the past year, three prominent anti-mining activists were murdered.[3] As the Obama administration begins talks on its first prospective trade pact, the Trans-Pacific Partnership, the Pacific Rim CAFTA case again spotlights the concerns that have led many in Congress and U.S. civil society to demand changes to the past model of trade pact investor rights and an end to their private enforcement. Tribunals have ordered over $200 million in payments to investors under similar terms in the North American Free Trade Agreement (NAFTA).
[1]Florian Erzinger, et. al, “El Lado Oscuro del Oro,” Unidad Ecologica Salvadoreña (UNES) and Development and Peace report, December 2008, at chapter 1.
[2]Pacific Rim Mining Corp, “El Dorado, El Salvador.” Accessed May 25, 2010. Available at: http://www.pacrimmining.com/s/ES_Eldorado.asp
[3] Matt Kennard, “How Sustainable is ‘Socially Responsible’ Mining?” The Nation, Feb. 17, 2010
The letter states that “rather than supporting El Salvador’s commitment to protecting its citizens and environment, the United States, through its current trade policy, is allowing companies to punish the people of El Salvador for pursing those objectives.” The letter calls on President Obama to publicly state his opposition to the Pacific Rim case against the Salvadoran government. It also demands the President state his support for revising CAFTA and for the Salvadoran government’s investigations into the murders of anti-mining activists. Lastly, the letter calls on the President to prevent making similar mistakes by eliminating investor-state private enforcement mechanism in pending free trade agreements with Korea, Panama and Colombia.
Social organizations weren’t the only ones to weigh in on the matter. A similar letter was signed by 19 Congressional Representatives and reiterated the same main demands. The letter was sponsored by Tammy Baldwin (WI), Michael Michaud (ME), Donald Payne (NJ) and Peter Defazio (OR). Two of the four sponsors (Baldwin and Michaud) were contacted, cajoled and convinced by our very own Sister Cities committees. The letters received attention in the U.S. and Salvadoran press and was published in a paid ad in one of the major Salvadoran newspapers.
The National Roundtable Against Metallic Mining in El Salvador participated in the activities in San Salvador around Obama’s visit and issued their own statement.
The International Coalition against Mining in El Salvador also organized a press conference which caught the attention of CNN en Español which arranged a special interview with Hector Berrios of the National Roundtable against Mineral Mining. The interview was supposed to be 7 minutes long but was cut off after 4:30 minutes, when the journalists interviewing Berrios tired of his strong criticisms of CAFTA and the U.S. trade policy. At the end of the interview one of the flustered journalists interrupted Berrios and declared that free trade agreements benefited Central America because they increase the most important export to the United States: undocumented immigrants. When Berrios implied this was actually a negative result of right-wing government policies, the journalist cut off Berrios mid-sentence and concluded by saying “I don’t know if they are from the right or from the left but I see [Salvadoran immigrants] working and producing in Miami, and so many more should come.” Clearly, these journalists have a lot to learn about free trade agreements, immigration and Central America.
To watch the interview with Hector Berrios click here:CNN interview
">Global Investment Rules:Threat to Democracy and the Environment
Around the world, citizens have been mobilizing to defend their environment and economic sovereignty from transnational corporations, but there is another threat lurking in the shadows that can ride roughshod over our rights.
This is a ">video of the Network for Justice in Global Investment about the ways in corporations take advantage of the International Trade Tribunals to subvert sovereignty and democracy.
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">Las Reglas Globales de Inversión:Una Amenaza para la Democracia y el Medio Ambiente
En todo el mundo, ciudadanos/as se han estado movilizando para defender su medio ambiente y su soberanía económica de las corporaciones transnacionales. Aun cuando hemos éxito, existe una amenaza oculta entre las sombras que puede pasar por encima de nuestros derechos.
The legal proceedings initiated by the mining company Pacific Rim[3] against the Salvadoran state before the International Center for the Settlement of Investment Disputes (ICSID), is today waiting on a resolution. This is because the three arbiters who will decide the case have been given the task of deliberating at length over the last round of jurisdictional objections put forth by El Salvador. The fact that Pacific Rim has created a subsidiary in the state of Nevada, three years after the beginning of its conflict with El Salvador, to then later claim that it has the right to recourse under the DR-CAFTA, might be considered a form of fraud. The tribunal should take this fact carefully into consideration.
We expect this decision to be given in the next few days.
At this stage in the process, the best scenario for El Salvador would be a decision on the jurisdictional objections that favors it, and would mean that the case is dismissed. The worst scenario for El Salvador would be that the tribunal allows the proceedings to continue to the next stage, in which both parties would present their charges and defense, and in which responsibilities would then be established.
Pacific Rim demands indemnity for 77 million USD in return for its investment in El Salvador, and the number could reach hundreds of millions of dollars. This is because the company claims that its stock lost value after the permit for a mining concession was denied.
It must be remembered that El Salvador has been placed twice in the defense seat at supranational tribunals. The first occasion was the case presented in mid-2009 by the mining company Commerce Group, with allegations that the country had no legal basis for denying it permits for mineral exploration. Commerce Group demanded compensation of 100 million dollars, along with the re-instatement of its revoked environmental permits, without which the mining project could never exist. The decision came in March of 2011 that this case would not be accepted by ICSID. Regardless, the phase of preliminary objections cost El Salvador 800,000 USD in legal fees.
In the Pacific Rim case, which was also presented in mid-2009 and was accepted somewhat later by ICSID, El Salvador has continued the process of placing objections, which has prolonged the proceedings at a considerable cost. The cost of this case for El Salvador has been estimated at 4.3 million USD. This means that in defending itself against these two cases, El Salvador has already spent a total of over 5 million USD. For El Salvador, a country with very few financial resources, to be paying millions in arbitration, it has the effect of deepening the precariousness for the lives of people whom the state protects the least. It is extremely difficult for our country to assume these costs for arbitration, and the costs have serious economic and social implications for the people of El Salvador.
As one example, those five million USD would have provided one year worth of adult literacy classes for 140,000 people[4].
Those five million USD could have doubled the amounts of scholarships available to middle school students[5].
Five million USD are equal to what the government invests every year in infrastructure and public schools that benefit 384,615 students[6].
The five million USD paid in arbitration are approximately a third of what the government invests in the provision of food for Salvadoran students[7].
The five million USD paid in arbitration equal the full sum of what the government would invest in order to give each public school student a glass of milk every day, to support their nutritional development.
Five million USD in arbitration would cover a fifth of what the government needs to develop its 2012 vaccination program.
Five million USD could serve to feed 60,570 families in temporary housing for a full two weeks during a natural disaster[8].
If this and more can be accomplished with five million USD, how much more could be accomplished with the 77 million USD that Pacific Rim is demanding, or the hundreds of millions it could win from El Salvador?
It is for this very reason that in December of 2011, civil society organizations representing millions of people in El Salvador, the United States, Canada and the world, submitted a petition to ICSID and the World Bank (where the trade tribunal is housed) that asks for respect for domestic judicial processes, the sovereignty of El Salvador, and to have the Pacific Rim case dismissed. We are waiting.
[1] With the support of Jan Morrill. Tranlsation by Lela Singh.
[2] Fundación de Estudios para la Aplicación del Derecho (FESPAD). www.fespad.org.sv
[3] Company of Canadian capital incorporated in the Cayman Islands until 2007 when it moved to the United States to benefit from the DR-CAFTA.
[4] This calculation is made with the data that in 2010 the government spent $2 million on literacy classes for 56,000 people
[5] In 2011 the government spent 6 million USD for scholarships to middle level education students.
[6] in 2012 the government will give either $13 or $25 per student to each school for materials and infrastructure. The difference in price depends on the type of school the student attends
[7] the 2012 govt has $15.5 dedicated for the school lunch and snack program
[8] the worst natural disaster in Salvadoran history was the tropical depression that hit in October of 2011. It caused over $650 million in damages and took 34 lives
El Salvador has faced a current suit by Pacific Rim and one that was thrown out by the ICSID.The pending arbitration demands that the country pay at least $77 million.
By Keny López, La Prensa Grafica
Monday, January 16, 2012 00:00
Translated by Jan Morrill
Defending itself from two arbitration suits for not issuing mining exploitation permits has cost the country a little more than $5 million over a two and half year period.
The corporations Pacific Rim and Commerce Group filed two different suits against the government of El Salvador between June and August of 2009 in the International Centre for Settlement of Investment Disputes (ICSID)-a branch of the World Bank- arguing that there was not a legal base for the denial of their permits and proceeding by suing the country through provisions in the Dominican Republic-Central American Free Trade Agreement (CAFTA).
They are under the umbrella of article 19 of the mining law of the country, approved in 1995, that established that exploration licenses “grants the exclusive right to apply for the respective concessions.”This law was conceived in order to strengthen the economic activity from mining.However, the past presidential administration and the current administration have stated that they do not endorse mining.
In the Pacific Rim case, according to information provided to the arbitration tribunal by thedisputing parties, the cost of the company’s defense for the two objections presented by El Salvador (without including preparation for the suit) has been approximately $4.4 million.The total costs for El Salvador have been an even $4.3 million.
The compensation that the company, made of Canadian capital and which is suing through a United States subsidiary, would ask for is $120 million (the amount that Pacific Rim alleges represents the loss in value of its stock) .Alternatively, it would demand $77 million which it claims to have invested in El Salvador, as well as an amount still not specified- but that easily could reach hundreds of millions-in lost profits.
Pacifc Rim has gambled on El Dorado, a mining project located in the department of Cabañas, where it would extract around one million ounces of gold and a little more than a million ounces of silver.
In the Commerce Group arbitration, the total cost to El Salvador was estimated at $800,000 during the preliminary objections stage, according to documents presented to the tribunal, while the U.S. Company spent around $230,000, because it used its own lawyers.
In its suit Commerce Group demanded compensation of $100 million, as well as the reinstatement of its revoked environmental permits, without which the mining project could not operate.The exploitation concession had been given for the San Sebastian (La Union) and San Cristobal (San Miguel) mines to extract gold and silver.
