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September-October 2010
Vol. 35, No. 5


El Salvador: Mining lawsuit given green light

Pacific Rim, the Canadian mining company that is suing El Salvador through the Central American Free Trade Agreement (DR-CAFTA) (see March-April 2010 NewsNotes), won its first victory when the International Center for the Settlement of Investment Disputes (ICSID) in Washington, D.C. denied the Salvadoran government’s request to dismiss the case. The lawsuit is being watched by many as it will set an important precedent that could influence at least 32 similar lawsuits over oil, mining and gas that the ICSID currently is considering.

The Salvadoran government argued that Pacific Rim did not have a right to a mining concession, that it treated Pacific Rim fairly in that it would have denied a Salvadoran company the same allowance, and that the company could not sue through DR-CAFTA because it was arguing the same case under El Salvador’s national investment laws. It also argued that Pacific Rim is a Canadian company and Canada was not a signer of the DR-CAFTA, so the subsidiary that it created in order to portray itself as a U.S. firm is illegitimate. The three judges on the ICSID tribunal denied all of these arguments.

The tribunal will not hear arguments about the ecological effects of the mine such as that a local investigation showed that 60 percent of the population near the mine experience symptoms of weakness, fatigue, lack of appetite, nausea, yellowed skin, rashes and mental confusion. Nor will they hear that the mine would require 10.4 liters of fresh water per second – over 3.2 million liters per year – the amount of water that an average local family consumes in 20 years, this in a country where an estimated 90 percent of fresh water is contaminated. As Manuel Pérez-Rocha of the Institute for Policy Studies writes, “These environmental charges will not likely carry much weight at the ICSID tribunal... 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 expropriation’ – and not compliance with environmental standards.”

The economic benefits from the mine are not nearly as impressive as portrayed by Pacific Rim. In 2006, all mining in the country was only 0.4 percent of El Salvador’s GDP. According to the corporation’s own estimates, the mine has a projected life of only 6.2 years, during which the Salvadoran government would receive only from two to three percent of gross sales from the mine.

The case is being watched closely by the U.S.-based mining group Commerce Group that has also sued El Salvador for $100 million through the ICSID tribunal system. Besides imposing mammoth costs on El Salvador to defend itself, the case could show other corporations that they can avoid negotiating with governments by using more sympathetic international tribunals to overrule decisions made by those governments. It will also make all countries involved in “free trade” agreements cautious about implementing any laws that may be challenged in these undemocratic courts. It could point toward an ominous future where governments not only will have no way to rein in polluting corporations, but could also lose millions of dollars in frivolous lawsuits from these same companies.

As Vidalina Morales, a member of the National Roundtable on Mining in El Salvador, has 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.”

Faith in action:

Send a message to Catherine McLeod-Seltzer, chair of the board of directors for Pacific Rim, and ask her to work to withdraw their lawsuit against El Salvador and to respect the decision of the Salvadoran people and cease all efforts to mine gold in that country. Write to her c/o Pacific Rim Mining Corp., #1050 - 625 Howe Street, Vancouver, BC, Canada V6C 2T6. You can also post a message using Pacific Rim’s website.

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