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.


Anonymous said…
The local people will not even see any substantial benefits from this mining operation. As always is the case. Those who are benefited are just a handful of people.
Anonymous said…
Yes! Already the company has let go hundreds of good paying jobs and stop funding community projects because the anti-development NGO's and radical Catholic Church have threatened the government to the point of paralysis with their lies and miss-information. Unfortunately, no one has ever reviewed the project for what it is, a very clean, small, underground gold mine. No one but the company has done any scientific studies to know the affect on the local environment. There was a time when the "true" environmentalists, socially responsible organizations, the government and the company could have work together to make this an excellent, clean development project for the region. But the NGO's and radical Catholic Church are against everything, no matter what benifits it has to people! So the project will never be built by the company, the community will continue to pollute and deforest their local environment through expanding agriculture, like OXFAM, FMLN and church are promoting. Education oportunities will be missed, malnutrician will continue, OXFAM will leave for another battle and the community will get nothing, the Church will maintain their control of the poor! However,someday one of SACA's buddies will obtain the rights to mine El Dorado. I guarentee, it will not meet the environmental or social standards offered by the current company. so, everybody but a few people win, in the end!
Anonymous said…
As always it is refreshing to get someone like anonymous's take on the subject. He obviously doesn't think that a livable wage is a substantial benefit or taxes paid to improve local infrastructure, scholarships, etc. Time to pull the heads out of the dark recesses and look at things with an honest eye and not the NGO/Oxfam eye. I am amazed that a supposedly impartial observer like Tim would even include the UDW article. If he was even halfway impartial he would be honest enough to admit that PacRim had nothing to do with the violence in the area. That part of the country (Trinidad) has been living the McCoy-Hatfield kind of fueds since the civil war, and for probably the same kind of brother against brother reasons as the US civil war. Blaming these kinds of problems on PacRim is like blaming the economic problems in the US on PacRim; the mark of a pure cretin. What really happened with the misguided soul mentioned in the UDW article, who lost his fingers, was that he was drunk and pulled a gun on the gentleman who had been developing his own land. They had had problems previous to that occaision. The relative had nothing to defend himself with but a machete and used it. Whose fault is it, the guy who drunkenly and illegally pulled a gun or the guy defending himself? Since neither had any connection with PacRim other than to be in favor or not in favor of the project of the company there, the small minded would say it was the companies fault... I think it is time for the NGO's to be held accountable for the hate and discontent they cause and open their books so the world and community can see where the money they bring into El Salvador goes. If it was used for some good purpose, such as to improve education or improve infrastructure more power to them. When it is used to line the pockets of the local workers for the NGO's and fight honest development I begin to have a problem with the hyprocrisy. It also amazes me that Tim being a lawyer has a problem with someone resorting to rule of law to sort out a problem. No rule of law and you have anarchy which is one of the problems El Salvador has; no rule of law and therefore no respect for the law. I mean you have to wonder about anarchy when somebody lets hardened criminals escape. 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. Honorable government and honorable people would live up to the obligations previously agreed to and then make whatever changes that were felt necessary for the future.
Tim said…
A couple of thoughts in response. First, I have given substantial space to Pac-Rim's side of the story and don't even quote any of the UDW article. I'm not an environmental scientist or a gold miner and I can't evaluate the claims made on both sides. But contrary to Pac-Rim's assertions, I have talked to enough people in El Salvador to know that the opposition is more home-grown than it is a product of Oxfam.

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).
Anonymous said…
a few remarks:

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.
Anonymous said…
Tim, I would disagree with your assertion that the opposition to mining is home grown. There have always been those in El Salvador who have promulgated a halt to any kind of development. But until Oxfam joined the fray and began subsidizing and training the groups in opposition to mining, dam building, etc., there was no hint of violence or social disorder involved. Once Oxfam taught the local groups that any means neccesary was to be used to combat mining and development, the anarchy began (social disorder, physical violence and intimidation, destruction of private property and outright lies). Their seminars at the national university preach radicalism and not rationalism. There was no movement here until after the anti-mining battle was "lost" in Guatemala and Oxfam announced that El Salvador was the next battleground against mining.

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.
Anonymous said…
Tim is right! There is now an element of home grown dissidents. It began 3 years ago when Joyce "somebody" of OXFAM was the keynote speaker at the first mining-in-El Salvador forum. In her tirade against all mining, she stated that mining and exploration were killing the poor people of El Salvador as well as destroying their environment. Before that moment, local environmental organization, the government and communities were sitting down with company management having a dialog to figure out a way to have a safe project which benefited the local people and protected their water and environment. As well, Pacific Rim was developing many community projects (water management systems, waste recycling systems, sponsoring medical events, reforesting large tracts of land, etc) for the local poor communities. Then, the local opposition turned nasty! The company was denied access to local radio which constantly programs a mantra of hate and lies against Pacific Rim and is the only radio station that reaches the people of the project area. Our medical NGO associates were attacked and would no longer continue with the medical programs in the project communities. When public meetings were held, there was no effort to debate the merits of the project, and the opposition subverted the meetings into just constant company bashing! Our technical people were threatened and it was decided it was too dangerous and unproductive to continue participation. However, when the government and Canadian embassy tried to broker talks between the industry and environmental groups (including OXFAM), only the industry people attended and the environmental groups boycotted them. Even when Pacific Rim employees were physically asaulted, the opposition threatened witnesses and prosecuters until the cases were dropped. It was obvious that the opposition was lead by a very small group of people. It is easy to review the media reports from El Salvador and pick them out. The most recent connection between OXFAM and the local opposition was at one of the last large OXFAM anti-mining forums in San Salvador. The opposition leaders stood up with OXFAM and presented their, inflammatory, anti-mining agenda, then a few days later, a group of about 100 people (from outside the local community) were lead by one of the OXFAM speakers onto a Pacific Rim property destroyed buildings, cut down trees, destroyed roads and did tremendus damage. There were 8 people from the community who recognized the OXFAM forum participant as the leader of the group who destroyed the property. Unfortunately, because the opposition preaches such violence, the locals refused to testify for fear of their lives! Some of them have actually moved away due to fear! It should also be noted that before OXFAM's arrival, the national government and locally elected governments were encouraging and requiring under the law that the company spend money and were pushing for them to begin exploitation. All this changed under presure, first by OXFAM and it's local sponsered NGO's then by the radical element apposed to all development that remains today. Tim should investigate the facts a little better. But he is right that most vocal and violent opposition is local, but he must recognize that it was fueled by OXFAM and others spreeding lies, distorting the truth and basically denieing the local communities real debate of the merits of the project.
Anonymous said…
hey sideliner. you wouldn't happen to be oscar menjivar, now, would you. how come your story about the gun is only appearing today, many months after the fingers incident. what i heard is that Santos was peacefully fishing when things worked up into an argument and snickity-snack he lost 2 digits.

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."
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."
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.
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.
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.
Anonymous said…
Rock on CAFTA. Gold mines and dead trade unionists. That's what we want.
El-Visitador said…
The international arbitration process has been enormously useful, for instance, in Europe, which wanted to discriminate against Latin American bananas from Colombia and Costa Rica in favor of French colony bananas. It was also helpful against European Socialist subsidies to Airbus.

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.
Anonymous said…
So what do folks think will be the ultimate outcome? Will El Salvador hand over the permit within the 90 day period?
Sherry said…
Great news! The Glamis gold mining case (between Canada and U.S.) was just decided under a parallel provision in NAFTA. This precedent should help El Salvador!