Jurisdictional ruling in Pacific Rim case

There has been another ruling in the international arbitration brought by Canadian gold mining company Pacific Rim against the government of El Salvador.  The case is pending in the International Center for Settlement of Investment Disputes (ICSID).  In its ruling, the ICSID tribunal dismissed Pacific Rim's case under the Central American Free Trade Agreement (CAFTA), but will permit Pacific Rim to continue a claim brought under El Salvador's 1999 Investment Law.

There is a good overview and analysis of this decision at the Public Citizen Eye on Trade blog.   The coalition of organizations opposed to metallic mining in El Salvador have collected news coverage and reactions to the decision at this link.

It is important to realize that this decision is only about the jurisdiction of the ICSID.   This decision is only about the question of whether or not the ICSID has the power to rule on the dispute between Pacific Rim and the government of El Salvador.   We have not yet gotten to the merits of the case.   There is nothing in this decision about whether or not El Salvador has dealt fairly with Pacific Rim or whether gold mining should be permitted in El Salvador.

Pacific Rim had brought two claims against the government of El Salvador -- a claim under CAFTA and a claim under El Salvador's Investment Law.   The part of the decision on CAFTA is long and complicated, but boils down to this -- Pacific Rim is a Canadian company which cannot get the benefit of a trade agreement which Canada is not part of.   Although Pacific Rim had created a US subsidiary and claimed the subsidiary could bring the claim, the Tribunal saw through this stratagem.

So far, gold mining companies are 0 - 2 in trying to bring their cases against El Salvador under CAFTA.   The Commerce Group had its complaint dismissed earlier for failure to comply with procedural requirements and now Pacific Rim has had its claim under CAFTA dismissed because it is a Canadian company and Canada is not part of CAFTA.

The decision on the Investment Law claim is actually a fairly common sense decision.   El Salvador has had an existing law since 1999, the Investment Law, which states in Article 15:
In the case of disputes arising between foreign investors and the State, regarding their investment in El Salvador, the investors may submit the dispute to: (a) the International Center for Settlement of Investment Disputes (ICSID), in order to settle the dispute by means of conciliation and arbitration, in accordance with the Convention on Settlement of Investment  Disputes  Among  States  and  Nationals  of  other  States  (ICSID  Convention).
(emphasis supplied).   The ICSID simply applied the plain meaning of this Salvadoran law which states that foreign investors can bring lawsuits against El Salvador in that forum.    The reason Pac-Rim's lawsuit will continue is not an error in the ruling by the ICSID, but the policy decision that El Salvador's National Assembly made in 1999 to permit international arbitration of such disputes.

The litigation has been very expensive for El Salvador  (and Pacific Rim).   Both parties are represented by high-priced Washington, D.C. law firms.   El Salvador's cost so far has been $4.3 million, and this has only paid for the case through its first two major procedural rulings.    There is still to come the cost of extensive future proceedings on the actual merits of Pacific Rim's claim.  

The only thing I can predict about the final outcome of this case is that the lawyers will pocket millions more in fees.