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El Salvador Wins First Round In Bout With Mining Companies

June 20, 2011

Marcelo Rivera was kindapped and killed for his opposition to foreign mining interests (credit - elsalvadordoc/flickr)

El Salvador has won an important first victory in an ongoing, high stakes showdown with North American mining companies desperate to access the Central America nation’s precious metals reserves.

On March 15, the Washington D.C.-based International Centre for Settlement of Investment Disputes (ICISD), an arbitration court tied to the World Bank (WB), tossed out a US$100 million suit brought against the Salvadoran government by a US mining firm called Commerce Group Corporation.

The ICISD based its decision on a technicality, ruling that the suit is inadmissible because Commerce Group had not halted ongoing court proceedings in El Salvador. The suit was not, however, “frivolous,” the court determined. The ICISD ordered the two parties to split all associated court costs. The nearly two-year-old case is expected to set the Salvadoran government back some US$800,000.

“To conclude from Respondent’s victory that Claimants’ claims were ‘frivolous’ would be to go too far. Indeed, the Tribunal has been presented with no indication that Claimants were not serious about the claims they asserted in these proceedings, nor that Claimants pursued this matter in bad faith,” the ICISD concluded.

Commerce Group, headquartered in Milwaukee, Wisconsin, filed the ICISD suit in mid 2009, three years after Salvadoran authorities revoked environmental permits the company needed to continue operating a gold mine it owns in La Unión, near the Honduran border.

The company worked the mine, called San Sebastián, between 1987 and 1999 but ceased operations when the international price of gold dropped against a then robust US dollar. Five years later, Commerce Group obtained the environmental permits it would need to reopen the mine, but in 2006 Salvadoran government authorities made an abrupt about face, withdrawing the permits and refusing to renew the company’s extraction license.

El Salvador’s Ministerio de Ambiente de Recursos Naturales (MARN) claimed it had good reasons to block renewed operations at the mine, which residents had long accused of polluting nearby waterways. Research carried out in 2006 found local water sources to contain elevated levels of heavy metals, including aluminum, which tested at 1,800 times the World Health Organization’s recommended limit.

“MARN will not grant permits for mining projects if the company’s environmental impact assessment does not show that they’re going to protect the earth, aquifers, surface, the air and the health of the people that live in the communities,” the then minister of economy, Yolanda de Gavidia, said in July 2006.

Calling the decision “arbitrary, illegal and unconstitutional,” Commerce Group pursued legal action through the Salvadoran courts. When that didn’t work, it turned to the ICISD, where it was able to present its US$100 million suit based on rules contained in the US-Dominican Republic-Central American Free Trade Agreement (CAFTA-DR), which El Salvador implemented in 2006. The agreement’s Chapter 10 allows foreign companies who feel their profit potential is threatened by local governments to sue their host country for cash compensation.

At the time Commerce Group filed its suit, gold was selling for approximately US$950 per ounce, up from US$600 in mid 2006, when the Salvadoran government first sent the message that the company was not welcome. In mid 1999, when Commerce Group stopped operating the San Sebastián mine, gold was selling just above US$250 per ounce. The precious metal is currently worth nearly six times as much, selling for US$1,467 per ounce.

A Partial Victory

The ICISD’s decision to dismiss the suit was cause for celebration in El Salvador, an impoverished that could ill afford a US$100 million private payout. “This is a victory for El Salvador. This is the first time that we won a case associated with CAFTA,” said Attorney General Romeo Barahona, who flew to Washington DC to receive the court’s ruling in person.

The ruling was also lauded by environmental groups, both in El Salvador and the United States. “We are celebrating this victory together with the communities in El Salvador that have been suffering the effects of gold mining. Now it’s time for Commerce Group to clean up the mess they’ve made in El Salvador,” said Steve Watrous, head of a U.S.-based activist group called the Midwest Coalition Against Lethal Mining.

The Sierra Club also welcomed the suit’s dismissal, but slammed the ICISD for sticking the government of El Salvador with half of the legal bill. “We find it outrageous that the people of El Salvador will be forced to bear the burden of $800,000 in legal fees spent defending the right to protect its people and environment,” Rachel Ackoff, the organizations associate Washington representative, noted in a press statement.

The costly defense tab is not the only reason why the March court ruling, significant as it is, was only a partial victory for El Salvador, whose troubles vis-à-vis foreign mining interests are far from over.

Of particular concern is a second CAFTA-based multi-million lawsuit that, like the Commerce Group case, is also being handled by the ICISD. The company behind the second suit, Pacific Rim Mining, is a Canadian-based mining company that owns a gold mine called El Dorado in Cabañas.

Pacific Rim filed the suit in April, 2009, claiming the government of El Salvador breached both Salvadoran international law by allowing the firm to spend five years – and a reported US$77 million dollars – prospecting for gold, only to decide in the end to not grant the company extraction rights (NotiCen, Dec. 12, 2009).

The CAFTA-DR rules are only supposed to apply to companies hailing from one of the trade pact’s seven participating countries. Canada is not on that list. To avoid that stumbling block, Pacific Rim filed its ICISD suit via a fully-owned subsidiary, Pac Rim Cayman, which is headquartered in the US state of Nevada. The ICISD is scheduled to resume hearings on the matter in early May.

Deadly Resistance

For Salvadoran authorities, the multi-million dollar lawsuit is just the latest in a string of problems associated with Pacific Rim, whose El Dorado mine has long raised objections among environmental and community activists.

Worried about the affects El Dorado and other proposed mining projects would have on local waterways – particularly the Lempa River, El Salvador’s longest – mining opponents joined forces in 2006 to form the Mesa Nacional Frente a la Mineria Metalica, an umbrella organization representing numerous environmental, religious, human rights and community groups in northern El Salvador’s Cabañas and Chalatenango departments.

The Mesa played a key role in influencing then President Antonio Saca (2004-2009) of the conservative Alianza Republicana Nacionalista (ARENA) party to issue a freeze on mining permits. His more moderate successor, current President Mauricio Funes, has maintained that position, despite then intense legal pressure from Commerce Group and Pacific Rim, which filed their suits just around the time he took office.

Funes cleared up any lingering doubts about his stance on the matter early last year, when he stated unequivocally that his government “is not approving any mining exploration or extraction projects (NotiCen, Jan. 28, 2010).”

The president made the Jan.11 declaration shortly after two Cabañas activists opposing Pacific Rim’s El Dorado mine were murdered. The victims, 32-year-old Dora Sorto Recinos and Ramiro Rivera, were gunned down within a week of each other in December, 2009. Both were members of local environmental group, the Comité Ambiental de las Cabañas.

The body of a third El Dorado opponent, community leader Marcelo Rivera, was found six months earlier at the bottom of well. An autopsy concluded that Rivera, who went missing June 18, 2009, was tortured and then strangled to death.

Pacific Rim adamantly denies any connection to the killings. “There is no evidence indicating these violent acts bear any relations whatsoever to the debate over mining in the country,” the company argued in a Jan. 4, 2010 press release.

The Mesa Nacional Frente a la Mineria Metalica begs to differ, especially as opponents of the El Dorado mine continue to face menacing harassment. On Jan. 11, according to the Mesa, a local Cabañas broadcaster called Radio Victoria received a written death threat, warning the station’s “loudest mouths” (identified as Elvis Zavala, Pablo Ayala, and Manuel Navarrete) they will be killed if they don’t “stop making trouble.” Twelve days someone threatened Mesa member Hector Berríos over the telephone.

During a Jan. 31 press conference, the anti-mining organization also reported that two people linked with the Marcelo Riveras case were recently murdered. Gerardo Abrego León, who testified against the men convicted of killing Rivera, was himself murdered on Jan. 2. Two weeks earlier, on Dec. 20, a young man named Darwin Serrano also showed up dead. Serrano is presumed to have participated in the activist’s murder. Because he was a minor, however, Serrano had been released from prison.

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