The Politics of Poverty

Ideas and analysis from Oxfam America's policy experts

Inside a secret hearing at a foreign tribunal, El Salvador awaits a verdict

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Residents of San Isidro (in Cabañas, El Salvador) look out over a valley where a OceanaGold hopes to begin mining gold and silver. Photo: Jeff Deutsch / Oxfam America Residents of San Isidro (in Cabañas, El Salvador) look out over a valley where a OceanaGold hopes to begin mining gold and silver. Photo: Jeff Deutsch / Oxfam America

$301 million and the health of El Salvador’s rivers and people are riding on World Bank arbitration next week.

Next week in Washington DC, right along Pennsylvania Avenue, decisions about El Salvador’s future will be made behind closed doors – almost 2,000 miles away from the Central American country.

On September 15th, the International Centre for the Settlement of Investment Disputes of the World Bank, will hear from the government of El Salvador and its opponent, a multinational mining company called OceanaGold (formerly Pacific Rim). The company is suing El Salvador for $301 million because the government did not grant it a mining permit. The government of El Salvador’s main reason for doing so is that the mining company never complied with the minimum legal requirements for obtaining a permit. On top of that, there were and are serious concerns about the social and environmental impacts of mining.

Can you imagine? For El Salvador, millions of dollars, the health of its environment and people, and the right of citizens to decide about their country’s future is all in the hands of this foreign tribunal.  Can you imagine that the future of El Salvador is in the hands of the three members of the Tribunal:

  • Prof. Brigitte Stern is an International Arbitrator and an Emeritus Professor at the Sorbonne, in Paris.  She is also an Associate Member at the Institute of International Law.
  • Prof. Dr. Guido Santiago Tawil is currently Professor at the University of Buenos Aires Law School. He is also a member of several international arbitration entities.
  • V. V. Veeder QC practices as an arbitrator and legal adviser from Essex Court Chambers, London. He is also a member of several international arbitration entities, and visiting Professor at the University of London.

Pacific Rim had failed to meet three key legal requirements for a mining permit: 1) it failed to get government approval for its Environmental Impact Study (EIS); 2) did not submit a required feasibility study; and 3) was not even close to meeting the requirement that it held titles to (or permission to mine in) all the land for which it requested a concession. The lack of land titles also demonstrates that, contrary to the company’s claims, the majority of the local population was not – and is not – supportive of their plans to mine in Cabañas, El Salvador. Pacific Rim had less than 13% of the required land holdings.

In short, Pacific Rim did not meet the requirements to obtain the concession under the laws of El Salvador,” says a lawyer close to the case who asked to remain anonymous.

Instead of meeting those legal requirements, the company made a conscious decision to spend millions of dollars lobbying for a new mining law that the company itself wrote, a law that would do away with the requirements the company could not meet. It also spent millions of dollars in a public relations campaign in the local communities that split families and put neighbor against neighbor.

“And when that didn’t work, the company initiated this arbitration to try to coerce El Salvador into compliance, or else pay millions.”

International Allies Against Metallic Mining in El Salvador, a coalition of organizations in El Salvador, the US, Australia and Canada (including Oxfam), have questioned whether the International Centre for the Settlement of Investment Disputes supports the World Bank’s mission of ending poverty and promoting responsible and sustainable economic development.

El Salvador is the smallest and most densely-populated country in Central America, and 40 percent of the population lives in poverty. The country is already suffering from a clean water crisis, according to the UN, and more than 90% of the surface water in El Salvador is contaminated. Near a now-closed mine in eastern El Salvador, the San Sebastian River was found last year to contain nine times more cyanide and one thousand times more iron than is safe for human consumption.

These concerns prompted the government and people of El Salvador to not grant any mining permits until they can have a debate and understanding of the benefits – and costs – of allowing mining. Yet OceanaGold/Pacific Rim is undermining that debate by pressuring the government with a lawsuit, and could potentially cost the country hundreds of millions of dollars.

If Pacific Rim were to win this arbitration, it would create a terrible precedent that would encourage many more frivolous cases against El Salvador and other countries,” says the lawyer.

“It would mean that the profits of mining companies everywhere would be more important than the laws of the countries in which they operate. This would turn the world upside down. 

“The mining companies would not feel that they are obligated to comply with the existing laws to obtain their permits, but that the laws must be changed to make sure the profits keep coming in. It would put corporate profits not only before the law, but also before lives and the protection of the environment. This cannot be allowed to happen.”

Hector Berrios, coordinator of MUFRAS- 32, a local civil society organization in Cabañas and a member of the National Roundtable against Metallic Mining (La Mesa) explains it this way, “It is a contradictory arbitration, based on facts that have been proven inconsistent in the process. It does not enjoy any legitimacy, since they [the company] have used legal tricks to sue the state of El Salvador. It is an unfair process, since state funds that could be used for the development of the population, health, and agriculture, could end up going instead to a company that seeks, through legal—but NOT legitimate—means, to extort the people. The people have already expressed their rejection to the presence of this company on their community.

For us, it’s a case that threatens the sovereignty and self-determination of peoples. The majority of the population has spoken out against this project and gives priority to water. According to a UNDP study, by 2050, only 4 in 10 Salvadorans will have access to water. This will be aggravated even further if the mining company comes, because the operations will use our already scarce resources and pollute the water. For us it is essential to ensure life for present and future generations,” says Berrios.

The implications are also striking for other resource-rich nations: Can an international corporation trump citizens’ right to decide how and whether resources are developed? Other Latin American nations are beginning to restrict mining because of environmental concerns, and we will be watching the outcome of this case along with them.

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Next week, join us at protests against the OceanaGold/Pacific Rim’s case in Washington, DC and in El Salvador.

You can also join 149,000 voices asking OceanaGold/Pacific Rim to drop the lawsuit against El Salvador by signing this petition.

Read more on the OceanaGold/Pacific Rim case here.

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