Pac Rim Mining loses suit against El Salvador

Last Friday, the World Bank’s International Centre for Settlement of Investment Disputes declared without merit Pacific Rim/OceanaGold’s $250-million lawsuit against El Salvador.

The investment tribunal rejected the company’s claims of having lost potential profits as a result of not being granted permits for the El Dorado gold mining project in the Central American country. Thus, it was ordered to pay $8 million in legal fees and costs to the Salvadoran government.

“We congratulate ourselves and are thankful for the brave role played in this case by the National Prosecutor, the National Roundtable against Mining, and the communities of Cabañas, Chalatenango, and San Isidro. We are also thankful for the support we’ve received from different countries around the world that joined these communities’ fight against the mining industry,” the communications secretary for the Salvadoran President, Eugenio Chicas, told the press.

However, according to the environmental organization MiningWatch Canada, after seven years of dispute, large amounts of money wasted in legal actions, and conflicts that led to threats, attacks, and murders, this case has “no winners.”

The “investor-state dispute settlement” case against El Salvador was brought in by Pac Rim Cayman LLC in 2009. The country’s government fought back alleging the now wholly-owned subsidiary of Canadian-Australian OceanaGold had failed to meet regulatory requirements for the permits.

After this experience, San Salvador put in place a moratorium on permits for the development of metalliferous mines, arguing its water supply was too threatened and its land titles too conflicted to allow extractive activities.

In response to the recent development, OceanaGold (TSX/ASX/NZX: OGC) issued a statement saying that management is disappointed and that it will review the ruling in detail before evaluating the next steps related to the company's El Salvador business unit.

“A modern resource industry that operates in a safe and sustainable manner and within internationally recognised best practices has the potential to unlock a sustainable and multi-decade development opportunity for the Republic of El Salvador. However, the Company recognises that the Government will need to take positive and definitive steps towards establishing a stable business environment if it wishes to attract foreign investment to establish this opportunity,” the release reads.

This notice wasn’t well-received by activists. Manuel Pérez-Rocha, from the Institute for Policy Studies, told MiningWatch that the fact that Pac Rim was able to sue a nation when it didn’t even had a licence to operate there is “an abuse of process” and “undermines democracy in El Salvador, and around the world.”

On a similar tone, MiningWatch’s coordinator for Latin America, Jen Moore, said that “this is one of now far too many examples of Canadian mining companies making use of international arbitration to bully governments when their mine projects lack community consent and have not met legal or regulatory requirements.”