A dispute in El Salvador between a multinational mining company, OceanaGold (aka Pacific Rim) and the government’s desire to ban mining due to documented risks of water contamination in this poor, water-stressed country has led to conflict, murders and costly legal skirmishes over the past five years or so.
But the implications go well beyond the turmoil and tragedy in El Salvador.
This is a story about figuring out who gets the most freedom from the rules of ‘free trade,’ about more such global rules to come from the Trans-Pacific Partnership (TPP) trade deal that the Obama Administration continues – despite protests from both the left and the right – to negotiate behind closed doors; and the inherent tensions that exist in trying to enhance commerce in a globalized world while also protecting the power of national governments to decide what is in the best interests of their citizens.
In other words, yes, it’s a complex mess and you’d probably rather just watch the Kardashians.
But let’s pose this simple hypothetical: If a multinational mining company came to your town and said it has the legal right under international free trade laws to open a huge mining operation that your own government officials oppose for fear of contaminating the region’s water supply, would you still just shrug and turn on the boob tube?
The dispute in El Salvador and the secret negotiations over the TPP are not new. Both have been chugging along, to little public notice. But concerns are rising lately over what may actually be in the draft language of the TPP, only revealed in bits so far thanks to Wikileaks, perhaps due to the push by the Obama Administration to ‘fast track’ approval of this new trade deal.
Of particular interest to opponents of the secretive fast-tracking of TPP such as Sen. Elizabeth Warren, who wrote a recent Washington Post op-ed about her concerns, is the provision for ‘investor-state dispute settlement.’
Sounds pretty boring. That’s usually the first clue, in legal documents or legislation, that something else might be going on. What most worries Warren and others is that this section in the TPP further builds up an already emerging international legal system that essentially allows corporations to sue national governments if they take actions that undermine ‘future expected profits.’
Does that sound crazy, unlikely to pass muster or Congress? Well, this is what’s already happening under current free trade regulations in El Salvador.
“El Salvador is a very water-stressed country,” said Stephanie Burgos, with Oxfam America, one of the humanitarian advocacy groups that has filed an ‘amicus brief’ (friend of the court) aimed at defending El Salvador’s right to decide against allowing mining operations in the country.
The Canadian mining firm Pacific Rim, later acquired by the Australian firm OceanaGold, in 2009 obtained permits from the Salvadoran government to explore for potential mining prospects. Even these minor operations ended up contaminating wells, which led the farming communities that would be directly affected by full-scale mining operations to oppose further development of the mine. The Salvadoran government, based on these environmental and safety concerns, denied the mining company’s application to move from exploration to full-scale mining.
So Pacific Rim (now owned as an ‘indirect subsidiary’ by OceanaGold) filed suit against the people and government of El Salvador for $301 million – for denying the company’s investors their expectation of profit.
“The case is based on the fact that the government of El Salvador never responded to Pacific Rim’s mining permit application,” said Andrea Atell, a spokeswoman for OceanaGold. Atell said OceanaGold is not involved in the lawsuit as it was initiated by Pacific Rim, even though she was designated by both firms to respond on this case.
Atell said the lawsuit is based on the government’s lack of action: “Instead of making a decision to accept or reject the application, the Government of El Salvador simply ceased taking further action.” She said the suit is based on El Salvador’s own investment laws and so she can’t comment on the impact of international trade laws.
Baloney, said Burgos of Oxfam. She noted that the mining firm failed to gain government approval for its environmental impact study, never came close to gaining title to all the land needed to launch the project and failed to meet all sorts of requirements in El Salvador. That’s why OceanaGold-Pacific Rim is suing to have this dispute heard not in the Salvadoran courts but by the World Bank’s International Centre for the Settlement of Investment Disputes.
“They are suing to be heard by arbitrators at the World Bank,” Burgos said. “The way to look at this is that these companies and their investors are going outside national governments to be compensated for actions that they contend deny them future potential profits.”
Vidalina Morales de Gámez is a community leader from Santa Marta in northern El Salvador, where she has been a leader of the fight for the right to water, for sustainable agriculture, and against mining.
“Our big concern is water,” said Morales. Only about one in four Salvadorans have access to clean water right now, she said, and even the minor exploratory work by Pacific Rim ended up contaminating wells and ground water. If the government had approved the mining operation, Morales said, it would have done so by putting the health and safety of many Salvadorans at risk.
Even the very conservative and foreign-investor friendly former Arena government put a moratorium on mining once it recognized the environmental risks. The concern about access to clean water in El Salvador, as this Guardian article indicates, has grown to become a movement, a matter of human rights – in part because of the problems caused by other mining projects.
“Why should these companies not have to respect our decision as a country, as Salvadorans?” said Morales. “We don’t think mining is the best way for us to do development. That is our decision.”
While investors and companies do have rights and legitimate expectations (such as not having your project seized by governments that like to ‘nationalize’ thriving private businesses), Burgos said these kind of legal challenges threaten national sovereignty and deny the rights of citizens to determine their own fates.
Much of the media and political attention to the TPP, and the idea of holding these international, extra-national tribunals whereby corporations can sue governments for potential profit-injuring decisions, has focused on the possibility of corporations suing the American government.
“This isn’t a partisan issue,” contended Warren in her op-ed warning of the day when corporations will have even more sway over government.
“Conservatives who believe in U.S. sovereignty should be outraged that ISDS (investor-state dispute settlement) would shift power from American courts, whose authority is derived from our Constitution, to unaccountable international tribunals,” she wrote. “Libertarians should be offended that ISDS effectively would offer a free taxpayer subsidy to countries with weak legal systems. And progressives should oppose ISDS because it would allow big multinationals to weaken labor and environmental rules.”
But the American government can probably hold its own against most corporations, even multi-nationals (assuming, of course, that government officials these days even want to hold their own against corporations ….).
These kind of challenges are not hypothetical, or dependent upon passage of the TPP. They are already taking place, at an increasing rate under existing free trade laws. And it is the poor countries who are most at risk.
“Poor countries like El Salvador don’t have the financial resources or clout to fight these kind of challenges,” said Burgos. What OceanaGold is claiming in damages is equivalent to half what El Salvador spends on education. Nearly half the country lives in poverty. El Salvador simply can’t afford to fend off these kind of legal challenges to its sovereignty, Burgos said, and the large corporations know this.
“In El Salvador, there is wide consensus across the political spectrum opposed to mining,” Burgos said. Our trade pacts should be structured to support those governments who make difficult decisions aimed at protecting the health and welfare of its citizens, she said, and not be based simply on ensuring corporate profits.