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EL SALVADOR
ICSID rules against Australian mining company
Latinamerica Press
10/24/2016
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After seven years, arbitration process initiated by Oceana Gold sided with the El Salvador state.

The World Bank’s International Centre for Settlement of Investment Disputes (ICSID), deemed without merit on Oct. 14 the demands filed by the Australian mining company Oceana Gold who since 2009 has been claiming a compensation payment from the Salvadorian government for US$250 million, for not having been granted an exploitation concession for the El Dorado mine in the northern department of Cabañas.

The ruling sided with the Salvadorian state who argued that the company did not meet with the environmental regulatory requirements to operate in the country and the Ministry of Environment and Natural Resources did not even accept their environmental impact plan.

“Over more than five years and throughout the three phases of this arbitration, El Salvador has had to respond to Pac Rim’s [Pacific Rim, acquired in 2013 by Oceana Gold] ever-changing story and legal arguments,” the ICSID said, adding that Pacific Rim’s claims “lack any basis in fact or law.”

The company had at the start of the arbitration process argued that it had a “perfected right” to a concession because it had met all the requirements except for an environmental permit, “which it claimed El Salvador had unjustifiably failed to grant.”

“Yet more than four years after making that promise, (the) claimant has failed to prove that it had a “perfected right” to such a concession,” it said. “On the contrary, (the) claimant has been forced to admit that it neither owned nor had the required authorization for the land in the area requested for the concession. (The) claimant has also been forced to admit that it never completed the required feasibility study,” the ICSID ruled.

The case goes back to 2002, when the government of former President Francisco Flores (1999-2004) awarded the first exploration permits to the Canadian company Pacific Rim Mining. Although in 2008 then President Antonio Saca (2004-2009) refused to authorize the start of operations, it was not until the following year that President Mauricio Funes (2009-2014) permanently rejected the permits for the company to start exploitation activities.

Funes based his decision on a potential cyanide contamination, the compound used in the extraction of gold, and the risk of the water resources being affected. The mining company intended to use an average of 2 MT of cyanide and some 900,000 liters of water on a daily basis. It is estimated that there are 9.4 million ounces of silver and 1.3 million ounces of high-grade gold in the deposit.

“This is a victory for us as a country and I believe that the importance of this ruling of the arbitration body transcends to other countries”, said Douglas Meléndez, the Attorney General of El Salvador.

Resistance to metallic mining
“Whilst disappointed, Oceana Gold will review the ICSID’s ruling in detail before evaluating the next steps related to its El Salvador business unit. The company believes that a modern resource industry that operates in a safe and sustainable manner and within internationally recognized best practices has the potential to unlock a sustainable and multi-decade development opportunity for the Republic of El Salvador,” expressed the company in a statement.

“However, the company recognizes 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 statement added.

The ICSID ordered Oceana Gold to pay the Salvadorian state the total amount of $8 million for the legal expenses it had incurred.

According to Meléndez, the company has the obligation to adhere to the ruling and to fulfill the payment as it was the company who believed this was the right venue for the arbitration process. In case the mining company refuses to pay that amount, Meléndez said, the government is considering the possibility to seize the assets that the company has in Cabañas.

Ever since Pacific Rim started exploration activities in 2002, environmental, religious and human rights organizations, as well as the population in the region, kept up a constant campaign against metallic mining for considering that it brings negative consequences for health and the environment as cyanide is used in the process.

Raquel Caballero de Guevara, procurator for the Protection of Human Rights, said that “while the motivation for the company in the litigation was because it represented economic losses, for the Salvadorian people it represented the defense of life and the protection of the natural resources of the country. For the population of the municipality of San Isidro, Cabañas, opposing the project left some irreparable costs since the local population and defenders of human rights met violent deaths in their fights to defend life and the environment.”

Caballero de Guevara made reference to the cases of Marcelo Rivera, Dora Sorgo, Ramiro Rivera and Juan Francisco Durán, activists and opponents to the mine who were killed in 2009. Although no involvement of the mine has been proven, environmentalists and the population in the area consider that their deaths were probably related to the opposition to mining activity expressed by the victims.

In 2011, Francisco Pineda, farmer and environmental activist was awarded the prestigious Goldman Environmental Prize for his defense of water resources that were seriously threatened by Pacific Rim.

In a statement, the Mesa Nacional frente a la Minería Metálica (National Group against Metallic Mining) welcomed the decision of the ICSID saying that the ruling “reaffirms the need to establish a mining ban in the country.” Also, it demanded the President Salvador Sánchez Cerén “to approve the proposal of Executive Decree for the prohibition of metallic mining while the Legislative Assembly approves the law banning metallic mining in El Salvador and thus prevent other similar arbitration processes.” —Latinamerica Press.


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