World Bank allows mining company lawsuit against El Salvador to move forward

Washington, DC – International relief and development organization Oxfam America is disappointed by the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) ruling in favor of Pacific Rim, a Canadian mining company that sued the country of El Salvador for failing to issue an environmental permit to mine for gold. The company claimed that the government’s failure to issue an environment permit violated El Salvador’s foreign investment law.

“We are very disappointed by (ICSID’s) decision to rule against El Salvador. It goes against the views the Salvadoran people who are overwhelmingly against mining,” said Keith Slack, manager of Oxfam America’s oil, gas and mining program. “We are concerned that the continued presence of Pacific Rim in El Salvador will contribute to further human rights abuses. We urge Pacific Rim not to pursue this case and to listen to the voice of the Salvadoran people.”

The jurisdictional ruling means that the case will now move forward into the merits phase, which may take several years to decide. Pacific Rim also filed a parallel lawsuit, claiming that El Salvador violated the Central American Free Trade Agreement (CAFTA), however the World Bank agency rejected their claim.

This David versus Goliath story began in the rural area of Cabañas, El Salvador in 2002, when Pacific Rim began exploring for gold. In 2004, the company applied for a required “exploitation permit” to start mining. However, the government refused to issue a permit since the application lacked three out of the five elements required under Salvadoran law.

A year later, CAFTA went into effect and by December 2007, the company reincorporated in Nevada and shortly after launched their suit under CAFTA, using an extremely controversial procedure under which corporations can sue governments for allegedly violating their rights as foreign investors. At the same time, the company filed another claim under El Salvador’s investment law. On Friday, the World Bank’s ICSID rejected Pacific Rim’s claim under CAFTA but accepted the company’s parallel claim under El Salvador’s foreign investment law.

“The Salvadoran government has recognized that not all foreign investment is good for the country,” said Slack. “The ruling undermines the government’s ability to protect its citizens and the environment.”

A number of mining activists have suffered human rights violations since Pacific Rim began exploration activities in 2002. The most recent occurred last June when Francisco Durán Ayala, a student who disappeared after posting flyers as part of a campaign against the mining company, was found in a soccer field a day later with two gunshots in the head. His killing is believed to be linked to his mining activism. Many of the community members such as Ayala along with local groups believe the mine will contaminate local water supplies and ruin their ability to grow crops; independent studies have confirmed their concerns.