A little-known but controversial World Bank tribunal actually ruled against corporate power Friday, rejecting Canadian-Australian gold mining giant OceanaGold's claim that El Salvador interfered with its profits when the government pulled the plug on a proposed gold mine.
The seven-year, multi-million dollar, largely secretive court battle had pitted mining-affected Salvadoran communities — supported by human rights organizations in North America, Australia, and the Philippines — against the deep pockets of OceanaGold, formerly Pacific Rim, in an international trade tribunal that has been criticized as a “kangaroo court.” However, the court, in the end, awarded El Salvador's government US$8 million to cover legal fees and costs.
The conflict sparking the US$301 million lawsuit dates back to 2007, when El Salvador took a stand for national sovereignty and clean water by denying OceanaGold, then Pacific Rim, a new permit to extract gold in the Central American country. The government raised concerns over the failure of the company’s El Dorado gold mine to live up to national standards regulating the industry, including the fact that it dodged submitting a feasibility study and Environmental Impact Assessment for the project. But the corporation saw the decision as an assault on its profits and retaliated.
In 2009, Pacific Rim leveled a US$77 million lawsuit against El Salvador in the World Bank’s investor-state tribunal, the International Center for the Settlement of Investment Disputes, that allows corporations to sue companies through free trade agreements for perceived infringement on their future profits. The mining giant later upped the price tag on the suit to a whopping US$301 million — equivalent to three years of El Salvador’s public spending on health, education, and public security combined.
The government primarily rejected OceanaGold’s proposed mine over fears of water pollution and scarcity in the country, the most water-stressed in Central America. Water quality is a major problem in El Salvador, where some 90 percent of surface water resources are considered unsafe to drink by international standards. Metal mining has been a big offender in fomenting the contamination crisis.
“By allowing transnational companies to blackmail governments to try to force them to adopt policies that favor corporations, investor-state arbitration undermines democracy in El Salvador and around the world,” said Marcos Orellana of the Center for International Environmental Law. “Regardless of the outcome, the arbitration has had a chilling effect on the development and implementation of public policy necessary to protect the environment and the human right to water.”
Not only is the gold mining industry notorious for toxic metals into surface and groundwater systems through its cyanide-intensive extraction process, but it is also sucks up staggering amounts of water on a daily basis. OceanaGold proposed mine would have used thousands of tons of cyanide and hundreds of thousands of liters of water every day it operated in the parched country.
In 2009, the same year OceanaGold filed the lawsuit against El Salvador, the newly-elected left-wing government tried to institutionalize an official moratorium on mining mining concessions. Though the law has not been passed, the government has continued to uphold a ban on new mining projects. Meanwhile, local water defenders have fought for years — together with the governing FMLN party — to pressure lawmakers to enshrine the human right to water in the constitution and force corporations to play their part in preserving the precious resource. To date, the conservative-dominated Congress has opted to continue shielding private profits instead of introducing industry regulation to protect human rights.
Despite the outcome of this shocking ruling, El Salvador’s fight to protect water, the environment and human rights is far from over as corporate globalization and free trade creates the conditions for corporations to do business with impunity across the globe.