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Mining for Profits in International Tribunals - Updated Report

November 22, 2011

Click here to access the report.

Washington DC – In conflicts over rights to valuable natural resources, transnational corporations are increasingly using a powerful new weapon – the right to sue governments in international arbitration tribunals.

A newly updated Institute for Policy Studies report, “Mining for Profits in International Tribunals, documents the increased use of these rights by transnational corporations involved in the oil, mining, and gas industries.

Most governments in the world are obliged to provide sweeping foreign investor rights through an expanding web of international arbitration tribunals, bilateral investment treaties, and free trade agreements.

The IPS report finds that at the most frequently used tribunal, the International Center for Settlement of Investment Disputes (ICSID), 43 of the 137 pending “investor-state” cases are related to oil, mining, or gas. By contrast, one year ago there were only 32 such cases and 10 years ago there were only 3.

Example:  Pacific Rim v. El Salvador

In one of the most controversial cases, Pacific Rim is suing the government of El Salvador, demanding $77 million over the denial of a gold mining permit on environmental and public health grounds. The firm charges that the government’s refusal to grant the permit is a violation of its right to “fair and equitable treatment” and other protections under the Central American Free Trade Agreement (CAFTA).

An ICSID tribunal is expected to make a ruling very soon on whether it accepts jurisdiction and will proceed with the merits phase of the case.  The government argues that Pacific Rim, a Canadian corporation, should not be allowed to file suit under CAFTA, since Canada is not a party to the agreement.  The company is using its U.S. subsidiary in Reno, Nevada to gain access to CAFTA’s investor-state dispute settlement mechanism.

IPS Director John Cavanagh and Associate Fellow Manuel Perez-Rocha have made separate trips to El Salvador to interview government officials and members of communities that would be most affected by Pacific Rim’s proposed mining project. 

In an in-depth article for The Nation, Cavanagh describes how community members have worked for many years through the democratic process to build national support for a ban on mining. A key concern is that the mining project would pollute the Lempa River, the water source for more than half the country’s people.   

According to Perez-Rocha, “The El Salvador cases are a prime example of how trade agreements have given transnational corporations the power to undermine democracy. The people of that country are overwhelmingly opposed to gold mining, and yet these expensive lawsuits have put extreme pressure on the government to grant the permits.”

Other key findings of the report:

  • The 43 current extractive industries cases include: 14 related to oil, 10 related to gas, 14 related to mining (including 4 over gold), and another 5 related to combination oil/gas projects. 
  • Latin American governments make up about 10 percent of the 157 ICSID member governments. And yet they are the targets of 68 (50 percent) of all ICSID cases and 25 (nearly two-thirds) of the 43 extractive industries cases.
  • The increase in investor-state lawsuits related to extractive industries has coincided with an increase in commodity prices. The price of gold, for example, has quadrupled, from $282 per ounce in January 2000 to $1,900 in September 2011.
The full report can be downloaded here. 

The Institute for Policy Studies is a community of public scholars and organizers linking peace, justice, and the environment in the U.S. and globally. IPS has partnered with The Democracy Center, based in Bolivia, to create a Network for Justice in Global Investment to help facilitate a debate over a range of policy options, including withdrawing from the current system, re-writing the rules to support sustainable development and protect national sovereignty, and replacing the system with alternative institutions. To learn more, see: www.justinvestment.org.