Mining dispute resolved in favor of El Salvador
In a 220-page ruling, the World Bank’s arbitration tribunal ICSID threw out Pac Rim Cayman's (a unit of Oceana Gold) lawsuit against El Salvador. The three judge panel ruled unanimously against Pac Rim Cayman.
Pac Rim Cayman argued that their investment rights had been violated because while they were given a concession to explore mining conditions in El Salvador, they were denied permits to extract those resources from the ground for no satisfactory reason. El Salvador argued otherwise, claiming that mining would have been an environmental disaster for such a poor country with weak institutions and already depleted and contaminated water supplies.
El Salvador has had what amounts to an effective moratorium on mining since ARENA and Tony Saca's term in office. Support for the moratorium generally crosses party lines, although ARENA likes to make a political show about it now and then.
In a sense, the process worked. International investors had little faith in El Salvador's weak judicial system that offered limited protections for investor rights. El Salvador agreed to resolve conflicts through the ICSID. When the dispute emerged in this case, the lawsuit was resolved. OceanaGold, Pac Rim Cayma's parent company, was disappointed by the ruling but said that it respected the opinion of the arbitration panel. The company was ordered to pay El Salvador $8 million to cover the costs of the seven-year legal battle.
However, the damage to investor confidence done by this case seems to be pretty extensive. For the last several years, El Salvador (and the US) has been trying to encourage greater foreign direct investment in the country. Its efforts have not been successful. Part of the problem is that, unlike the 1990s, there is little public industry to sell off to private investors. Corruption remains a problem under FMLN government like it was under ARENA. Violence rightfully scares away investors.
However, El Salvador's decision not to offer Pac Rim Cayman a mining contract has been held up rather frequently by right-wing critics of the FMLN. While I am told that she is not as influential as she used to be and that her opinions do not always reflect broader opinions within Republican circles, Mary Anastasia O'Grady of the Wall Street Journal never let an op-ed on El Salvador go by without criticizing the FMLN's handling of this mining dispute. The Reds are destroying the Salvadoran economy.
It's not clear that this litigation's successful resolution is going to spur greater foreign investment. The damage to El Salvador's international reputation was quite high in this case, much higher than the $8 million it might receive in damages.
Pac Rim Cayman argued that their investment rights had been violated because while they were given a concession to explore mining conditions in El Salvador, they were denied permits to extract those resources from the ground for no satisfactory reason. El Salvador argued otherwise, claiming that mining would have been an environmental disaster for such a poor country with weak institutions and already depleted and contaminated water supplies.
El Salvador has had what amounts to an effective moratorium on mining since ARENA and Tony Saca's term in office. Support for the moratorium generally crosses party lines, although ARENA likes to make a political show about it now and then.
In a sense, the process worked. International investors had little faith in El Salvador's weak judicial system that offered limited protections for investor rights. El Salvador agreed to resolve conflicts through the ICSID. When the dispute emerged in this case, the lawsuit was resolved. OceanaGold, Pac Rim Cayma's parent company, was disappointed by the ruling but said that it respected the opinion of the arbitration panel. The company was ordered to pay El Salvador $8 million to cover the costs of the seven-year legal battle.
However, the damage to investor confidence done by this case seems to be pretty extensive. For the last several years, El Salvador (and the US) has been trying to encourage greater foreign direct investment in the country. Its efforts have not been successful. Part of the problem is that, unlike the 1990s, there is little public industry to sell off to private investors. Corruption remains a problem under FMLN government like it was under ARENA. Violence rightfully scares away investors.
However, El Salvador's decision not to offer Pac Rim Cayman a mining contract has been held up rather frequently by right-wing critics of the FMLN. While I am told that she is not as influential as she used to be and that her opinions do not always reflect broader opinions within Republican circles, Mary Anastasia O'Grady of the Wall Street Journal never let an op-ed on El Salvador go by without criticizing the FMLN's handling of this mining dispute. The Reds are destroying the Salvadoran economy.
It's not clear that this litigation's successful resolution is going to spur greater foreign investment. The damage to El Salvador's international reputation was quite high in this case, much higher than the $8 million it might receive in damages.
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