Corruption, El Salvador Government, International Relations, Mauricio Funes, News Highlights, Organized Crime, U.S. Relations

Talk of an International Commission Against Organized Crime in El Salvador

El Faro posted a story this morning about a growing movement to create an International Commission Against Organized Crime in El Salvador. This Commission, modeled after the CICIG in Guatemala, would investigate and prosecute cases that the Salvadoran Attorney General’s Office (Fiscalia, in Spanish) has not taken on. Though the CICIG (the International Commission Against Impunity in Guatemala) has had its troubles over the last few years, its successes and lessons learned could greatly benefit El Salvador.

Momentum for such a commission has grown out of a general frustration with the Fiscalia, which is led by Attorney General Romeo Barahona, for its failure to investigate drug trafficking and organized crime. Though El Salvador has struggled with organized crime throughout its modern history, drug trafficking has taken off in recent years as cartels have increasingly used Central America to transport their products to the United States markets.

One of the complaints against Fiscal Barahona is that under his leadership, the Fiscalia has gone after low-level gang members while staying away from more difficult cases involving higher-level organized crime syndicates.  A related issue is that the Fiscalia attributes many homicides that appear to be political in nature to gang members (“common crime”) or family issues. An example is the 2009 murder of Marcelo Rivera.  Rodolfo Delgado, the prosecutor and lead investigator, called it a crime of passion committed by four gang members. He also attributed the 2004 murder of union organizer Gilberto Soto to a family disagreement and arrested Soto’s mother-in-law. As in many, many other cases, Barahona and his team of prosecutors seem more interested in depoliticizing murders and steering investigations away from organized crime rather than seeking the truth and justice.

Fiscal Barahona, however, believes an international committee is unnecessary.  In response to the idea of creatingsuch a commission, he stated, “We do not believe it is necessary to create a commission to combat crime. It is better that the resources that it would take be invested in strengthening the Fiscalia and the Police.”

Though it seems early in the process, El Faro reports that the Salvadoran government is taking the steps necessary to create the legal foundation for this international authority. Though the Commission would have to work with Fiscal Barahona, those working on the project realize that it would require a significant amount of autonomy. The Commission would have to be led by someone with the character to take on organized crime-a vast network that includes past and present government officials who have maintained the culture of impunity and gotten rich from illicit activities.

The discussion of a commission is becoming public just days before President Obama is scheduled to visit El Salvador, a visit during which he and President Funes are sure to discuss security and the region’s growing struggle with crime and violence. At the end of January, the Economist reported that El Salvador, Guatemala, and Honduras make up the most violent region in the world, battlefields aside. Everyday there are new reports about the Zetas and other Mexican cartels setting up camp in Central America where the cost of doing business is less, and there are plenty of corruptible government officials at the local and national levels. President Obama and the US ought to support the idea of an International Commission in El Salvador and provide all of the support and training necessary to ensure its success.

Economy, El Salvador Government, International Relations, Mauricio Funes, News Highlights, U.S. Relations, violence

Obama to Travel to El Salvador

President Obama recently finalized the dates for his trip to Central and South America.  Pending U.S. government budget resolutions, he will tour the region March 19 to 23, visiting Brasilia and Rio de Janeiro in Brazil, Santiago, Chile, and San Salvador, El Salvador.  If the budget resolutions are not passed in time, however, his trip will almost definitely be cancelled or postponed.

While many are confounded by the President’s choice to visit El Salvador, there are several hot-button issues on the table. Salvadorans compose the 6th largest immigrant population in the U.S., numbering approximately between 1 and 1.5 million people. Most of them live and work in the U.S. under a Temporary Protected Status (TPS), begun in 1991 and extended in 18-month increments since then (the current TPS is set to expire March 2012). Given the continued violent and unstable political climate in El Salvador, Salvadoran President Mauricio Funes hopes to work with President Obama to establish permanent residence for those currently living under TPS.

In addition to immigration, a discussion about drug trafficking is likely to be a priority. Organized crime syndicates trading in drugs or weapons are a major cause of violence throughout Central America, though this remains largely unrecognized and untreated.  Where Mexico, the focus of the U.S.’s war on drugs, has 15 murders per 100,000 people yearly, El Salvador has 73, the highest rate in the region.

Funes recognizes that, in both of these cases, it’s important to unearth the root causes of the problem. In the same way that immigration issues can be addressed by reducing the flow of emigrants from El Salvador, so can narco-trafficking concerns be relieved by reducing North American drug consumption. Besides these international objectives, Funes hopes to impress upon Obama the dire need to reduce poverty in El Salvador. Some measures have already been proposed for the resolution of this problem; first, the BRIDGE initiative, which proposes formalizing and securitizing a system for workers to remit money from the U.S. to El Salvador, thus hypothetically increasing the long-term benefit of these remittances for the country as a whole. Second, Funes intends to open negotiation of a renewal of El Salvador’s 5-year compact with the Millennium Challenge Corporation (currently in its 3rd year), with grant money financing improvements in education, public services, agricultural production, rural business development, and transportation infrastructure.

Overall, President Obama’s visit to El Salvador seems to mark real intent to ally the two countries, and we at Voices are hopeful that these upcoming talks will result in a mutually beneficial relationship.

 

El Salvador Government, International Relations, violence

Salvadoran Military Shooting in Morazán along the Honduran Border

At 5:30 pm on Thursday, January 27, Salvadoran soldiers shot and killed two Salvadorans on the Honduran side of the Border. Despite newspaper reports, the men were unarmed and the shooting occurred on the Honduran side of the border near the community of Nahuaterique.

According to witnesses in involved in the incident, on Thursday a group of four men crossed the border into Honduras and collected a load of lumber that they planned to sneak back to Rancho Quemado, Morazán through a punto ciego (unmonitored boarder crossing, often used for smuggling). As the group approached the border, three men walked ahead of the truck to keep an eye out for border patrols. The forth man, Aristides Pineda drove the truck. Soldiers from the Sumpul group were expecting the smugglers and had prepared an ambush, but on the Honduran side of the border. When the soldiers confronted the three men on foot, they ran into the woods. The soldiers chased them, firing their weapons, but the three men escaped.

The pursuit took the soldiers farther into Honduras until they came upon Aristides in the truck with the lumber. The soldiers pulled Aristides from the truck, threw him to the ground, and beat him with the butts of their rifles. With their prisoner’s hands tied, the soldiers attempted to drive the truck down the road and back into El Salvador where they would have the authority to officially arrest Aristides and detain the truck and lumber. They were unable to get the truck very far due to their inexperience driving on such rough terrain, and gave up while trying to cross the Rio Negro.

Residents of Rancho Quemado heard that the soldiers had arrested Aristides and confiscated the truck. They quickly informed his father who hiked 20 minutes down to the riverbed where he saw soldiers beating his son, who was lying on the ground with his hands tied. He ran back to the community for help. Someone also notified Aristides wife, and the gathering crowd waited for her to arrive with others from Segundo Montes. In all a crowd of 100 to 120 people gathered at the scene.

When they arrived, Aristides wife and daughter approached the soldiers who told her they were holding him because he had tried to escape. The women then asked the crowd to help free Aristides, and when they approached, the soldiers let him go. At that point the crowd began congregating around the truck, and Aristides’ brother, who was one of the four smugglers, got in to drive it back up the road farther into Honduras to prevent the soldiers from confiscating it. Realizing what they were doing, the lieutenant in charge opened the door of the truck to stop him. The crowd began picking up rocks and sticks to defend Aristides brother, who tried to close the door and continue driving. At that point Aristides and his father grabbed the lieutenant to get him away from the truck and the lieutenant ordered his troops to open fire on the crowd. The soldiers began discharging their M-16 rifles at the ground sending the crowd running. Many people sustained injuries from shrapnel and shattered rocks. A group of them hid behind rocks in the riverbed and watched as the soldiers began shooting in their direction.

Remberto Molina, known to his friends as Gilberto, took out his cell phone and took photos of the soldiers attacking the crowd. One of the soldiers saw him and shot him in the leg. They then fired multiple rounds into his chest and another into his head, killing him instantly. Those nearby began yelling that the soldiers had killed someone, at which point the troops stopped shooting and began returning to their vehicle.

As the crowd emerged from their hiding places, they found Gilberto dead and Pelayo García Martínez, a catechist from Rancho Quemado, shot in the leg and bleeding profusely. While some of the soldiers left, a few stayed behind and confirmed that Gilberto was dead. They eventually fled by foot into the woods.

Due to the remote location of the shooting, it took 30 minutes to find a car to transport Pelayo to the clinic in Perquín, Morazán on the Salvadoran side of the border. Once at the clinic, they rushed him to the closest hospital in Gotera, Morazán, which is another 45 minutes away. He died from his injuries about 5 minutes before reaching the hospital.

Gilberto and Pelayo both left behind grieving families and communities that are demanding justice.

La Prensa Grafica reported on the shooting on Saturday, but their story differs from the testimonies taken from Aristides and others at the scene. The newspaper account says that the shooting occurred on the Salvadoran side of the border in an area called Carrizal. The 100 plus people at the scene all testify that everything happened on the Honduran side of the border. In an interview with the newspaper the military spokesperson said that one of the soldiers was wounded by someone in the crowd, and was recovering in a military hospital. Again, witnesses testify that none of the soldiers was injured and that no one in the crowd was armed.

The article also reports that the soldiers involved in the shooting will be charged with aggravated homicide. The military was trying to negotiate with the local prosecutors office so that the soldiers could be held at the military base, but the prosecutor said that the law did not permit them to leave his custody and that he needed them for questioning. We were unable to confirm whether or not any of the soldiers involved in the shooting are in custody or whether any of them will be charged.

The day after the shooting, community members report that three military trucks and a transport helicopter brought more soldiers to Rancho Quemado, and that the police and military presence has increased significantly.  Puntos ciegos are a problem all along the Salvadoran border, and are used for trafficking drugs, guns, people, and all sorts of contraband in and out of El Salvador to Honduras and Guatemala. In June, President Funes deployed the Salvadoran military to close these illegal border crossings.

Community members contacted the police and the Human Rights Ombudsman’s office immediately after the shooting. The police would not investigate the scene because they do not have jurisdiction in Honduras. The Ombudsman’s office however, documented the crime scene, collected evidence such as bullet casings, and took photographs of Gilberto’s body. So far, the Salvadoran military has not acknowledged that their soldiers had crossed over into Honduras, but the Honduran government is also investigating the scene to determine whether the Salvadoran military crossed the border.

El Salvador and Honduras have a long history of border disputes, and the area that is now Nahuaterique used to be part of El Salvador. In fact, many people in the region have dual-citizenship and can pass freely between the two countries. The 1992 Convention of National and Acquired Rights recognizes that people from this region ought to have special economic and social rights to accommodate living in the once-disputed area. One of the issues that has been discussed in the past is the need to allow them to transport lumber from Honduras to El Salvador.

The families of the victims are communicating with the Salvadoran government in hopes of being compensated for their injuries and losses, and to ensure that those responsible for the shooting are held responsible.

We will report updates as we receive them.

Thanks to Maria and Jessie for interviewing witnesses and putting together this article.

El Salvador Government, Environment, International Relations

Civil Society Leaders Still Targeted for Anti-Mining Activities

Last week, Salvadoran environmentalists were kidnapped and robbed for a second time in Guatemala. The activists have been protesting the Cerro Blanco mine on the Guatemala-El Salvador border and the victims believe this to be the motive of the attack.

On October 28, three Salvadoran environmentalists from the Center for Investigation of Investment and Commerce (CEICOM) and two Salvadoran journalists from Channel 10 were traveling on a Guatemalan Highway en route to the Capital when their vehicle was stopped by a group of armed men. Though the men were wearing civilian clothes, the victims report that some of their clothing identified them as Guatemalan police. The attackers took the environmentalists and reporters to a nearby farm where they were beaten, robbed of their video camera, laptops, cash, and mobile phones, and then abandoned.

Members of the MESA meeting with Foreign Minister Hugo Martinez

The CEICOM delegation was on its way to report on a hearing being held by the Guatemalan Legislative Assembly on the Cerro Blanco mine, and its impacts on El Salvador. The ministries of Foreign Relations, of the Environment, and Energy and Mines all testified. While the attackers first claimed that they suspected the delegation of smugglin

g drugs, during the detention they referred to the activists going to the legislative hearing about the Cerro Blanco mine.

The day before the attack, activists blocked the Guatemalan-Salvadoran border crossings at San Cristóbal and Cara Sucia in protest of the Cerro Blanco mine

. Environmental organizations that participated in the protests included the National Roundtable Against Mining (La Mesa), the Environmental Committee of Metapán, and CEICO

M from El Salvador, and the Madreselva Collective, the Catholic Church and the neighbors of Asunción Mita from Guatemala.

CEICOM and others have called for the Salvadoran government to denounce the assaults a

nd demand an investigation by the Guatemalan government. Salvadoran Foreign Minister Hugo Martínez announced that he would send an official diplomatic letter to the Guatemalan Government asking for explanations for the a

ttacks. Martínez also stated that he would meet with CEICOM representatives to discuss the potential impacts that the mine will have on Salvadoran communities.

This was not the first time that CEICOM environmentalists were stopped by the Guatemalan police. On July 30, a CEICOM delegation was en route to Guatemala City when the Guatemalan police detained them, claiming that they were searching for drug traffickers. According to reports at the time, the delegates were robbed of their money, cameras, and other items, and released after several hours of detention. The delegation was on its way to the Capital to file a complaint with the Guatemalan Human Rights Ombudsman for environmental harm that the Cerro Blanco mine would cause to El Salvador. In statement to the press, CEICOM representative Edgardo Mira said, “for us it is clear that this event is directly related to the first event.”

The CEICOM environmentalists are only the latest anti-mining activists from El Salvador to be attacked. As we’ve discussed in numerous other postings, activists from around Cabañas, El Salvador have been threatened, attacked, and even murdered for taking a public stand against mining. These attacks are all a part of a systematic attempt to quash civil society, and impunity in these attacks undermine weakens the rule of law and the democratic process in El Salvador and other Central American countries.

 

International Relations, U.S. Relations

New U.S. Ambassador to El Salvador

On August 19, President Obama bypassed months of Congressional stagnation with the recess appointment of Mari Carmen Aponte as Ambassador of the U.S. to El Salvador.  She had been nominated in December 2009, but her confirmation had stalled in the Senate Foreign Relations Committee in April due to Republican senators’ concerns over her past romantic relationship with Roberto Tamayo, “a Cuban-born insurance salesman who was alleged to have ties to both the FBI and Fidel Castro’s intelligence apparatus” (Foreign Policy‘s The Cable, 8/19/10).

 

U.S. Ambassador Mari Carmen Aponte

 

Commenting on the four recess appointments he had made that day, President Obama stated, “At a time when our nation faces so many pressing challenges, I urge members of the Senate to stop playing politics with our highly qualified nominees, and fulfill their responsibilities of advice and consent.  Until they do, I reserve the right to act within my authority to do what is best for the American people” (White House press release, 8/19/10).

Aponte was sworn in as ambassador on September 22, 2010.  The position had been vacant for almost two years prior to Aponte’s arrival.  Robert Blau served as the Deputy Chief of Mission for half a year before assuming the role of Chargé d’Affaires from January 20, 2009 to September 25, 2010.

After presenting her credentials to President Funes, she held a press conference highlighting her “interest in women’s issues, strengthening the rule of law, and economic prosperity for all” (US Embassy in San Salvador, news archive 9/27/10).  On October 7, she held a nearly 1-hour long interview on the Salvadoran TV program Frente a Frente, discussing bilateral relations and U.S. foreign policy in the region.  She stressed that El Salvador, Central America, and Latin America were all priorities of the Obama Administration, stating that, “The United States has a great interest in a safe, prosperous, and stable El Salvador.  The United States wants to support democracy; commitment on behalf of President Obama, Secretary Clinton, and myself, is unbreakable.”  She also categorized relations between the governments of the United States and El Salvador as “extraordinarily good.”  To view the entire interview, visit the U.S. Embassy of El Salvador’s YouTube page, which features the interview in three video segments: USEmbassyElSalvador’s Channel.

Since arriving at the Embassy, Ambassador Aponte has already made strides in implementing the Obama Administration’s goals in the region.  On October 8, Aponte was present at the inauguration of the newly completed U.S. Science Corner for Energy Research at the Universidad Don Bosco (located in Soyapango, San Salvador).  The project is aligned with the Administration’s emphasis on renewal energy, which satisfies approximately 50% of El Salvador’s current energy needs (US Embassy in San Salvador, news archive 10/08/10).

The U.S. Embassy summarizes her prior work history as the following:

Before assuming the position of U.S. Ambassador to El Salvador, Mari Carmen Aponte worked as an attorney and consultant with Aponte Consulting, and served on the Board of Directors of Oriental Financial Group.  From 2001-2004, Ms. Aponte was the Executive Director of the Puerto Rican Federal Affairs Administration.

Prior to that, she practiced law in Washington D.C. for nearly twenty years.  Ms. Aponte has served as a member of the Board of Directors of the National Council of La Raza, the Puerto Rican Legal Defense and Education Fund, and the University of the District of Columbia.  She was a member of the Board of Rosemont College, and served as president of the Hispanic National Bar Association; the Hispanic Bar Association of the District of Columbia; and as a member of the District of Columbia Judicial Nominations Commission.  In 1979, as a White House Fellow, Ms. Aponte was Special Assistant to United States Housing and Urban Development Secretary Moon Landrieu.  Ms. Aponte has a B.A. in Political Science from Rosemont College, an M.A. in Theatre from Villanova University, and a J.D. from Temple University.  (U.S. Embassy of El Salvador – About Us:  Ambassador)

Cabanas, International Relations, Mining

Interview with Antonio Pacheco, Director of ADES

On June 8th, the CEO of Pacific Rim mining company, Thomas Shrake, spoke before a Canadian congressional committee about his experience with the El Dorado mining project in Cabañas, El Salvador.  The congressional committee was debating the Bill C-300 that proposes oversight of the government’s investments into international mining projects.  The committee invited Mr. Shrake to testify as an example of why the bill is needed to protect Canada’s reputation abroad.  Mr Shrake’s testimony argued against the Bill and demonized the sectors of Salvadoran society that have opposed the company’s projects in their communities.  Here we provide a response from the community association, ADES, targeted in Shrake’s testimony.

Interview with Antonio Pacheco, Director of ADES:

ROSIE: We’re here with Antonio Pacheco, the Director of ADES, and we have reviewed the comments made by Thomas Shrake to the Canadian Congressional committee on June 8, 2010. I’d like to ask, after reviewing these accusations against ADES, how do you perceive what he has said?

ANTONIO:  Mr. Shrake’s objective was to create a strong impression in the Canadian Congress, to the end that they will not approve a law that controls the behavior of Canadian businesses. Mr. Shrake accuses us of promoting violence, but in reality, the authorities of this country know very well that ADES had nothing to do with these acts, and that ADES is very removed from this type of event.  ADES has done nothing to cause violence in the area of Cabanas.

ROSIE: So, why do you think it was in Mr. Shrake’s interest to make this type of accusation against your organization?

ANTONIO: He tries to paint ADES as the devil, and to make himself into the victim of our actions. He tries to make an impression on the Canadian public that they are the victims of an attack from a Salvadoran organization, and that the Salvadoran government has done nothing to prevent this type of action.

ROSIE: So, what is the real history of ADES? What’s the organization’s mission?

ANTONIO:  ADES is a community organization, comprised of campesinos and campesinas, dedicated to agriculture and community organization. Its focus is community development. This mission leads us to oppose a project like mining exploration, which is so environmentally devastating. Before we knew about the damage caused by mines, we thought it was a good project because of the employment opportunities and development that it could bring. However, our position changed when the people effected by Pacific Rim’s initial exploration came to our office to ask for help and accompaniment. The population, coming to their own conclusions, had already tried to denounce the project through the municipal government, the attorney general, and prosecutor’s office, but these organizations didn’t pay any attention to their complaints.

From this point, ADES began to get involved in this issue. The first thing we had to do was investigate the issue, and we realized that effectively in Central America and Latin America there had been a lot of damage caused by mining companies.  We are convinced that our vision, which is sustainable development, including the rational use of natural resources, is the best way to improve our standard of living.  So, due to this situation, specifically the persistent increase of mining exploration throughout the department, and the continuous complaints of the population, we decided to accompany them by raising awareness of the potential damages, scientific research with outside experts, and to begin to bring the issue onto the national stage. We decided to bring the issue to politicians, to the Salvadoran Congress, ministers, and the church, while respecting the mining industry’s presence in Cabañas.

ROSIE: Mr. Shrake has said that on 2 occasions armed groups attacked his employees and damaged his property, along with other incidences of violence, and he says that ADES is responsible for all of these violent events.

ANTONIO: Frankly, we don’t know where this accusation; that we have acted in a planned manner with armed groups, is coming from.  We are a social organization, legally constituted, and we focus on peaceful advocacy. We understand the detrimental impact that this type of activity could cause on our area, where we work and live with our families. We make it very clear that it is not our political practice to use violent means, as Mr. Shrake suggests.

ROSIE: So, ADES is going to prepare a more detailed response to these accusations, and we will await this document.

ANTONIO: Of course ADES will respond to the accusations of the president of Pacific Rim, so that the citizenry, not only in El Salvador but also in USA and Canada can hear our point of view.

Cabanas, El Salvador Government, Environment, International Relations, Mining

Thinking Twice About A Gold Rish: Pacific Rim v El Salvador

Gus Van Harten just published an interesting perspective on Pacific Rim’s lawsuit against El Salvador concerning their efforts to mine gold. Looking beyond the heated rhetoric and passion that has dominated the mining debate in recent years, Mr. Van Harten considers the tension between encouraging stability for investors and allowing governments make changes in development policies that reflect new information and situations. We found the article insightful and timely, considering the hearing for the Pacific Rim case begin in less than a week, and have provided it in its entirety below.

Thinking twice about a gold rush: Pacific Rim v El Salvador
by Gus Van Harten*

Whether it concerns oil drilling or gold mining, sometimes a government, facing new circumstances, must change its mind. This reality creates a tension in law between encouraging stability and allowing adaptation to new information and new situations. The “gold rush” CAFTA lawsuits [1] against El Salvador reveal this tension.

Pacific Rim, a Canadian-based mining firm, has brought one of two gold mining lawsuits against El Salvador under CAFTA. [2] Since the early 2000s, Pacific Rim has spent money looking for gold in El Salvador. It did so under exploration (but notably not exploitation) licenses that were issued in 1996 and that Pacific Rim acquired in 2002. A few years later, after Pacific Rim decided where it wanted to dig, the government had adopted a more cautious position on gold mining.

So, Pacific Rim has invoked its privilege – uniquely available to foreign investors under international law, via investment treaties – to sue El Salvador. It argues that the government should have allowed it to mine for gold; the government responds that Pacific Rim failed to satisfy steps in the approvals process, including an acceptable environmental assessment. Pacific Rim seeks at least $77 million for its costs and hoped-for profits.

El Salvador is a small, poor country with precariously few water resources. It lost 20% of its surface water in the past 20 years, and 95% of the rest is reportedly contaminated. [3]

Industrial gold mining is a recent prospect for the country, and there are serious concerns about the risks it poses to people’s health and livelihoods, especially their access to clean water. How should the tension here between stability and change be resolved?

On the one hand, it seems unfair that a company that put money into exploration should be frustrated when applying for permission to exploit what it has found. On the other hand, all mining companies must be aware that a government might change its approach over time to health and environmental risks of mining. If taxpayers had to compensate everyone who lost out in bets on the social or environmental feasibility of a project, this would disadvantage those who are more prudent, patient, or environmentally conscious.

The question of how the arbitrators in Pacific Rim v El Salvador might resolve this tension is challenging to answer. Although not the fault of the arbitrators, it raises some important concerns.

First, under CAFTA and other investment treaties, the constraints put on governments are both exceptionally potent and highly malleable. This makes it very important, and yet very difficult, to assess the legal standards that will apply in particular cases. In numerous awards to date, tribunals have interpreted provisions on expropriation, national treatment and fair and equitable treatment in starkly divergent ways. In turn, they have fueled high-stakes uncertainty in the evaluation of policy space and litigation risk.

Second, investment treaties rely on the remedy of damages in cases often stemming from difficult judgment calls by governments in complex areas of policy. This can put arbitrators in a bind. Do they order a state to pay damages after finding that it violated an unclear rule? Or do they dismiss the claim, leaving the investor reeling after a long, expensive arbitration? Compared to other forms of public law judging, the system gives few options to respond to government conduct that is characterized, well after the fact, as unlawful.

Third, the use of arbitrators instead of judges to decide basic tensions in public policy makes it essential that the process be credible and independent. However, investment treaty arbitration lacks key safeguards of independence that apply to courts, including security of tenure, an objective method of assigning judges to specific cases, and checks on income-earning activities outside of the judicial role.

This invites unsavory questions. What are the business interests of the arbitrators chosen to decide a case? With whom might they have a common outlook at the International Chamber of Commerce, ICSID and others that wield key powers over arbitrator appointments? By allowing the arbitration industry to make final decisions in matters of public law, investment treaties remove longstanding safeguards that protect judges from economic and financial entanglement and that ensure public confidence in the courts.

How should governments respond? One option is to re-introduce a mediating role for domestic courts, including perhaps the courts of neutral states not involved in a specific dispute. Another is to look for ways to re-introduce safeguards of judicial independence, such as by designating a roster of eminent jurists, drawn from outside the commercial arbitration industry, from which arbitrators would be chosen.

On the rules, governments could clarify that investment treaties are designed to offer an exceptional remedy in cases of serious abuse or targeted discrimination against a foreign investor, but not a wide-ranging opportunity to challenge general laws and policies. Nearly all government measures harm some people while helping others, not because this is the aim of the regulation but because all general decisions, by definition, have ripple effects across the economy and society. Requiring public compensation for those foreign investors who are “harmed” by a general measure skews markets, as well as regulation, by inappropriately privileging one group of private interests over all others.

There are various ways to address the lack of independence, fairness and coherence in investment treaty arbitration. But the root questions are familiar. How should the tension in law between stability and change be resolved, and by whom?

Gus Van Harten, ‘Thinking twice about a gold rush: Pacific Rim v El Salvador,’ Columbia FDI Perspectives, No. 23, May 24, 2010. Reprinted with permission from the Vale Columbia Center on Sustainable International Investment (www.vcc.columbia.edu).”

*Gus Van Harten (GVanHarten@osgoode.yorku.ca) is an Associate Professor at Osgoode Hall Law School, York University, Toronto, Canada. The author wishes to thank three anonymous reviewers for their helpful comments on this Perspective. The views expressed by the individual author of this Perspective do not necessarily reflect the opinions of Columbia University or its partners and supporters. Columbia FDI Perspectives is a peer-reviewed series.

[1] CAFTA is short for the United States-Dominican Republic-Central America Free Trade Agreement, signed in 2004.

[2] The second lawsuit is by U.S.-based Commerce Group Corporation. I focus on the Pacific Rim case here because there is more information publicly available about it.

[3] R. Steiner, “El Salvador: gold, guns, and choice,” Report for the International Union for the Conservation of Nature and the Commission on Environmental, Economic, and Social Policy (February 2010).

Economy, International Relations, Mining

Proposed Trade Act of 2009 May Lead to Change in Arbitration Provisions in CAFTA and Other Trade Agreements

Congressman Michael Michaud (D-ME) and 106 other members of Congress recently introduced the TRADE (Trade Reform, Accountability, Development, and Employment) Act of 2009, which calls for a reevaluation of international trade agreements.  The bill would in part require existing and future trade agreements to include a ban on investor-state dispute settlement mechanisms, providing for state-to-state dispute resolution instead. Currently, Chapter 10 Section B of CAFTA-DR permits investors to sue a government if their investment has been undermined in a manner that amounts to expropriation, or violation of the national treatment or the most-favored-nation treatment standards outlined in Section A of Chapter 10.

Currently, Pacific Rim Mining Corporation is pursuing arbitration over its mining investment in Cabanas, claiming that the Salvadoran government violated its rights under Chapter 10 of CAFTA, Section A when they denied the mining company exploitation permits. Prior to CAFTA-DR, Pacific Rim would have had to take its complaint to their own government, and asked them to seek arbitration on their behalf – state to state. In fact, state-to-state dispute resolution remains a principle of international law, and only signatories to CAFTA, NAFTA and other trade agreements are subject to a claim by a non-state actor.

Provisions such as those found in Chapter 10 of CAFTA and other agreements give non-state investors unprecedented rights and influence over the domestic affairs in a foreign country.  For centuries, international and domestic law has embraced the principal that foreign affairs are best handled by states, and in the case of the U.S. the executive branch. Giving non-state investors the right to sue a sovereign state not only undermines a government’s ability to care for the needs of its people, but can also undermine the foreign policy and national interests of the investors’ native country.

Civil society organizations in the U.S. and Latin America have expressed their support for the bill, joining the Obama Administration, the U.S. State Department Subcommittee on Investment, and others who believe that non-state investors should not have the right to sue a foreign government.  President Obama has stated in the past, “with regards to provisions in several [Free Trade Agreements] that give foreign investors the right to sue governments directly in foreign tribunals [he would] ensure that foreign investor rights are strictly limited.”  The State Department Subcommittee on Investment of the Advisory Committee on International Economic Policy Regarding the Model Bilateral Investment Treaty recommends the change to state-to-state dispute resolution mechanisms proposed in the TRADE Act, because it would require investors to first exhaust domestic remedies and allow governments to prevent frivolous or harmful claims.

The need to protect foreign investors from expropriation and enforce national treatment and most-favored-nation standards are very legitimate. However, even under the state-to-state dispute resolution system, Pacific Rim would still be able to seek restitution, but they would have to first convince either the Canadian or U.S. government (they have registered corporations in both countries) to negotiate a settlement or seek arbitration on their behalf.  If their claim was legitimate, either government should have been more than willing to advocate on their behalf.  As it is, Pacific Rim has successfully divided the country of El Salvador, and caused the government to invest valuable resources into defending itself against lawsuit that will likely turn out to have little merit.

If passed, Congressman Michaud’s TRADE Act of 2009 would be the first step in restoring balance and order to the international community and prevent the interests of a few corporations to trump those of sovereign nations.

International Relations, Mauricio Funes, Politics

President Funes at the United Nations

On Wednesday, Salvadoran President Mauricio Funes made his first speech before the United Nations General Assembly, during which he discussed some of his administration’s accomplishments in its first 100 days, ongoing issues such as insecurity and immigration, and El Salvador’s foreign policy objectives.

Salvadoran President Mauricio Funes before the United Nations General Assembly
Salvadoran President Mauricio Funes before the United Nations General Assembly

Unity was a theme throughout Funes’ speech. At home, Funes declared that national decisions are no longer made within the confines of four walls, rather around a national table in which all sectors have a seat. He also called for greater unity amongst members of the international community to address issues such as climate change, drug trafficking and organized crime.

President Funes also called for greater unity within the Central American region, stating that building stronger ties with El Salvador’s neighbors is a top priority of his administration. He also called for the interim government in Honduras to return ousted-President Zelaya to power, stating that the region cannot return to its history of military dictators.

President Funes also highlighted some of his administration’s successes since taking office on June 1, 2009, including the creation of a new Economic and Social Council, and a housing initiative that will provide 25,000 new homes to impoverished families and create 100,000 new jobs.  He also raised concerns about immigration, pointing out that 3 million Salvadorans live abroad and their remittances count for 18% of El Salvador’s economy.  Funes said that his administration will work to improve conditions in El Salvador so that their children do not have to leave to survive. At the same time, they will fight for the rights of the 3 million immigrants living abroad so that they will enjoy the right to vote in their native country, and are able to secure appropriate documentation from their host country.

Funes also used his moment on the international stage to address charges made during the presidential campaign that if elected his party and government would lead to economic and political instability. He argued that his administration has already demonstrated that they are serious and responsible; managing the country’s finances well; and creating a secure environment for foreign and domestic businesses.

To read his speech in its entirety, click here.