Cabanas, El Salvador Government, Mining

The Government of El Salvador files New Objections with the ICSID Tribunal

On August 3, the attorneys defending El Salvador in Pacific Rim’s claims before the International Center for Settlement of Investment Disputes (ICSID) submitted another round of preliminary objections, challenging Pacific Rim’s right to file a claim under CAFTA.

Pacific Rim sought arbitration in 2009, claiming that the Salvadoran government violated their rights under the local Investment Law and Chapter 10 of the Central American Free Trade Agreement (CAFTA-DR). In January of this year, El Salvador’s attorneys filed a first round of preliminary objections, arguing that even if the facts are accepted as true the Government did not violate Pacific Rim’s rights. On August 2, the panel rejected those objections. This latest round of objections, challanges Pacific Rim’s right to file a claim under CAFTA. Their first argument is that Pacific Rim abused the arbitration process by changing their nationality just to file a claim under CAFTA. From December 2004 through December 2007, Pacific Rim was registered in the Cayman Islands, which is not a signatory to CAFTA. Communication between the Ministry of the Environment, which reviews applications for environmental permits, and Pacific Rim ended in 2006, long before “Pacific Rim Cayman’s nationality was changed from the Cayman Islands to the United States.” El Salvador argues that because the entirety of the events being considered took place before Pacific Rim was registered in the United States the court ought to dismiss their claims.

El Salvador’s second argument is based on the denial of benefits provision of CAFTA. They argue that while Pacific Rim Cayman filed the suit, the interested party is really Pacific Rim Mining Corporation, which is registered in Canada. El Salvador also argues that Pacific Rim Cayman has no real investment interests in the United States, and therefore should be denied the benefits of CAFTA arbitration. Similarly, the Government’s third arguement is based on the principle of ratione temporis, which states that a Court only has jurisdiction for actions or crimes that occur after a statute comes into force. El Salvador believes that because the facts and events leading to arbitration took place before CAFTA came into force, Pacific Rim is barred from making a claim under CAFTA. Their final argument is that Pacific Rim’s claims based on the Investment Law ought to be dismissed because Article 15 of that law does not constitute consent to jurisdiction as required under Article 25 of the ICSID convention.

Since the process began last year, the Government of El Salvador has given little indication as to its strategy or its willingness (or lack thereof) to negotiate a settlement. On August 2, after the tribunal announced their decision on El Salvador’s initial preliminary objections, Tom Shrake said “with this phase of arbitration now completed, we hope to resume a mutually beneficial dialogue with the GOES to resolve the impasse on the El Dorado project.” When El Salvador filed a new set of objections just a day after these comments, they sent a clear signal that they were in no mood to resume a dialogue, and instead were digging in for a long fight that could get very expensive for Pacific Rim.