Canadian Embassy Denies Access to two of its Own in San Salvador

Yesterday morning (June 13), a small group of anti-mining activists held a peaceful protest and press conference on the sidewalk in front of the Canadian Embassy. The protest was the culmination of a two-week effort by anti-mining activists to hand-deliver a letter to the Canadian Embassy asking them to end their support for Pacific Rim’s lawsuit against El Salvador. (For background on the lawsuit and Pacific Rim’s efforts, click here and here).

One highlight from the event was when two Canadian law students (Erica and Leah) who are interning for Voices on the Border and FESPAD this summer, tried to enter the embassy to deliver the letter, and talk to Embassy officials about the case. The Embassy turned them away without explanation. Yesterday afternoon, Erica wrote:

“This is outrageous treatment. Any citizen of any country is allowed to enter their embassy while traveling abroad – that’s what embassies are for. Your political affiliations don’t affect this basic right, nor do your stances on controversial issues. The embassy is Canadian territory. As citizens, we have the right to enter our embassy. They do not have the right to refuse entry to law-abiding Canadians.”

When they pressed the issue with security guards, they received word from Embassy officials that one of them could enter if they had document problems, otherwise they could not enter. That’s true solidarity! Erica and Leah experienced the kind of exclusion that Salvadorans and impoverished people around the world experience every day as they try to defend their environment, protect their economic security, and build a healthy life for their children.

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Yesterday’s events came almost two weeks after the International Center for Settlement of Investor Disputes (ICSID) tribunal announced their decision on preliminary objections in Pacific Rim’s lawsuit against El Salvador. This round of objections focused on jurisdiction – determining whether ICSID had the authority to hear Pacific Rim’s claim against El Salvador. In their lawsuit, Pacific Rim argues that El Salvador violated rights protected under the Central American Free Trade Agreement (CAFTA) and El Salvador’s investment law. The tribunal decided it did not have jurisdiction to hear the CAFTA claims (Pacific Rim is a Canadian firm and Canada is not a CAFTA signatory), but that it would hear the claims under El Salvador’s investment law.

Following the decision, Gus Van Harten, Associate Professor of Law at Osgoode Hall Law School, said,

“The case will now be one of the rare ones that proceeds under the host state’s domestic law on investment, but it is no less threatening than the treaty cases because of this. The arbitrators retain essentially the same wide-ranging powers, including to decide what a regulatory expropriation is, what is fair or unfair regulation, etc…. and to award damages or make affirmative orders against the government. Their award will also be widely enforceable in the manner of any treaty case.”

The Salvadoran Attorney General has tried to spin the decision as a victory, and that CAFTA works, but few agree. Pacific Rim’s lawsuit is still alive and a victory under Salvadoran law is just as enforceable as a victory under CAFTA.

What happens next remains a little unclear. It could be that Pacific Rim and El Salvador proceed to the next phase of the trial. Pacific Rim will present their complaint and EL Salvador will present their defense. Then the tribunal will hand down their decision. Or it could be that Pacific Rim and El Salvador negotiate a settlement; though El Salvador has yet to indicate they’d even consider doing so.

There is another, more extreme option worth mentioning, if for no other reason than highlighting El Salvador’s more serious problem – the fact they give corporations the right to sue them in the first place.

Historically, individuals and corporations did not have the right to sue a country – only a country could sue another country. That began to change when the U.S., Mexico, and Canada signed the North American Free Trade Agreement, which gave corporations the right to seek arbitration if a signatory country appropriated an investment. International law still dictates that a country has to submit to jurisdiction, and unless they have, individuals and corporations cannot sue. By signing CAFTA, the U.S., Mexico, and Canada all agreed that they would give international courts jurisdiction to arbitrate any disputes with investors.

El Salvador first submitted to jurisdiction in 1999 when the Flores Administration and ARENA-controlled Legislative Assembly passed the Foreign Investment Act – the law Pacific Rim is using now. The also agreed to give international tribunals jurisdiction to arbitrate disputes when they signed CAFTA and other trade agreements.

Professor Van Harten suggested after the recent ruling that one way El Salvador could get out of the Pacific Rim suit would be to repeal part or all of the 1999 Investment Law and no longer submit to jurisdiction. The Legislative Assembly would have to explicitly state that the law is retroactive and apply to any current actions. While that would likely be a popular move at home, it probably wouldn’t go over well with the U.S. and other international bodies, and it seems unlikely that the Salvadoran government would put those relationships at risk without careful consideration.

Withdrawing from jurisdiction may be something El Salvador wants to do anyway. Pacific Rim is only one of many mining companies that have applied for but not received exploitation permits from the Salvadoran government. If Pacific Rim is successful in their lawsuit, many others will likely follow. If El Salvador is unsuccessful in defending itself, it may end up granting more than 30 mining permits or face defending itself against an equal number of very large lawsuits.

Another reason to withdraw jurisdiction from international arbitration panels like ICSID is because future trade agreements may grant investors even more protection and rights than NAFTA and CAFTA.

Just yesterday, Public Citizen published a report on the investor protection provisions in the Trans Pacific Partnership (TPP) – a trade agreement being negotiated by Australia, Brunei Darussalam, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam, and the U.S. According Public Citizen’s analysis, some of the most outrageous provisions would:

• Limit how countries can regulate foreign firms operating within their jurisdiction, with requirements to provide them with greater rights than domestic firms;

• Establish a two-track legal system that gives foreign corporations to avoid domestic courts and laws, and sue States in foreign tribunals; and

• Grant foreign corporations the right to demand compensation for financial, health, environmental and land use regulations they claim undermine their TPP privileges, and demand compensation for costs of complying with financial or environmental regulations that apply equally to domestic and foreign firms.

El Salvador is not a signatory to the TPP, and the agreement has not even been signed or ratified, but the pendulum seems to be swinging very far in favor of these kinds of pro-investor rights. Once that is the standard, any efforts to protect local environments and resources are subject to the desires of international corporations… until countries organize and push the pendulum back to protect their interests.

Corporations and the U.S. have worked hard to keep concerned citizens and civil society groups from influencing negotiations of these trade agreements. Public Citizen’s account of how hard the U.S. has worked to keep the TPP negotiations sounds a lot like the CAFTA negotiations eight and nine years ago. While Corporations and business interests have a say in the process, concerned citizens and civil society organizations are left on the sidewalk to protest.

In that context, it’s not really surprising that the Canadian Embassy denied Erica and Leah (the Canadian law students interning in El Salvador) entry to the Embassy – they were hanging out with the wrong crowd. Perhaps if they were interning for Pacific Rim or any other international corporation they  would have had a different experience.

Update on Pacific Rim Mining Company

It has been over three years since Pacific Rim closed down its operations in El Salvador and filed a notice of intent to seek arbitration against the Salvadoran Government for denial of mining permits.

Pacific Rim, a Canadian company that bills itself as “an environmentally and socially responsible exploration company,” reports that in the first half of fiscal 2012, their “cash and cash equivalents increased $1.4 million from $0.3 million at April 30, 2011 to $1.7 million at October 31, 2011. The company’s short-term investments increased from $0.8 million to $1.1 million over the same period, resulting in a $1.8 million total increase in assets.

The increase in assets does not indicate that they are all of a sudden profitable. According to a Pacific Rim’s press release announcing their quarterly report, the increase “reflects the cash proceeds of a private placement equity financing undertaken by the Company.” This means that Pacific Rim found new private investors to finance their operations. In fact, the press release states clearly that they have “no source of revenue, and will require additional cash to continue fund legal, exploration and administrative expenses.”

While Pacific Rim’s El Dorado project in San Isidro, Cabañas is their most advanced, the company recently acquired an option to earn 65% interest in the Hog Ranch gold property in Nevada and has begun field exploration. Pacific Rim also has the opportunity to acquire a 100% interest in the Remance property in Panama – an interest they secured in 2010. While they have begun “phase 1 drilling” at Hog Ranch, Pacific Rim reports that the Remance project is “in doubt” and they have no plans for exploring the property.

The biggest question mark for Pacific Rim remains their ICSID claim against El Salvador, which is potentially worth $100 million dollars and the rights to mine gold in Cabañas. In their press release, Pacific Rim says,

“Expenditures related to Pacific Rim’s CAFTA/ILES arbitration claim are expected to continue at present or modestly higher levels during the coming months, and are directly related to the level of arbitration activity. The Company has currently accumulated a liability of approximately $1.4 million related to the CAFTA/ILES arbitration action and is currently discussing vendor-specific alternative financing opportunities that will reduce this accounts payable position.”

The ICSID Tribunal will likely hand down a ruling any day on the last round of preliminary objections filed by El Salvador. If the Tribunal finds in favor of El Salvador, part or all of Pacific Rim’s claim could be dismissed. If the Tribunal finds for Pacific Rim, the case moves a little closer to a full hearing.

In anticipation of the decision, a group of labor, union, environmental and other civil society leaders will hold a rally outside the World Bank tomorrow (Thursday, December 15) protesting Pacific Rim’s claim. Those attending the rally will present a letter to World Bank and ICSID officials calling on them to respect El Salvador’s decision to prohibit mining in order to protect their local communities and water resources from environmental damage.

Though Pacific Rim continues to engage in minor exploration activities, their primary activity and asset is this lawsuit. A favorable outcome of the ICSID arbitration would be a windfall for Pacific Rim’s investors, possibly allowing them to recoup their $77 million investment and perhaps damages and lost profits.

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.

Pacific Rim’s ICSID Claim Lives to See Another Day

This morning Pacific Rim Mining Co. announced that yesterday the ICSID (International Center for Settlement of Investment Disputes) tribunal denied the Government of El Salvador’s preliminary objections that sought to dismiss most of the mining company’s claims.

In April 2009, Pacific Rim filed international arbitration proceedings against the government of El Salvador claiming that their denial of mining exploitation permits violated their rights under the Central American Free Trade Agreement and Salvadoran Investment Law. In January of this year, the government filed preliminary objections requesting that the tribunal throw out most of Pacific Rim’s claims. They argued that even if all alleged facts are accepted as true, the tribunal still does not have a legal basis on which to decide in Pacific Rim’s favor. (Click here for a summary of the oral arguments). The tribunal heard oral arguments over these preliminary objections on May 31 and June 1, 2010, and yesterday released its decision denying the government’s request.

The tribunal’s decision does not mean that Pacific Rim is necessarily any closer to securing mining permits – only that their ICSID claims will live to see another day. In Pacific Rim’s press release, the company’s President and CEO states “We are very pleased with ICSID’s decision on the Preliminary Objection.” He continues, “[t]his is a positive and crucial step in the CAFTA process for PacRim. We are, however, reticent to celebrate, as we believe a more productive outcome is possible for both the Salvadoran people and foreign investors. With this phase of the arbitration now completed, we hope to resume a mutually beneficial dialogue with the GOES to resolve the impasse on the El Dorado project.”

In filing their claim, Pacific Rim is seeking to recover the $77 million they have invested in exploring their El Dorado site in Cabañas, El Salvador, as well as damages. In his statement, however, Tom Shrake seems to indicate that in trying to negotiate a settlement they are still working to secure exploitation permits. At this point, however, it seems very unlikely that Pacific Rim or any company buys their Pacific Rim El Salvador subsidiary will be able to mine for gold anytime soon. Public support for mining in Cabañas is so low that even Mayor Bautista (once a Pacific Rim promoter) from San Isidro, the municipality where the El Dorado site is located, has expressed his opposition to their efforts.

Investors are apparently not too impressed with the ICSID decision. Pacific Rim’s stock closed at $0.17 a share yesterday and is currently selling for $0.16.

While Pacific Rim’s ICSID claim may live to see another day, the likelihood that they will be resuming their activities in the region are slight.

Pacific Rim v. El Salvador: The Tribunal Begins

Here’s the latest from Tom Shrake and Pacific Rim:

Pac Rim Cayman, LLC (“Pac Rim” or the “Company”), a Nevada corporation and a wholly-owned subsidiary of Pacific Rim Mining Corp. (TSX: PMU)(NYSE Amex: PMU) (“Pacific Rim”) has received notice from the International Centre for Settlement of Investment Disputes (“ICSID”) that the three nominations for arbitrators in the Company’s action under the Central America-Dominican Republic-United States of America Free Trade Agreement (“CAFTA”) and the El Salvadoran Investment Law have all accepted their appointments. As a result, the Arbitral Tribunal is therefore deemed under ICSID Arbitration Rule 6 to have been constituted. For additional information about Pac Rim’s claims against the Government of El Salvador see Pacific Rim news release #-09-03 dated April 30, 2009 or its 2009 Annual Report.

“This is a key milestone in Pac Rim’s claim as the arbitration process will now get fully underway,” states Tom Shrake, CEO. “The next step is for the Arbitral Tribunal to convene a hearing to set out the further procedures in the arbitration. The shareholders of Pacific Rim can rest assured that although the arbitration will proceed as quickly as possible, we continue to maintain a dialogue with the Government of El Salvador to find a resolution to our dispute to the benefit of both parties. Pacific Rim has worked with both local residents and their elected officials, and the Government of El Salvador, to design a mine plan for the El Dorado deposits that sets new environmental protection standards for Latin America. We are committed to responsible mining that can put the people of Cabanas back to work in these extremely difficult economic times. El Salvador has tremendous gold wealth that can be translated to jobs and economic prosperity in the poorest region of the country in a safe and responsible manner.”

About the Company

Pacific Rim is an environmentally and socially responsible exploration company focused exclusively on high grade, environmentally clean gold deposits in the Americas. Pac Rim’s primary asset and focus of its growth strategy is the high grade, vein-hosted El Dorado gold project in El Salvador. The Company owns several similar grassroots gold projects in El Salvador and is actively seeking additional assets elsewhere in the Americas that fit its project focus. All references to “Pac Rim” or “the Company” encompass the Canadian corporation, Pacific Rim Mining Corp, and its U.S. and Salvadoran subsidiaries, Pac Rim Cayman LLC, Pacific Rim El Salvador, S.A. de C.V., and Dorado Exploraciones, S.A. de C.V., inclusive.

On behalf of the board of directors,

Thomas C. Shrake, President and CEO

Forward-Looking Information

Information set forth in this document may involve forward-looking statements. By their nature, forward-looking statements are subject to numerous risks and uncertainties, some of which are beyond Pacific Rim’s control, including: the schedule and commencement date of future arbitral hearings; the outcome of any ongoing discussions with the Government of El Salvador; and the outcome of the arbitration against the Government of El Salvador. Readers are cautioned that the assumptions used in the preparation of such information, although considered reasonable at the time of preparation, may prove to be imprecise and, as such, undue reliance should not be placed on forward-looking information. Pacific Rim’s actual results, programs and financial position could differ materially from those expressed in or implied by these forward-looking statements. Readers are urged to thoroughly review the Company’s Risks and Uncertainties as outlined in its 2009 Annual Report.