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Pacific Rim Files
Notice of Intent to Arbitrate
Under DR-CAFTA
On Tuesday, December 9, 2008, Pacific Rim Mining Corporation, a Vancouver based mining company, issued a press release announcing that the company has filed a Notice of Intent (NOI) to arbitrate against the Salvadoran government under the Central American Free Trade Agreement (CAFTA). Pacific Rim claims the Salvadoran government's failure to issue an extraction permit to the company for its El Dorado project is a violation of their rights as a foreign investor under CAFTA, and has cost the company significant financial losses. Pacific Rim declares to have invested $77 million during its gold exploration in El Salvador, and argues that the company is entitled to an extraction permit.
In accordance with El Salvador's current mining law, Pacific Rim filed an Environmental Impact Study with the Salvadoran Ministry of Natural Resources and Environment (MARN) in September 2007, in its bid to secure a mining extraction concession for its El Dorado mine project in San Isidro, Cabañas in the Northern Zone of El Salvador. Pacific Rim claims to have met all the concerns expressed by the MARN, and that the Salvadoran government's refusal to grant the extraction permit is in violation of their rights as investors under CAFTA.
This Notice of Intent to arbitrate regarding investors' rights to mining extraction permits is the first of its kind to be filed under CAFTA. In El Salvador, there are currently 24 mining exploration concessions for gold and silver. The geographical area of El Salvador is 20,749 k km2 with a population of 5.7 million inhabitants. The population densities of larger countries that allow mining extraction, such as Bolivia and Chile, which have population densities of 8.73 inhabitants/ km2 and 21.14 inhabitants/ km2 respectively, pale in comparison to El Salvador's extreme population density of 284 inhabitants/ km2 . For better or worse, this case has the opportunity to set an important precedent for foreign investors whose operations will seriously affect the health and environment of the local people. The people of El Salvador have voiced their opinion, and will continue to stand up for their health, their environment, and the right of their community to make an informed decision with regard to mining.
MINING AND RECENT PROPOSALS FOR MINING REFORM
The mineral exploration process consists of searching for commercially viable concentrations of minerals in a specific area. The mineral extraction process involves the complex removal of the minerals in order to make them useful for sale in the market. Extraction also contemplates the need to separate the mineral from the surrounding rock, a process which often employs cyanide. This use of cyanide has been controversial; the state of Montana banned the use of cyanide in mineral extraction. Moreover, inhabitants of the Union and Morazán Departments, in representation of affected communities, presented a complaint to the Attorney General's office in September 2007 citing pollution due to acid drainage, a by-product of mining that has caused serious health and environmental issues to inhabitants following the mining that occurred in the region between 1950 and 1981.
Throughout 2006, Salvadoran civil society organizations were active against the granting of the extraction permits. In July that year, the Salvadoran Ecological Union proposed a 10-year moratorium on the granting of mineral exploration and extraction concessions in El Salvador. By December, the National Coalition against Mining, a coalition of civil society organizations that focus on the environment, human rights, and economic justice, introduced into the Legislative Assembly a proposal for a new mining bill. The bill would prohibit the approval of further metallic mineral mining exploration and extraction concessions. The bill was never formally discussed within the Legislative Assembly.
By November 2007, another mining bill was introduced into the Legislative Assembly by the National Conciliation Political party, which would diminish the role of government in the monitoring and regulation of the mining industry. This Bill would create a semi-autonomous "Mining Authority" responsible for both the promotion and regulation of mining investment and would be funded entirely by earnings from mining.
GOVERNMENT'S POSITION ON MINING
In December 2007, the Legislative Assembly set up an Ad-hoc Commission to listen to experts and stakeholders regarding the mining debate and proposed legislation for El Salvador. The purpose of the Commission was to study the issue more in depth in order to come to an informed conclusion regarding potential mining extraction in El Salvador.
Sandra de Barraza, member of the autonomous governmental institution the Commission for National Development and ARENA party member, in her presentation to the Ad Hoc Commission studying the mining issue in El Salvador, she emphasized that due to El Salvador's population, size, and vulnerable institutions, it is more environmentally vulnerable than other countries that allow mineral mining extraction.
Current President Antonio Saca has affirmed that the current Salvadoran government will not grant extraction permits until it has a diagnostic study about the impact of extraction on the environment and the benefits that extraction could bring to the country. The presidential political candidates avoid discussing the topic, although a national debate between the people of El Salvador and the mining companies clearly has been exists.
CHURCH'S POSITION ON MINING
The Catholic Church in El Salvador has maintained a strong stance against mining for El Salvador. In 2007, the Catholic Bishops' Conference of El Salvador made a public statement expressing its concern for the environment and communities that would be subjugated to suffer health problems, due to cyanide use, and inevitable water pollution. The Conference reiterated that in a small and populated country such as El Salvador, the negative effects would be multiplied.
In February of 2008, the Archbishop of San Salvador Fernando Sáenz Lacalle reiterated the church's rejection of metallic mineral mining extraction in a document entitled, "Concerns about the Mining Bill presented in November 2007,"in which he sustained that the activity is unacceptable in El Salvador due to the irreversible damage it will cause to humans and the environment." In March 2008, Archbishop Sáenz Lacalle gave the church's position to the Ad-Hoc Commission of the Legislative Assembly. During his presentation, he stated that, "No material advantage can be compared to the value of human life."
A month later, the Catholic Bishops' Conference of El Salvador ratified, in the Vatican, its opposition to metallic mineral mining extraction projects that are being promoted by foreign corporations throughout the Northern Zone of the country, especially in light of growing social denunciation. In his report presented to Pope Benedict XVI, the Sáenz Lacalle referred to mining as one of the principal problems that the country faces, along with violence, poverty, and emigration.
The Church of El Salvador's commitment to its statements against mining is laudable in light of the protests that have been staged in front of the National Cathedral during his Sunday mass. Throughout April and May 2008, groups of twenty-some people would protest against the Archbishop of San Salvador, demanding that he change his position against the mining of precious metals.
Following Pacific Rim's announcement of its Notice of Intent to arbitrate under CAFTA, Archbishop Sáenz Lacalle again maintained the Church's position on mining, "It's not right to risk the health of the population and damage the environment so that a few who do not live here can take 97% of the juicy profits, but they leave us with 100% of the cyanide."
THE PEOPLE'S POSITION ON MINING
In October 2007, the Institute for Public Opinion of the Central American University "José Simeón Cañas" conducted a public opinion poll about understanding and perceptions of mining in the areas affected by mining activities. 62.5% of those surveyed considering El Salvador as an inappropriate country for mining. Additionally, 55.9% of those believe that the impact of the mining industry would be contaminating, while 40% of those surveyed expressed that mining would not help the population at all.
By June 2008, several communities throughout the Cabañas Department report that their water wells dried up due to the mining exploration activities of Pacific Rim lowering the water table. A month later, communities organized the second annual Green March in Sesuntepeque, Cabañas, with a focus against mining. Over 2,000 people marched behind the slogan, "We can live without gold, but we can't live without water."
Local anti-mining groups have been organizing on the issue for years, holding protests, educational forums, and community education programs throughout El Salvador. Days before Pacific Rim filed the notice of intent, a group of protestors celebrated Pacific Rim's "funeral" by burning a black coffin in the street. At that protest, Juan Carlos Moreno said, "We want the El Dorado mine to close down."
PACIFIC RIM'S PERSPECTIVE
Pacific Rim, frustrated at the delay in receiving the extraction permit, hired C & M Capitolink in April 2008 for the purposes of lobbying the United States government with regard to Pacific Rim's mining project in El Salvador. C & M Capitolink reported receiving $40,000 from Pacific Rim for conducting informational meetings with the U.S. House of Representatives, the U.S. Senate, the Millennium Challenge Corporation, the State Department, the White House Office, and National Security Council.
Tom Shrake, President and CEO of Pacific Rim stated, "It is with deep regret that we must now pursue our legal rights through the initiation of a CAFTA action and we intend to pursue these rights vigorously… Sadly, it is not just Pacific Rim whose rights are being compromised, but the rights of all Salvadorans and foreign investors. Local communities and social and environmental agencies are being denied the benefits of our community programs."
In a conference call explaining the details of the Notice of Intent, Shrake blamed non-governmental organizations (NGOs) in El Salvador for the Salvadoran government's refusal to grant Pacific Rim mining extraction permits. Specifically, Shrake named OXFAM America as "the most active organization in the country" supporting anti-mining efforts. Shrake claimed NGOs "just try to scare the heck out of everybody involved" in mining.
Shrake and Pacific Rim's lawyer, Timothy McCrum of Crowel & Moring LLP, also referred to the Catholic Church's resistance to mining extraction. McCrum stated, "there is a certain constituency of the Catholic Church basically that…[is] almost radically left-leaning." Ralph Weil of R. Weil Investment Management insinuated the Catholic Church was being "paid off" by Oxfam America for its anti-mining stance. McCrum responded, "We'd rather not speculate there."
In response to a question regarding the possibility of negotiating a settlement with a new government, Shrake replied positively. Noting the upcoming Salvadoran elections, Shrake asserted that both the evident "political will" and "populous support" for mining make him confident that Pacific Rim will be able to broker some sort of resolution. McCrum further added that a resolution with the current Salvadoran government is still possible.
During the call, Shrake acknowledged that Pacific Rim has budgeted several million dollars for the arbitration proceedings. For a company, which reported a net loss of over $1.2 million dollars between August and October 2008, significantly reduced staff levels in its Vancouver office-including cutting the positions of the Chief Operating Officer and the Chief Financial Officer-to save money, and still lacks the necessary cash flow to operate the mineral extraction El Dorado project in El Salvador, it seems Pacific Rim's only hope for staying afloat is to prevail in this arbitration proceeding or come to a settlement with the government.
WHAT HAPPENS NEXT?
Under CAFTA, the Salvadoran government and Pacific Rim have 90 days after the filing of the NOI to resolve the matter amicably. If the involved parties are unable to come to a resolution, Pacific Rim will have the right to begin an arbitration proceeding against El Salvador on or after March 9, 2009. Arbitration is a legal action that allows parties to resolve disputes outside courts. The dispute is brought before a third party or a panel of arbitrators, whose "decisions are final and not subject to appeal." Pacific Rim plans to seek:
1. Compensation for the money Pacific Rim has spent in pursuit of its investments in El Salvador;
2. Damages for the loss of value that has been created by the Company through its efforts and investments resulting from the Government's wrongful conduct;
3. Costs associated with preparation for and conduct of the arbitration proceedings; and
4. Pre- and post- award interest on all claims.
Once the arbitral tribunal is selected, the length of the ensuing proceeding may take years to resolve.
PUTTING IT ALL TOGETHER
The mining issue has served as a point of debate between mining companies, the church, and the Salvadoran people for years. The upcoming period of negotiations between the government of El Salvador and Pacific Rim, as well as any potential arbitration of this case under CAFTA, will greatly impact life in El Salvador. The SHARE Foundation hopes that the government of El Salvador will listen to the health and environmental concerns that have been voiced by the people living in the areas directly affected by mining exploration, and make an informed decision that is representative of what is best for all Salvadorans, rather than best for foreign mining companies.
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