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El Salvador raises preliminary objections to jurisdiction of ICSID tribunal in CAFTA mining claim

publication date: Jan 17, 2010
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By Adam A. Kay

The Republic of El Salvador (El Salvador) has raised preliminary objections to a number of claims made by Pacific Rim El Salvador under the US-Central American Free Trade Agreement (CAFTA) in a closely-watched mining dispute.*

Pacific Rim turned to arbitration last year, alleging multiple breaches of the CAFTA in relation to the company’s failed application for a mining exploitation concession and other mining rights.

El Salvador denies claimant had a perfected right in mining concession

In its Notice of Arbitration, Pacific Rim argued that the firm’s completion of exploration activities, and submitted application for a mining concession, obliged El Salvador under its Mining law to grant a concession.

However, El Salvador has asserted in its recent January 4, 2010 filing, that it was under no such obligation, pointing out that an application merely “triggers an administrative decision process that may result in the denial of the application at different stages.”

El Salvador further argues that, in any event, there were a number of problems with the Claimant’s application for the mining concession that made approval of the concession application impossible. For example, El Salvador contends that the claimant had improperly applied for a concession over 12.75 km (square) of land, when the claimant only had authorization to use 1.6 km (square) of that land. El Salvador further contends that the claimant had not completed the required Feasibility Study for the application.

The sum total of El Salvador’s contentions appears to be that the claimant lacked a perfected right to a concession agreement, and, as such, could not be said to have suffered any loss.

El Salvador asserts insufficient facts provided to support CAFTA claim

El Salvador also argues in its recent filing that the claimant fails to provide sufficient factual basis in its Notice of Intent and Notice of Arbitration to sustain many of its claims.

Indeed, the government complains that the claimant has provided no factual foundation for claims that El Salvador has breached the National Treatment and Most-Favored-Nation Treatment provisions of CAFTA. Accordingly, El Salvador calls for all such “unsubstantiated” claims to be dismissed by arbitrators on a preliminary basis.

In addition, El Salvador also contends that Pacific Rim made certain claims over other lands for which it did receive the necessary permits, but which, by the company’s own accord, were left to expire.

El Salvador challenges tribunal’s jurisdiction over non-CAFTA claims

As part of its preliminary objections, El Salvador has also called upon the tribunal to dismiss parallel claims advanced by the claimant under El Salvador’s national Investment Law.

Noting the exclusivity requirement in CAFTA, which precludes claimants from initiating any non-CAFTA claims involving the same measures alleged to constitute a breach of CAFTA, El Salvador argued that it would be improper to allow the Claimant to advance two sets of legal claims either in parallel proceedings – or in the context of a single international arbitration.

In other words, by bringing claims for breach of the CAFTA’s substantive obligations and for breach of El Salvador’s investment law, the claimant is alleged to be taking two bites of the apple contrary to Article 10.18.2(b) of CAFTA. In this vein, El Salvador insists that “(c)laimant cannot do in a single arbitration what it is not allowed to do in two separate arbitrations.”

Claim has been closely watched and dogged by controversy

The Pacific Rim arbitration, as well as a separate claim initiated by US-based Commerce Group, have received considerable press attention, owing to long-standing pressure on the El Salvador government from non-governmental organizations and the influential Roman Catholic Church to limit mining in the tiny Central American country.

In recent weeks, several anti-mining activists in El Salvador have been killed by unknown persons.** Non-governmental organizations have called on the government to investigate the murders, which remain unsolved.***

In a recent press statement, Pacific Rim has disavowed any involvement or responsibility for the murders.****

* A copy of the preliminary objections will shortly be made available on our partner’s website: http://ita.law.uvic.ca

** See “Violence hits critics of mine proposed by B.C. firm; Three activists opposed to Vancouver company's mining have been killed”, By Fiona Anderson, Vancouver Sun, December 31, 2009, at: http://www.vancouversun.com/news/Violence+hits+critics+mine+proposed+firm/2394732/story.html

*** See the website of the Committee on Solidarity with the People of El Salvador (CISPES): http://www.cispes.org/

**** See: http://www.pacrim-mining.com/s/Announcements.asp?ReportID=378925

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