Investment Arbitration Reporter

By Adam A. Kay

A mining company embroiled in a highly-politicized mining dispute with El Salvador has tabled its response to preliminary objections raised by the Republic in an ongoing ICSID arbitration.

As previously reported, on January 4, 2010, El Salvador recently became the first country to file preliminary objections under the expedited procedures of the US-Central American Free Trade Agreement (CAFTA). *

In its objections, El Salvador argued that the Pacific Rim Cayman LLC had failed to provide a sufficient factual foundation to support its claim. The government further contended that, even if the Claimant did provide a sufficient factual foundation, it did not have an “automatic right” to a mining concession, and therefore could not be said to have incurred any loss.

Claimant argues that it only has to make sufficient factual allegations to make it possible to establish legal liability

In its response to El Salvador’s objections, Pacific Rim contends that El Salvador has made a fundamental error by confusing and conflating the issues of “standard of review” with “sufficiency of the pleadings”.

As a result of this confusion, Pacific Rim argues that El Salvador has improperly called upon it to make out its case in much greater detail than is required at such an early stage of the proceedings.

All that is required at this stage, according to Pacific Rim, is that the claimant make sufficient factual allegations that, if true (which at this stage they must be assumed to be), would be sufficient to trigger legal liability. That is, so long as the claims have any chance of legal success whatsoever, based on the pleadings to date, the preliminary objections of El Salvador must be rejected.

Claimant insists it had earned the right to a mining concession

In its recent filing, Pacific Rim also accuses El Salvador of misconstruing its argument about its professed right to a mining concession. Pacific Rim agrees with El Salvador that there is no “automatic right” to a mining concession. However, the company argues that, once it has an exploration license (such as it had), and provided that it follows all the legal requirements to obtain a mining concession, El Salvador has virtually no discretion to deny a concession application that has been submitted.

Moreover, the claimant notes that even if it were argued that El Salvador does have discretion to deny such an application, this would be a question of interpreting Salvadorian law. And since questions of domestic law are considered questions of fact in international law, Pacific Rim contends that it is sufficient at this stage of the proceedings for the claimant to have made its assertion. In other words, any dispute over this matter is more appropriately resolved on the merits of the dispute.

Claimant insists that breaches of El Salvador’s Investment Law are actionable under CAFTA

El Salvador also argued in its preliminary objections that Pacific Rim is barred from pursuing a claim under El Salvador’s Investment Law, or that it has otherwise waived its right to do so.

In this regard, the government had earlier cited 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.

On El Salvador’s view, the claimant is taking two bites of the apple by asserting that the same facts constitute breaches of the CAFTA and of El Salvador’s national investment law.

In response to these objections, Pacific Rim counters that “it is a basic principle of investor-state arbitration that cases may be based on one or more instrument of consent.”

Pacific Rim points out that El Salvador’s arguments seem to be predicated on avoiding duplicate parallel proceedings. However, Pacific Rim argues that this is beside the point since it is not looking to instigate duplicate proceedings, but rather only trying to have a single tribunal determine questions of law under two separate legal instruments.

The parties will exchange another round of briefs, after which a hearing on the preliminary objections will be held on May 31 and June 1.

* For a summary of El Salvador’s preliminary objections, see Investment Arbitration Reporter, January 17, 2010, http://www.iareporter.com/articles/20100205_6 ** Pacific Rim is represented by the law firm Crowell and Moring. El Salvador is represented by Dewey Leboeuf.

Investment Arbitration Reporter is a specialized news publication tracking developments in the area of international investment law and policy.

The publication does not offer legal or financial advice or recommendations of any kind.
 
To offer news-tips or comments, email the Editor, Luke Eric Peterson, at: editor@iareporter.com