Canada: El Salvador Makes History As First Nation To Impose Blanket Ban On Metal Mining

Last Updated: May 9 2017
Article by Milos Barutciski and Josh Scheinert

On March 29, 2017, El Salvador's legislature unanimously voted to ban all metallic mining, including for gold, in the Central American country. El Salvador is the first country in the world to impose a blanket ban on mining activities. The question is, will other countries follow suit? Understanding El Salvador's political justification for the ban and its claimed experience with mining provides important lessons for mining companies, host states, and home states to mitigate the risk of fractious relationships that could lead others to follow El Salvador's lead.

El Salvador's government contends that the reason for the mining ban is to protect the country's water resources from pollution. The decision was stated to be motivated by the country's challenges arising from the El Dorado gold mine, whose exploration rights were held by Pacific Rim Mining Corporation (Pacific Rim), a company since acquired by OceanaGold Corporation. When El Salvador refused to issue the environmental permits the company needed to acquire an exploitation concession, the company launched arbitration claims under the Central American Free Trade Agreement (CAFTA) and El Salvador's domestic investment law in 2008. (The claim was brought by Pac Rim LLC, an American company). The arbitral tribunal declined jurisdiction to hear the case under CAFTA, but proceeded under the domestic investment law. The protracted legal dispute concluded in October 2016 when the tribunal dismissed the investor's claims, and awarded $8 million in legal costs to El Salvador.1

In the Pac Rim dispute, El Salvador argued that its decision to refuse the permits was rooted in the precautionary principle, arguing that the withholding of environmental permits was necessary to fulfilling its constitutional duty of environmental protection. El Salvador asserted that it was not experienced with metallic mining and lacked capacity to properly assess its environmental impacts.

El Salvador's decision represents a setback in the global mining community's efforts to reconcile the interests of investors with development opportunities for host states. It highlights the risks arising from an absence of effective institutions, including civil society mechanisms in some developing countries, that allow local communities and governments to bring concerns to investors in a manner that fosters constructive engagement. In the end, what El Salvador perceived, rightly or wrongly, is that future efforts to protect the environment that adversely affected multinational interests would be met with more costly arbitration claims. Backed into a corner, the government acted.

There are at least three important lessons stakeholders can draw from the El Salvador experience.

  1. States may seek shelter under the primary duty to protect their citizens and uphold fundamental laws. The first pillar of the UN Guiding Principles on Business and Human Rights places the primary responsibility for protecting human rights on states. For local communities, issues like clean water and waste disposal can, at their extreme, be issues of life and death. Where questions arise over the health of communities, a state's primary duty is to ensure its citizens are protected. Notwithstanding a company's knowledge that its operations will not in all likelihood adversely affect a particular community and may, in fact, improve living conditions, it should consider constructive engagement with local officials and residents to demonstrate that knowledge and opportunities for local benefits. This requires real planning before an investment is made.
  2. Effective grievance mechanisms must exist at all stages of a project. The third pillar of the UN Guiding Principles calls for access to remedies. While this is frequently interpreted to mean after-the-fact judicial remedies, what happened in El Salvador reinforces the importance of companies and states putting in place effective grievance mechanisms at the outset in order to mitigate tensions and reconcile interests before political levers are employed. These mechanisms must be founded upon real understandings of numerous issues in play. This requires effective due-diligence at the outset to gain comprehensive understanding of the likely claims associated with potential human and environmental impacts. Companies should also pay close attention to related and potentially underlying factors such as:

    • political and community power structures;
    • benefits the project may have at the national and local level; and
    • how those benefits will be distributed across society.
    All of these factors can lead to claims by stakeholders, real or purported. Without understanding the issues at stake, and implementing proper mechanisms to bring about front-end remedies, projects and future investment may be jeopardized.

  3. Home states can do more to reduce tensions. Canada's strategies on CSR and bribery and corruption are acknowledgments that home states have a measure of responsibility to help ensure Canadian companies are not engaged in improper behaviour abroad. As more international standards crowd the field of global business conduct, companies may feel inundated with new and evolving standards, making it increasingly difficult to keep track of applicable norms, or to make sense of what, if any, demands they impose. Home governments can assist companies to sift through the growing number of international standards for multinational corporations and global business, including through embassies, export credit agencies, and trade commissioners. Home states also have an opportunity to help promote the benefits of investment in the host states. Industry, Industry Associations, and home states should work together in capacity building so that host states are able to implement a regulatory framework that secures optimal benefit for all stakeholders.

Industry is heavily involved in health care and environmental activities around the world. The challenge is how to expand and deepen those efforts across a broad spectrum of issues to bring stakeholders together in a manner that facilitates investment and development, including in natural resources.

Whether or not the situation in El Salvador could have been avoided is now a moot point. The law banning mining will remain in place until political change resets the stage for investment. Future situations will also arise that warrant investors to resort to dispute settlement against host states. In the post-fact world, it remains to be seen whether stakeholders can collaborate and communicate to demonstrate a shared resolve to bridge a potentially growing chasm between foreign investors and host states before disputes lead to a total breakdown between players.

Footnote

1. As a prelude to the mining ban, and signalling its dissatisfaction with international investment arbitration, in 2013, El Salvador removed the option of international arbitration through the World Bank's ICSID dispute settlement mechanism as a means to settle disputes under its investment law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Milos Barutciski
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions