The Constitutional Court of Ecuador (the “Court”) has recently ruled on a series of constitutional actions brought against the development of mining projects in Ecuador (the “Decisions”). The Decisions illustrate the Court's continued approach to recognizing and strengthening the right to prior consultation of indigenous communities on extractive activities in the country. The Decisions however seem to run counter to President Lasso's attempts to reform the country's historic economic policy by pledging to promote foreign investment to stimulate Ecuador's economic growth, especially through the exploration and exploitation of hydrocarbons and mining resources.
We discuss below the Decisions and some of their potential implications for companies in extractive industries.
The Decisions
- The Los Cedros Decision (December 1, 2021)
On December 1, 2021, the Court revoked environmental licenses granted by the Ecuadorian government based on grounds of protecting the “Rights of Nature” in the Los Cedros case (the “Los Cedros Decision”). The Los Cedros case was a constitutional action filed by the city of Cotacachi against the Ministry of Environment and Ecuador's state-owned mining company ENAMI EP in relation to the Río Magdalena mining project carried out in partnership with Canadian mining company Cornerstone Capital Resources in the Los Cedros protected forest (the “Forest”).
In late 2018, the lower appellate court found that environmental licenses granted by the Ministry of Environment to ENAMI EP in December 2017 for the exploration of minerals in the Forest violated the rights of nature and the constitutional rights to clean water, a healthy environment and environmental consultation.
In the Los Cedros Decision, the Court held that nature has rights under the Ecuadorean Constitution, and that the Forest's rights had been violated by the mining activities, which the Court presumed under the precautionary principle caused harm to the Forest's biodiversity. The Court also found that the Ministry of Environment had failed to properly assess the impact of the licensed activities on the people's access to clean water and a healthy environment, and that affected communities had not been consulted as required by local and international law.
As a result, the Court revoked the environmental license and water permits for the mining project and prohibited any extractive activity that may be harmful to the Forest. It also ordered the Ministry of Environment to take all necessary measures to preserve the Forest and its rights, and to draft new regulations imposing stricter environmental standards for permits for extractive activities.
- The Chocó Andino Decision (January 12, 2022)
On January 12, 2022, the Court upheld the Constitutional right of indigenous communities to prior consultation before the government may move forward with mining and similar extractive projects. The underlying dispute concerned the legitimacy and force of a referendum proposal directed to the residents of the city of Quito for prior consultation on the approval of mining concessions in the Chocó Andino region (a region known for its biodiversity and endemism) (the “Chocó Andino Decision”). The referendum proposed to consult the community of the city of Quito on whether exploitation of metal mining on a (i) large, (ii) medium, (iii) artisanal or (iv) small scale should be prohibited within protected areas in the Chocó Andino region.
The Court held that the referendum's proposed questions met the relevant constitutional test established by article 57(7) of the Ecuadorian Constitution, which provides for the right of indigenous communities to prior consultation. In particular, the article states that indigenous communities have a right to:
free prior informed consultation, within a reasonable period of time, on the plans and programs for exploration, exploitation and commercialization of non-renewable resources located on their lands and which could have an environmental or cultural impact on them; to participate in the profits earned from these projects and to receive compensation for social, cultural and environmental damages caused to them. The consultation that must be conducted by the competent authorities shall be mandatory and timely. If consent of the consulted community is not obtained, steps provided for by the Constitution and the law shall be taken. (Free translation).
Importantly, the Court clarified that if the indigenous community does not consent to the proposed extractive activities in the referendum, the result would apply forward to future mining projects to uphold the principle of legal certainty. The Court also ordered the city of Quito to provide a map of the areas the Chocó Andino region comprises in order to guarantee that the community is able to clearly identify and have notice of the areas subject to the referendum.
The Chocó Andino Decision seems to have been a prelude to the Court's continued trend toward heightened enforcement of indigenous rights, which was then followed by the Sinangoe Decision, which, as discussed below, set out the various steps the government must take in order to satisfy article 57(7) of the Constitution.
- The Sinangoe Decision (January 27, 2022)
In 2018, the A'I Cofán indigenous peoples of the Sinangoe area brought a constitutional action (acción de protección) alleging that twenty mining concessions and thirty two concessions in process of approval violated their right to prior consultation, right to live in a healthy environment, right to clean water, health and food, as well as the rights of nature. The lower and appellate courts hearing the action confirmed the violation of the A'I Cofán people's rights and as a result 52 mining concessions in the area of the Cofanes, Chingual and Aguarico rivers in Sinangoe, which were granted without prior consultation, were revoked.
Following the filing of extraordinary constitutional actions (acción extraordinaria de protección) against the appellate court decision by the Mining Ministry, as well as the mining companies impacted by the decision, on January 27, 2022, the Court upheld the right of the A'I Cofán community to be consulted prior to the approval of mining concessions and other extractive activities in indigenous lands (the “Sinangoe Decision”).
The Court found that the mining activities taking place in Sinangoe and its surrounding areas have a direct impact on the A'I Cofán peoples' right to cultural identity, self-determination, healthy environment and health, in addition to potential impacts on the rights of nature.
Given that Ecuador has not yet enacted a law regulating the right to prior consultation, the Court took the opportunity to consider the scope and enforcement of the constitutional right to prior consultation, and held that:
- The obligation of prior consultation is not limited to plans or projects within indigenous lands, but also to those that may affect indigenous lands environmentally or culturally, as a result of the broad scope of article 57(7) of the Constitution. In response to the respondents' argument that the mining concessions were outside of the official territorial boarders of the A'I Cofán community, the Court held that the A'I Cofán community has property rights over their territories of ancestral possession and not exclusively over what the State had designated as the territorial borders of their community.
- The essential elements of “prior, free and informed”1 consultation that the State must respect are: a) the necessity to grant sufficient time to the indigenous peoples involved to collect information and debate on the issues that are being consulted; b) good faith and the objective of reaching an agreement, without coercion, intimidation, pressure or manipulation by the State with indigenous peoples, before or during the consultation process; c) adequate and accessible consultation; d) an environmental impact study, and e) an informed consultation.
- Along these lines, the Court established that the information provided to indigenous peoples in the framework of a prior consultation must be clear and accessible and, if necessary, transmitted through authorized interpreters or in a language that allows the members of the peoples and communities involved to fully understand the information.
Finally, the Court explained two potential scenarios following the conclusion of a consultation process:
- If the indigenous communities consent to the underlying project after prior consultation, the State must guarantee open communication channels and effective participation of the indigenous peoples throughout the project execution process. Additionally, the Court determined that the communities should derive benefits from these projects, as well receive compensation for the social, cultural and environmental damages that they might suffer as a result of extraction activities.
- If it is not possible to obtain the consent of the communities and it is nonetheless decided to move ahead with a project, the State is obliged to give objective, reasonable and proportionate reasons why it was not possible to accommodate the project or modify it according to the concerns, demands and proposals expressed by the communities that would be affected2 The Court also warned that under no circumstances may a project be carried out that generates excessive sacrifices to collective rights of communities and nature.
Potential Implications of the Decisions
The Decisions set a stricter framework of requirements for the development of extractive projects in Ecuador – which might be heightened by future regulations on extractive industries' permits if, for example, public agencies embrace the parameters set forth in the Los Cedros Decision. In particular, the requirements relating to prior and free consultation to the public and indigenous communities place a heavier burden on private companies to demonstrate that their activities do not harm the areas in which they expect to operate in order to avoid the risk of their licenses being revoked.
The Decisions further confirm that companies and the government are both responsible for ensuring that environmental and community rights are factored in their investment analysis and that contemplated extractive activities will not damage the areas affected by the investment.
The requirement of prior consultation is likely to cause delays in the start of new projects in the country, as well as subject investors to stricter scrutiny from courts when assessing their impact on the affected areas and communities.
Footnotes
1 See ILO Convention No. 169 and the Declaration on the Rights of Indigenous Peoples. Available at: https://www.ilo.org/dyn/normlex/en/f?p=NORMLEXPUB:12100:0::NO::P12100_ILO_CODE:C169.
2 See Article 83 of the Organic Law of Citizen Participation. Available at: https://www.oas.org/juridico/pdfs/mesicic4_ecu_org6.pdf.
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