In 2004, the Pacific Rim mining company applied to dig for gold in El Salvador. Pacific Rim (since acquired by the Canadian-Australian company OceanaGold) assured the government of then-President Antonio Saca that its work would be eco-friendly and would generate jobs. But with 90 percent of the country’s surface water contaminated, and fearing damage to the Lempa River — an essential source of water for El Salvador’s 6 million people — the administration failed to approve the proposal. In 2008, Mr. Saca instituted a moratorium on new mining permits; to date, this has been maintained and is widely popular.
Pacific Rim fought back in 2009, filing a $77 million lawsuit with the International Center for Settlement of Investment Disputes (Icsid), a World Bank-affiliated institution in Washington that facilitates arbitration between governments and investors. The case was brought under a 1999 Salvadoran investment law, according to which foreign companies could take the Salvadoran government to international arbitral tribunals.
Pacific Rim raised its suit to $301 million and the final Icsid hearing opened in September; a verdict is expected in 2015.
International arbitration is considered by its proponents to be relatively objective. Indeed, over 150 nations have consented to arbitration at Icsid. But corporations are increasingly using investment and trade agreements — specifically, the investor-state dispute settlement provisions in them — to bring opportunistic cases in arbitral courts, circumventing decisions states deem in their best interest. And now investor-state dispute settlement provisions may be enshrined in two new treaties: the Transatlantic Trade and Investment Partnership and Trans-Pacific Partnership, currently under negotiation between, respectively, the United States and the European Union, and the United States and 11 Asia-Pacific nations. If the final agreements contain these mechanisms, we can expect a flood of cases like Pacific Rim v. El Salvador.