President Funes backs metallic mining ban as lawsuits against El Salvador move forward

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Salvadoran president Mauricio Funes openly endorsed the FMLNparty's legislative proposal to ban metallic mining throughout El Salvador onin an August 22 interview. “If such an initiative is presented, I will give itmy full political backing,” Funes said, noting that “it is the legislativedeputies that will decide if they will approve or not approve thislegislation.” Should such a bill be passed, it would make El Salvador the firstcountry in the world to enact such a ban.

Over the course of2010, Funes has taken a progressively more strident stand against mining. InJanuary, the president reiterated his campaign promise to deny all permits formetallic mining while in office. However, his recent statement in support of alegislative ban was his first public endorsement of that proposal, which hasbeen pushed by anti-mining and environmental activists for years.

 

Funes’ backing of theban comes at the end of an eventful summer in the legal battles between thegovernment of El Salvador and two North American gold mining companies whosemines are stalled by the government’s refusal to grant extraction permits.

 

After failing toreceive permits for its proposed El Dorado mine near the town of San Isidro,Vancouver, B.C.-based Pacific Rim Mining filed a lawsuit against El Salvador ina special free trade tribunal in April 2009. Citing the investor rights rulesof the U.S.-Central America Free Trade Agreement (CAFTA), Pacific Rim arguesthat El Salvador is illegally limiting the company's right to make a profitfrom its investment in the country. Under CAFTA, the case is administered bythe International Centre for the Settlement of Investment Disputes (ICSID), adependency of the World Bank in Washington, D.C.

 

The three-member ICSIDtribunal met for the first time on May 31 and June 1, 2010, and on August 3announced that it had rejected El Salvador's preliminary objections to PacificRim's lawsuit, which the company's CEO says seeks compensation in the “hundredsof millions of dollars.” This decision moves the case forward to ajurisdictional phase, in which the Salvadoran government will argue that thesuit should be thrown out on the grounds that Pacific Rim committed an “abuseof process” by changing its nationality from Canada to the U.S. solely for thepurpose of filing its lawsuit under the auspices of a U.S. free tradeagreement. El Salvador further argues that the corporation cannot seekcompensation for acts taken by the Salvadoran government prior to CAFTAentering into force. No date has been set for the jurisdictional hearing at theICSID, though it will likely convene next spring.

 

 Following inthe footsteps of Pacific Rim, Commerce Group, based in Milwaukee, filed acopycat suit against El Salvador in June 2009 seeking compensation for lostprofits on its mine in La Unión, the permits for which were revoked due tosevere water contamination. On July 1, the ICSID announced that the threemembers of the tribunal had been assigned, with a likely first hearing set forNovember 15. Twenty-six other metallic mining projects are currently proposedby foreign companies in El Salvador, leading to worry and speculation thatfurther lawsuits could follow.

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