El Salvador: “Arbitration with Pacific Rim has cost the State $12.6 million”

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El Salvador: “Arbitration with Pacific Rim has cost the State $12.6 million”

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Author: Rafael Mendoza López, 21-7-15

Translated by Anoosha Boralessa (Feb 2016). Not reviewed by bilaterals.org or any other organization or person.

Luis Parada, a lawyer with the law firm Foley Hoag, is optimistic that the company, Pacific Rim, will not prevail in the proceedings, where it is claiming $314 million from El Salvador for refusing to grant it a concession to extract metals from the subsoil. He talks about the progress and consequences that this arbitration has had for the country.

What makes you so sure that the ICSID arbitration will be determined in favour of the Salvadorian state?

In this arbitration that was initiated six and a half years ago, the arguments were made at the beginning and it was clear that the position of El Salvador was the same that it maintained up to the end, while Pacific Rim changed its position. Their problem is that right from the beginning, they lacked an initial strategy and that to be able to save their case, they had to lie to the tribunal.

What were their arguments?

Their final argument was that because they made discovery, they automatically acquired a right to exploitation. This is contrary to the Salvadorian legal framework. They did not even summon a Salvadorian lawyer as an expert to back up the Salvadorian law.

What impact does this arbitration have on the state of El Salvador?

This arbitration has had two negative consequences for El Salvador. The first is that it must spend money to defend itself. Up to now, it has spent 12.6 million dollars and the State could use that for something far better for the public benefit. However, faced with the threat of $314 million dollars, it must defend itself.

Can there be a negotiated exit from this dispute?

Pacific Rim and Oceana Gold, its new parent, would have some hope of having a negotiated exit, but no. Now, given that we are at the climax of the case where, with a situation so favourable for the legal position of El Salvador in sight, I think that there would be no benefit to agree to a negotiated solution.

When do you expect that the tribunal will render its decision?

We are only waiting for the final decision of tribunal. The final hearing of the case took place on 15 September 2014, and now we are only waiting for the decision of the tribunal. Although a date has not been fixed, I would hope that this would be ready before (the end of) 2015.

What would be El Salvador’s options if an award were rendered in favour of the company?

Probably what the business is doing right now is trying to negotiate with El Salvador and to tell them “give us the concession and I will not claim l00 million” or whatever. However, this is not an option for El Salvador because no government could grant this concession because it does not meet the three requirements of the Mining Law to obtain it.

What is the outcome for the country after the ruling, if it is in its favour?

We have asked the tribunal not only that it rules in favour of El Salvador, dismissing the claim of Pacific Rim, but that it orders it to reimburse El Salvador the legal costs for the arbitration. If the tribunal rules in favour of El Salvador and grants it legal costs, it is necessary to put international pressure on this business so that as it intended to profit from a claim that they are liable for and pay the legal costs.

source: El Salvador