Pac Rim vs. El Salvador: Water contamination
Photo by International Allies Against Mining
  • Amount demanded: US$314 billion
  • Outcome: Case dismissed
  • Treaty invoked: CAFTA - DR, Investment Law (El Salvador)
  • Sector: Mining
  • Issue: Environment, health, water

by Public Citizen (edited by

Pacific Rim Mining Corp., a Canadian-based corporation that sought to establish a massive gold mine using water-intensive cyanide ore processing in El Salvador, claimed that the government violated DR-CAFTA by not issuing a permit for the mine. This proposed project, to be located in the basin of El Salvador’s largest river, as well as applications filed by various companies for 28 other gold and silver mines, generated a major national debate about the health and environmental implications of mining in El Salvador, a densely populated country with limited water resources. Leaders of El Salvador’s major political parties, the Catholic Church and a large civil society network expressed concerns.

In April 2008, one month after El Salvador’s president announced that he would not grant mining permits until the legislature undertook an in-depth environmental study of the proposed mining projects, a new U.S.-based Pacific Rim subsidiary sent a letter to the Salvadoran government to threaten a DR-CAFTA claim. The corporation had incorporated the subsidiary – Pac Rim Cayman LLC – just five months earlier. Pacific Rim never completed the feasibility study necessary to obtain an exploitation permit for its mine and in July 2008 ceased exploratory drilling. Later that year, the company launched its DR-CAFTA challenge, claiming that the Salvadoran government’s decision to not grant the mining permit violated DR-CAFTA’s rules on expropriation and national treatment, among others.

The tribunal dismissed jurisdiction over the CAFTA-DR in 2012, but allowed Pac Rim to continue pursuing its claims at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) under a domestic investment law with provisions similar to DR-CAFTA.

In October 2016, ICSID announced its unanimous decision that Pac Rim’s lawsuit was without merit, as the corporation had failed to meet the legal requirements to receive a mining permit. The tribunal also ordered the investor to cover $8 million out of the $12 million the country paid in legal fees.

The following year, El Salvador had to freeze bank accounts and assets belonging to Pac Rim (now OceanaGold) after the mining company refused to pay the country US$8 million.

Last update: May 2021

source: Public Citizen