JOHANNESBURG (miningweekly.com) – To the dismay of international aid network Oxfam America, TSX-listed Pacific Rim (PacRim) on Monday obtained a World Bank ruling in its favour on ‘jurisdictional’ objections filed by the government of El Salvador in a long-running dispute over a mining licence.

The company claims that El Salvador’s failure to issue an environmental permit violated the country’s foreign investment law, and the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) ruled that the case would proceed.

PacRim said it had designed the El Dorado mine and submitted the plans to the Salvadoran authorities eight years ago, following which the authorities have failed to issue a mining permit for the project.

PacRim said the mine would set new precedents for environmental protection in the Americas and would exceed current Canadian and US environment standards.

“Had the government of El Salvador followed its laws, the El Dorado mine would be in operation today, employing thousands. The company would be the single greatest taxpayer in El Salvador. The company has met or exceeded all the legal requirements necessary for a mining permit according to El Salvador's mining, environmental and foreign investment laws,” the company said in a statement.

A tribunal at the ICSID ruled that the case would proceed to the final phase of the arbitration, where the merits of PacRim's claims would be addressed.

The tribunal would determine whether El Salvador had breached Salvadoran and international law by refusing to issue the necessary mining licences. It would also determine El Salvador's monetary liability for breaching the investment protections owed to a foreign investor, as contained in its own laws.

The tribunal determined the ICSID has jurisdiction and will hear PacRim's claims under the Salvadoran investment law, but not under the Dominican Republic/US/Central America Free Trade Agreement (Cafta).

This was the second time the government suffered a setback in the case, as it previously tried to terminate arbitration by objecting to the validity of the ICSID’s jurisdiction on its soil.

The tribunal ruled that PacRim is in fact a US company and is part of a group of companies that has substantial business activities in the US, but concluded that the company did not have sufficiently substantial business activities in the US for the investment protections under Cafta to kick in.

"We look forward to proceeding to the final portion of the arbitration case to recover the value of the El Dorado asset. We are confident in the merits of this case. The fact that it will proceed under the investment law alone rather than under both sets of investment protections has no impact on the merits of the case," CEO Tom Shrake said in a statement.

PacRim said it would immediately begin to prepare for the final phase of the arbitration.

OBJECTIONS

However, Oxfam America on Tuesday said it was disappointed in the ICSID ruling.

“We are very disappointed by the ICSID’s decision to rule against El Salvador. It goes against the views the Salvadoran people who are overwhelmingly against mining,” Oxfam America’s oil, gas and mining programme manager Keith Slack said in a statement.

The organisation said it is concerned that the presence of PacRim in El Salvador would contribute to human rights abuses.

“The Salvadoran government has recognised that not all foreign investment is good for the country. The ruling undermines the government’s ability to protect its citizens and the environment,” Slack said.

Oxfam America said a number of mining activists had suffered human rights violations since PacRim began exploration activities in 2002. It cited an example of the murder of Francisco Durán Ayala, a student who disappeared after posting flyers as part of a campaign against the mining company in June 2011.

“He was found in a soccer field a day later with two gunshots in the head. His killing is believed to be linked to his mining activism,” Oxfam America said.