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Mining for Profits in International Tribunals

April 29, 2010

By Sarah Anderson, Rebecca Dreyfus, Manuel Pérez Rocha

Source:  Institute for Policy Studies

Transnational corporations are increasingly turning to international arbitration tribunals to resolve disputes over natural resource rights, new report reveals

Washington, DC – In conflicts over rights to valuable natural resources, transnational companies are increasingly using a powerful new weapon – the right to sue governments in international arbitration tribunals.

A new Institute for Policy Studies report, “Mining for Profits in International Tribunals,” documents the increased use of these rights by transnational corporations involved in the oil, mining, and gas industries.

Most countries in the world are obliged to provide such sweeping foreign investor rights through an expanding web of international arbitration tribunals, bilateral investment treaties and free trade agreements.

The report finds that at the most frequently used tribunal, the International Center for Settlement of Investment Disputes (ICSID), 32 of the 128 pending cases are related to oil, mining, or gas. By contrast, ten years ago there were only three such cases.

Chevron recently won such a case against the government of Ecuador. On March 30, a panel of arbitration judges ordered the government to compensate the oil giant for taking what they deemed to be an unreasonably long time to resolve disputes over oil contracts in domestic courts.  The $700 million award for Chevron is the equivalent of about 1.3% of Ecuador’s GDP.

The international gold mining firms Pacific Rim and Commerce Group are each suing the Salvadorian government, demanding $100 million a piece. That’s the equivalent of nearly 1% of El Salvador’s GDP. To put that in perspective, 1% of the U.S. GDP is $138 billion.

According to report co-author Manuel Perez-Rocha, “The El Salvador cases are a prime example of how trade agreements have given transnational corporations the power to undermine democracy. The people of that country are overwhelmingly opposed to gold mining, and yet these expensive lawsuits have put extreme pressure on the government to grant the permits.”

Other key findings of the report:

  • The 32 current ICSID cases related to extractive industries include:  12 related to oil, 10 related to gas, 7 related to mining (including 4 over gold), and another 3 related to combination oil/gas projects.
  • Latin American governments make up about 9 percent of the 155 ICSID member governments. And yet they are the targets of 70 (55 percent) of all ICSID cases and 21 (nearly two-thirds) of the 32 extractive industries cases.
  • The increase in investor-state lawsuits related to extractive industries has coincided with an increase in commodity prices. The price of gold, for example, has nearly quadrupled, from $282 per ounce in January 2000 to $1,121 in January 2010.

“The oil, mining, and gas cases highlighted in this report are just one illustration of the imbalance in current rules that govern international investment, says Sarah Anderson, IPS Global Economy Project Director.  “Policymakers should pursue alternative approaches that would promote a more equitable balance between corporate interests and the broader public interest.”

The Institute for Policy Studies is a community of public scholars and organizers linking peace, justice, and the environment in the U.S. and globally. IPS has partnered with The Democracy Center, based in Bolivia, to create a Network for Justice in Global Investment to help facilitate a debate over a range of policy options, including withdrawing from the current system, re-writing the rules to support sustainable development and protect national sovereignty, and replacing the system with alternative institutions. To learn more, see: www.justinvestment.org.

The report can be downloaded here

Contact: Sarah Anderson, Institute for Policy Studies, (202) 234-9382 x 5227, saraha@igc.org

1 comment to Mining for Profits in International Tribunals

  • Dr B.A Bukar

    what is currently happening in latin America’s extractive industry is about to happen in Nigeria. The Petroleum Industry Bill which is before the National Assembly is being substantially reviewed even before same is passed in to Law at the behest of multinationals. Thanks to the pressure and or blackmail mounted by these multinational oil companies on the government against the bill.These companies according to newpaper reports have even threatened to challenge the bill before the courts. What am not sure of is whether the threat will be before national courts or ICSID. What ever be the case, this is an ominous sign for Chad, Cameroon and indeed other petroleum producing countries in the west African sub region.

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