What happens when a country says “no” to mining?

The battle between a Canadian mining company and Panama over one of the richest copper and gold mines in the Americas is headed for international arbitration, exposing Canada’s double standards when it comes to promoting free trade in the Global South.

In late 2023, Panama’s Supreme Court unanimously ruled that the agreement to mine Cobre Panamá, controlled by First Quantum Minerals of Toronto, was unconstitutional. Beset by a generational popular backlash against the mine, Laurentino Cortizo’s government accepted the court decision and the legislature banned new mining.

Not everyone celebrated. Cobre Panamá provides around five percent of the GDP of this small nation of just over four million inhabitants and generates thousands of jobs. The open pit mine, located in the middle of the Mesoamerican Biological Corridor connecting wildlife in Central America and southern Mexico, it is also a major source of copper needed in large quantities to transition to clean energy. Before resigning after the court ruling, the Minister of Commerce of Panama, Frederico Alfaro foretold The decision would cause economic chaos, unemployment and, no less important, an avalanche of “international investor claims.”

The latter is now in Game. First Quantum, the main investor in the mine, announced that it intends to take Panama to international arbitration for alleged non-compliance with the free trade agreement signed by the Canadian Harper government in 2013. Its Panamanian subsidiary has initiated a separate arbitration regarding alleged non-compliance with the 2023 concession agreement (approved by Panama in October and declared unconstitutional in November). At least three additional mines investor suits against Panama, including one from Toronto-based Franco-Nevada, have also suddenly emerged.

Panama and companies must now enter the clandestine world of Settlement of disputes between investors and states (ISDS) – A little-known global system designed to resolve disputes between foreign investors and sovereign nations. By bringing a dispute to ISDS, a foreign investor seeks to enforce commitments made by a nation through a law, treaty or contract. Cases are usually decided by three ISDS judges – not judges but private sector lawyers – where the investors choose one, the nation chooses another and both agree on a third. The dispute is then resolved through a binding ruling, which may include compensation to investors.

There have been at least 1,200 known international arbitration cases since the late 1980s, with a sharp increase in both the number and value of awards made since 2000. Extractive oil, gas and mining companies account for around a third Of all cases, with The governments of Latin America and Africa are the most attacked.

Gus Van Harten, a law professor at York University’s Osgoode Hall and author of four books on ISDS, says First Quantum will attempt to use the arbitration process to prove that Panama’s Supreme Court violated the Canada-Panama free trade agreement. If the mine is closed, the company wants compensation for the billions it claims to have invested up to this point, and probably much more. “The most important element will be the claim for loss of future profits, which will amount to a very large amount, billions, perhaps more.”

Van Harten doesn’t think First Quantum will have an easy time making its case. “When you attack a country’s decisions that come from the Supreme Court, it is better to have a very good argument.”

First Quantum did not respond to calls for this story.

The battle between a Canadian mining company and Panama over one of the richest copper and gold mines in the Americas is headed for international arbitration, exposing Canada’s double standards on free trade. #mining #Panama #copper #commodities

However, the stakes are enormous. If a country loses in arbitration, there is no escape. Van Harten says that the international ISDS system, unlike most international law that is lax in its consequences, “has no teeth, it has fangs. Once you get the prize, [the investors] “Basically, we can compare prices between different countries, look for state assets, and then we can pursue and attack those assets to meet the award.”

Parties can apply for loans from development banks and practically anything else. Argentina had one of its navy seized ships while docked in Ghana, on behalf of an American hedge fund. Van Harten says the treaties are drafted very favorably for the protection of foreign investors’ assets and are more generous than anything that can be seen in domestic legislation protecting property rights. “This is about property rights for foreign investors on steroids.”

Recent history speaks to the power of the ISDS system exercised by canadian mining companies, which account for a disproportionate number of these cases due to Canada’s dominance in international mining. A joint venture led by Toronto’s Barrick Gold Corporation brought Pakistan to the World Bank’s International Center for Settlement of Investment Disputes in 2011, after the latter refused to issue a mining permit for Reko Diq, one of the largest untapped copper and gold deposits in the world. In 2019, three private arbitrators ordered Pakistan to pay Barrick’s Australian subsidiary around $5.8 billion in compensation, and a separate arbitration decision reportedly raised the total compensation to 11 billion dollars.

These staggering awards – equivalent to 40 percent of Pakistan’s total foreign cash reserves at the time – included compensation for expected future profits, even though the joint venture’s investment in 2011 was only about $220 million. of dollars. Pakistan eventually allowed the mine to proceed, and Reko Diq, 50 percent owned by Barrick, will begin construction in 2025.

Jennifer Moore, associate fellow at the Institute for Policy Studies, says ISDS Grand Prix “can impose a brake on the actions of regulators and governments to properly implement decisions that have been made in the interests of people and the environment.”

Jennifer Moore, associate member of the Institute of Policy Studies. Photo submitted by Jennifer Moore

Moore says the prospect of payments and loss of sovereignty is leading some resource-rich countries – including Brazil, South Africa and Indonesia – to back away or opt out entirely of treaties and contracts with ISDS provisions. Meanwhile, European countries have withdrawn en masse of the EU’s Multilateral Energy Charter Treaty, while Canada recently hailed the elimination of ISDS, in the latest renegotiation of the North American Free Trade Agreement, as a victory for Canadian sovereignty.

“[ISDS] has cost to Canadian taxpayers more than $300 million in fines and legal fees,” then-Finance Minister Chrystia Freeland said in 2018 when Canada announced the renegotiated deal. “ISDS elevates the rights of corporations above those of sovereign governments. By eliminating it, we have strengthened our government’s right to regulate in the public interest, to protect public health and the environment…”

Even with this awareness, Moore says Canada’s respect for public interest regulation does not extend beyond its own borders.

“Canada continues to promote the inclusion of ISDS in its trade agreements around the world, in order to shore up the interests of Canadian-based corporations, knowing full well what the implications of that are.”

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