El Salvador loses on three out of four counts, as anti-environment and anti-development case launched under CAFTA drags on
Todd Tucker, June 4, 2012
El Salvador lost three out of four of its major arguments in last Friday’s Pac Rim Cayman LLC v. El Salvador jurisdictional ruling. Even though it narrowly won dismissal of its CAFTA case, the underlying claims will proceed at World Bank-based hearings as a challenge under El Salvador’s domestic Investment Law.
-El Salvador lost on three out of four counts, and Pacific Rim's attack on El Salvador's mining policies will proceed. The government may still have to pay millions in tribunal and legal costs for the portion that was dismissed.
-CAFTA's extraordinary investment protections kick in for existing investments even without a firm making any new investments after CAFTA went into effect! Government actions that predate CAFTA - but continue after it went into effect
-Government actions that predate CAFTA - but continue after it went into effect – can be a "continuing omission" that can keep governments on the hook years later. In this case, Pacific Rim's mining permit was presumptively denied before CAFTA went into effect, but the firm and the government continued to discuss it and the permit remained not granted to date. Following this logic through, a company’s failure to meet a regulatory requirement in the year 1800 can constitute a “continuing omission” attributable to the government (as if it were a contract) for centuries to come, provided the government is nice enough to continue to talk about it.
-The dismissal of CAFTA jurisdiction was on worryingly narrow grounds: had the firm reorganized its corporate structure so that its pre-existing U.S. corporate entity obtained ownership of the Salvadoran mining interest (rather than Pacific Rim's Cayman subsidiary that owned those assets being reincorporated as a new U.S. entity to pursue the CAFTA case), El Salvador could have been held liable for a CAFTA violation on the basis of a dispute that actually started before CAFTA, just because the governmental authorities were kind enough to keep speaking to the company about their permits.
-Through this narrow dismissal of the CAFTA complaint, the tribunal practically laid out a road map for future aggressive nationality planning companies to abuse the investor-state system to attack environmental policies.