World Bank favours El Salvador in $250m mining dispute

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Phosphate Mining at SNPT (Societe Nouvelle des Phosphates de Togo) in this file image of 2 December 2007.

Phosphate Mining at SNPT (Societe Nouvelle des Phosphates de Togo) in this file image of 2 December 2007.

WASHINGTON - A World Bank arbitration panel on Friday found in favour of El Salvador in a $250 million(about R 3.5 billion) dispute brought by a mining company over a gold concession.

The panel at the International Center for Settlement of Investment Disputes also awarded legal costs to the Central American country, finding that the case brought by the mining company Pac Rim Cayman was without merit.

"ICSID rejected all of the mining company's claims," Salvadoran Attorney General Douglas Melendez told reporters in a news conference in Washington. 

Now owned by the Canadian-Australian miner OceanaGold, the US company Pac Rim Cayman in 2009 had sought arbitration, claiming that authorities in San Salvador had improperly denied the company environmental permits for its exploration projects, rendering them worthless.

The claim had sought $250 million in compensation. 

In a statement, OceanaGold said it was "disappointed" but would review the ruling before considering next steps.

"OceanaGold inherited the arbitration process when it acquired Pacific Rim Mining Corp in November 2013 and the company has stated from the beginning that its goal was to reach an amicable resolution of this matter that would benefit all parties."

The panel awarded $8 million in legal costs to El Salvador.

The dispute was brought under so-called "investor-state dispute settlement" provisions of the Central American-US Free Trade Agreement, which says investors can take disputes with the El Salvador government to ICSID for arbitration.

Provisions for resorting to privately constituted investor-state dispute settlement panels have made trade pacts such as the Trans-Pacific Partnership controversial among activists, who say they allow companies to override the laws of sovereign states.

"A mining company that calls itself responsible should not be using mechanisms like ICSID to force governments to do its bidding," Keith Slack of Oxfam America said in the statement.

"Countries like El Salvador have a right to say no to mining without fear of a massive lawsuit."