Pacific Rim against El Salvador in an international arbitration tribunal

Lauren Carasik has an article in Foreign Affairs on Undermined: The Case Against International Arbitration Tribunals.

A decision in favor of Pacific Rim -- allowing its corporate profits to trump El Salvador’s domestic safeguards -- would set a dangerous precedent about who has the power to dictate the terms of development for emerging economies. Corporations, concerned primarily with maximizing profit, should not be able to subvert the will of sovereign countries, especially those whose poverty requires them to seek outside investment. Compounding the problem, developing countries often submit to bilateral investment treaties and free trade agreements whose terms usually grant jurisdiction to international tribunals.

The dominant development orthodoxy of the past several decades has pressured countries to make concessions to attract foreign capital by implementing neoliberal reform packages, including austerity measures, privatization, and deregulation. In practice, this has often meant gutting labor, health, and environmental standards. Foreign tribunals, which further expand corporate prerogatives while limiting the ability of states to protect their citizens, are another step in the wrong direction.

I'm not that persuaded (read the comments to the Foreign Affairs article as well). I still hope that El Salvador wins or reaches a settlement with Pacific Rim that maintains the de facto ban over mining in the country. I just have a lot of questions over the safety of the operations and mining's potential to reignite social conflict that was the norm a few years ago. Mining doesn't have to go hand in hand with social conflict but in countries with weak rule of law and a history of government and elite exploitation of their people, it sure seems to. Social conflict around mining remains a permanent condition in Honduras and Guatemala whereas tensions seem to have subsided since the de facto ban.

While I have no love for Pacific Rim, the case was brought to an international arbitration tribunal because it was the Salvadoran government that agreed that in order to encourage foreign investment in a country that lacked the rule of law and where the courts were weak, corrupt, and politicized, investors needed greater guarantees than what their courts could provide. Go back to the McDonald's case.

The Salvadoran people and the FMLN generally seem to support the mining ban in general and in the decision not to extend an exploitation permit to Pacific Rim. However, the tribunal will (hopefully) decide the case on the legal merits. I'm hoping that the tribunal rules in favor of the Salvadoran government on the legal merits of the case ("The government countered that Pacific Rim had not complied with the requirements for a permit, including acquiring land titles for the area encompassing its proposed mines, obtaining the appropriate environmental authorizations, and submitting environmental impact assessments and a project feasibility study") rather than the more abstract argument that a ruling in favor of Pacific Rim goes against the will of the Salvadoran people.

A ruling along those lines would appear to do more to strengthen the rule of law in El Salvador than other alternatives at this point.