Private Sector


World Bank arbitration mechanism ICSID rules in favour of El Salvador

31 January 2017

In October 2016, the International Centre for Settlement of Investment Disputes (ICSID), a World Bank arm for investor-state dispute arbitration, announced that the 2009 case brought by Pac Rim Cayman against El Salvador was without merit (see Observer Autumn 2015, Summer 2014). It ruled that El Salvador would not have to pay the company the $250 million it sought and ordered the company to pay the country $8 million to cover most of its legal costs. In 2009, the company, now a wholly-owned subsidiary of the Canadian-Australian company OceanaGold, sued El Salvador for the loss of potential profits after El Salvador decided not to issue it a mining permit because the company failed to meet regulatory requirements.

The role of ICSID and other investor-state dispute settlements, which allow foreign investors to sue states in international tribunals if they feel unfairly treated, have been heavily criticised, particularly in Latin America where Bolivia, Ecuador and Venezuela have withdrawn from ICSID (see Bulletin Dec 2013).  In an October 2016 interview with The Guardian newspaper Manuel Pérez-Rocha of the Institute for Policy Studies in Washington noted that “the fact that it took more than seven years to release the ruling, and that a country with so many economic difficulties like El Salvador has had to pay millions for its defence, is immoral and shows the complete discretion with which these tribunals, sponsored by the World Bank and its infamous ICSID arm, operate.” Reacting to the news in a press release, the Salvadoran Roundtable against Metallic Mining, La Mesa, lamented that “Irrevocable damage has already been done to communities in El Salvador”.