CAFTA Investor Rights Undermining Democracy and the Environment: Commerce Group Case

By Public Citizen's Global Trade Watch

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The Commerce Group Corporation, a mining firm registered and based in Wisconsin, was the second multinational company to attack El Salvador’s environmental policies under the controversial investor rights of the Central America Free Trade Agreement (CAFTA). The company’s environmental permits for its gold mining and milling operations in Northeastern El Salvador were revoked after the company failed its environmental audit; in April 2010, the Salvadoran Supreme Court ruled that the company had been accorded due process during and after the audit.

On November 15, 2010 in Washington, D.C., the company pushed a CAFTA claim for compensation from El Salvador’s impoverished taxpayers for at least $100 million, using CAFTA’s controversial investor-state enforcement system. That mechanism elevates private investors and corporations onto the same level as governments, providing private rights to enforce special foreign investor privileges provided in CAFTA.5 At that hearing, the El Salvadoran government argued that CAFTA’s procedural rules required the company to actively terminate its domestic court case, and that its failure to do so means that the government has not consented to the CAFTA arbitration and thus the case should be dismissed.

On March 14, 2011, the investor-state tribunal dismissed the Commerce Group case on a technicality, but ruled that the claim could have otherwise proceeded under CAFTA, and that El Salvador must pay more than $800,000 in legal costs. The proceedings came shortly after Pacific Rim (another multinational mining company) attacked El Salvador’s mining policies under CAFTA. (See a separate Public Citizen backgrounder on that case at: http://bit.ly/dmt8bM). The backdrop for this case is rising concerns in El Salvador about the impact of mining. Leaders of El Salvador’s major political parties, the Catholic Church and a large civil society network have increasingly expressed concerns about mining companies’ operations over past years. At the same time, intimidation and threats against civic groups raising concerns about mining issues have escalated. In the past year and a half, three prominent anti-mining activists were murdered. Salvadoran activists focused on the Commerce Group case – along with the Pac Rim case – to call on Salvadoran President Mauricio Funes to renegotiate CAFTA.