The Global Fight Against Corporate Rule
Robin Broad and John Cavanagh | January 14, 2014
Over the past several decades, multinational corporate Goliaths have helped to write and rewrite hundreds of rules skewing tax, trade, investment and other policies in their favor. The extraordinary damage these policies have caused has become increasingly apparent to the communities and governments most directly affected by them. This, in turn, has strengthened the potential of a movement that’s emerging to try to reverse the momentum. But just like David with his slingshot, the local, environmental and government leaders seeking to revise rules to favor communities and the planet must pick their battles carefully.
One of the most promising of these battles takes aim at an egregious set of agreements that allow corporations to sue national governments. Until three decades ago, governments could pass laws to protect consumers, workers, health, the environment and domestic firms with little threat of outside legal challenge from corporations. All that changed when corporations started acquiring the “right” to sue governments over actions—including public interest regulations—that reduce the value of their investments. These rights first appeared in little-known bilateral investment treaties. Twenty years ago, corporate lawyers embedded them in the North American Free Trade Agreement (NAFTA). Today, more than 3,000 trade and investment agreements and even some national investment laws grant foreign investors these powers.
The Obama administration is attempting to insert similar anti-democratic investor protections in new trade and investment agreements with countries that border the Pacific and with the European Union. Hoping to expedite the so-called Trans-Pacific Partnership (TPP) and the Transatlantic Trade and Investment Partnership (TTIP), congressional leaders introduced fast- track trade promotion legislation on January 9 that would severely limit Congress’s ability to amend such agreements. The widely anticipated move set off a storm of protest from unions, environmentalists, liberal members of Congress and others, and will likely remain a high-profile fight in the coming weeks.
The forces aligned against these proposed agreements are not alone. Activists across the globe are developing creative and increasingly effective strategies to push back against investor assaults on their communities, environment and national sovereignty. An important front has opened up in El Salvador, where a multinational firm is using investor powers to sue the government over the “right” to mine gold. This case represents an extreme assault on democracy, as local communities, the majority of the Salvadoran public and the Salvadoran government all oppose the gold mining. But what’s happening in El Salvador is not an anomaly. There are crucial battles brewing in several other Latin American countries—including Argentina, Venezuela, Bolivia and Ecuador—as well as in other parts of the developing world.
At the very least, these struggles should give the Obama administration pause as it considers the next round of trade agreements. But what makes them so strategic—and promising—is that powerful citizen groups are persuading governments to take up the challenge. As they do, they are building momentum in a broad global fight against investor rights.
* * *
Salvadoran land sits atop a wide belt of gold running down the middle of Central America, a vein that has enticed profiteers for more than a century. In the early 1900s, the US miner Charles Butters began plundering the region using a lucrative process that employed cyanide to separate gold from rock. Within years, Butters was making millions. But what he seems not to have contemplated—and what the farmers in these parts know well—is that the area is vulnerable to earthquakes and tropical storms, both of which make it difficult to contain the toxic chemicals used to mine gold. And no one appears to have known that the heavily concentrated sulfides found in the rock that often surrounds gold become sulfuric acid when they are exposed to the elements during the extraction process. The acid leaches other toxic materials into the soil and water. In July 2012, at the San Sebastián site of the mine that Butters opened more than a century ago, the Salvadoran environment ministry found levels of cyanide and iron that were through the roof.
The areas affected by gold mining will remain contaminated for centuries unless the companies are kept out and forced to pay for costly cleanup. Yet El Salvador is not suing the mining firms for such destruction. Instead, in 2009, at a tribunal housed in an imposing World Bank building just a few blocks from the White House, firms sued the Salvadoran government for not letting them mine. One of them, Canada’s Pacific Rim Mining Corporation, is demanding either that it be allowed to mine in northern El Salvador or that the government pay it over $300 million in damages, an amount equivalent to more than 1 percent of the Salvadoran economy.
Over the course of several trips we have taken in recent years to learn about the local movement against mining, corn and bean farmers have led us up and down the hills of northern El Salvador, guiding us through the streams that feed the Lempa River. This river, which flows from Guatemala through El Salvador and then along the border with Honduras before it plunges south into the Pacific Ocean, provides water to more than half the country’s people. One of our guides was Miguel Rivera, a local “pro-water” activist whose older brother Marcelo, a popular educator, was brutally assassinated in 2009 after organizing many in his community against gold mining.
Miguel and his colleagues brought us through different parts of the Lempa watershed to show us pollution from agribusiness, factories, hog farms and gold mining. Along the way, Miguel, who has become a trained water expert, often paused to test it for toxins and other substances. We visited the site of Butters’s San Sebastián mine, which has been closed for years but continues to leach toxic substances into the streams. Some days, the water was Kool-Aid orange; on others, it was Ocean Spray cranberry.
As the prices of gold and other metals skyrocketed after 2000, multinational firms like Pacific Rim rushed to apply for permits to mine in resource-rich regions like the Salvadoran province of Cabañas, where Miguel lives. Initially, the farmers of this poor region were intrigued by the prospect of good jobs, but a number of them visited the mines in neighboring Honduras and returned with horror stories of disease, polluted rivers and few actual jobs. A community activist told us, “We learned how much water the mining companies would use to mine, and water became a big issue. Mining uses a lot of it, and we had little.” Some visited the old Butters site in San Sebastián, where the orange and cranberry waters sealed their opposition.
Local activism on the proposed Pacific Rim mine—including cultural work led by Marcelo Rivera and a radio station run by local youth—spread in Cabañas and across El Salvador. Farmers, students, people of faith, lawyers and human-rights activists formed the National Roundtable Against Metallic Mining, and won over politicians and even the mainstream Catholic church. By 2007, a national poll showed that more than 62 percent of Salvadorans opposed metals mining. As Miguel Rivera and others continually stressed to us, the slogan of the Roundtable was “We can live without gold, but we can’t live without water.”
When the progressive FMLN party won the presidency in 2009, the newly elected president, Mauricio Funes, pledged not to issue mining permits during his five-year term, a promise he has kept. In other words, El Salvador has quietly become the first nation on earth to stop destructive gold mining.
But the victory has come at a cost. Pro-mining forces, including conservative local politicians in Cabañas, have fought back. At least four anti-mining activists have been assassinated since 2009. Marcelo Rivera’s mangled body was found at the bottom of a well; he had been tortured.
Pacific Rim acted quickly once it became clear that it would not be granted a mining “exploitation” license. The firm filed suit at the World Bank–based International Centre for the Settlement of Investment Disputes, charging that the Salvadoran government had violated the investor-rights provisions of its domestic investment law and a regional trade agreement, both modeled on NAFTA. (According to a study by Sarah Anderson and Manuel Perez-Rocha of the Institute for Policy Studies, cases related to oil, mining and gas make up more than a third of the docket at the ICSID, the most frequently used tribunal for such investor lawsuits. More than half of these are directed at Latin American countries, a region where several governments have asserted national interests over those of their corporate interlopers.)
The Salvadoran government and the Roundtable have had to put significant time and resources into fighting the suit. Joining them has been International Allies Against Metallic Mining in El Salvador, a coalition of US and Canadian groups that held weekly protests outside the World Bank in 2012 and coordinated with the Roundtable protests in San Salvador. Many legal experts are aghast at the suit, but the ICSID has allowed the case to proceed. A decision is not likely before 2015.
* * *
By late 2012, Pacific Rim seemed to be running out of money for its ICSID suit. To its rescue came a Canadian-Australian mining firm, OceanaGold. The firm’s infusion of cash granted it a one-fifth stake in Pacific Rim, and in November 2013 shareholders approved an outright purchase of the company. As a result, Pacific Rim has become a wholly owned subsidiary of OceanaGold, with more money to pursue the case at the tribunal.
Like Pacific Rim, OceanaGold claims to mine “responsibly,” using the latest environmentally sustainable techniques. To see if OceanaGold’s record matched its claims, we traveled to the firm’s Philippine gold and copper mine this past August. During the twelve-hour drive into the remote gold-laced mountains northeast of Manila, leaders of the Philippine Rural Reconstruction Movement told us about the long community struggle against OceanaGold’s pursuit of a mother lode of gold and copper that sits under a mountain where hundreds of farming families lived. They showed us before and after photos in which the green mountainside turned into an open-pit mine.
But nothing prepared us for the destruction and the noise and the anguish. In the community of Didipio, we spent time with farmers who had formed an organization to oppose OceanaGold as it moved in. With great emotion, they described the barricades they set up in 2008 and 2009 after the company demolished the homes of those who refused to sell out. But the Didipio Mine became operational in December 2012. Our hosts told us of “dirty water” downstream from the mine, dead fish washing up on the shores and other environmental problems the mine had caused.
We met with Carmen Ananayo, a leader of the efforts to close the mine. Her voice breaking and eyes tearing, she quietly shared the story of the 2012 murder of her daughter, Cheryl. Killed along with another community member, Cheryl was the mother of two very young children. It is an eerie parallel to El Salvador, where one of the assassinated was a pregnant woman who had been holding her toddler in her arms. No one suggested that the mining company shot Cheryl. But, as in El Salvador, the key variable is the mining company’s presence, which brought conflict and death to this previously peaceful municipality.
Carmen also told us that many of the mine’s workers—often hired as irregulars to avoid giving them the minimum wage and benefits—put in a grueling twelve-hour shift while earning less than $1.20 an hour. It would take these workers many lifetimes to approach the $1.3 million compensation package that OceanaGold CEO Michael Wilkes received in 2012.
What we witnessed in this remote community in the Philippines is plunder, pure and simple. OceanaGold’s bailout of Pacific Rim reminds us that the global brotherhood of mining companies can ensure that corporate lawsuits against recalcitrant governments will be well funded for years to come. Farmers in Didipio told us that they want to end the mining, to have their community and clean rivers back, to be able to farm in peace and build a better tomorrow for their children. They are proud to be producers in the northern Philippines’ “fruit and vegetable bowl,” and they want to keep it that way. The community has support in the Philippine Commission on Human Rights, which filed a motion in 2011 against OceanaGold for this mine. The motion recommended the revocation of the company’s mining license, citing forcible and illegal demolitions, the harassment of residents, and the indigenous community’s right to preserve its own culture. In August, the head of the commission told us unequivocally that it continues to be concerned about these violations at OceanaGold’s mine.
* * *
As the strategies for asserting investor rights proliferate across the globe, new alternatives are sprouting up, as communities, activists and governments confront the challenge with increasing urgency.
In the 1990s, a conservative Bolivian government that was privatizing its municipal water systems granted the concession for the water system of its fourth-largest city to the US corporation Bechtel. When Bechtel hiked the rates for consumers, tens of thousands rose up in what became known as the “water war.” After Bechtel abandoned the contract as a result of the opposition, it sued Bolivia under a bilateral investment agreement. Following a creative global campaign that included protests outside the company’s San Francisco headquarters and a shaming strategy, Bechtel finally caved, settling the case for a mere $1.
Groups as diverse as the Council of Canadians, MiningWatch Canada, US and Australian unions, Oxfam and the Institute for Policy Studies are attempting to do with Pacific Rim what those activists did with Bechtel. They’ve started a petition drive to pressure Pacific Rim and its parent company, OceanaGold, to “drop the suit,” and they’ve organized several hundred labor and other citizen groups to push the World Bank to sever its ties with the ICSID tribunal.
Meanwhile, Miguel Rivera and his colleagues are trying to build an alternative economy rooted in local enterprises and sustainable farming, as are other groups across El Salvador. One town we visited in the province of Chalatenango had set up a system to deliver clean water to households and had also established a cooperative to process sugar cane, manage a fish hatchery and maintain beehives for honey. The women of this town have organized to plant organic corn and beans collectively, and they are producing shampoo, soap and alternative medicines—they’re even running a small massage business.
Several Latin American governments are challenging corporations’ rights to sue them in international tribunals. Brazil has never accepted such rights in any international agreement. Bolivia, Venezuela and Ecuador have withdrawn from the ICSID tribunal and are rethinking their bilateral and multilateral investment deals. In an important development, Ecuador hosted these governments and several others last April to discuss an alternative to such agreements. Twelve governments are now on record supporting the creation of a regional mechanism “to ensure fair and balanced rules when settling disputes between corporations and States,” while laying out a framework for continuing the negotiations and bringing in other governments.
South Africa is terminating its bilateral investment agreements and establishing a new investment law that allows foreign corporations to bring such claims only to domestic courts rather than international tribunals. India is conducting a review of its treaties in the face of several corporate lawsuits. Australia refused to include these corporate rights in the 2005 Australia-US Free Trade Agreement, and so far it has not agreed to subject itself to them in the secretive negotiations surrounding the Trans-Pacific Partnership agreement. Recently leaked documents suggest that several of these governments are attempting to at least scale back investors’ rights in the TPP trade deal.
The diverse set of groups that fought NAFTA two decades ago have remained united through the Citizens Trade Campaign, which is trying to stop the fast-track legislation for the TPP and the TTIP. Opponents have gained significant traction by raising questions about the corporate interests behind the proposed agreements. So too on the question of secrecy: in The Washington Post and elsewhere, Public Citizen, Friends of the Earth and others have stressed that 600 corporate advisers have had access to the text of the TPP agreement, while the public and members of Congress do not.
These fights are critical. If the momentum of corporate investment rules can be slowed or halted, the power of global corporations would be significantly curtailed. No one should expect that the hundreds of corporate rules written and strengthened over the course of decades can be dismantled overnight. But rules protecting investors’ rights are a key strategic front where progress is possible. A victory in the David versus Goliath battle between El Salvador and Pacific Rim would be huge—both symbolically and substantively. It would help shift the momentum back toward the rights of people and the environment they inhabit. It would also, we hope, lift some of the sadness that appears every day in the eyes of people like Miguel Rivera and Carmen Ananayo.