Award Rendered in Case Involving Claims under CAFTA and El Salvador’s Investment Law

PacRim1.JPG​The first case in which an ICSID hearing was publicly webcast, Pac Rim Cayman LLC v. Republic of El Salvador (ICSID Case No. ARB/09/12), recently concluded with an Award. The jurisdictional hearings were publicly broadcast based on the transparency provisions of the Dominican Republic-Central America-United States Free Trade Agreement (CAFTA, Art. 10.21).

After a jurisdictional phase, the Tribunal (V.V. Veeder, British, as President; Guido Santiago Tawil, Argentine; and Brigitte Stern, French) rendered an Award rejecting all of the investor's claims and ordering Pac Rim to pay part of El Salvador's costs.

Pac Rim, a company registered in Nevada in the United States, alleged that El Salvador breached the CAFTA and El Salvador's 1999 Investment Law (subsequently modified in 2013) by failing to approve a gold mining license for the 'El Dorado' underground gold mine located in Las Cabañas and San Vincente, in northern El Salvador. Pac Rim sought monetary damages of US$ 284 million to compensate for the losses it incurred as a result of the alleged breaches.

The Tribunal decided to bifurcate the matter and hear argument on jurisdictional questions before proceeding to the merits. In its Decision on Jurisdiction, the Tribunal dismissed Pac Rim's CAFTA claims on the basis of the treaty's denial of benefits clause. It held that Pac Rim could not avail itself of protection under the CAFTA because it was wholly owned by a Canadian company and did not have substantial business activities in the United States as required by CAFTA Article 10.12.2. Canada is not a Contracting Party to the CAFTA. As the CAFTA claims were dismissed in the Tribunal's Decision, the case proceeded on the merits only with regard to the claims under the Investment Law. 

On the merits of the case under the Investment Law, Pac Rim argued that El Salvador breached (i) the prohibition of arbitrary and discriminatory measures under Article 6; (ii) the prohibition of expropriation without compensation under Article 8; and (iii) the right to protection of property under Article 13.

In the Award, the Tribunal concluded that Pac Rim had no legal right to obtain the requested exploration license because it did not meet the requirements of El Salvador's 1999 Mining Law. In particular, the Tribunal found that Pac Rim had not taken the proper steps to acquire legal ownership of the land covered by the concession and therefore could not obtain the necessary licences from the government under the Mining Law, as interpreted by the Bureau of Mines and Hydrocarbons of the Ministry of Economy. In reaching its conclusions on the merits, the Tribunal held that "[a]s a general approach, deference should be given by an international tribunal to the unanimous interpretation of its own laws given in good faith by the responsible authorities of a State at a time before the emergence of the parties' dispute" (Award, para. 8.31).

Recordings of the public hearings in Pac Rim and other cases are viewable on ICSID's LiveStream site and documents published with the parties' consent may be found under the case details on the ICSID website.