Although most of the attention has been on the Canadian gold mining company Pacific Rim and its international arbitration suit against the government of El Salvador, there is a second US gold mining venture which has also commenced an arbitration. The Commerce Group and San Sebastian Gold Mines filed a notice to demand arbitration under the DR-CAFTA trade agreement. The companies, which are both headquartered in Milwaukee, Wisconsin, assert that El Salvador has a de facto ban on the operation of gold mines in El Salvador by foreign companies and that this has deprived Commerce and San Sebastien of their investment interests from operation and exploration of gold mines in the country. They claim damages exceeding $100 million.
On July 2, 2009, the companies commenced their arbitration against El Salvador. In announcing the commencement of arbitration, the Commerce Group's 8-K filing states:
The Company contends that the government of El Salvador has frustrated its efforts to develop its mining interests in the country of El Salvador in violation of CAFTA-DR. On September 13, 2006, the government of El Salvador, without justification or any forewarning, revoked the Company's permits which it had issued for the San Sebastian Gold Mine exploitation concession and the San Cristobal Mill and Plant, effectively terminating the Company's right to mine and process gold and silver. On October 28, 2008, the government of El Salvador denied the Company's application to extend its exploration permits in connection with the New San Sebastian Exploration License and the Nueva Esparta License.
The risk for the government of El Salvador in these cases, is that it does not appear to have followed its own set of rules. Rather than going through the steps of evaluating environmental impact statements and then issuing a decision about the environmental impact which denies a mining permit, both Pacific Rim and Commerce allege that licenses were simply revoked or not granted without explanation. That's a mistake by the government. An international arbitration panel is not going to second-guess El Salvador's evaluation of the environmental evidence, even if that evaluation seems flimsy. However, the arbitrators can understand and rule against a government which does not go through the motions and issue an explanation for its actions. In other words, a wrong decision is more defensible than no decision at all.