The dispute between Panama and Canadian mining company, First Quantum Minerals, over the Cobre Panamá copper-gold mine has escalated to international arbitration. The Supreme Court of Panama ruled the agreement to mine unconstitutional, leading to a generational backlash against the mine. Despite this, First Quantum Minerals intends to take Panama to arbitration for alleged breach of the Free Trade agreement. The case will be settled by three Investor State Dispute Settlements (ISDS) adjudicators, where the investors select one, the nation chooses another, and a third is agreed on by both. The dispute is then settled by a binding ruling, which can include compensation awards to investors.
The Cobre Panamá mine provides about five percent of GDP for Panama and supplies thousands of jobs. It is also an important source of copper needed in vast quantities to realize the clean-energy transition. However, the mine is set amid the Mesoamerican Biological Corridor that connects wildlife across Central America and southern Mexico, and its operation is causing environmental concerns. The battle between First Quantum Minerals and Panama is exposing Canada’s double standard when it comes to promoting free trade in the Global South.
At least three additional mining investor suits against Panama, including one by Toronto-based Franco-Nevada, have also suddenly emerged. The stakes are enormous, as if a country loses at arbitration, there is no escape. Recent history speaks to the power of the ISDS system wielded by Canadian mining companies, which account for a disproportionate number of these cases due to Canada’s dominance of international mining.
The international ISDS system, unlike most lax-on-consequence international law, “doesn’t have teeth—it has fangs. Once you get the award, [the investors] can basically shop that award around across different countries, looking for assets of the state, and then you can chase and attack those assets to make good on the award.” Parties can go after development bank loans and virtually anything else.
While some resource-rich countries are stepping back or opting out completely from treaties and contracts with ISDS provisions, Canada continues to promote the inclusion of ISDS in its trade agreements around the world, in order to shore up the interests of Canadian-based corporations.
Recent history speaks to the power of the ISDS system wielded by Canadian mining companies, which account for a disproportionate number of these cases due to Canada’s dominance of international mining. A joint venture led by Toronto’s Barrick Gold Corporation took Pakistan to the World Bank’s International Center for Settlement of Investment Disputes in 2011 after the latter refused to issue a mining permit for Reko Diq, one of the world’s largest undeveloped copper-gold deposits. In 2019, three private arbitrators ordered Pakistan to pay Barrick’s Australian subsidiary about US $5.8 billion in compensation and a separate arbitration decision reportedly brought the total award up to US $11 billion.
These staggering awards—equal to 40 percent of Pakistan’s total foreign cash reserves at the time—included compensation for expected future profits, even though the investment by the joint venture in 2011 was only about $220 million. Pakistan ultimately allowed the mine to proceed, and Reko Diq, which Barrick 50 percent owns, will begin construction in 2025.
Jennifer Moore, an associate fellow with the Institute For Policy Studies, says big ISDS awards “can impose a chill on the actions of regulators and governments to properly implement the decisions that have been made in the interest of people and the environment.”
Moore says the prospect of payouts and loss of sovereignty is prompting some resource-rich countries—including Brazil, South Africa and Indonesia—to step back or opt out completely from treaties and contracts with ISDS provisions. Meanwhile, European countries have withdrawn en masse from the EU’s multilateral Energy Charter Treaty, while Canada recently hailed the elimination of ISDS, in the latest renegotiation of North American Free Trade Agreement, as a victory for Canadian sovereignty.
“[ISDS] has cost Canadian taxpayers more than $300 million in penalties and legal fees,” said then-finance minister Chrystia Freeland in 2018 as Canada announced the renegotiated deal. “ISDS elevates the rights of corporations over those of sovereign governments. In removing it, we have strengthened our government’s right to regulate in the public interest, to protect public health and the environment.”
Even with this awareness, Moore says Canada’s respect for regulation in the public interest does not extend beyond its own borders: “Canada continues to promote the inclusion of ISDS in its trade agreements around the world, in order to shore up the interests of Canadian-based corporations, very well knowing what the implications of that are.”
