Today’s Trivia Quiz: How Global Mining Corporations Are Able to Undermine Democracy

Robin Broad, guest blogger

Today’s trivia category is how global mining corporations undermine democracy.

First a bit of background. The way licensing for mining works is that a company first gets an “exploration license.” With that license, that company gets the right to explore – or test – the area to get a better sense of the extent of the gold or whatever the relevant mineral is. After that, the company can move on to apply for an “exploitation” or “extraction” license — that is, an actual mining license. Different countries have different requirements for both licenses but typically a company would be asked to present an environmental impact assessment and a feasibility assessment among other things.

To make this easier, let’s use the hypothetical case of a gold-mining company that is seeking to mine in another country.

Are you set? Ok, so here’s today’s trivia question: You are a foreign gold-mining company. You have already received an “exploration license” to mine in another country. You want to get an “exploitation license” so that you can start the actual mining. However, that country’s government has not approved your environmental impact statement and you have not yet submitted a feasibility assessment. Therefore, your best chance at getting that “exploitation license” is to:

(a)  Just redo the environmental impact statement.
(b)  Just do the feasibility assessment.
(c)  Carefully follow the country’s written requirements and submit everything that is required.
(d)  Ignore the country’s written requirements and find some friendly government official who is willing to meet with you.

And (drum-roll, please) the answer is: (d). That’s right: Ignore the country’s written requirements and find some friendly government official who is willing to talk about the possibility of getting a mining license.

For fact-checking of today’s trivia answer, we go not to established international law but rather to a real life legal ruling: This is precisely what a World Bank tribunal ruled on June 1, 2012 in the case of Canadian-headquartered mining company Pacific Rim versus the government of El Salvador.

Pacific Rim had an exploratory license but was not granted an exploitation license. Among other things, Pacific Rim’s environmental impact assessment had not been approved and it never submitted a feasibility study. Rather than re-submitting, a Pacific Rim official (Tom Shrake) continued to talk with Salvadoran government officials. And, when that didn’t work, Pacific Rim sued the government for violating its investors’ rights, bringing the suit not to Salvadoran courts but to the International Centre for the Settlement of Investment Disputes (ICSID) at the World Bank.

And, yes indeed, in the believe-it-or-not category: the ICSID tribunal ruled on June 1 that the willingness of some unnamed government official at some level to meet with a Pacific Rim official was enough to give Pacific Rim grounds to expect that it would receive a mining license. And therefore Pacific Rim does have a legal case against the government of El Salvador which is now allowed to go forward in the World Bank tribunal.

This is one of those trivia questions that has real-world lessons, of course. These lessons are especially relevant if you are a mining company and you want to mine in a community where local people do not want you…if you want to mine in a country where the majority of people have come to believe that the long-term sustainability of their watershed is more important than any short-term benefits of mining … and indeed, as in the case of El Salvador, a country where a democratically-elected government is now listening to the views of its citizens.

In such cases, the key thing is to have one of your top executives argue that some government official was at some point still willing to meet (unclear if it needs to be an official meeting or if it can be over a drink or in a Deep Throat kind of parking garage).  If you follow this advice and use the Tribunal’s ruling on the Pacific Rim case as your legal precedent – well then, you have a very good chance that the arbiters who judge “investor rights” cases will believe you, even if you don’t have any further evidence besides your oral testimony.

Oh, dear, our phones are ringing off the hook. There seem to be a number of lawyers out there who find this ruling disturbing, against prior legal precedents. There seem to be a number of environmentalists who find this ruling outrageous. And there seem to be quite a large number of Salvadorans who don’t understand why the oral testimony of one man is more important than their views. If I had to put a name on what I’m hearing from you callers, I’d term it “moral outrage.”

Ok, here’s what I’ll do: I promise to try to find a less disturbing trivia question on the subject for our next show. But let me warn you, in this era of global institutions, which somehow are able to maintain an air of objectivity while issuing rulings decidedly biased in favor of global corporations, this is not an easy task.

And here’s what those of you who find this disturbing can do: write the chair of Pacific Rim Catherine McLeod-Seltzer (, and tell her she and Pacific Rim should be ashamed of their actions and should withdraw the case against El Salvador immediately.  And write the incoming World Bank president, Jim Kim, and tell him to review ICSID and its mission.  And, those of you in the United States can also let President Obama know that you do not want to see any more investor-rights clauses in any upcoming trade agreements.

Robin Broad is Professor of International Development at the School of International Service, American University in Washington, D.C. Her longer article on this El Salvador case, coauthored John Cavanagh, was published in The Nation. She and Cavanagh have a regular blog on YES! Magazine. Her most recent book is Development Redefined: How the Market Met Its Match.

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