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Costa Rica’s request to terminate Infinito Gold’s ICSID Claim: Brief Reflections
By Nicolas Boeglin, 10-8-15
Translated by Anoosha Boralessa (March 2016). Not reviewed by bilaterals.org or any other organization or person.
On 24 July 2015, Costa Rica requested the termination of the arbitral proceedings that the Canadian Mining company, Infinito Gold filed with the Centre for the Settlement of Disputes between Foreign Investors and States (better known as CIADI in Spanish and ICSID in English). A few days before, on 15 July 2015, the specialized press (see press release entitled "Infinito Gold Ltd. Announces Resignation of All Directors and Officers") informs us that all the directors and officers of the company have resigned due to its delicate financial situation:
"As a result of the aforementioned working capital deficit and given the fact that the Company’s major shareholder and creditor has advised the Company that it is unwilling to advance any further funds to the Company, the Company has concluded that it will not be possible for it to continue operations".
Two days after, it is stated on a specialist stock market site (see the Bloomberg.com website) that:
“Further to the TSX Venture Exchange (TSXV) Bulletin and Infinito Gold Ltd.’s press release both dated July 15, 2015, effective at the opening on July 17, 2015, trading in the shares of the company will be suspended for failure to maintain Exchange requirements”. (click on section “Snapshot” to read the complete note).
The section “Charts” in this same link on shares listed on the stock exchange - listed in the last 5 or 10 years – allows us to appreciate how sensitive the stock market value of the Infinito Gold Ltd shares in Canada was to events in Costa Rica, including episodes that occurred before the Costa Rican judicial courts, notably from October 2008. It is worth highlighting that the financial health of the Canadian Company, Infinito Gold, has been the focus of an interesting opinion article by a Canadian activist Rick Arnold, published in May 2015 in Costa Rica, entitled: ”Op-ed: ’Zombie’ Canadian mining company, Infinito Gold, stalks Costa Rica”. In the final part of the text, we read in the newspaper that published it that:
“The Tico Times sought a response from Infinito Gold to this opinion piece. Calls made to the company’s Costa Rica office and to its Canadian headquarters were not returned, and emails were unanswered”.
ICSID in Latin America
As is well known, ICSID is an arbitral mechanism established in 1965 by the Washington Convention (see complete text, pp. 7-33) to resolve disputes between States and foreign investors. Contrary to an opinion that is widely held in several sectors, there is no need to ratify this Convention to attract foreign investment:
• In Latin America, Brazil, Cuba, Mexico and the Dominican Republic clearly demonstrate this: none have ratified the 1965 Convention. To these, we can add the economic successes more recently obtained by Bolivia and Ecuador that denounced this treaty in 2007 and 2009 respectively (because they considered that some ICSID claims were abusive and some ICSID decisions were questionable). To complete the panorama of the Spanish-speaking community, we must mention that Spain has experienced a recent surge in ICSID claims brought against it (many of which are due to the legislative change on renewable energies, aimed at reducing public subsidies). According to some media outlets, this has placed it just behind Argentina and Venezuela in terms of the number of claims registered (see the statement in El País). At the time of writing this note, Spain counted 18 ICSID claims pending resolution, behind Venezuela (with 25 pending claims) and Argentina (with 18). In Latin America, Argentina is followed by Costa Rica (with 4 cases pending), Ecuador, Panama and Peru (with 3 a piece).
As for the States of the American hemisphere, the last state to accept the system established by the ICSID Convention is Canada, which announced its membership only on 1 November 2013.
It is important to recall that until 1996, ICSID operated, at the global level, in a highly sporadic manner:
• 1972 is the date that the first case was registered (the first one that year);
• 1974 saw four cases registered;
• In the following years not even one case was registered: 1973, 1975, 1979, 1980, 1985, 1988, 1990 and 1991.
The exponential increase in the volume of cases per year from 1996 (1997: a total of 10 cases; 2011: a total of 38 cases; and a total of 50 in 2012) is explained by the effect of numerous bilateral investment protection and promotion treaties (better known by the English acronym “BITs”) signed from the nineties. These treaties represented 63% of the basis for consent to ICSID jurisdiction for all cases registered in 2011 (see graph, p. 10 of the official statistics for 2011-2012). According to the most recent statistics in 2015-1 (p. 10), this percentage remained almost unchanged (61.8%) In Latin America, in the nineties, Argentina signed 58 of these bilateral treaties (see the chart on p. 4 of this interesting study) and is the State against which the most ICSID claims have been registered in ICSID’s entire history (90 claims filed against Argentina, of which 18 are pending resolution). In a study on investment claims against a State (which we recommend reading), Patxi Zabalo has concluded, from Argentina’s sad experience and with other States in the region, that:
“In light of the burden that investor-state claims signify for development in several Latin American countries and due to the inadequate measures that have been adopted so far to avoid them, we must seriously reconsider the path undertaken.” (Note 1).
Regarding the study, the focus of these brief reflections, we must recall that Costa Rica signed the Washington Convention establishing ICSID in 1981 and then ratified it in 1993, under external pressure due to the non-resolution of the Santa Elena matter (Note 2).
Clarifying the Terminology
We read on the official ICSID website, on the technical tab on the claim that Infinito Gold filed against Costa Rica, about four ICSID claims currently pending resolution and another one before another arbitral mechanism (Note 3). It is also stated that:
"the Respondent files a request for the discontinuance of the proceeding pursuant to ICSID Arbitration Rule 44 on July 24, 2015".
If, despite reservations on the lack of transparency in the ICSID system, we take this data as a starting point, the result is the following. ICSID Arbitration Rule 44 reads as follows:
"If a party requests the discontinuance of the proceeding, the Tribunal, or the Secretary-General, if the Tribunal has not yet been constituted, shall in an order fix a time limit within which the other party may state whether it opposes the discontinuance. If no objection is made in writing within the time limit, the other party shall be deemed to have acquiesced in the discontinuance and the Tribunal, or if appropriate, the Secretary-General, shall in an order take note of the discontinuance of the proceeding. If objection is made, the proceeding shall continue ".
The Spanish version of ICSID Arbitration Rule 44 applicable to arbitration proceedings (see the text on pp 101 et seg) reads as follows:
"Regla 44. Terminación a solicitud de una de las partes Si una de las partes solicita que se ponga término al procedimiento, el Tribunal, o el Secretario General si aquel no se ha constituido todavía, fijará mediante resolución el plazo dentro del cual la otra parte podrá oponerse a la terminación. Si no se formula objeción alguna por escrito dentro del plazo fijado, se presumirá que la otra parte ha consentido en la terminación y el Tribunal, o en su caso, el Secretario General, dejará constancia, en una resolución, de la terminación del procedimiento. Si se formula una objeción se continuará el procedimiento".
The Spanish version talks about "a request to terminate proceedings " while the English version expresses it as a "request of discontinuance of the proceeding". Thus the Spanish version clarifies the panorama and permits a far better appreciation of the scope of the term "suspensión" used (incorrectly, in our modest opinion) in the media outlets in Costa Rica in recent days. In fact, the notion “suspensión” can be interpreted as a provisional suspension, or as a momentary action that can give rise to a later reactivation of the proceedings. What the Spanish version establishes, from what must be understood by “discontinuance”, is very different from a “suspensión”. At issue is a request to terminate proceedings. The final sentence of Rule 44 is even clearer on the scope of this: if an objection is made to terminating proceedings, that proceedings continues.
In declarations made to the press in recent days, the Minister for Foreign Trade indicated (without wanting to go into the reasons or motivations of Costa Rica’s legal team) that he objected in July to the request for a new time limit made by the company (see Press Release on the Radio Programme Amelia Rueda with sound incorporated). There is no information on whether or not the company objected to the request pursuant to Art 44 that Costa Rica made on 24 July.
This brief clarification on terminology tries to respond to the confusion generated by some press headlines from 24 July read in Costa Rican media outlets: headlines such as “Infinito Gold requested suspending its claim against Costa Rica, while it stopped operating as a company” (Statement in CRHoy) or “Mining Company Infinito requests freezing international claim against the country” (Statement in La Nación) or others even more confused such as, “Country requests the international arbitration centre not to suspend the dispute against the mining company Infinito” (see statement of Amelia Rueda’s Radio Programme). On 24 July, there was no suspension requested by the company, nor either a request as such for one by the company. At issue is a request by the State to terminate the proceedings, It is somewhat surprising that no headline has so far reviewed it.
A Mining Project halted by Costa Rican Justice
In February 2014, the Canadian mining company, Infinito Gold, filed a claim against Costa Rica for slightly less than USD$ 94 million (see the complete text of the claim). This was due to the cancellation of permits, license, environmental viability and the Decree on National Interest (each one issued by the Executive Power) by the Costa Rican courts in November 2010. We refer the reader to the complete text of the ruling of the Administrative Tribunal (TCA) in November 2010, all aspects of which were confirmed in November 2011 by the First Division (see complete text). The TCA ruling concluded, specifying that:
"Resolutions no. 3638-2005-SETENA, no. 170-2008-SETENA, no. R-217-2008-MINAE, no. 244-2008-SCH and Executive Decree no. 34801-MINAET are cancelled. It orders the Respondents, Industrias Infinito Sociedad Anónima, the State and the National System of Conservation Areas for full compensation for environmental damages caused by the felling carried out on the properties of Industrias Infinito Sociedad Anónima, following the wording of resolution N°244-2008-SCH. Such damages will be determined in the execution of the ruling /…/".
In addition, the three judges of the Administrative Tribunal indicated that the strange attitude of the State aimed at committing so many illegalities in such a short time (which they qualified as a genuine “orchestration of wills”) had to be investigated from the criminal standpoint; and that this investigation had to be extended to high officials, including President Oscar Arias, and his Environmental Minister, Roberto Dobles, Sonia Espinoza, the Executive Secretary of the National Secretariat for the Environment (SETENA) and others. The judges indicated so in the following terms:
"We order the communication of this ruling to the Public Prosecutor so that he can decide whether to institute criminal proceedings against the following persons: Oscar Arias Sánchez, Roberto Dobles Mora, Sonia Espinoza Valverde, Eduardo Murillo Marchena, José Francisco Castro Muñoz, Cynthia Cavallini Chinchilla, Sandra Arredondo Li and Arnoldo Rudín Arias.".
Alvaro Sagot, one of the litigation lawyers that commenced these proceedings, who is also a Professor specializing in environmental law, indicated after reading the ruling (see Statement) that:
”What is perfectly clear and which therefore emerges from several sentences in the ruling, is that SETENA forgot that it is a technical organ and that it was making political decisions”.
In a later article the same lawyer determined that:
“Although the project predicted visible, local profits, a people can NEVER benefit and build alleged economic or social progress under the cloak of illegalities. This is because this completely distorts a State, that in the end, would have to continue to allow irregularities, in the name of an illusion” (Note 4).
Regarding the enforcement of the TCA 2010 ruling confirmed in 2011, ecological organizations and their lawyers had to proceed to gather together experts to quantify damages. An initial evaluation of the environmental damage caused in the area concludes by quantifying the damage as escalating to more than US$ 4.6 million (see report, p. 76). A second evaluation, this time carried out by a team that could carry out a site visit several months after, produces an evaluation of more than USD$ 10 million (see press release). The enforcement proceedings were delayed in the period 2012-2013 due to the company’s strategy (see statement in CRHoy). The hearing, scheduled for June 2015, called by the judge in charge of the enforcement of the order, was postponed once again at the company’s request (see statement in Radio Santa Clara).
A Controversial Mining Project
It may be somewhat surprising for those that live outside Costa Rica and that have visited it attracted by its nature and the green image it has projected for many years throughout the world, that Costa Rica wanted to develop there a project such as Infinito Gold, that claimed to be the best mining project in all Central America. It was also a surprise (mixed with astonishment) for many of its inhabitants when, mid-October 2008, this same project was declared to be of “a national interest and in the public interest” in an Executive Decree passed without consultation. Situated in a remote area of Las Crucitas, in the Northern Zone of Costa Rica, it would be located 3 kilometres from Río San Juan, bordering Nicaragua, in one of the areas with the last remnants of tropical woodland of the Northern Zone, a sanctuary for various species on the road to extinction and in an area of the Humid Tropics with the highest rates of rainfall in the world. From 2008, the authorities lent their unrestricted support to this project and this caused a strong reaction in the Costa Rican society and gave rise to one of the biggest struggles of the ecologist, social and academic sectors in Costa Rica in recent years, through unprecedented controversies. A state/company “conspiracy” was the word used for a headline on an unprecedented intervention of Executive Power before the first test carried out before the constitutional judge (see statement in Seminario Universidad). A previous episode carried out in September 2009 on the project site with two members of the Constitutional Chamber of the Supreme Court of Justice aroused very similar sentiment (see statement in Seminario Universidad), this time in relation to the action of both judges. Press reports that implicated the highest authorities of the State (for example the statement in La Nación, February 2011 on the calls received by the Attorney General, or the statement of April 2011, on a donation to the Fundación Arias) shook again and again the Costa Rican society. These and many other irregularities rose to such a level that they inspired a producer, Pablo Ortega, to capture them in a documentary produced by the University of Costa Rica (UCR) and entitled "El Oro de los Tontos", available on Youtube. The documentary was presented in June 2011 and it was so successful in Costa Rica that the decision was taken to put a version with English subtitles on line (“Fool´s Gold (Gold Mining in Costa Rica documentary)”, available at this link).
The mining company commenced legal proceedings for defamation against some of the university professors that were interviewed in this documentary for USD$ 1 million per person. This provoked a wave of widespread condemnation after which the courts would absolve the professors from all culpability (we refer the reader to the statement published in Canada: " Mining Company Fails to Silence Critics" (and its French version, "A Mining Company Fails in its Attempt to Silence its Critics"). In addition to these two academics from UCR, the company brought proceedings for alleged defamation against a communal leader for USD$ one million, as well as two Costa Rican MPs. The absence of mining company’s lawyers in the criminal proceedings initiated against the first three led to the respondents being seen in several media outlets. It is odd that it led to resorting to hearings with absences justified by illnesses that were both sudden and repeated (see the opinion article “Audiencias con el Infinito: ausencias…” published in La Nación, July 2012).
This mining project was also at the epicentre of one of the biggest judicial scandals in Costa Rica due to a draft ruling leaked in November 2011 to the Company’s lawyers. This leaking was denounced by that company’s former spokesperson (see statement in the Semanario Universidad). In another CRHoy article on the investigation of this leak carried out by Judge Julia Varela, we read that:
“Varela tried by all means to establish who it was that that removed the draft ruling from the First Chamber against the appeal filed by Industrias Infinito, in the “Crucitas” matter. However, she could never determine with certainty who did it, and therefore gets rid of the report that she filed with the Full Court”.
The mining project located in Las Crucitas also gave rise to unprecedented action by the mining company aimed at formally requesting UCR to modify the list of exponents in a seminar and to sift some of them out. We refer the reader to the request (in our modest opinion, unprecedented) sent by the representatives of the Canadian company and the response of the UCR Dean in July 2012, available at the end of this article, published on the UCR portal. The UCR seminar began in August 2012 without major setbacks (see Statement), while the representatives of more than 68,000 academics in Canada, sent a letter to the mining company’s directors requesting them to stop legal action against UCR. The letter was drafted in terms rarely read in Costa Rica:
"We urge you to immediately withdraw any current legal actions against the University of Costa Rica and their academics and to put an end to the aggressive threats and inappropriate interference undermining their freedom to teach (see the complete text of the letter).
Another scandal was the one that occurred in the Legislative Assembly in November 2012 in a (failed) attempt by various legislators aimed at removing Judge Fernando Cruz from the Constitutional Chamber– or the Fourth Chamber – was analysed by several lawyers as a manoeuvre not entirely separate from an appeal filed by the mining company against the First Chamber decision. The Statement “Lawyers in the Crucitas case: Exit of Judge Cruz Could Shift the Balance in the Constitutional Chamber,” contains interesting assertions in this respect. On this final legal action of the mining company, it is worth pointing out that there appeared to be a “lack of agreement” between the judges of the Constitutional Chamber. This is according to what we read in an interview with the President (see Statement in University Seminar, May 2012), which literally declares that:
“I have been presenting this issue, that already had a specific proposal, to the Chamber from December, and it has not been possible to resolve it. We have not been able to reach an agreement”.
Nevertheless, in June 2013, the Constitutional Chamber dismissed the petition (see La Nación press release): the internal disharmony that could be seen from dissenting votes of one of the seven members of the Constitutional Chamber (or in the division existing at the time of approving a decision) dissipated completely: the dismissal of the company’s final attempt was approved by unanimous agreement.
Despite the issue being an Executive Decree of National Interest signed in October 2008 by two high officials, the Office of the Republic’s Public Prosecutor’s chose– without offering further explanations – to divide the disputes. In January 2015, first of all, the criminal judge sentenced one signatory to the text - the Minister of the Environment (see La Nación release). This decision may be appealed before the Costa Rican courts and it is possible that that the criminal charge does not withstand further appeal.
These and many other episodes, some of which the Public Prosecutor has dismissed one after the other, explain that our modest opinion article, published in November 2011 (see the text) has concluded referring to the rather bizarre character of this "mining project in a remote locality that appeared to take the unforgettable name of “Las Crucitas”, and that would appear, at the same time, chosen by destiny to be set up in a novel without end".
The ICSID proceedings
By letter sent in April 2013 to the Costa Rican authorities, the mining company gave notice that it was initiating the six month period to reach a satisfactory agreement, and that, if it were not able to do so, it would resort to the international arbitration mechanism provided in the prevailing Costa Rica-Canada bilateral treaty (BIT). The letter sent (see complete text), referred to the lack of legal certainty the company faced and concluded that:
“/…/ Industrias Infinito has not been treated fairly, transparently and consistently and finds itself in a situation of complete legal insecurity that prevents it from further developing the Las Cristinas project ” (sic) (p.3).
The reference to the Las Cristinas mining project (located in Venezuela) can be understood, at least in part, as evidence of the haste with which that letter was signed and drafted. In a missive, several NGOs in Canada pending this announcement, indicated to the company that:
“We demand that Infinito Gold respect the will of the vast majority of Costa Ricans and drop the threat of international arbitration” (see the letter).
In the text of the claim dated 6 February 2014 sent to ICSID (see the 32 page complete text and the several annexes incorporated), the mining company set out the specifics of the different violations of the Canada/Costa Rica BIT that it claimed to have suffered and referred to the (alleged) contradiction between the Constitutional Chamber judgement of April 2010 and the TCA decision in November 2010 and the legal uncertainty resulting from this situation. In respect to the compensation requested, we read (paragraph 110) that the legal representatives included other sums that could be derived from legal action pending resolution before the Costa Rican courts (in particular – although they did not mention this expressly – costs order for the failed actions for alleged defamation and an enforcement ruling (still pending) from the TCA decision:
“Pursuant to this provision, Infinito requests that the tribunal award to it or to Industrias Infinito:
(i) damages for expenses of at least USD$ 93,896,794;
(ii) damages for any amounts paid in accordance with the Supreme Court (Sala I)’s decision condemning Industrias Infinito to pay damages to restore the Crucitas project area to its pre-construction state;
(iii) damages for expenses incurred in connection with the Crucitas project after the filing of this Request for Arbitration;
(iv) costs associated with these proceedings, including all professional fees and disbursements;
(v) pre-award and post-award interest at a rate to be fixed by the Tribunal; and
(vi) such further relief as counsel may advise and this Tribunal may permit.”.
Despite several positions made public in October 2013 (see statement in Seminario Universidad) and a public debate organized by the UCR (see statement on the forum held in March 2014) aimed at informing the authorities that ICSID was not empowered to review national court rulings and that Article XII 3 b) of the Costa Rica/Canada BIT (see text of Canada/Costa Rica BIT) prohibits an investor resorting to arbitration if it chose to have recourse to the national courts, the Costa Rican authorities that exercised their functions until May 2014 consented to the company’s request to refer the case to ICSID. We might read an opinion article of the Geologist Allan Astorga, a former Secretary General of SETENA, published in February 2014 that:
“As things are, it is highly recommended that the Executive Power revises its arguments and challenges them in all seriousness, if it accepts to go to arbitration where the technical input for this are from institutions that at that time formed part of the “orchestra” of entities that participated in authorizations and environmental viabilities that did not have technical or scientific foundation. If it had not been for the actions of civil society, the company would have extracted gold from Crucitas for many years”.
Another call, among many, this time to the new authorities from May 2014 was from the Environmental Economist Joan Martínez Alier. This is her conclusion to her article “Crucitas, Costa Rica y el CIADI”:
“Should Costa Rica under its new President resort to ICSID in Washington to defend itself on a rival terrain against the ridiculous claim of Infinito Gold on an issue which has already been ruled on? Should it withdraw completely from the ICSID Convention, setting a good example to other countries in the region?”
Notwithstanding this, the newly elected authorities opted in this case (as in many others) to continue with the proceedings inherited from the administration of President Laura Chinchilla (2010-2014).
A detail, that gives an idea of what that means for any State to be defended before ICSID, merits mention: in February 2014, it was indicated by the authorities that the legal costs for defending Costa Rica in the claim filed by Infinito Gold would rise to USD$ 2 million per year (see Statement in Tico Times) (Note 5).
In August/September 2014, the arbitral tribunal was established pursuant to the terms of Article 37(2) of the 1965 Convention that establishes ICSID. The company appointed a Belgian lawyer, Costa Rica a French lawyer and ICSID appointed a Swiss lawyer as Chairman (see note in CRHoy of 4/10/2014 as well as the CVs of the three arbitrators available on this ICSID link). This tribunal held its first session on 22 January 2015. On 17 February 2015, it indicated to the parties the proceedings and time limits for presenting the briefs that its members had agreed upon.
Compensatory amounts, claims and unanswered questions
In October 2013, the mining company had initially threatened filing an ICSID claim against Costa Rica for a total of USD$1,092 million (see statement in La Nacion). The Canadian Press has echoed this announcement, by specifying (see Statement) that:
”The 1,092 billion demanded by the company is made up of 92 million in the form of investment already made and a billion in the form of loss of earnings on the production envisaged”.
Notwithstanding this, in February 2014, the ICSID claim that was formally filed, was a bit less than USD$ 94 million. To date, the company has not explained such a vertiginous downward revision of its claims. In November 2013, a petition that had gathered 14,000 signatures in Canada and Costa Rica was handed over personally to the company directors, requesting them (regardless of the amount claimed) to abandon the idea of making an international claim against Costa Rica (see Statement published on www.Canadians.org). On the compensatory amount requested, it is worth recalling that when in 2005, the predecessor company in charge of the mining project in Crucitas, Vanessa Ventures, claimed from Costa Rica (due to the non-approval of the environmental impact study by SETENA, which according to it was tantamount to a nationalization), it did it for USD$ 276 million (see statement in La Nación). In a letter dated 3 October 2005 (see complete text), the mining company formally withdrew its claim, claiming to be in negotiations with the Costa Rica Government of that time. Once SETENA two months later (December 2005) approved the Environmental Impact Study that it had previously rejected, the expression “reasonably optimistic” mentioned by the company in this letter of October 2005 acquires particular significance. To date we still do not know who in the name of the State "negotiated" with the company in 2005 and what was the object of these negotiations.
We refer the author to a brief note on the compensatory amounts of the claims made by the Canadian mining companies in Costa Rica published in La Nacion in August 2010, when the Costa Rican authorities made an unprecedented announcement: its Vice President paid in advance the sum of USD$ 1,700 million dollars as compensation to pay the company if the Executive derogated from the decree of national interest (see the declarations in the statement in the Nation of 27/7/2010). To date, the identity of the members of the “Working Group” then called the "High Level Commission” is unknown. They brought to the Vice President of Costa Rica a similar statement. A note published in the Elpais.cr focussed on the statements of one of them (see note republished in UCR Kioscos Ambientales). In an article in the Semanario Universidad, February 2014, we read that the office of one of MPs in the North Zone (apparently more worried than the other 56 about the identity of those that advise the authorities on issues of national interest) tried to obtain a list of members of this commission:
"Felipe Arguedas, adviser to MP Manrique Oviedo assured that they have not received a response to an official letter sent more than three years ago, requesting the names of the advisers appointed by Piva. Arguedas added: “Now we have made another request for the names, but still they are within the time limit to respond".
As regards the investigation linked to the Fundación Arias, in June 2013, the Public Prosecutor’s office announced that it had received documentation from Canada (which, according to the contents of a CRHoy statement, apparently worried the spokesperson of the mining company); finally, he chose to dismiss the open case again the President Oscar Arias in October 2014 (see note in CRHoy). Canadian activists perceived some disinterest on the part of their own authorities to respond to the more specific requests for information sent by the Costa Rican Public Prosecutor from 2013. Peter Julian, a Canadian MP requested information from the Canadian authorities, (see statement in CRHoy of 22/12/2014). We consider it relevant to set out in full the wording of his request:
“(a) does the Minister of Justice or his Department have any information regarding an amount of $200,000 sent to the Arias Foundation for Peace in 2008 and, if so, what are the details, including the identity of the sender and the relationship between the sender and Infinito Gold, Ronald Mannix, the Norlien Foundation, and Coril Holdings Ltd.; and
(b) did the Department of Justice answer the Costa Rican Attorney General’s questions in the first request letter (#08-000011-033-PE) sent on Tuesday, December 10, 2013, as well as in the second request letter (#12-000124-621-PE) dated Tuesday, February 4, 2014, (i) if so, what answer was provided, (ii) if not, why not?”.
It appears that that the Canadian authorities neither responded to the MP’s request for information.
In June 2015, a criminal judge dismissed a claim, filed against the Attorney General for dismissing the action against the Former President Oscar Arias. The criminal judge took the position that it was necessary to first demonstrate that the dismissal of the proceedings against the former President affects the person filing this type of actions (see the press note).
The doubts and many other questions that have arisen due to such peculiar actions in Costa Rican public institutions in the “Crucitas matter” in these recent years (including a Public Prosecutor that has shown himself to be not very effective in investigating and sanctioning serious irregularities and more generally complaints in cases of corruption) will perhaps one day be the object of a detailed publication that clarifies what the limited investigations of the Public Prosecutor’s office have dismissed.
In relation to transnational investor-State arbitration, the Crucitas matter had presented us with the opportunity to set out in greater detail the distinct threats of the international claim made by the Canadian mining company at various times (and how the authorities have echoed these threats to justify their action): we refer the reader to a short statement published by Kioscos Ambientales/UCR, that concluded by indicating that:
“The good faith of a foreign investor suggests rather, that since he knows that a mining concession is being challenged before the tribunals, it must wait for the court’s decision before commencing operations, and not proceed to invest without knowing for sure if the permits (in this case for the mining concession) will be declared valid or not. The reading of the recent 170 page judgement of the Administrative Tribunal set out in a very detailed and informed manner that words like “fraud”, “crude”, “malicious” and “orchestration” are supported by a solid and varied evidentiary foundation, both in respect to the conduct of the national authorities and the company. However, there does not appear any record of the “good faith” of the investor in the text of this ruling that could be of any utility in the case of recourse to ICSID”.
Finally after the threat against Costa Rica had been articulated in February 2014, an arbitral tribunal was established and the time-limits fixed for presenting the briefs against ICSID, the company’s failure to present its written brief on 10 July led to Costa Rica formally requesting terminating the proceedings on 24 July.
In addition to the financial difficulties of the mining company that gave rise to the State’s request to terminate the proceedings, this case illustrates (once again) the imperial need to look for ways to protect Costa Rica from this type of abusive claims. In a study that details the dizzy increase in claims by foreign investors due to the effect of the BITs we read:
“in recent years, the risk that an investor institute proceedings against a State, has considerably increased. This is due to various factors. First, these processes have gathered major interest in the business world. Consequently, the number of rulings has shot up from a dozen in the mid- nineties to 568 at the end of 2013” (Note 6).
Recently (see Note in La Nación) an economic adviser from the Chinese embassy in Costa Rica urged the approval of a BIT pending ratification by Costa Rica: as Chinese businesses licensed to implement projects in Costa Rica face difficulties, threatening claims could be very useful for them; indeed it has been for other businesses in Costa Rica.
A recent report published in Canada that analyses the claims made by Canadian investors against Latin American states and other parts of the world, refers equally to the abusive nature of these claims in the following terms:
“Despite the government’s posturing, this study has shown that Canada’s ISDS regime does not work as its proponents suggest it should. Instead of facilitating restitution where domestic legal systems have failed, Canada’s promotion of ISDS abroad has resulted too often in investors abusing the process to claim compensation from governments acting in the public interest” (Note 7).
There is no doubt that the Crucitas matter has profoundly impacted an important sector of Costa Rican society. In relation to transnational arbitration, it evidences how receptive political decisions could be to the threat of an international claim to justify what the public would consider erratic action. Reviewing decisively the clauses contained in some bilateral investment treaties, reconsidering the relevance of the ICSID system that is free of any type of safeguard, in light of some recent experiences (which challenge the dogma according to which “there is no foreign investment, if there is no ICSID and BIT”) would allow reducing the risk these costly claims, resolved by ICSID tribunals, entail. In addition to Bolivia, Ecuador, Venezuela, or Brazil completely outside the system established by ICSID, Indonesia, South Africa and some states that host foreign investment have also opted to protect the appetites (always voracious and often insatiable) of some foreign investors favourable to this type of clauses (Note 8). The case (pending resolution) of the ICSID claim brought in 2010 by the transnational Philip Morris against Uruguay for USD$ 25 million (under the Swiss – Uruguay BIT) on account of the adoption of legislation protecting Uruguayans from the effects of smoking (see file) is more than exemplary in this respect.
It is worthwhile recalling that in the sixties, Latin America was the only region in the world that was opposed to the idea of establishing a tribunal such as ICSID: the first draft of the ICSID Convention (drafted in 1963) was approved by the World Bank Board of Governors on 10 September 1964, at the World Bank Annual Meeting in Tokyo. Notwithstanding this, on this occasion, the following states (as well as Iraq and Philippines) voted against it –what “specialized” literature refers to as " the Tokyo No": Argentina, Bolivia, Brazil, Chile, Colombia, Costa Rica, the Dominican Republic, Ecuador, El Salvador, Guatemala, Haiti, Honduras, Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela (Note 9).
(you can access all the links in the original source: Rebelión)
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Note 1: See ZABALO P., “America Latina antes las demandas inversor-Estado”, a 30 page digital document, available here.
Note 2: The case of Costa Rica’s membership of the ICSID Convention is sufficiently illustrative. Costa Rica signed the Convention in 1981, but only ratified it some 12 years after in 1993. This time lag was due to Costa Rica’s reluctance to ratify it while the Santa Elena proceedings remained unresolved before the national courts. The Santa Elena matter refers to an expropriation carried out with the motive of establishing a National Park, Santa Rosa, in 1978. This gave rise to Compañia de Desarrollos de Santa Elena SA, controlled by North American citizens, bringing a claim for USD$ 6,400,000. The State offered a total of USD$ 1,900,000, on the basis that in 1970, the company has purchased the property for USD$ 395,000. Before the lack of agreement and following Costa Rica’s ratification of the ICSID Convention in 1993, on 31 May 1995 the company claimed the payment of USD$ 41 million from Costa Rica, and ICSID decided in its award dated 17 February, 2000 to order the payment of damages of USD$ 16 million. We read in a GCAB (Global Committee of Argentina Bondholders) memorandum on the situation of Argentina that this decision of Costa Rica resulted from direct pressure from the United States in relation to the Santa Elena case:
“in the 1990s, after a North American investor made a request for an alleged expropriation, Costa Rica refused to submit the dispute to ICSID arbitration. The North American investor invoked the Helms amendment and the Inter American Development Bank suspended a loan of USD$ 175 million to Costa Rica. Costa Rica agreed to submit to ICSID proceedings and the North American investor recovered USD$ 16 million.” In a statement in La Nación of 1997 (see statement) on unjust actions by Senator Helms on behalf of the problems of North American citizens, we read that:
“The conduct of this senator combined with his 1993 claim to block the Inter American Development Bank (IAD) from granting loans to Costa Rica so that it would pay for the expropriation of the Santa Elena farm, the property of Joseph Hamilton”.
Note 3: In addition to the Infinito Gold claim, are the following ICSID claims against Costa Rica:
• Supervision y Control S.A. v. Republic of Costa Rica, ICSID Case No. ARB/12/4. This is a request for arbitration by the company Riteve for a claim of USD$ 262 million. In a press conference, (see Diario Extra statement, 16/06/2012) the Vice Minister of the Ministry of Public Works and Transport (MOPT), Rodrigo Rivera,
«explained that it was cheaper for the State to allow Riteve to remain operational for ten more years and this ensured that it would not have to pay $280 million if it lost the arbitration».
The company claimed that the Costa Rica-Spain treaty has been violated. In 2012, Costa Rica confirmed that Riteve could have the concession for a further ten years, but the ICSID claim remains in force. We read in the file of this case that on 20 July 2015, something happened that was somewhat unprecedented.
“The Claimant files a proposal for the disqualification of arbitrators Claus von Wobeser, Joseph P. Klock Jr. and Eduardo Silva Romero. The proceeding is suspended under ICSID Arbitration Rule 9(6)”.
• On 11 March 2013, another claim was filed: Cervin Investissements S.A. and Rhone Investissements S.A. v. Republic of Costa Rica (ICSID Case No. ARB/13/2) for USD$ 30 million (see file). The claimants are a group of shareholders that control the company, Gas Zeta. They claim that the Switzerland/Costa Rica BIT has been violated. In December 2014, the ICSID tribunal declared that it was competent (see award of 15 December 2014, Spanish version).
• Spence International Investments et al. v. Republic of Costa Rica (ICSID Case No. UNCT/13/2) is registered. Here the claimant alleges violations of the Free Trade Treaty (FTA) between the United States and Central America and claims the payment of USD$ 49 million (see request for arbitration, 10 June 2013) due to limitations for developing a project on the beaches of Santa Cruz, Guanacaste.
In April 2015, El Salvador, as a State Party to the FTA, filed its interpretation of certain clauses (see text). So too did the United States (see text). Before UNCITRAL, another institution also mandated to resolve disputes of this kind, a claim was registered alleging violations of the FTA with the United States: David Aven, Samuel Aven, Carolyn Park, Eric Park, Jeffrey Shioleno, Giacomo Buscemi, David Janney and Roger Raguso v. Costa Rica. See the document sent by the Ministry of COMEX, 24 February 2014, in response to a request for arbitration (see text). The last ICSID award on the merits against Costa Rica was rendered in 2012. In the decision of 16 May 2012 in M. & R. Unglaube v. Costa Rica (ARB/09/20), Costa Rica was ordered to pay more than USD$ 4 million to a German couple. The claim filed in 2008 alleges that the German – Costa Rica BIT had been violated because they had not been able to develop their project on the Playa Grande, Guanacaste and considered this to be the object of an expropriation. It is noteworthy that the claimants made a claim for USD$ 8.8 million.
Note 4: See SAGOT RODRIGUEZ A., “Las ilegalidades y lo justo en Crucitas”, Revista Ambientico, Numero 2010, UNA, Marzo 2011, pp.5-6, p. 6. available here.
Note 5: Regarding the ICSID claim that the mining company, Vanessa Ventures, filed in 2004 against Venezuela for USD$ 1,045 million due to the suspension of the mining project, Las Cristinas, in 1999, it was ruled (see paragraph 235 of the ICSID award in favour of Venezuela dated December 2012, Spanish text) that Venezuela and the company both spent USD$ 20 million on their defense. Pacific Rim v. El Salvador was a large case initiated by a Canadian mining company in 2008. It involved a claim for compensation for USD$ 314 million (see the case-file on the Official ICSID website). It is possible that this amount is fully exceeded. In a recent interview in July 2015 in El Salvador, we read that: “The Pacific Rim arbitration has cost the State $12.6 million” (see Note). On the complexity of this case and the reactions it has provoked, both in El Salvador and elsewhere, we refer to an article in the Guardian entitled “Lawsuit against El Salvador Mining Ban Highlights Free Trade Pitfalls” published in May 2015.
Note 6: See EBERHARDT P., “La protección de las inversiones en una encrucijada: La TTIP y el futuro del derecho global de las inversiones”, Friedrich Ebert Stiftung, 2014, pp.5-6. Text of this detailed study available here.
Note 7: See, MERTINS-KIRKWOOD H., “A Losing Proposition: The Failure of Canadian ISDS Policy at Home and Abroad”, Report of Canadian Centre for Policy Alternatives, August 2015, p. 38, Report available here.
Note 8: Recently Indonesia terminated its BIT with the Netherlands, effective from 1 July 2015 (see Statement). We read in a brief statement that “The Netherlands Embassy also stated that the Indonesian Government had mentioned it intended to terminate all of its 67 BITs” (see statement ). This is a clear trend that South Africa, the biggest receiver of foreign investment on the African continent, also follows (see statement ). In Latin America, Brazil has signed a large number of BITs but has not ratified any of them and there is no discernible change in its relation to the Convention that established ICSID (which it has neither signed). Bolivia, Ecuador and Venezuela – which denounced this convention in 2007, 2009 and 2012 respectively – have also proceeded to review their bilateral treaties, some of which include clauses that are extremely favourable to foreign investment. In 2008, Venezuela denounced its BIT with the Netherlands signed in 1991 (see technical file), which served as the basis for around 10 ICSID claims. An UNCTAD 2010 study suggests that:
“Finally, a State wishing to rule out the possibility of ISCID arbitration may negotiate with its BIT partners with a view to removing the ICSID clause from the BITs altogether” (p. 8 of this study entitled “Denunciation of the ICSID Convention and BITs: impact on investor-state claims” and available here).
On the recent attempts in Latin America, we refer the reader to a modest analysis published in 2013: BOEGLIN N., “ICSID and Latin America. Criticisms, Withdrawal and the Search for Alternatives”, Bretton Woods Project, available here, as well as the Spanish version, “El CIADI y América Latina. Críticas, denuncias y busca de alternativas”.
Note 9: See ICSID, History of the ICSID Convention. Documents Concerning the Origin and the Formulation of the Convention on the Settlement of Investment Disputes between States and Nationals of Other States, Washington DC, ICSID, vol. II-1, pp.606-608. See also the detailed analysis, FACH GOMEZ K., “Latin America and ICSID: David versus Goliath”, digital publication, 2010, on p. 2,. The entire text of the article available here.
Nicolas Boeglin, Profesor de Derecho Internacional Público, Facultad de Derecho, Universidad de Costa Rica (UCR)