A Sea of ​​Troubles: Seabed Mining and International Arbitration in Mexico

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In its submission to the NAFTA tribunal, the cooperative argued that an environmental approval for the project would jeopardize the health of their fishing concession and, therefore, the livelihoods of the families that make up the cooperative, as well than the local economy as a whole. The threat, they add, goes beyond financial implications given the central role that fishing plays in the culture and social fabric of their communities. The Cooperative also highlights the threat that phosphate mining poses to the delicate interconnection of biodiversity in the Gulf of Ulloa, which, in addition to highly productive fishing grounds, is home to breeding and breeding grounds for marine mammals. It is also home to many species with special protections or in danger of extinction, including the loggerhead turtle and the caguama turtle.

Puerto Chale Cooperative fishing concession. (CIEL)

Court refuses Puerto Chale and reveals its own bias

In its amicus ruling released earlier this month, the court exposed its own bias under an arbitration system that has no obligation to consider the myriad damages that transnational investments such as that of Odyssey have on people and the planet.

A majority of the panel, two out of three, refused to admit the amicus. They maintain without too many details that neither the Cooperative nor the CIEL have a “significant interest” in the case. According to the company-appointed arbitrator and committee chair, the co-op’s contribution is irrelevant because the company is likely seeking compensation, not restitution for the project. CIEL, according to the panel, has the same general interest “that any environmental organization might have” in the case. Neither, they say, would help the court resolve the legal or factual issues arising from the license denial. This, despite the Cooperative actively participating in the public hearings and other submissions on the company’s license and CIEL’s arguments in the amicus on why Mexico’s license denial is consistent with the principle precautions as described in national and international law.

A member of the tribunal, however, disagreed. His dissenting opinion published with Procedural Order No. 6 referred to growing global dissent over the legitimacy of an arbitration system set up to put corporate interests first. Arbitrator Philippe Sands, a law professor specializing in environmental law, argued that the Cooperative’s concerns should be considered “in light of both (a) general concerns of legitimacy with respect to the arbitration of investment treaties and (b) the specific interests of local communities that are engaged by a particular case. He also argued that CIEL could “offer a unique perspective because of its ability to place this dispute in the context of broader debates and developments in international law.”

In particular, he acknowledged how the ramifications of Odyssey’s arbitration could go far beyond this single project and cast a chill over environmental regulation in the country: “It is now well recognized that treaty arbitration investment can have a significant impact on national regulatory regimes, even when compensation is the only remedy granted. It is therefore entirely possible that a finding that the respondent [Mexico] breached the treaty could result in regulatory changes directly affecting the interests of the Cooperative, either immediately or in the future. The majority decision does not recognize or consider the broader impacts of investment treaty arbitration. »

The Unsustainability of Seabed Mining and Investor-State Arbitration

Almost everywhere that seabed mining projects have been proposed around the world, they have met with resistance from those affected and, therefore, a cautious approach from governments. As the amicus of the Puerto Chale Cooperative and CIEL describes, “Given the dangers implicit in the development of seabed mining projects, the authorities of most countries where this type of project has recently been proposed refused permits or declared a moratorium on this type of activity”.

This is the precautionary principle at work, explains the amicus, which prescribes preventive measures to avoid harm to people and the environment “without having to wait for scientific proof of the cause and effect relationship”. Australia’s Northern Territory provides a clear example when in August 2021 it turned a 9-year moratorium on seabed mining into a total ban, citing the need to protect the “cultural, economic , biological and social” of the coastal environment and the failure to adequately assess or regulate the real risks associated with seabed mining.

The investor-state dispute settlement system enshrined in the original NAFTA and thousands of other international investor-state agreements around the world stands in direct opposition to the precautionary principle. Odyssey is just one of dozens of mining companies filing multi-million or multi-billion dollar lawsuits against governments, especially in the Global South, to reap profits when their projects fail due to a lack of social acceptance, human rights violations and great environmental risk.

The cost of such lawsuits is not just monetary, as Sands acknowledges in her dissenting opinion, but can effectively pressure governments to weaken protections for people and the environment in order to address or avoid future lawsuits. At a time of overlapping health, economic and ecological crises, now is the time to undo this biased system that has only costs and no benefits for people or the planet.

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