Colombia wins against multinationals endeavouring to mine in protected areas of ecological importance

Grave concerns have been expressed internationally over the World Bank’s Centre for Settlement of Investment Disputes (ICSID) ruling in favour of Canada’s Eco-Oro multinational gold mining company that sued Colombia for protecting the environment and water. This decision by ICSID has been called into question by two recent decisions by ICSID Tribunals on Montauk Metals (previously Galaway Gold) and Red Eagle that ruled against these two multinational companies, all three were suing because of a ban on mining in the Colombian Paramos.  

Colombia passed a law to protect the Paramos, a range of high-altitude wetland ecosystems of the Santurbán páramo, that are recognised by Ramsar for their ecological importance. Law 1382 of 2010 prohibits mining operations in the “páramo ecosystems,” which are defined as “high-mountain ecosystems that play a central role in maintaining biodiversity, premised on a unique capacity to absorb and restore water.” The paramos provide the water supply for millions of people. They are also important in terms of Colombia meeting its commitments in the Paris Agreement and addressing the climate emergency. Eco-Oro, Montauk Metals and Red Eagle all sued Colombia for passing this law.

Montauk Metals argued that Colombia, amongst breaching other obligations, had refused to pay compensation for losses incurred at its Riena de Oro Goldmining project, and asked for compensation of U$177 million. Colombia contended that the mining ban is a legitimate regulatory measure, and that Colombia did not expropriate nor violate the Fair and Equitable Treatment Standard. The Tribunals that heard the cases of Montauk Metals and Red Eagle Exploration Limited agreed with the Colombian Government, stating that it had acted in good faith and exercised regulatory powers to protect the paramo ecosystem. The Tribunal also stated that there was “no legitimate reason for Montauk to expect that Colombia was not going to protect the paramos.’[i]  The question therefore stands as to why the Tribunal that heard the case of Eco-Oro vs Colombia ruled in favour of the Canadian multinational. Eco-Oro was suing Colombia for U$696 million, and they won the case due to – according to the Tribunal – lack of “fair and equitable treatment/Minimum standard of treatment, including denial of justice claims”.

This case rung alarm bells with UN Trade and Development (UNCTAD) because the Canadian Investment Chapter in its Free Trade Agreement was of the newer variety and supposed to have contained safeguards that explicitly allowed a country to regulate to protect their climate. In its assessment of the Eco Oro case, UNCTAD states that this ISDS decision signals that measures taken for the protection of the environment can be challenged and deemed in violation of IIAs. 

In recent years, Colombia has increasingly been sued by large multinational companies (MNCs) for policies that protect the environment, biodiversity and address climate change, as well as decisions by Courts that uphold the fundamental rights of communities. Swiss commodities giant Glencore International has initiated three ICSID arbitration proceedings against Colombia, using the Colombia-Switzerland Bilateral Investment Treaty (BIT). The most recent case arises out of the Colombian Constitutional Court’s decision to suspend the development of the northern portion of La Puente, at the Cerrejón open pit coal mine. The Court was concerned about the impact on the Indigenous Peoples fundamental rights, and the impact the rerouting of the Arroyo Bruno Creek would have on the water supply for these communities. Wayuu Indigenous and Afro-Colombian Communities are calling on Glencore to withdraw this caseRead the Colombian NGO report on the situation.

South32, a British registered company is suing Colombia using the Colombia-UK Bilateral Investment Treaty for damages caused by sanctions imposed by the National Comptroller General due to alleged royalties owed to the state by the claimant’s subsidiary Cerro Matoso.

There has been much controversy around the Cerro Matoso mine. In April 2018, the Colombian Constitutional Court stated in its decision that during the last 30 years, the Cerro Matoso nickel mine’s waste emissions had caused serious and long-term heart and lung problems for local Zenú and Emberá indigenous communities. This mine has been owned by South 32 since May 2015. South32 is a company that was spun-off by BHP Billiton, which held the concession for approximately 30 years.

South32’s response on 9 April 2018, “…Cerro Matoso S.A. operation accepted notification of the decision handed down by the Constitutional Court of Colombia in relation to alleged health and environmental impacts on the community surrounding our Cerro Matoso S.A. operation. We are in the process of appealing the decision.”

Cerro Matoso S.A.’s track record in Colombia is not good. An audit by the Comptroller General revealed that Cerro Matoso S.A. had failed to pay taxes and royalties amounting to approximately U$D 20 million from 2008 and 2009. In August 2012, the Comptroller General, Sandra Morelli, issued an official warning to the Minister of Mines and the president of the National Mining Agency regarding Cerro Matoso S.A. In her statement, Morelli refers to two previous warnings, one of which was in response to a disparity in the official figures that BHP Billiton had filed with the Colombian tax authorities. These showed that BHP Billiton had officially declared total exports of 9 billion Colombian pesos to the Colombian Government, whilst the company also filed returns that were more than twice as high, at 23 billion Colombian pesos.[ii] The Company, when asked about this by ABColombia in 2012, did not respond directly to this point by the Comptroller, but stated that ‘Cerro Matoso S.A. has paid substantial taxes and royalties under BHP’s ownership totalling in excess of $2.5 billion’.[iii]

BHP Billiton agreed to pay USD $19.6 million to the Colombian government to cover unpaid royalties in return for its being allowed to continue operations at Cerro Matoso, which at that time was Latin America’s biggest nickel mine and accounted for the most ferronickel operations. However, having agreed to pay this in 2011, only a year later (2012), and following the renewal of its mining contract until 2029, the Colombian Minister of Mines reported, “BHP Billiton is offering to pay only USD $1.5 million – less than a 12th of its previous offer.”

There have been 25 ISDS claims filed against Colombia the – majority of which are related to the oil and gas, mining and telecommunications industries.

According to former UN Special Rapporteur David Boyd, the majority of ISDS cases nowadays ‘challenge legitimate public policies enacted by democratic governments in States with independent judiciaries’. These claims result in “crippling damages awards, secrecy, lack of public participation, restrictions on States’ ability to regulate, the one-sided system, inconsistent tribunal decisions, the high costs of defending arbitration claims and conflicts of interest or the perceived bias of arbitrators in favour of investors… Replacing domestic courts with arbitration tribunals to adjudicate disputes between foreign investors and States removes important safeguards against human rights violations, including transparency, public participation, equality and non-discrimination. The ISDS system also undermines democracy by subordinating important policy decisions to arbitration tribunals that are unaccountable, whose decisions are not subject to appeal and that have no duty to consider domestic law.”  (see A/76/238).

[i], World Bank tribunal rules against Canadian miner  a legal dispute with Colombia and

[ii] Between 2007 and 2010 the company paid the Colombian government 870,000 million pesos (US $470 million) in royalties calculated from total exports of 9 billion pesos.  However, the company filed returns of more than double this at 23 billion pesos (US $12,500 million) for the same period. As a result, in 2011, Cerro Matoso S.A. was ordered to pay 35,317 million pesos (US $20 million) to the Colombian state.

[iii] Statement given to ABColombia by BHP Billiton on 1 November 2012.