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7/6/15

Legal Controversies: The obscure legal system that lets corporations sue countries - by Claire Provost and Matt Kennard

Luis Parada’s office is just four blocks from the White House, in the heart of K Street, Washington’s lobbying row – a stretch of steel and glass buildings once dubbed the “road to riches”, when influence-peddling became an American growth industry. Parada, a soft-spoken 55-year-old from El Salvador, is one of a handful of lawyers in the world who specialise in defending sovereign states against lawsuits lodged by multinational corporations. He is the lawyer for the defence in an obscure but increasingly powerful field of international law – where foreign investors can sue governments in a network of tribunals for billions of dollars.

Fifteen years ago, Parada’s work was a minor niche even within the legal business. But since 2000, hundreds of foreign investors have sued more than half of the world’s countries, claiming damages for a wide range of government actions that they say have threatened their profits. In 2006, Ecuador cancelled an oil-exploration contract with Houston-based Occidental Petroleum; in 2012, after Occidental filed a suit before an international investment tribunal, Ecuador was ordered to pay a record $1.8bn – roughly equal to the country’s health budget for a year. (Ecuador has logged a request for the decision to be annulled.)

Parada’s first case was defending Argentina in the late 1990s against the French conglomerate Vivendi, which sued after the Argentine province of Tucuman stepped in to limit the price it charged people for water and wastewater services. Argentina eventually lost, and was ordered to pay the company more than $100m. Now, in his most high-profile case yet, Parada is part of the team defending El Salvador as it tries to fend off a multimillion-dollar suit lodged by a multinational mining company after the tiny Central American country refused to allow it to dig for gold.

The suit was filed in 2009 by a Canadian company, Pacific Rim – later bought by an Australian mining firm, OceanaGold – which said it had been encouraged by the government of El Salvador to spend “tens of millions of dollars to undertake mineral exploration activities”. But, the company alleged that when valuable deposits of gold and silver were discovered, the government, for political reasons, withheld the permits it needed to begin digging. The company’s claim, which at one point exceeded $300m, has since been reduced to $284m – still more than the total amount of foreign aid El Salvador received last year. El Salvador countered that the company not only lacked environmental permits but also failed to prove it had obtained rights to much of the land covered by its request: many farmers in the northern Cabañas region, where the company wanted to dig, had refused to sell their land.

Read more: The obscure legal system that lets corporations sue countries | Claire Provost and Matt Kennard | Business | The Guardian

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