They aren’t all mining-related claims as outgoing President Andrés Manuel López Obrador, elected in 2018, put in place protectionist policies affecting its entire economy.
López Obrador’s term is up in November, when his protégé and president elect Claudia Sheinbaum following a June vote, will take over.
But the damage has been done as López Obrador nationalized Mexico’s lithium resources, blocked new mineral concessions for the past six years and proposed a ban on open pit mining. Several miners, including GoldGroup Resources, Silver Bull Resources, Almaden Minerals and China’s Ganfeng Lithium have all registered new claims against the country with the ICSID over the past year and a half.
Resource nationalism spreading
As states tighten their grip on critical minerals, we can expect cases to shift from precious metals project disputes to those involving strategic minerals.
“It’s a universal phenomenon with legal claims that law follows business,” Hugh Meighen, a Toronto-based partner at Canadian law firm BLG said. “Where there is an active sector that is driving investment, that is driving commerce, those transactions, those investments over time, spin out disputes.”
Natural resources projects — oil and gas and mining —represent one quarter of all cases heard by ICSID panels since the World Bank body started hearing cases in 1972 — more than any other industry. Electric power and energy cases stand at 17%.
The biggest mining award given by the ICSID was for a copper project — Reko Diq in Pakistan. The case entered arbitration in 2011 and in 2019, Tethyan Copper, an equal joint venture of Barrick Gold and Antofagasta, was awarded damages of US$5.9 billion. Barrick Gold agreed to waive the award after the parties came to a new agreement in 2022 that also saw Antofagasta exit. The restructured project is 50% owned by Barrick with the rest split equally between Pakistan and Balochistan province.
More copper cases are in the works. First Quantum Minerals is preparing to fight Panama in arbitration for shutting down its Cobre Panama copper mine last year.
Why arbitration
Companies turn to international arbitration as a last resort when negotiations with the host government or court actions in the country fail to resolve the dispute.
GoldGroup, for example, alleges its San Jose de Gracia gold project was essentially expropriated by proceedings in domestic courts that have been stalled for a decade, and by another that it says was “plagued with incomprehensible procedural defects.”
International tribunals offer an impartial venue, but there are risks: decisions are meant to be binding and final. On average, mining arbitration take about five years to reach a judgment, according to a study released last year by Toronto-based law firm Charles River Associates. Gabriel Resources’ US$4.4-billion claim against Romania, which the company recently lost, was an outlier at nearly 10 years.
Awards, when given, can also be disappointing. Charles River’s study showed that 47% of mining awards for which information was available were for less than 10% of the amount claimed.
Indigenous Rights questions
Investors should also be aware that environmental, social and governance factors are a growing cause of investor-state disputes, especially Indigenous rights.
Almaden Minerals, for example, is seeking at least US$200 million to compensate for revoked permits on the Ixtaca gold-silver deposit it discovered in Mexico’s Puebla state in 2010. Mexico’s Supreme Court in 2022 ruled the country’s mining law was unconstitutional because it didn’t explicitly require consultations with Indigenous communities before granting concessions.
“Rather than proceeding to consultation, as we and local community members expected, Economia (the Ministry of Economy) instead alleged that there were technical errors in our original concession applications and on that basis denied them retroactively,” Doug McDonald, Almaden’s executive VP, wrote in an emailed response to questions. “So, our case is simple – the government retroactively terminated our mineral rights and reversed its prior positions regarding our mineral title applications decades after they were approved.”
In previous cases where Indigenous rights were at issue, Clifford Chance laywers noted that the terms of the specific treaties signed by the country won out over international laws or norms that protect Indigenous communities, such as the International Labour Organization’s Convention concerning Indigenous and Tribal Peoples in Independent Countries and the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).
“Many tribunals have rejected the relevance of such laws to the dispute, which are not mentioned in the legal instruments on which the disputes are based,” the firm’s lawyers wrote in an emailed response to questions.
In a dispute between Bear Creek Mining and Peru over the controversial Santa Ana silver project, Peru claimed the company had failed to comply with international norms requiring consultation with Indigenous Peoples
“The tribunal upheld Bear Creek’s claim on the basis the company had not caused or contributed to the protests and awarded damages based on the company’s investment costs,” Clifford Chance lawyers wrote. “The state authorities had approved the company’s plans — and could not retrospectively argue that its conduct was contrary to international conventions.”
Overall the number of ICSID cases have grown steadily over the past 30 years, the centre’s own figures show. Meighen says the increase is likely a function of more international treaties creating a “network” of agreements.
While countries have a right to regulate their resource industries, they are still expected to comply with international treaties and to compensate companies if radical changes in policy amount to expropriation. No one likes to say ‘see you in court’ — or in front of an arbitration panel — but it may become just as common a phrase for the industry as ‘critical minerals’ and ‘the green energy transition.’
