The following is a translation of a statement made by the International Mission to #StopISDS. See the original statement in Spanish here.
"Foreign investors use the dispute settlement process to seek exorbitant compensation from States that strengthen environmental protection, with the fossil fuel and mining industries already winning over $100 billion in awards. These cases create regulatory chill.” - David Boyd
On February 28, 2024, the Government of Colombia was given notice that a decision had been reached at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID) in Case No. ARB/18/12. The Centre found in favour of Colombia in the lawsuit filed by the multinational Red Eagle Exploration, who filed suit against Colombia for having stopped mining activity in the Santurbán headwaters. ICSID found Colombia not responsible for violating investment protections or other allegations made by the company.
The decision recognizes that the State of Colombia may adopt measures for environmental protection, and that the inherent difficulties in conserving nature and promoting health and a healthy environment must be taken into consideration. It also confirms that the protection of water and the páramos are legitimate public policy objectives, “as demonstrated by the extensive social, economic, and environmental studies carried out.” With regards to illegal mining, the decision underscores that while this type of activity complicates the protection of the páramos, its existence is not an argument to do away with mining restrictions in areas of special importance for water and life. Finally, the ruling specifies that for the companies who have obtained mining concessions, their property rights are not absolute; [these concessions] are still subject to the results of Environmental Impact Studies and subject to meeting the necessary requirements to obtain environmental permits.
However, we have seen the arbitrary nature of this system. It once more exposes the illegitimacy and arbitrariness of a mechanism designed to serve transnational companies, marginalizing once again the communities who are affected by their investments, and putting pressure on future government decisions to protect ecosystems and water. This system runs counter to international human rights law, making it “a major obstacle to the urgent actions needed to address the planetary environmental and human rights crises,” as noted in the recent report by the UN Special Rapporteur on the issue of human rights obligations relating to the enjoyment of a safe, clean, healthy and sustainable environment, David R. Boyd.
In spite of the fact that the company lost in the case of “Red Eagle Exploration Limited vs. Colombia,” our country had to assume litigation costs totalling $11.398 million Colombian pesos. What’s more, ICSID ordered Colombia to pay Red Eagle half of its litigation costs, amounting to $1.805 million pesos more – which means that this lawsuit[1] cost the country $13.202 million pesos in legal fees alone, or more than the monthly minimum wage of 10,000 people.
Therefore, as part of the campaign to #StopISDS, we insist that a good legal defense strategy on the part of the State against the demands from transnational companies is not sufficient. Instead, a full review is urgently needed of the free trade and transnational investment protection treaties that grant transnational companies access to these types of arbitration tribunals. This review must include the participation of communities affected by megaprojects protected by these treaties, and include the participation of civil society as a whole. Support a citizen audit now!
Accordingly, we invite the Ministry of Industry and Commerce and the Government of Colombia to heed the proposal made by civil society organizations to denounce the ICSID agreement and initiate a responsible exit from the ISDS framework – as other countries have done – so as to avoid the constant threat of multi-million-dollar lawsuits for Colombia’s policies in defense of life and nature, and to avoid being saddled with outlandish costs for merely having to appear before these tribunals. Red Eagle's loss in this case could be a real victory for Colombia if it withdraws from this system. Not one more peso should go towards the lawsuits launched by transnational corporations.
#StopISDS
Summary of the Legal Case
The Canadian transnational company Red Eagle Exploration Limited sued the State of Colombia based on the Colombia-Canada Free Trade Agreement (FTA), which was signed on November 21, 2008 and entered into force on August 15, 2011. ICSID decided not to find in favour of Red Eagle, considering that Colombia did not violate the alleged reasonable expectation, nor did it act with a lack of transparency, nor did it act in an unreasonable or arbitrary manner, nor disproportionately or with discrimination. ICSID concluded that Colombia had not acted in violation of the Minimum Standard of Treatment.[2] Nor was it shown that Colombia had indirectly expropriated Red Eagle's mining concessions, as the company alleged in its claim.
The Tribunal affirmed that, although the company proved that it had indeed purchased eleven mining concessions from Colombia, it was also aware of the prohibition on mining in páramo areas. Therefore, the large-scale Vetas Project could not be advanced due to the prohibition on mining since February 9, 2010, [the company] was never recognized as having acquired the rights, and the Colombian authorities had enforced this prohibition.
The transnational company Red Eagle requested ICSID order Colombia to pay damages and interest in the amount of USD 130,000,000[3] and to pay all costs, fees, and expenses in the amount of USD 6,765,834, alleging that there was no impediment to carry out mining activities because, in their opinion, the mining concessions acquired by Mineras Vetas for the large-scale project "Proyecto Vetas or Proyecto Aurífero Vetas" did not overlap with the protected areas – rather, the measures adopted by Colombia had modified the terms of those concessions.
According to the transnational company, the laws and legal decisions[4] that protect the Páramo de Santurbán and its surrounding water system – decisions made after the Colombia-Canada FTA came into force – affect 100% of the rights acquired for the development of the Aufífero Vetas project.
Colombia argued before the closed-door ICSID Tribunal that the Tribunal did not have jurisdiction to hear Red Eagle’s complaint because the protection measures came into effect before the signing of the FTA in February 2011. Additionally, Red Eagle had not obtained the environmental permits or management license for the Vetas Project, and that existing mining activities were artisanal and small-scale. Colombia alleged that the ban on mining in the páramos area has been in effect since February 9, 2010, and that the transnational company was fully aware of this protection.
The expenses incurred by the State of Colombia to defend itself were USD 2,900,042.24,[5] broken down as follows:
A. Legal fees and expenses - USD 2,065,000.00
B. Expert witness in Colombian Law - USD 93,096.53
(Fees and Expenses) USD 4,802.46
C. Expert in quantifying damage and mining - USD 624,656.00
D. Internal costs in Colombia - USD 98,862.08
E. Hearing costs - USD $9,538.96
Travel to Washington DC, lodging and support for the case representatives and witnesses - USD 4,086.71
TOTAL (A+B+C+D+E) USD 2,900,042.24
Conclusions
The International Mission #StopISDS expresses its concern regarding the Red Eagle vs. Colombia ruling.
Under a system of ISDS, States never win. This case is no exception, for the following reasons:
- Although Red Eagle lost its claim, Colombia had to assume the legal costs of 11.398 million pesos, which is equivalent to USD $2,900,042.
- The arbitration tribunal ordered Colombia to pay the transnational company half of its arbitration costs ($1,805 million pesos - USD $461,118).
- In conclusion, arbitration costs alone cost Colombia $13,202 million pesos, which is equivalent to more than the monthly minimum wages of 10,000 people. This is equal to USD $3,361,160.
- The legitimate defense of the páramos and of water should not have cost the State anything. Colombia loses, taking into consideration the litigation expenses to which we were subjected just for being part of the ISDS system. These are resources that the State stops investing in public social spending. This case shows the arbitrary nature of international tribunals where only three private arbitrators decide whether a State's defense of human rights and the environment is legitimate in the face of the profit privileges of foreign investors.
- In short, the system of investment protection and international arbitration is an arbitrary and biased system that establishes a mechanism of private and parallel justice, presenting a danger for the public coffers of States and their citizens. With urgency, Colombia should withdraw from ICSID and renegotiate all trade and investment treaties where these privileges are granted to transnational corporations.
- The arbitration tribunal understands that the Colombian State can adopt environmental protection measures, and that the protection of water and the páramos is not arbitrary; in this sense, the existence of illegal mining is not an argument to remove restrictions on mining in areas of special importance for water and life.
STOP ISDS
International Mission
[1] See page 165 of the judgment
[2] Colombia has an obligation to treat claimants and their investments with the Minimum Standard of Treatment under customary international law, including Fair and Equitable Treatment (FET). The claimant adds that, pursuant to the Most Favoured Nation (MFN) clause of Article 804 of the Treaty, it and its investment should receive treatment no less favourable than that accorded to investors of other States, including the FET standard that is provided for in other investment treaties with Colombia as an independent standard that is not necessarily linked to customary international law. Page 60 of the judgment.
[3] Figure contained in the December 31, 2023 litigation report of the Colombian State's Legal Defense Office.
[4] Law 1753/2015 of June 9, 2015, Constitutional Ruling No. C-35/2016 of June 8, 2016, Constitutional Court Ruling 361 dated May 30, 2017, among others, which had been adopted in August 2015.
[5] See page 163 of the judgment