In its submission to the NAFTA tribunal, the Cooperative argued that an environmental approval for the project would risk the health of their fishing concession, and in turn the livelihoods of the families that make up the Cooperative, as well as the larger local economy. The threat, they add, goes beyond the financial implications given the central role fishing plays in the culture and social fabric of their communities. The Cooperative also highlights the threat of phosphate extraction to the delicate interconnectedness of the biodiversity of the Gulf of Ulloa, which in addition to highly productive fishing grounds, is home to breeding and reproduction grounds of marine mammals. It also supports numerous species with special protections or in danger of extinction, including the logger head and caguama turtles.
Fishing concession of Cooperative Puerto Chale (Credit: CIEL).
Tribunal Refuses Puerto Chale, Reveals Own Bias
In its decision over the amicus published earlier this month, the tribunal revealed its own bias as part of an arbitration system that has no obligation to consider the myriad of harms that transnational investments such as Odyssey’s have on people and the planet.
A panel majority, two of three, refused to admit the amicus. They argue with little detail that neither the Cooperative nor CIEL have a “significant interest” in the case. According to the company-appointed arbitrator and the panel chair, the Cooperative’s input is not relevant because the company is presumably seeking compensation, not restitution of the project. CIEL, according to the panel, has the same general interest “that any environmental organization might have” in the case. According to them, neither would help the tribunal address legal or factual issues arising over the permit denial. This, despite the Cooperative having been an active participant in public hearings and other submissions over the company’s permit and CIEL’s arguments in the amicus about why Mexico’s permit denial is coherent with the precautionary principle as described in national and international law.
One tribunal member, however, disagreed. His dissenting opinion published with Procedural Order Nº 6 referenced the growing global dissent over the legitimacy of an arbitration system set up to privilege corporate interests. Arbitrator Philippe Sands, a law professor who specializes in environmental law, argued that the Cooperative’s concerns should be considered “in light of both (a) general legitimacy concerns in relation to investment treaty arbitration, and (b) specific local community interests that are engaged by a particular case.” He also argued that CIEL could “offer a unique perspective due to its ability to place this dispute in the context of broader debates and developments in international law.”
Most notably, he acknowledged how the ramifications of Odyssey’s arbitration could go far beyond this one project and cast a chill on environmental regulation in the country: “It is now well-recognized that investment treaty arbitration can have a significant impact on domestic regulatory regimes, even where compensation is the only remedy awarded. It is therefore entirely possible that a finding that the Respondent [Mexico] has breached the treaty could lead to regulatory changes which directly affect the interests of the Cooperativa, either immediately or in the future. The Majority’s decision fails to recognize or take account of the broader impacts of investment treaty arbitration.”
The Unviability of Seabed Mining and Investor State Arbitration
Just about everywhere that seabed mining projects have been proposed around the world, they have given rise to resistance from affected people and, as a result, a cautious approach from governments. As the amicus from the Puerto Chale Cooperative and CIEL describes, “Given the implicit dangers of developing seabed mining projects, authorities in most countries where this type of project has recently been proposed have refused permits or declared a moratorium on this type of activity.”
This is the precautionary principle at work, explains the amicus, which prescribes preventative measures to avoid harm to people and the environment “without having to wait for scientific proof of the cause-effect relationship.” The Northern Territory of Australia provides a clear example when in August 2021 it turned a 9-year moratorium on seabed mining to a total ban, citing the need to protect the coastal environment’s “substantial cultural, economic, biological and social value” and the inability to adequately assess or regulate the real risks from seabed mining.
The Investor State Dispute Settlement system enshrined in the original NAFTA and thousands of other International Investor Agreements around the world stands in direct opposition to the precautionary principle. Odyssey is just one of dozens of mining companies that are bringing multi-million or multi-billion dollar suits against governments, especially in the Global South, to extract profit when their projects fail for lack of social acceptance, violations of human rights, and great environmental risk.
The cost of such suits is not just monetary, as Sands acknowledges in his dissenting opinion, but can effectively pressure governments to weaken protections for people and the environment in order to settle or avoid future suits. At a time of overlapping health, economic and ecological crises, the time has come to undo this biased system that only has costs and no benefit to people or the planet.
