Report: Gold-digging with investor-state lawsuits

Time to read
2 minutes
Read so far

Report: Gold-digging with investor-state lawsuits

Ahead of Wednesday’s final European Parliament vote on the Canada-EU trade deal (CETA), a new report shows the devastating effects the agreement could have on EU member states whose citizens and courts block harmful mines. A lawsuit over the controversial Roşia Montană mine in Romania highlights governments’ vulnerability to expensive investor-state challenges attacking member state decisions to protect the environment and people’s health.

Canadian mining company Gabriel Resources is using an investor-state lawsuit to push through its illegal toxic gold and silver mine in the historical Romanian village of Roşia Montană. The project has faced strong community resistance and is on hold after Romanian courts found that Gabriel had illegally obtained several permits required to operate the mine. Other permits have never been issued as the company failed to submit all necessary data.

But the project’s majority owner, Canadian company Gabriel Resources, is now using a parallel legal system for foreign investors in order to demand Romanians pay two per cent of the entire value of their economy in compensation for lost profits. What’s more, the mining company’s legal bills are being financially backed by a Wall Street hedge fund in return for a claim of the spoils. To avoid facing these costs the Romanian Government may be forced to open the mine after all. Gabriel could also just walk away with a vast amount of public money in compensation - and the lawsuit itself could become the company’s true goldmine.

Gabriel's claim foreshadows the massive claims which could hit the EU and its member states if trade deals such as the EU-Canada CETA get concluded and come into force.

Notes to editors

  • Read the full report, ‘Gold-digging with investor-state lawsuits
  • Following the signing of CETA by EU and Canadian governments in October 2016 and controversial votes in several European Parliament committees, Wednesday’s vote in the Parliament’s Strasbourg plenary will be the final step in the EU-level ratification of CETA. If Parliament approves CETA, large parts of the deal will enter into force as of spring 2017. The full agreement will only be implemented after ratification by parliaments in all 28 EU member states, including those where CETA is highly controversial and will face referenda.
  • Read more about the investor-state lawsuit which Gabriel Resources has filed against the Romanian Government at the World Bank’s International Centre for Settlement of Investment Disputes (ICSID Case No. ARB/15/31).
  • Key findings of the report include:
  • To operate the proposed Roşia Montană goldmine, a total of 240,000 tons of toxic cyanide would be used, which equals lethal doses for 600,000,000,000 adults.
  • The mine would leave behind a waste lake of cyanide-contaminated water the size of 420 football fields – much larger than the toxic dump at Romanian Baia Mare, where a cyanide spill in 2000 caused a devastating environmental disaster.
  • The mine would destroy 18th and 19th century houses and some of the world’s most valuable ancient gold mining galleries, proposed as UNESCO World Heritage.
  • A total of ten permits and plans required by Gabriel Resources to develop the mine were irrevocably annulled by Romanian courts due to a lack of compliance with environmental laws or evidence of administrative abuse by different authorities.
  • Mid-2015, Gabriel Resources filed an investor-state claim against Romania, arguing the country breached its bilateral investment treaties with Canada and the UK.
  • The company reportedly seeks up to US$4 billion in compensation for the gold it is unable to extract in Roșia Montană – equivalent to 2% of the Romanian economy.
  • Gabriel Resources’ legal costs are backed by Wall Street hedge fund Tenor in return for a claim of the spoils.
  • CETA contains largely the same far-reaching investor rights used in the Gabriel Resources claim: fair and equitable treatment of investors, the protection against discrimination, and the protection against direct and indirect expropriation.
  • CETA would increase the risk of challenges in the mining, oil and gas sectors, where Canadian investment is significant. Canadian mining corporations are already engaged in controversial natural resource projects across the EU and the industry is celebrating CETA as a “landmark” agreement with “major implications for miners”.
  • Four out of five US-based corporations with EU operations (41,811) could use CETA to attack the EU and its member states if they structure their investment through Canadian subsidiaries.