Panama’s government ordered the closure of Cobre Panama, one of the world’s largest copper mines, in late 2023. The decision sparked a legal dispute with First Quantum Minerals, the Canadian company that operates the mine. First Quantum is seeking $20 billion in compensation from Panama, claiming that the closure violated its rights and damaged its reputation.
Why did Panama close the mine?
The Cobre Panama mine, located in the province of Colon, started production in 2019 and accounted for about 40% of First Quantum’s revenue in 2023. The mine has an estimated reserve of 3.18 billion tonnes of copper ore, enough to last for 40 years.
However, the mine also faced opposition from some local communities, environmental groups, and indigenous people, who accused First Quantum of violating their land rights, polluting their water sources, and harming their livelihoods. They also claimed that the mine did not bring enough benefits to the region, which suffers from poverty, violence, and lack of infrastructure.
In December 2023, Panama’s Supreme Court ruled that the law that granted First Quantum the concession to operate the mine was unconstitutional, because it did not consult the affected communities or conduct a proper environmental impact assessment. The court ordered the government to revoke the concession and close the mine within six months.
The government, led by President Laurentino Cortizo, complied with the court’s order and announced the closure of the mine in March 2024, despite protests from First Quantum and its workers. The government said it was acting in the best interest of the nation and respecting the rule of law.
What is First Quantum’s response?
First Quantum rejected the court’s ruling and the government’s decision, arguing that they were arbitrary, unfair, and politically motivated. The company said it had invested more than $6.5 billion in the mine, creating thousands of jobs and contributing to Panama’s economic development. The company also said it had followed all the legal and environmental requirements and had engaged with the local communities and authorities.
First Quantum filed a request for arbitration against Panama under the bilateral investment treaty between Canada and Panama, which protects the rights and interests of investors from both countries. The company is seeking $20 billion in damages, which includes the value of its investment, the lost profits, and the reputational harm.
The arbitration process, which will be conducted by the International Centre for Settlement of Investment Disputes (ICSID), a branch of the World Bank, could take several years to resolve. Meanwhile, the mine remains closed, affecting the livelihoods of more than 9,000 workers and contractors, as well as the supply and demand of copper in the global market.
What are the implications of the dispute?
The dispute between First Quantum and Panama is one of the largest and most complex cases of investor-state arbitration in the world. It raises questions about the balance between the rights and responsibilities of foreign investors and host governments, as well as the role of the judiciary and the public interest in natural resource governance.
The dispute also reflects the challenges and opportunities of mining in Latin America, a region rich in mineral resources but also plagued by social and environmental conflicts, corruption, and political instability. Mining companies face increasing pressure from civil society, regulators, and consumers to adopt higher standards of environmental, social, and governance (ESG) performance, while also delivering value to their shareholders and stakeholders.
The outcome of the arbitration could have significant implications for the future of the Cobre Panama mine, as well as for the mining sector and the investment climate in Panama and the region. It could also set a precedent for other similar cases around the world, where governments and companies clash over the control and benefits of natural resources.
A note of hope
Despite the uncertainty and tension surrounding the Cobre Panama mine, there is also hope for a peaceful and constructive resolution of the dispute. Both First Quantum and Panama have expressed their willingness to engage in dialogue and seek a mutually beneficial solution that respects the law, the environment, and the people. They have also recognized the importance of the mine for the economic and social development of the country and the region.
Moreover, there are examples of successful collaboration and coexistence between mining companies and local communities in Panama and elsewhere, where both parties have shared the risks and rewards of mining, and have worked together to protect the environment and promote human rights. These examples show that mining can be a force for good, if done responsibly and inclusively.
Source: Reuters
