Is ‘responsible mining’ possible without strong regulations?

By Cecilia Olivet, Jaybee Garganera, Farah Sevilla and Joseph Purugganan

ATM press release

24 May 2016

In the last decade, the resource-rich country of the Philippines has bet
heavily on the mining industry as a strategy for development, but this
focus has come under growing scrutiny.

With 47 large-scale mines in operation and growing evidence of their
social and environmental costs, all the presidential candidates in the
May 2016’s election were forced to explain their position on, and their
financial ties, to the extractive industry.

Most candidates, including newly elected President Rodrigo Duterte,
argued for “responsible mining” and an end to “exploitative contracts.”
Yet few candidates addressed whether a new Philippines administration
could effectively enforce new regulations on a largely
foreign-controlled mining industry.

Our briefing paper “Signing away sovereignty: How investment agreements
threaten mining regulation in the Philippines” argues that the
possibility of properly regulating or even reversing damaging mines will
be severely constrained by the network of investment treaties the
country has signed which provide excessive protection for foreign investors.

This legal investment straitjacket will only draw tighter if the
Philippines proceeds with the EU-Philippines Free Trade Agreement, the
Regional Comprehensive Economic Partnership, and the Trans Pacific
Partnership Agreement.

Human and environmental costs prompt national movement against mining

The need for further regulation of the mining industry in the
Philippines has become ever more obvious since 2004 when mining was
declared a priority for “national economic development.” Despite
promises of economic growth, industrialization and jobs, the industry
contributed less than one per cent of the country’s Gross Development
Product. Moreover many mines have been found culpable of illegal
demolitions, harassment of residents, polluting of water including the
Rapu Rapu Gold Silver Copper and Zinc Mining Project and mining
operations in Didipio.

Indigenous communities have been particularly hard hit as it is
estimated that 66 percent of officially recognized ancestral domains of
indigenous peoples are covered by mining concessions. Environmental
damage has also been a major concern as almost 50 percent of all key
biodiversity and protected areas are impacted by mining.

The government has had to suspend several mining operations (Surigao del
Sur, Zambales and Cagayan), mainly as a result of investigations on
compliance with environmental policies.

Growing anger at the mining companies’ impacts led to the creation of
the Alyansa Tigil Mina, a coalition of organizations and groups that
have decided to collectively challenge the aggressive promotion of
large-scale mining in the Philippines. They initially sought the
scrapping of the 1995 Mining Act (RA7942), an end to full foreign
ownership, a stop to large-scale mining and the formulation of the
alternative minerals management bill that would require strict
regulations for mining. These demands became part of a national debate
in the run-up to Philippine’s national elections.

Mining industry protected by BITs

However, as the paper shows, the mining industry has a very effective
line of defense against regulation, the existing network of investment
treaties that the Philippines has ratified: 31 Bilateral Investment
Treaties and seven Free Trade Agreements that include an investment
protection chapter. These include treaties with Canada, Malaysia,
Australia, South Korea, UK, Japan and China — all host nations of major
multinational mining companies.

All of these treaties, bar a very few exceptions, allow investors to sue
the government at international arbitration tribunals when they consider
their profits have been unduly affected. Extractive companies have been
one of the sectors most prone to launch arbitration lawsuits, with 109
current cases globally relating to mining and extraction. Based on the
44 cases where there is available data, mining companies have sued
States for a total of $53 billion.

The Philippines has yet to receive an investment arbitration case
related to mining, but has already experienced one very costly case
launched by German company Fraport. Although the Tribunal (the
International Center for the Settlement of Investment Disputes or ICSID
under the World Bank) eventually dismissed the case, the Philippine
government still ended up paying $58 million solely in legal fees, equal
to the salaries of 12,500 teachers for 1 year.

Regulation of the mining industry will almost certainly lead to more
ISDS cases

In May 2015, Mayor Rodrigo Duterte of Davao challenged those opposing
the newly passed ordinance in Davao City banning mining to “sue us.”

While Duterte’s tone might have changed slightly with his more recent
pronouncements supporting responsible mining, statements like these from
Filipino politicians on regulating the mining industry — if followed
through — will almost certainly lead to more arbitration lawsuits.

Denying or revoking mining permits because of environmental concerns or
violation of the human and social rights of the indigenous communities
is the reason that has led to at least ten investment treaty cases. The
governments of Bolivia, Peru, South Africa, Indonesia and Mongolia have
all faced costly lawsuits after taking measures towards the mining
industry that aimed to tackle tax fraud, make a company comply with an
agreed pollution clean-up, and remedy past discrimination. Meanwhile,
Indonesia and South Africa ended up lowering environmental standards in
order to put an end to lawsuits.

Time to roll-back Investor protection, not extend it

Growing numbers of countries are realizing the financial, social and
environmental costs of the system of investor rights — with countries
as diverse as Indonesia, India, Bolivia, Australia and South Africa
revising their investment treaty policy. In Europe, massive public
concern on the issue (that prompted 150,000 public comments to the
European Commission, 97 percent of which rejected ISDS) has almost
derailed the Transatlantic Trade and Investment Partnership.

That is why the Philippines’ move to negotiate RCEP and the
EU-Philippines FTA, which will extend investor rights with more
countries, is a dangerous step and one that will prevent effective
regulation of Philippine’s mining industry. Worst of all, unlike the
existing Bilateral Investment Treaties that can be terminated, it will
be much harder for the Philippines to get out of these regional trade
agreements.

The stark reality that communities across the Philippines facing
pollution in their rivers and destruction of their lands have realized
is that they are not just up against some of the most powerful
transnational mining companies, but they are also up against an
international trading system stacked against them.

This complex web of trade and investment agreements has created an
architecture of impunity that has made rejecting or even effectively
regulating mining operations increasingly impossible. It is crucial that
the Philippines starts to unravel this web by halting negotiations for
further treaties and seeking to revise those in existence.

Negotiating away our right to regulate

From May 23-27 outgoing officials of the Department of Trade and
Industry will start formal negotiations with the European Union for an
EU-Philippines free trade agreement. Similar to the much talked about
Trans Pacific Partnership Agreement, the FTA with the EU is a new
generation agreement that goes beyond the liberalization of trade in
goods and services. It is an ambitious agreement that would impose
standards on intellectual property rights, and stronger investor
protection including ISDS.

Can the incoming Duterte government reverse the path towards more FTAs
pursued by the Aquino administration? Will it have the political will to
defend the State’s right to regulate investments particularly in
contentious sectors like agriculture, oil and gas, mining and
extractives in the interest of the Filipino people?

For more information and to request a copy of the report please get in
touch with:

* Jaybee Garganera, Alyansa Tigil Mina – Email: nc@alyansatigilmina.net
* Joseph Purugganan, Focus on the Global South – Email:
josephp@focusweb.org; Mob:+639228299450
* Cecilia Olivet, Transnational Institute – Email:
ceciliaolivet@tni.org; Mob: +32 474972501