Copper mining dispute in Panama: First quantization triggers arbitration proceedings
Canadian company First Quantum intends to initiate arbitration against Panama, Panama’s Commerce Ministry and the company announced Sunday. Panama’s Supreme Court is considering nullifying the copper contract, which some opponents consider unfair.
On Oct. 20, the Panamanian government approved a contract with First Quantum to operate the Cobre Panama copper mine. It included a 20-year mining right with an option to extend for another 20 years. In return, the miner agreed to pay Panama $375 million a year. Opponents argue that the contract favours the miner too much, as the mine represents about 5% of the country’s GDP and about 1% of global copper production. Demonstrators have protested the mine’s environmental and economic impacts and accused it of corrupt practices during the approval process.
A First Quantum spokesman confirmed to Reuters that the company had sent a notice of arbitration. Panama’s trade ministry said in a statement that First Quantum, the local unit of miner Minera Panama and Franco-Nevada Corp had sent two notices to the international arbitration centre and were ready to defend the country’s interests. Arbitration is a method of dispute resolution in which an impartial person or panel decides the outcome.
Challenges to the validity of the treaty are piling up in Panama’s Supreme Court, which on Friday began hearing several constitutional challenges against it and is expected to issue a ruling in the coming days. “People seem to think that the Supreme Court’s decision will be the end of the matter, but it will not… Panama’s exposure in international arbitration is huge,” said international arbitration expert Damien Nyer in a statement to BNamericas this week.
Panama’s actions will be subject to review, he added.
The head of Panama’s Chamber of Mines, Zorel Morales, estimated at least $50 billion of what the country would pay if it loses the arbitration and said the uncertainty surrounding the First Quantum project could scare off investors. J.P. Morgan warned earlier this month that the likelihood of Panama losing its investment grade rating would rise significantly if the deal was cancelled.
First Quantum was forced to shut down commercial production this week because of protesters’ blockades at a key port that prevented the miner from receiving deliveries of essential materials.
Tensions are rising around the mine and eight workers from Panama were injured when protesters threw stones at them, a union leader said Sunday.
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