The Expropriation of US Property in Panama

This paper analyzes expropriation of US property in Panama by providing a comprehensive overview of the case of Dominion Minerals v Panama. By analyzing this specific case of expropriation the paper works to provide a wider analysis of the US-Central American economic relationship and how the issues of land rights affects the state of their relationship. Using key documents including treaties, court documents, domestic laws, and international agreements this paper outlines the conflict between the US owned Dominion Minerals and the Panamanian government. By analyzing these various documents this paper will show how US interests often conflict with the national interests of Central American states and how the issue of expropriation and land rights can cause tension between governments. This conflict of interests is key to understanding the contemporary relationship which exists between the United States and Central American states as the ramifications of this disagreement will have substantial impact on indigenous people in Panama, the Panamanian government, and US-Panamanian relations.

Land use and rights have been a prominent issue in Central America since the republics sought independence from Spain. Wars were fought; politicians killed; over the issues of land redistribution and ownership, and the issues created by the exploitation of Indigenous lands. These contentious issues continue to affect the international relations between Central American nations and Western Nations. The case of the Panama Canal is perhaps the most famous of these conflicts. While no blood was shed there was clearly a political and ideological movement which contributed to the return of the Panama Canal from the United States to the Republic of Panama. The history of expropriation of US land in Panama is extensive and we can use this history to better understand the current state of expropriation law.

The Bilateral Investment Treaty between the United States and Panama defines the following as expropriation: "any measure" regardless of form, which has the effect of depriving an investor of his management, control or economic value in a project can constitute expropriation requiring compensation equal to the "fair market value." Such compensation, which "shall not reflect any reduction in such fair market value due to . . . the expropriatory action," must be "without delay," "effectively realizable," "freely transferable" and "bear current interest from the date of the expropriation at a rate equal to current international rates."1 This broad definition was used in the case of Dominion Minerals v. Panama which was heard by the ICSID (International Center for Settlement of Investment Disputes). This case reflects some of the contradictory elements of domestic policy in Panama and how this affects their relationship with the United States. The conflict between Dominion Minerals and the Panamanian government begins in Cerro Chorcha in the Ngäbe Buglé Comarca (semi-autonomous region). The area in and around Cerro Chorcha had been suspected of being a copper and gold rich mineral reserve. In 2006, Cuprum, which was a mining company owned by Bellhaven Copper & Gold, Inc was given rights by the Panamanian government to explore Cerro Chorcha for copper reserves. The following year Dominion Minerals would garner a majority holding in Cuprum thus giving them access to Cerro Chorcha. In the subsequent years Dominion Minerals would continue exploring and collecting data on Cerro Chorcha’s possible reserves. They would eventually meet pushback from the Panamanian government after they attempted to extend their mining rights in Cerro Chorcha. A 4 year project term was initially given to Cuprum to explore Cerro Chorcha but once Dominion Minerals took over and attempted to extend this term the Director of Mineral Resources would block their exploration by citing a decision from the National Environmental Authority (“ANAM”) which purported to reject Cuprum’s Category I Environmental Impact  Assessment(“EIA”). This decision essentially denied Dominion Minerals access to Cerro Chorcha.

The issue of Cerro Chorcha and the claims of Dominion Minerals were exacerbated after the indigenous Ngäbe Bugle peoples of Panama protested open pit mining in their region. The idigenous people of Panama have long been the stewards of the Ngäbe Buglé Comarca which is a semi-autonomous region with specific rights and authority given to the idigenous people of the region. After intense protests led to the death of a Ngäbe Bugle person and left dozens injured the Panamanian government passed Ley núm. 11, de 26 de marzo de 2012 (Law 11) which specifically protected the Indigenous lands from mining exploitation from multinational mining corporations like Dominion Minerals. This law ceased the agreement between Cuprum and the government and in the eyes of Dominion Minerals expropriated their land without proper compensation. This was the final act from the Panamanian government which led to Dominion Minerals petitioning the ICSID to hear their case.

The ICSID (International Center for Settlement of Investment Disputes) which is hearing this dispute is an international arbitration institution which is tasked with legal dispute resolution and conciliation between international investors and States. They are a part of the World Bank Group which is a collection of five international institutions which work to secure the financial system of the world. Both the United States of America and the Republic of Panama are members of the World Bank Group. Their membership gives them access to financial tools and platforms for international cooperation or arbitration as is the case for Dominion Minerals v Panama. In the absence of proper national institutions to deal with international disputes such as the case of expropriation of foreign owned lands the ICSID provides a framework for arbitration. International organizations such as the ICSID are an often overlooked aspect of the relationship between two countries. The ICSID and similar institutions provide a platform for discussion and diplomacy.

In the case of Dominion Minerals v Panama, the ICSID is specifically analyzing possible infractions of the Bilateral Investment Treaty between the USA and Panama (BIT). The BIT is a direct representation of the relationship between the US and Panama. The treaty essentially outlines that US companies should be treated equally as domestic companies in Panama. Such agreements also include that these companies should be offered equal opportunities. The United States has supported and signed BITs with numerous countries in an effort to promote their access to foreign markets and protect US companies abroad. BITs clearly show the US’s influence on the foreign policy of other countries. These bilateral agreements are designed to attract foreign direct investment and US companies to operate in the country by showing some simple rules which the country must follow. At the situation in Cerro Chorcha, Dominion Minerals claims that the Panamanian government has broken this agreement and the established guidelines by expropriating the area they were given access to explore.

For the breach of the BIT between Panama and the US, Dominion Minerals has asked for the following: a) a declaration that the dispute is within the jurisdiction and competence of the Center and the Tribunal (ICSID); b) a declaration that Panama has violated the Treaty (BIT) and international law with respect to Claimant (Dominion Minerals)’s investment; c) an order directing Panama to pay damages to Claimant in an amount presently estimated at not less than USD 263.8 million, which amount may be further developed and quantified in the course of this proceeding; d) an order directing Panama to pay pre- and post-award interest to Claimant at the applicable rate until the date of Panama’s full and effective payment; and e) an order directing Panama to pay all of Claimant’s costs of the present arbitration proceedings inclusive of all of its attorneys’ fees and expenses. The ICSID can not force Panama to fulfill these wants even if the court sides with the prosecution. As an international body they do not hold direct control over the policy of a sovereign nation such as Panama. However by not following the verdict of the ICSID, Panama may hurt other foreign direct investment opportunities.

The US takes cases of expropriation very seriously and has developed numerous policies which work to protect US interests abroad. Congress has worked to pass laws such as 22 U.S. Code § 2370a - Expropriation of United States property and a variety of amendments which outline a precise methodology for how the US should react when a country expropriates the property of US citizens or companies. In the expropriation bill mentioned above in the case that a country does not sufficiently pay for expropriated land they can be subject to use their power within international institutions to counter the targeted country. “The President shall instruct the United States Executive Directors of each multilateral development bank and international financial institution to vote against any loan or other utilization of the funds of such bank or institution for the benefit of any country to which assistance is prohibited under subsection (a), unless such assistance is directed specifically to programs which serve the basic human needs of the citizens of that country.”4 These laws and policies are a deterrent to other countries. The US can and will use their political and diplomatic clout in order to ensure stability for their economic holdings. Whether the US is likely or not to use such policies on Panama in the case of Dominion Minerals is less important to the fact that the US is one of the largest trading partners of Panama. The economic relationship with the US is critical for Panama.

The indigenous people of Comarca Ngöbe Buglé have fought to maintain the biological and geological integrity of their region. Since 2011, the Panamanian government has dealt with conflict with the indigenous people of the region. State violence against these groups has been a prominent issue culminating in Law 11 mentioned before. Law 11 clearly defines the protection of the natural resources of the region and allows for the autonomous utilization of these resources. Beyond mining, the indigenous peoples similarly fought against the development of a highway. The Comarca Ngöbe Buglé is a special autonomous region which was created by Ley núm. 10 de 1997 (law 10). Similar to law 11, law 10 was created to protect the integrity of the indigeoonous communities of Panama. Panama is one of the few countries of Latin America which has created distinct regions for indigenous communities and beyond that these regions represent substantial parts of the country. The interests of US companies, specifically mining and infrastructure development companies directly oppose such systems. For this reason the Panamanian government has had to balance the needs of both and develop policies which are able to allow for economic development while continuing to uphold the human rights of indigenous communities. Part of Law 11 mandates that any hydroelectric plant established in the region will have a minimum of 25% of their recipients be part of the Ngöbe Buglé Camarca or part of the adjacent indigenous groups as well certain parts of the camarca are designated for touristic development instead of for mines or hydroelectric plants.

By turning the Cerro Chorcha area into protected land the Panamanian government inadvertently nationalized the land and denied Dominion Minerals access to the area which they had originally paid to explore. The creation of Law 11 solidified the deprivation of Dominion Minerals to freely administer this area and thus broke the BIT which had been established between the US and Panama. The international agreements which the Panamanian government had signed on to had also relinquished some of their own power in Panama itself. The national laws of Panama became susceptible to legal attack from laws outside of their own control.

Ultimately the ICSID sided with the investor and has asked the Panamanian government to pay Dominion Minerals 15.9 million dollars for the related damages. While this is a distinct departure from the 684 million initially asked, the fact still stands that the arbitration sided with Dominion Minerals. The Panamanian government’s budget for 2020 was 9.11 billion dollars so clearly the 15.9 million will not have drastic effects on government spending. This expropriation has also not had damaging impacts on the economic relations between the two countries. In 2012, the United States—Panama Trade Promotion Agreement (TPA) went into effect. This agreement facilitated even more financial cooperation and openness between the two countries. The indigenous people however are still in contention with the government.

Various infrastructure plans along with state violence have threatened indigenous communities. Panama’s state-owned Electrical Transmission Company (ETESA) has planned for Panama’s Fourth Electrical Transmission Line to cross the territory of the Ngäbe and Buglé Indigenous peoples. Many have come out against this development and see this as part of the continued mismanagement of indigenous rights by the government.

The issue of expropriation continues to change foreign policy across the world. As governments change and the wants of the constituents change the possibility for expropriation also changes. Many see the ownership of mines and other extractive resource projects as exploitative and communities in the United States, Central America, and in the wider world continue to oppose it. How countries deal with the issue of ownership whether it be forceful, diplomatic, or accidental continues to play a critical role in the domestic and international politics of the country. Often the needs of the domestic and international landowners or claimants counter each other and cause disruptions in relationships at various levels of government.

The case of Dominion Minerals v Panama shows us the complexities of the US-Panamanian relationship including the complexities of the aspirations of groups on both sides. The relationship between the US and Panama is long and intersects at numerous points. Their relationship also shows a staple of US foreign policy. The commitment to protecting US land claims for US companies is significant. The US has dealt with varying degrees of expropriation and has promoted both diplomatic and violent solutions to ensure that their holdings are maintained. The Dominion Minerals v Panama shows one diplomatic solution between two friendly allies but the US company had no problem putting in significant resources to take back what they had bought. The power of the United States continues to threaten the autonomy of smaller nations while still forcing dependency. Even this relationship exists within the wider relationship which includes the national government of Panama which counters the semi-autonomous peoples of the Comaraca.