Important Precedent for DR-CAFTA

June, 2012 - San Salvador, El Salvador

An ICSID tribunal has thrown the claim filed against El Salvador by PacRim Cayman LLC, a mining company, against El Salvador for over US$70MM under the free trade agreement between the United States of America, the Central American countries and the Dominican Republic “DR-CAFTA’’, but upheld its jurisdiction under a local investment law.

In its decision, the tribunal upheld El Salvador's jurisdictional objection based on the free trade agreement's "denial of benefits" provision. The provision allows host states to refuse investment protections to claimants who have "no substantial business activities" in another DR-CAFTA contracting state, or are not owned or controlled by nationals of other contracting states.

The award marks the first time an arbitral tribunal has addressed the application of DR-CAFTA's denial of benefits provision – an issue that prompted submissions from the US and Costa Rica as non-disputing parties.

Consortium Centro America Abogados – El Salvador acted as local counsel to the Government of El Salvador along with Foley Hoag LLP from Washington DC.

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