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In the recent op-ed When Corporations Sue Governments, Manuel Pérez-Rocha presents a highly selective narrative. The Salvadoran government is right to be concerned about water quality, but that’s not the issue: The dispute is about whether compensation for money accepted by the government in exchange for a mining permit should be awarded now that the government has decided the permit it issued can’t be used due to environmental concerns.
Further, Pérez-Rocha suggests that arbitration tribunals and the obligations they enforce somehow guarantee a company’s level of profits. Such a notion is nonsense. He cites two examples where compensation was actually awarded, one for breach of contract and the other for nationalization of an investment. Upholding the basic tenets of contract law and requiring compensation whenever a government takes property are always consistent with the public interest. Views to the contrary are a danger to us all.
Finally, companies sue governments and governments sue companies all the time in domestic courts. International arbitration is reserved for select and specific circumstances when a neutral venue to resolve a dispute is needed. There is no evidence that there is a flood of cases in the making. That argument has been made for many years, yet the number of cases, particularly in relationship to the increased volume of foreign direct investment, is not on the rise.