Korean Industrial Complex to File Nearly 1 Trillion Won ISD Claim Against Panama Government Soon

Published 24 Jan.2024 20:15(KST)

Updated 24 Jan.2024 22:24(KST)

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Official Halt of Guri Mine Development Announced with Expected Damages
Korea Mine Reclamation Corporation Begins Selecting Legal Representatives

Korea Mine Reclamation Corporation (KOMIR, President Hwang Kyu-yeon), which has been investing in overseas mine development, is gearing up for an investor-state dispute settlement (ISD) lawsuit against the Panamanian government.

[Photo by Beopryul Newspaper]

Last month, the corporation issued a confidential bidding notice to major law firms to select legal representatives capable of handling the dispute against the Panamanian government. It plans to finalize negotiations and select representatives with at least three major law firms soon and then proceed with the litigation. The amount in dispute through the ISD lawsuit could reach up to 1 trillion KRW.

Unprecedented ISD Move by Korean Corporation... Also Signifies Preservation of National Treasury

According to the resource industry and legal circles, KOMIR’s ISD filing against the Panamanian government is imminent.

The corporation can file an ISD under the Korea-Central America FTA or the bilateral investment treaty (BIT) with Panama. If the ISD is filed, the dispute is expected to involve several hundred billion to 1 trillion KRW. KOMIR holds a 10% stake in Minera Panama, and LS Nikko Copper, which also held a 10% stake, sold its entire share in 2017 for $665 million (approximately 889.4 billion KRW).

If KOMIR receives a favorable ruling in the ISD against the Panamanian government, it is interpreted as having significance in preserving the national treasury.

Prior to this, the Canadian investor in Minera Panama, First Quantum Minerals (FQM), filed a lawsuit against the Panamanian government at the International Chamber of Commerce (ICC) arbitration tribunal in November last year.

An industry insider said, “It is not impossible that negotiations with the Panamanian government could be settled before the ISD lawsuit begins. However, considering that Panama, which is facing a presidential election in May, is unlikely to ignore public opposition to mine development, the possibility is low.”

There have been many cases where foreign companies such as Lone Star and Elliott have filed ISD lawsuits against the Korean government. Korean companies have also filed ISD lawsuits against foreign governments. Anseong Housing Industry lost an ISD case against the Chinese government in 2017. The ISD filed by Korea Western Power against the Indian government in 2019 is still ongoing.

Panama Unilaterally Closes Mining Project... Korean Corporation Holds 10% Stake

This situation was triggered by the Panamanian government’s decision to halt development of the Cobre Panama mine in December last year.

[Photo by Beopryul Newspaper]

The Cobre Panama mine is one of the world’s top 10 copper mines, with estimated reserves of approximately 3.147 billion tons. KOMIR’s predecessor, the Korea Mine Reclamation Corporation, acquired a 10% stake in the local mining company Minera Panama in 2009. The remaining 90% stake is held by First Quantum Minerals.

Commercial production at the Cobre Panama mine began in earnest in 2019, and 684,000 tons of copper were extracted within three years. Through this project, KOMIR recovered 49.5 billion KRW in 2021 and 145.2 billion KRW in 2022.

However, the situation changed at the end of last year. In October, local residents in Panama staged mass protests, claiming that mine development caused severe environmental damage. In November, two people were shot and killed during protests in Panama City opposing the “Mining Development Contract Approval Act.” The bill included provisions to extend Minera Panama’s rights to mine and sell minerals at Cobre Panama for 20 years.

On November 28, the Panamanian Supreme Court unanimously ruled that the Mining Development Contract Approval Act was unconstitutional, citing that the bill violated residents’ fundamental right to live in an unpolluted environment. In December, the Panamanian government ordered the suspension of mining and export activities at the Cobre Panama mine. The company is proceeding with layoffs of more than 4,000 employees.