This Canadian company, Gabriel Resources, is abusing the UK jurisdiction in using a 'shell' or' mailbox' company registered in Jersey which is not intended to be protected by the UK-Romania trade agreement.
A Canadian company, Gabriel Resources, has filed a $2.56 billion claim in a World Bank trade court against Romania after its rejection of a huge gold mine at Rosia Montana.
In December 2013 the lower house of Romania's parliament refused to pass revisions to the country's mining laws designed to enable the company to construct the mine in the Carpathian mountains. This followed an earlier rejection of the plan by the Senate.
The Rosia Montana mine would be Europe's largest open cast pit gold mine, employing highly toxic cyanide to mine about 300 tonnes of gold and 1,500 tonnes of silver a year.
Although Gabriel Resources is Canadian, it is taking the action under a bilateral trade agreement between Romania and the UK, which includes 'investor-state dispute settlement' (ISDS) clauses similar to those in the 'TTIP' Trans Atlantic Trade and Investment Partnership.
GR is taking the action via a company registered in the UK tax haven of Jersey, which it believes gives it the legal 'standing' to pursue the case under the UK-Romania agreement.
As British as the Klondike
According to GMB's Bert Schouwenburg, Gabriel Resources' action is "abusing the UK jurisdiction in using a 'shell' or' mailbox' company registered in Jersey which is not intended to be protected by the UK-Romania trade agreement. It has no real business activities in the UK to make use of an investment agreement to launch claims before an ISDS tribunal."
GR is also "undermining the sovereignty of Romania to make its own decisions to protect the health and safety and well-being of its own people", he added.
He has now written to the prime minister, David Cameron, asking him "to investigate the case and present evidence to ICSID that Gabriel Resources should not be covered by the provisions of the UK-Romania agreement."
Nick Dearden, director of Global Justice Now, added his voice to the protest: "It's bad enough that Gabriel Resource's 'right to profit' is being put forward as more important than the government of Romania's right to act for the benefit of its citizens.
"It's even worse that a Canadian mining company is able to do this by exploiting a trade agreement between the UK and Romania based on a shell company it owns in Jersey."
According GR's website, Gabriel Resources Ltd "is a Canadian TSX-listed (GBU.TSX) resource company focused on permitting and developing its world class Rosia Montana gold and silver project in Romania. The project is owned through Rosia Montana Gold Corporation S.A. (RMGC), in which Gabriel holds an 80.69% stake with the balance held by the Romanian State."
As such it is unclear on what basis the existence of a Jersey-registered subsidiary would qualify GR to take the action under the UK-Romania agreement.
A decade of protests in Romania
The mine is deeply unpopular among the country's small farmers and its increasingly vocal environmental movement. Huge demonstrations and protest actions took place against the mine throughout 2013 in the small town of Rosia Montana, the nearby city of Cluj, and in Bucharest.
However Gabriel Resources claims that the project "has been strongly supported by the local community as it would assist to alleviate the poverty of the people of Rosia Montana and the region."
It also says there is no rational reason to oppose the mine, which "has been exhaustively analysed by various Romanian competent authorities, as well as a large number of international experts and, as designed, will comply with or exceed all relevant Romanian and European Union legislation, as well as the highest global industrial standards."
Instead, it argues that the project "has become hostage to conflicts between rival political factions and misinformation" that has "unnecessarily damaged the ability for development of the Project."
Gabriel Resources has been pursuing the project for more than 15 years, enjoying the strong support of the Romanian Government, which has an almost 20% stake in the project, for most of that time.
The company claims that it has "not been afforded the treatment by the Romanian Authorities that is stipulated by investment protection treaties signed by Romania. Accordingly, in view of the substantial losses that the Gabriel Group will incur if the Project is not permitted to proceed in accordance with all applicable laws Gabriel has been left with no alternative but to file the Notice."
However this claim appears at odds with the fact that changes in Romania's mining laws were needed for the mine to proceed. Normally ISDS actions are only possible only when laws are changed in a way that adversely affects investors.
A warning for us all
Meanwhile campaigners are warning that many more such actions could take place under TTIP and that the Rosia Montana case shows the dangers to which EU governments would expose themselves if they sign up to the deal, as well as to the very similar CETA deal with Canada. Both contain ISDS provisions.
With TTIP and CETA in place, US and Canadian companies woould no longer have to resort to using Jersey-registed shell companies to pursue such disputes. Instead their rights to sue governments that they deem to reduce their profits could be pursued directly and without subterfuge.
"Cheerleaders of TTIP, the toxic trade deal being pushed by the EU and the USA, have accused its many critics of exaggerating the threat that it poses to democracy", said Nick Dearden. "But this is a clear example of how we are leaving ourselves vulnerable to an enormous corporate power grab."
Oliver Tickell edits The Ecologist.