Panama City, Nov 23 (EFE).- Panama’s Supreme Court will begin a permanent session on Friday to consider the alleged unconstitutionality of the contract for a large open-pit copper mine owned by Canadian First Quantum Minerals.
The operation of the mine has triggered the largest protests in the country in decades, resulting in four deaths, millions of dollars in economic losses, and social unrest.
The nine-judge panel will consider two complaints of unconstitutionality against Law 406, which regulates the contract between the state and Minera Panama, a subsidiary of the Canadian company First Quantum Minerals, “until it issues its decision in the shortest possible time.”
This contract, approved on Oct. 20 last year, renewed the concession for 20 years, with the possibility of a further extension.
Minera Panama oversees the Cobre Panama mine, the largest private investment in the country’s history, valued at approximately $10 billion, creating over 7,000 direct jobs and 40,000 indirect jobs.
According to the company, its activities account for 4.8% of the country’s gross domestic product and represent 75% of Panama’s merchandise exports.
Here are five key reasons why this project, accused by environmentalists of causing significant damage to the Mesoamerican Biological Corridor, is facing a legal process that could end it.
1. An initial contract declared unconstitutional in 2017
The Supreme Court declared the contract law, which in 1997 endorsed the concession for the mine’s exploitation, unconstitutional.
This concession was initially granted to the now-defunct company Minera Petaquilla, and its rights passed through several sales to Minera Panama.
Both Minera Panama and the government, led by then-President Juan Carlos Varela (2014-2019), contended that the 2017 ruling did not impact the mine.
They argued that the ruling declared unconstitutional the law enacted to provide legal certainty to the agreement, not the concession itself.
2. A new contract negotiated in mid-2021
The current government, led by President Laurentino Cortizo, announced its intention to negotiate a new contract with Minera Panama.
The goal was to legalize the operation and enhance benefits to the treasury, thereby avoiding the project’s closure, deemed “suicidal” from an economic perspective.
Negotiations started in September 2021 and concluded with the agreement on the new contract law in March 2023.
This involved a rigorous process, including a government order to stop the mine’s operations and the company initiating “two arbitration proceedings against Panama,” according to the Ministry of Trade and Industry on Dec. 24.
The government argues that the new contract will increase contributions to the treasury tenfold, ensuring a minimum annual payment of $375 million in royalties.
This represents a significant rise from 2% to a range of 12% to 16%, along with the payment of previously exempted taxes and enhanced environmental monitoring.
3. Environmentalists denounce vices were maintained
Environmental groups, lawyers and politicians who have been fighting the mine claim that the new contract maintains the same flaws that led to the first contract being declared unconstitutional.
“The vices are repeated and increased in this contract compared to the previous one,” Ana Matilde Gómez, Panama’s former attorney general, told EFE.
4. Broad popular opposition
The crisis, initiated on Oct. 23 with the mine rejection, has triggered mass marches, however, demonstrations against the mining contract began earlier this year.
In a non-binding public consultation facilitated by the government through a digital platform, “more than 70% of participants voted against open-pit metal mining,” former attorney general Matilde Gómez added.
5. What comes after the ruling
If the Supreme Court declares Law 406 unconstitutional, the contract “ceases to exist,” former attorney general and constitutional expert Ernesto Cedeño told EFE.
In the very short term, the executive will have to order the suspension of operations, which is not the same as closing the mine.
Environmentalist Raisa Banfield, a member of the “Panama is worth more without mining” movement, told EFE that they are promoting a “public tender with terms of reference for companies to come and reduce the operation and put an end to it.”
It is also expected that Minera Panama and FQM initiate arbitration proceedings, which could involve billions of dollars in compensation.
On the other hand, the scenario of a ruling that the contract is constitutional is unlikely, according to Gómez, “because the Supreme Court would be contradicting itself” in light of the 2017 ruling. EFE
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