- Odyssey Marine Exploration, a deep-sea mining company based in Florida, sued Mexico after rejecting environmental permits for a phosphate mining project off the coast of the state of Baja California Sur.
- The company brought Mexico to arbitration through an obscure legal process known as an investor-state dispute settlement, which allows foreign companies to directly sue countries they’ve invested in.
- Investor-state dispute settlements have been criticized for their lack of transparency and public participation, offering few guaranteed rights to affected communities.
MEXICO CITY — A mining company trying to launch a controversial phosphate project in Mexican waters has won a lawsuit against the country claiming officials wrongfully rejected its environmental permits, effectively shuttering the project without legitimate cause.
Odyssey Marine Exploration, a deep-sea mining company based in Florida, took Mexico to arbitration after the permits were rejected, winning $37.1 million from the country for breaching obligations. The decision, reached through an obscure international legal process, has reignited concerns about the ability of corporations to overpower local environmental protections.
“It is unacceptable that [the arbiters] should side with a company that only seeks to continue enriching itself at the expense of the planet’s biodiversity and set a very negative precedent in the fight of civil society against this emerging industry,” Greenpeace said in a statement. “Underwater mining is not acceptable under any circumstances or conditions. There is no place for underwater mining in a sustainable future.”
In 2012, Odyssey obtained a 50-year concession for what’s believed to be one of the world’s largest deposits of phosphate, a mineral used in fertilizers, foods and cosmetic products, among other things. Located in the shallow waters off the coast of Baja California Sur, in the Gulf of Ulloa, the extraction process would have involved dredging around one square kilometer of the seabed each year, without using chemicals.
The company said it spent over three years preparing an environmentally sustainable development plan, promising to restore the seabed after dredging and ensuring the work had “no material impact on fisheries,” despite allegedly interfering with several fishing cooperatives. To make this possible, the company said it voluntarily relinquished part of the original concession granted in 2012.
It also planned to include turtle protection measures even though the dredging activity would take place in much deeper waters than where turtles live and feed.
Phosphate mining has traditionally been carried out on land, not underwater, involving deforestation and the displacement of soil. Odyssey’s underwater project would have been one of the first of its kind, making the true environmental impacts unpredictable, according to the Interamerican Association for Environmental Defense, a legal advocacy group.
“[The company] does not have adequate experience in this area, nor does the Mexican government have the experience to implement and monitor it properly,” the group said in 2016.
Other deep-sea phosphate projects proposed around the same time as Odyssey’s — including in Namibia and New Zealand — were met with similar concerns from officials and conservation groups.
In 2016, Mexico’s Secretariat of Environment and Natural Resources (Semarnat) rejected Odyssey’s environmental permit for the Baja California Sur project, citing potential negative impacts.
The country’s federal court of administrative justice ruled that the decision to reject the permit had been politically motivated rather than based on scientific evidence or the company’s ability to meet government regulations.
After the ruling, Semarnat denied the permit again, prompting Odyssey to take Mexico to international arbitration. Odyssey and Semarnat didn’t respond to a request for comment.
The legal mechanism, known as an “investor-state dispute settlement,” allows foreign companies to directly sue countries they have invested in for violating an international treaty.
“The ruling today validates our position that Mexico’s environmental agency Semarnat wrongfully denied our environmental permit, which received extensive input from external advisors and industry experts to determine an economically feasible and environmentally responsible development plan,” Odyssey CEO Mark Gordon said in a statement.
But investor-state dispute settlements can privilege the economic rights and interests of international investors, according to the Columbia Center on Sustainable Investment. Criticism of the process has grown as fossil fuel and mining companies have sought arbitration at an increasing rate over the last several years.
“Foreign investors use the dispute settlement process to seek exorbitant compensation from states that strengthen environmental protection, with the fossil fuel and mining industries already winning over $100 billion in awards,” David Boyd, former U.N. Special Rapporteur on human rights and the environment, said last year. “Such cases create regulatory chill.”
In a report, Boyd criticized dispute settlements for the “secretive” nature of the process, which is often conducted behind closed doors and never has to be made public. Documents and other information are so confidential that the U.N. doesn’t currently know how many cases there have been.
Public participation is virtually non-existent, the report said, offering no guaranteed rights to participation by affected communities, human rights defenders, Indigenous Peoples and civil society. Currently, they can only submit briefs as a “non-party.”
Boyd also said most of the claims are brought by investors from the global North against countries in the global South, “perpetuating extractivism and economic colonialism.”
Amendments to the dispute settlement rules in 2017 and 2021 were meant to address some of these issues, but Boyd called them largely inadequate in the face of a growing environmental crisis.
“The surge in fossil-fuel [settlement claims] could not come at a worse time,” he said. “Humanity has reached the now or never point for achieving the Paris Agreement objective of limiting global warming to 1.5°C, a goal that requires achieving net zero emissions by 2050 – incompatible with new coal, oil or gas developments.”
Banner image: A whale breaches off the coast of Baja California Sur. Photo courtesy of the National Institute of Anthropology and History.
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