Turkey is the latest victim of a billion-dollar corporate heist

Alamos Gold, a multi-billion dollar Canadian miner, which was barred last year from working on a mining lease in Turkey’s northwestern region, has said it will file a $1 billion claim against Ankara. 

The contentious Kirazli gold mine project had drawn widespread protests as locals feared it would badly damage the natural habitat in the forests where the excavation was taking place. 

In a statement, the company claimed that it has invested $250 million since the work started on the mine in 2010.

Alamos claims that it was denied mining license and the forestry permit even though it has met all the legal requirements. 

A official at Turkey's Ministry of Agriculture and Forestry said Alamos was supposed to apply for a forestry permit with a fresh mining license by October last year. 

"Since an application was not made with a renewed license within that period, the permit was cancelled." 

Alamos is using what’s become a controversial Investor State Dispute Settlement (ISDS) process to force Turkey into coughing up an astronomical compensation amount far surpassing what it had actually invested. 

The company plans to use a bilateral investment treaty (BIT) that Turkey has with the Netherlands for the purpose of making the claim. BITs are agreements that cover trade and protect investments made by multinationals. 

While Alamos is headquartered in Toronto, it has two subsidiaries registered in the Netherlands that experts say are nothing more than ‘letterbox companies’ specifically set up for tax purposes and arbitration cases like this one. 

“They were used only to transfer money or to take shelter from any liability,” says Jamie Kneen of the Mining Watch, an industry watchdog. 

“In many cases such subsidiaries have one employee and sometimes one employee for several companies at the same time because they don't do any work other than just transfer money. This entire thing is only a legal construct,” he tells TRT World. 

Alamos says it will file the lawsuit at the International Center for Settlement of Investment Disputes (ICSID), a secretive quasi court run by the World Bank. 

The legal proceedings are held away from public scrutiny and at times arbitration decisions are not even made public. 

The controversial system allows multinational companies to sue countries — but the governments can’t sue the companies. 

ICSID has come under the spotlight in recent years because of multibillion dollar awards it has announced in favour of the multinational firms. 

Last year, the ICSID struck Pakistan with a $6 billion penalty over cancellation of a copper and gold mining lease in the restive Balochistan province. The verdict was widely seen as unfair especially considering that the companies — Canada’s Barrick Gold and Chile’s Antofagasta — did not excavate even an ounce of the minerals. 

Islamabad is still contesting that decision, which if implemented can badly hit its economy. That penalty is almost as much as what Pakistan has borrowed from the IMF to avoid a balance of payments crisis. 

Jamie Kneen says arbitration cases have become a business for big law firms and powerful lobbyists who exploit the complex BITs to extract money for their clients and themselves. 

Canada’s former Minister of Foreign Affairs John Baird is reportedly part of the legal team that’s defending Alamos. 

The ICSID Convention was adopted on October 14 1966, to appease rich countries concerned with their investments in developing nations. 

But the convention didn’t guarantee that a country where an investment is being made will necessarily allow an ICSID tribunal to arbitrate in case of a dispute. 

This gap was inadvertently filled by what is known as Bilateral Investment Treaty (BIT) agreements that governments sign to promote private investment from other countries. 

Turkey and Canada don’t have a BIT and that’s the reason Alamos is using its Dutch subsidiaries to file the claim, says Kneen. 

For more than three decades, ICSID was almost dormant with only a handful of investors reaching out to seek arbitration. That began to change in the early 2000s and ever since there has been a steady rise in arbitration requests. 

Experts say that’s primarily because creative lawyers saw a loophole in the BITs, which allowed companies to threaten and sue governments. More than 60 percent of the arbitrations heard by ICSID tribunals stem from BITs. 

In previous cases, the arbitrators have considered what an investor might have earned from a project over its life to decide the compensation. Robert Howse of New York University calls it “junk science”. 

“How do we predict how a particular business is going to do in 20 years? Do we take into account climate change? What presumptions do we make about technology and how it will change?” Howse said in an interview. 

The ISDS system also faces criticism for not taking up disputes that involve the concerns of local communities and the environmental degradation where these mining companies operate.