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Callejas v. Law No 406 (unconstitutionality of mining concession) - judgment

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On November 27, 2023, the Supreme Court of Panama rendered a verdict declaring Article 1 of Law No. 406, dated October 20, 2023, unconstitutional. Article 1 of Law No. 406, enacted on October 20, 2023, explicitly approves the Mining Concession Contract between the State and MINERA PANAMÁ, S.A. (referred to as the 1997 Contract), asserting legislative authority to approve or disapprove contracts involving the State. This approval is conditioned on compliance with the Authorization Law, specified in numeral 75 of article 759 of the Political Constitution. The Mining Concession Contract, endorsed by Law 9 on February 26, 1997, grants MINERA PANAMÁ, S.A. exclusive rights to explore, extract, and exploit gold, copper, and other minerals in the "Cerro Petaquilla" area. By virtue of this Contract of 7997, MINERA PANAMÁ, S.A., has developed and operated in the area given in concession, the mining project known as "Panama Copper Mine", authorized under the Environmental Impact Study approved by Resolution DIEORA IA -1210-2011 of December 28, 2011, and other Environmental instruments. 

However, Law 9 of February 26, 1997, approving the 7997 Contract, was declared unconstitutional on December 21, 2017, by the plenary session of the Supreme Court of Justice. Subsequently, negotiations between the State and the concessionaire led to the formulation of a new concession contract aimed at safeguarding employment, fostering economic growth, and ensuring the State's benefit from resource exploitation. The new concession contract, executed as a result of negotiations, grants MINERA PANAMÁ, S.A. exclusive rights over specified zones for twenty years, starting from December 22, 2021. The contract includes the rights to explore, extract, exploit, benefit, process, refine, transport, sell and market the mineral metallic copper and, in conjunction with the exploration and exploitation of copper. Environmental compliance is mandated, with the mining project subject to an approved Category III Environmental Impact Study (EIS). The EIS was approved by the National Environmental Authority, today the Ministry of the Environment, through Resolution DIEORA-IA1210-2011 of December 28, 2017. The concessionaire is also obliged to adhere to environmental laws, undertake continuous improvement, and bear responsibility for environmental damages.

In challenging Article 1 of Law No. 406, Mr. Juan Ramón Sevillano Callejas contends that it violates articles 257, 259, and 266 of the Political Constitution of Panama. He asserts that the violation of article 257 stems from the non-application of the Public Procurement Law and Cabinet Decree No. 267 of 1969 during the initial Contract, which required mining concessions to be granted through fair public bidding. Additionally, the transgressions of articles 259 and 266 are alleged due to the perceived failure of the National Assembly to safeguard collective interests and uphold public interest, leading to benefits favoring the concessionaire. For example, the concessionaire benefited from a series of rights, exemptions and disproportionate tax deductions. 

During the court proceedings, several arguments were presented by members of the Supreme Court, emphasizing the violation and threat to social interests and constitutional and international regulations of a social and environmental nature. Notable dissenting opinions include concerns about constitutional principles, human rights, equality before the law, public interest, and compliance with international agreements such as the Escazú Agreement.

Ultimately, the Supreme Court, recognizing the constitutional conflict, determined that the clash between fundamental rights, such as the right to life, health, and a pollution-free environment, and private investment interests necessitates a resolution in favor of protecting the rights and obligations previously acquired by the Panamanian State. The decision underscores the duty of the State to guarantee a healthy environment and adhere to international environmental standards. The court concludes that the particular interests arising from private investments must not override the supreme values enshrined in the Panamanian Constitution.

Considering that in Chapter VII of Title III of the Political Constitution of Panama, recognizes the duty of the State regarding the Ecological Regime, it is necessary to cite the following norms: "Article 118. It is the fundamental duty of the State to guarantee that the population lives in an environment "healthy and pollution-free entity, where air, water and food satisfy the requirements for the adequate development of human life." Given that there is a legal relationship between the recognition of environmental obligations in the constitutional framework and respect for international standards in this matter, the State ratified, through Law 21 of 1992, the Protocol of San Salvador, recognized as additional to the American Convention on Human Rights. It recognizes the obligation of the State to protect and promote a healthy environment in Article 11. 

Consequently, the international policy of the Panamanian State has supported this environmental protection. Through the Stockholm Declaration, both the Panamanian State and the signatory States committed that "the natural resources of the Earth, including air, water, land, flora and fauna, and especially representative samples of these natural ecosystems, must be preserved for the benefit of present and future generations through careful planning or management, as appropriate (Principle 1), considering that "the Earth's nonrenewable resources should be used in a way that avoids endangering their future," exhaustion and ensure that all humanity shares the benefits of such employment" (Principle 5), recognizing that "All countries, large or small, must deal in a spirit of cooperation and on an equal footing with international questions relating to protection and improvement of the environment, it is essential to cooperate through multilateral or bilateral agreements or by other appropriate means. to effectively control, avoid, reduce, and eliminate the harmful effects that activities carried out in any sphere may have on the environment, taking due account of the sovereignty and interests of all States" (Principle 24). For the Plenary Session of the Supreme Court of Justice, there is no doubt that we are in the presence of a constitutional conflict of a specific type, in which the fundamental rights of the Panamanian population such as the right to life, health and a healthy environment free of pollution come into collision with the particular interest arising from private investments that seek economic growth. 

In effect, the Supreme Court warns that one of the incompatibilities or normative contradictions noted in this case consists of the prohibition that the Political Constitution imposes on the National Assembly related to the issuance of laws that contradict its spirit. In accordance with numeral 1 of article 163, as well as distorting the concept of retroactivity of the laws contemplated in article 46 of the Magna Carta, which were not observed when the Law Contract was approved, which is the object of the unconstitutional action under judicial scrutiny of the Court. On the other hand, a clash is observed between the fundamental rights to life, health and a healthy and pollution-free environment provided for in articles 17, 109 and 118 of the Political Constitution, which contain supreme values of the population of the Republic of Panama against the particular interest that is recognized in article 182 of the Political Constitution, which was superimposed on the contract approved with the censored Law, ignoring that these constitutional rights enjoy a special category.

The Court further reinforced the guidance of the Inter-American Commission on climate change, which calls on States to reexamine policies that affect the climate in a way that is transparent and participatory. The Law No. 406 of 2023 does not specify the environmental management instruments that would allow effective access to information about environmental adaptation programs, mitigation measures, and effective compensation for affected populations. This is contrary to Principle 13 of the UN Guiding Principles of Business and Human Rights, which stipulates that "The responsibility to respect human rights requires that companies": "Seek to prevent or mitigate the negative consequences on human rights directly related to their operations, products, or services provided through their business relationships, even when they have not contributed to generating them."

This aspect is important because, despite the State presenting clauses that could be considered insufficient in light of human rights protection instruments, such as citizen participation and environmental law, the contracting company could not bypass them by arguing that it did not bear that responsibility. The Plenary of the Supreme Court of Justice of Panama believes that companies, in their management and economic activities, cannot leave the task of protecting human rights solely to the contracting State. They also have a duty of respect, which in this case was materialized in the stipulation of clauses that were effective in reducing, mitigating, and preventing social and consequential consequences.

The Court also emphasized that the law in question violates the rights of children (art. 56 of the constitution), especially considering the state of the climate in which we inserted. This calls on States to observe the precautionary principle in its decisions. In this sense, the Court specifically refers to the Committee on the Rights of the Child General Comment 26 on Child Rights and the environment, with a special focus on climate change. 

Callejas v. Law No 406 (unconstitutionality of mining concession)

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Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

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Activities of businesses and institutions that provide financial services and products to individuals and organisations.

A tax advantage is an economic benefit applied to certain accounts or investments that are, by law, tax-reduced, tax-deferred, or tax-free. This can apply to investments in areas such as green energy projects or the agricultural sector, where tax advantages can help manage financial risks.

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Activities of industries that extract natural resources, such as mining, oil, and gas, for commercial use.

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Conditions that enhance the feasibility of adaptation options. Enabling conditions include finance, technological innovation, strengthening policy instruments, institutional capacity, multi-level governance and changes in human behaviour and lifestyles.

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Hot temperature extremes are daily maximum temperatures  that were exceeded on average once in a decade or once in 50 years, and includes heatwaves.

People whose health, both mental and physical, makes them more vulnerable to the effects of climate change

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Coal is a combustible sedimentary rock formed from carbonised plant matter, rich in carbon and hydrocarbons, and occurring in several main types including hard coal and brown coal.

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Social protection systems consist of policies that help people manage social risks in order to prevent poverty and maintain decent incomes and living standards

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Callejas v. Law No 406 (unconstitutionality of mining concession) - judgment

Target

Policy instrument

Risk

Impacted group

Just transition

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance