Until late August, the massive Frontier copper mine used to be Democratic Republic of Congo's biggest taxpayer, employing about 1,500 people. Now the site, owned Vancouver- and London-based First Quantum Minerals Ltd. lies dormant.
The mine, cut into the tree-dotted savanna along Congo's border with Zambia, was seized by a group of Congolese police, soldiers and government officials, armed with a Congolese court order, on the morning of Saturday, Aug. 27.
"I wouldn't describe it as an orderly retreat," said Clive Newall, the company's president, in a telephone interview from London. "… It developed into quite a standoff."
Just back from a visit to the mine's perimeter fence, Mr. Newall said only a few Congolese border guards seemed to be keeping watch. Some of his workers have been allowed to stay onsite to ensure that the mine's pumps - which prevent it from flooding - keep running.
The seizure was First Quantum's latest problem in an escalating fight with Congo's notoriously corrupt government. The company, which has invested $1-billion in its Congolese facilities, alleges that Congo took the Frontier mine in retaliation for First Quantum's move to challenge the government's "illegal" seizure and resale of its stake in another nearby copper project, Kolwezi.
The company has launched lawsuits against the companies that now own Kolwezi. And it has pushed Ottawa and London to apply political pressure on - or delay debt relief to - Kinshasa.
But First Quantum is also fighting back by using what many multinationals locked in fights with governments have found to be an increasingly useful tool: international arbitration.
International arbitration proceedings have long been popular with corporations locked in contract disputes. But they are more and more being used as a forum for disputes between companies and foreign governments.
Earlier this month, First Quantum launched a case to try to retrieve its Frontier mine at the International Centre for Settlement of Disputes in Washington. The centre is an independent body, affiliated with the World Bank, which has more than 140 member states.
Riyaz Dattu of Osler Hoskin & Harcourt LLP in Toronto said foreign investors are increasingly taking this route. The idea caught on after 2002, Mr. Dattu said, when investors challenged moves made by Argentina during that country's financial meltdown. (Argentina has since refused to pay up, however.)
Many cases are referred to arbitration by what are known as bilateral investment treaties. These deals, which have spread rapidly in recent years, are a kind insurance policy for investors. Essentially, they give foreign companies the right to take a government to an arbitration tribunal over policies that harm its interests, such as nationalization.
First Quantum made the move because Canada has no investment treaty with Congo, which has a handful of such deals with other countries. Congo's mining laws also refers disputes to international arbitration.
Mr. Dattu said multinationals faced with similar situations are finding legal ways around it. For example, a Canadian miner could funnel its investment in a country with which Canada does not have an investment treaty through a specially set up subsidiary in a third country that does have such a treaty.
"Our advice is, engage in treaty shopping," Mr. Dattu said.
It appears to work. For example, Exxon Mobil added a Dutch subsidiary into its Venezuelan corporate structure before that country nationalized its oil holdings in 2007. The staunchly anti-American government of Hugo Chavez had no investment treaty with the U.S. - but it did have one with the Netherlands, giving Exxon the right to refer the dispute to international arbitration.
The process has its critics. Gus Van Harten, an assistant professor at York University's Osgoode Hall law school, said international arbitration is mostly held in secret; unlike with open public courts, the process cannot be held accountable.
"The treaties tend to be very investor-friendly," Mr. Van Harten said, adding that many disputes involve countries with reliable court systems and stable governments, unlike Congo.
Tim Tyler, a lawyer and international arbitration expert with Vinson & Elkins LLP in Houston, defends the system, saying: "This isn't some kind of great cabal. … This is the way that investment gets done."
Mr. Newall, First Quantum's president, believes international arbitration holds some hope for his company to recoup some of its losses in Congo, whose government, he said, appears to be taking the process seriously. He doesn't expect a result for two or three years. "It is sort of a long game. Who knows what the Congo will be like in three years' time?"