The Supreme Court of Panama decisively rejects State contracts that threaten the right to a healthy environment.
In a landmark ruling, the Supreme Court of Panama rendered a decisive verdict on the intricate balance between fundamental rights and private investment interests. Emphasizing the paramount importance of safeguarding rights and obligations already established by the Panamanian State, the court underscored the imperative of ensuring a pristine environment and upholding international environmental norms.
This landmark decision reaffirmed the State’s obligation to uphold the sanctity of a healthy environment and adhere to globally recognized environmental standards, asserting that the pursuit of private investments should never supersede the foundational values enshrined within the Panamanian Constitution.
The State of Panama and mining company Mineria Panama, S.A. had a decades-long contractual history. In 2023, the Executive branch drafted a concession contract between State and Minera Panamá, S.A., that granted the company exclusive rights to explore, extract, exploit, benefit, process, refine, transport, sell and commercialize copper and its associated minerals in an area located in various townships in the province of Colón. The contract included improved economic, labor, and environmental duties relative to a prior contact between the parties, which had been declared procedurally flawed and therefore void by the Supreme Court.
That same year, Juan Callejas, a citizen acting on his own behalf, filed a action of unconstitutionality against Law No. 406 of October 2023, through which the National Assembly had approved the mining contract. The plaintiff claimed that the negotiation process led by the Executive and approved by the Legislature, as well as the contractual clauses themselves, violated constitutional articles related to due process, social welfare and public interest.
The Court agreed and held that the negotiation process led by the Executive Branch and approved by the Legislative Branch, as well as the contractual clauses themselves omitted the due diligence and management that domestic and international regulations have established as essential obligations. Going much further than what the plaintiff claimed, the Court held that the law violated twenty-five substantive and procedural constitutional guarantees. Among them were arts. 4 (public participation and access to justice); 17 (protection of human life); 56 (protection of children); 109 (right to health); 118 (right to a healthy environment (R2HE)); 119 (sustainable development); 120 (rational use in the exploitation of natural resources); 121 (environmental precautionary principle); 258 and 290 (insusceptibility of state property to private appropriation and other States), and 298 (freedom of economic competition and markets). This was because the negotiation and contract gave preferential and priority treatment to Minera Panamá, S.A. by granting benefits and permissions that did not further the constituently mandated the principle of a common good.
While the R2HE permeated throughout the Court’s opinion, the Court also undertook an in-depth analysis of the right, concluding that “faced with the dilemma presented, in which the human right to a healthy environment must be weighed against the right to the protection of economic investment, the balance of the Plenary of the Supreme Court of Justice will naturally lean towards safeguarding the continuity of the human race […].”
Both the plaintiff and the Court used the constitution and environmental law as an anchor.
As is often the case, the Court first used the potential breach of constitutional rights to establish its jurisdiction. The Court particularly highlighted the importance of its role in the face of omissions by those other branches of the State who had the responsibility to protect such rights, as it was the case here. It concluded, “that is to say, this decision behaves as a correction to such omission, exercising the function of police power […].”
The Court also used the constitution and its history to construct its framing of the case. It explained that, through its protections, the Constitution balances the public utility of exploiting natural resources with the promotion of the public interest of the State and the rights of citizens. More specifically, it explained that “the human right to a healthy environment and the exercise of economic activities and private investment are operations that can coexist jointly, as long as both the State and the companies fulfill a role of respect for human rights.” Because of this, the Court reasoned, its own role was to weigh such interests in specific cases. It concluded that “having carried out the weighing of the constitutional values in collision […] the protection of the right to life, health and the environment of future generations takes precedence over any other right of an economic nature, including the right to investment.”
The Court centered the R2HE in its balancing analysis because “without access to a healthy environment, the human being will irremediably lose his environment and means of subsistence, so that any effort to protect the other constitutional and conventional guarantees and rights that have been mentioned throughout this decision, including the right to life, will become ineffective.” While emphasizing that the R2HE – enshrined in art. 118 – is an individual human right, the Court highlighted the interdependence between the R2HE and other fundamental rights.
In explaining how the R2HE and other fundamental rights may be balanced with economic rights, the Court notably delved into the relationship between States and companies. It explained that to promote social and economic development that prevents environmental pollution, maintains the ecological balance and avoids the destruction of ecosystems, public contracts, like the one in question, cannot be treated in the same manner as contracts between private parties. In other words, they cannot be understood as a pact between equals, in which the parties simply agree on the clauses they consider to be mutually beneficial. Public contracts must be understood as an agreement in which the private party accepts or declines the conditions established by the State, in consideration of the social welfare and the public interest. To ensure the proper substance of the contract, the negotiation and drafting process must follow paths predefined by the legislator, which are inspired by constitutional rights and principles.
In this case, the Court concluded, neither Minera Panamá, S.A., nor the Executive and Legislative branches followed the pre-established legal framework that spells out the phases and stages of the administrative and legislative process to be followed in the establishment of any investment relationship with the State. For example, among many errors, there was no public bidding process; Minera Panamá, S.A. was simply chosen due to its contractual history with the State. In addition, the mining concession was approved on the basis of an outdated twelve-year-old environmental impact assessment (EIA) that also failed to provide access to information and public participation. In the contract clauses themselves, furthermore, the “State is the one that is legally subordinated to the private party,” with public competencies and powers being granted to the company.
Because these errors violated twenty-five substantive and procedural constitutional guarantees – ranging from due process to the right to life and the R2HE – the Court declared Law No. 406 of October 2023 that approved the contract unconstitutional, and therefore, the contract void.
The Court explained that weighing of the R2HE and economic rights must not only be done from an anthropogenic point of view, but also from the perspective of rights of nature. It explained that through Law No 287 of February 24, 2022, Panama granted nature the status of a subject of law. This implied that the State must have the necessary public policies to ensure “the best interest of nature” for its intrinsic value and regardless of the utilitarian value it has for human beings. Therefore, the State has the obligation to ensure its protection, respect, permanence, restoration, maintenance and regeneration of its vital cycles, as well as the conservation of its ecological structures and functions.
Throughout its analysis, the Court drew direct connections between specific constitutional articles and their international counterparts, emphasizing Panama’s role as a member of the international community. It explained that, although Panama has become a signatory of international economic and investment agreements, such as the Free Trade Agreement and the Bilateral Investment Treaty, “when economic rights collide with rights related to the protection of the right to health and life, the State must necessarily prioritize the latter […].”
Specifically, the Court noted that the Constitution recognized the importance of respecting international agreements mandating that economic activities be sustainable in light of the protection of the environment. It reiterated that the 2004 constitutional reforms led to the inclusion of articles that establish respect for international law norms, especially those respecting human rights. The Court further explained that the rights and guarantees enshrined in the Constitution must be considered as a minimum threshold of protection for fundamental rights and the dignity of the person. If international law to which the State has subscribed offers higher protection, the obligations of the State are “extended” to these.
The Court then referred to the various international conventions and guidelines that Panama adopted on environmental protection to inform the standards of protection to which Panama was obliged. These included the American Convention on Human Rights and San Salvador Protocol; the Regional Agreement on Access to Information, Public Participation and Justice in Environmental Matters in Latin America and the Caribbean; the United Nations Framework Convention on Climate Change; and the Convention on Biological Diversity Act No. 2 of 1995; and the Sustainable Development Goals. It also mentioned general principles of international environmental law that were interconnected with the environmental precepts established in the Constitution and in international law. These included the principles of indivisibility; prevention; precaution; non-regression and sustainable development.
The Court explained that abiding by these instruments meant even if Panama possessed insufficient domestic human rights and environmental protections, its relationship with a contracting company would be under the umbrella of such international protections. Further, the Court explained, companies have individual responsibility to respect human rights, regardless of their “size, sector, operational context, ownership and structure.”
“Putting Panama’s nature at stake is non-negotiable, especially when our country is a subscriber to multiple national and international instruments that protect the environment,” the Court concluded.
In its discussion of international law, the Court highlighted recent relevant developments. It specifically pointed to the 2023 pronouncements of the UN Committee on Economic, Social and Cultural Rights on corporate responsibility, through which it recommended to Panama to “effectively enforce environmental regulations and complete social, environmental and human rights impact assessments prior to the licensing of development and natural resource exploitation projects.”
The Court also emphasized the 2022 UN General Assembly’s Resolution 76/300, signed by Panama and which recognized the R2HE as a standalone human right. It explained that the Resolution emphasized the importance of procedural elements to protect the R2HE and recalled the Guiding Principles on Business and Human Rights, which highlight the responsibility of companies to respect human rights.
The Court explained that the State, as the guardian of development of the national economy has historically sought to regulate its assets to ensure their protection. This is represented in the constitution, according to which the State shall regulate, supervise and apply the necessary public policies to ensure that the use of the environment, including non-renewable natural resources, is consistent with the preservation of the environment. It is also included in the international law adopted by Panama, such as the San Salvador Protocol.
For this, the Court explained, the State has created a structure in which each administrative and legislative procedural stage allows the competent government authority to manage the mining process according to the best interests of the state. In this context, the Court clarified that “the sovereignty of the State, although absolute in the management of its resources, is limited to the protection of the environment, and not to cause damage through the actions carried out for the economic development of the country.” In this case, by getting involved in the drafting of the contract, as opposed to merely approving or disapproving it, the National Assembly went beyond the scope of its power.
The Court also explained that the duty to regulate public resources and services also forbids the State from delegating the duty to private entities, as it had been the case with certain services in this situation. On the other hand, companies, in their management and in the development of their economic activity, cannot leave the task of protecting human rights to the discretion of the contracting State.
The Court emphasized both domestic and international cooperation and collaboration. In explaining the State’s duty to regulate, the Court highlighted that, according to the constitution, “power emanates from the people, but that grants a delegation or representation so that the country is governed and administered by the Executive, the Legislative and the Judicial Organs, who act separately, but in harmonious collaboration.” In this case, the Court explains, the other branches of government affronted the separations of power by repeating the errors of the prior contract between Minera Panamá, S.A. and the State, which the Court had once before declared unconstitutional.
The obligation to cooperate also stems from international law, principles, and agreements the Court explained. It cited the United Nations Conference on the Human Environment, which declared that “all countries, large or small, should deal in a spirit of cooperation and on an equal footing with international questions relating to the protection and improvement of the environment […].” The Court also concludes that to be a good international community member, Panama must follow the principles of international cooperation and shared but differentiated responsibility for the environment.
Generally speaking, and as stated above, the Court made clear that constitutional law served as a minimum threshold of protection of the R2HE and other fundamental rights. International law served to complement and heightened such protections. However, the Cabinet Resolutions through which the Cabinet Council approved the execution of the contract, the Court explained, alluded to conversations not based on a law but on “exorbitant powers” and “good faith,” and that were therefore insufficient to protect fundamental rights.
In addition, the Court explained the contract itself did not provide clear metrics for the guarantee of the R2HE, such as by providing the unclear and insufficient metric that the company “will guarantee the supply of sufficient drinking water for the subsistence of those natural persons who have legally been occupying affected areas as of February 28, 1997.” The Court also explained that the contract showed no evidence of the inclusion of regulations that obliged the company to establish strict measures to prevent environmental damage, limiting the contract to establishing a reactive regime that would come into effect only after potentially irreparable damage was caused.
In finding the contractual process to violate of the right to public participation, the Court invoked General Comment No. 26 issued by the Committee on the Rights of the Child that same year. It explained that the Comment highlighted the right of children to be heard. In it, the Committee emphasized that “Children identify environmental issues as being highly important to their lives. Children’s voices are a powerful global force for environmental protection, and their views add relevant perspectives and experience with respect to decision-making on environmental matters at all levels.” The Court agreed and stated that “as children are a vulnerable group and the future of the Nation, they should not be deprived of the human right to a sustainable environment and the State is obliged to guarantee it through the scrupulous exercise of its constitutional and legal powers by the State authorities.” Partly because the Constitution integrates Article 12 of the Convention on the Rights of the Child – granting children the right of participation –, and the contract did not follow it, it was declared procedurally flawed.
The Court also held that the law in question violated the constitutional duty of the State to protect the physical, mental and moral health of children and adolescents and to guarantee their right to food, health, education, social security and social welfare, a precept also related to the environmental precautionary principle referred to above. Notably, the Court used the issue of youth rights to introduce the topic of climate change and a safe climate. In this regard, the Court held that, by virtue of the environmental precautionary principle, Article 24(2) of the Convention on the Rights of the Child, the “Executive, when entering into this mining concession contract, should have safeguarded the best interests of the children, with respect to their right to health and a healthy environment, foreseeing the impacts that an open-pit mine may generate in their integral development.”
The Court framed the Constitution and the international law that Panama has ascribed to as embodying Panama’s “country vision.” This vision includes government that is unitary, republican, democratic and representative. In this context, the Court explained that the R2HE is not only a duty, but is a value, a motivation and a pillar of the identity of Panamanian society.
The Court emphasized that legislative functions have democratic legitimacy as long as they serve the public interest. Representatives in a position of power, however, may neglect to look after the welfare of those they represent, and disturb or violate the rights of minorities or the majority. It is precisely because of this, the Court explained that the State instituted a process of assessment of constitutionality. Through this process, the Court may contain and remedy the possible excesses of the legislator.
Ninety total amicus briefs – in support of both the plaintiff and company – were submitted. Over a dozen amicus briefs in favor of the plaintiff invoked the R2HE.
