Nicaraguan Farmers Plan for the Repeal of the Canal Law

The country can’t live for 100 years in a state of humiliation. There are legal options, but all paths will involve a national protest movement

27 de junio 2017


Although the promise of an Inter-oceanic Canal fades on the horizon as time goes by, Law 840, awarding an all-encompassing concession to Chinese magnate Wang Jing, still represents a threat to the country. The risk of property expropriation is real, and the challenge is how to repeal a law that leaves Nicaragua “on its knees” concur independent legal experts, organizations from civil society and the rural movement that for four years has been protesting to demand the law’s repeal.

This was one of the conclusions of the forum and debate “The Ortega-Wang Law, four years later” organized by Confidencial last Thursday in Hispamer, Managua.

The six-year deadline

What solutions are left if Wang Jing doesn’t have any major obligations to the country yet everything in the law favors him?  Attorney Monica Lopez Baltodano finds a glimmer of hope in one of the articles of the Concession Framework Agreement: Clause 15.2 establishes that the government of Nicaragua or the concession holder can put an end to the concession for any sub-project if the resources to finance it haven’t been obtained within a span of six years.

“But there’s a trap,” warns Lopez, legal advisor for the rural movement and the researcher who documented the existence of the briefcase companies created by HKND. “Every project is a sub-project; even the waterway itself is a subproject. However, exercising that clause doesn’t mean the repeal of Law #840 or of the contract, because they would continue in force for the other projects,” she explained.

According to Lopez, the clauses are “designed to be confusing.” But this possibility is the only one left to the country – to demand that Daniel Ortega’s government put an end to the entire set of measures making up the canal concession and thus be able to repeal Law #840.

“The six-year noncompliance of some sub-projects doesn’t automatically invalidate the Canal law. The Government could end the Canal concession itself, but Law 840 would continue to be in force for the other subprojects,” the lawyer explained. “But however we look at it, it’s a glimmer of light in the face of so many padlocks preventing the repeal of the entire legal structure. The justification that the Government gave for all this was the Canal. And – by logic, if there are no resources for the Canal, it should be repealed.”

Article 2 of Law 840 establishes the development of seven sub-projects all over the country: an airport, a port on each ocean, a free trade zone and a number of tourist facilities.  Item A of that article leaves the Inter-oceanic Canal on the level of a sub-project, even though it’s been sold as the chief work.

The lawyer considers that this would be the easiest way to undo a legal scaffolding that is “harmful to the country”. It’s a political decision that we should force the government to make,” she declared.

“This is the most crushing Law in the country’s entire history. It violates 41 articles of the Constitution,” said Azahalea Solis, constitutional expert, who also participated in the forum moderated by journalist Carlos Fernando Chamorro.

Others present with Lopez and Solis included Medardo Mairena, coordinator of the National Council in Defense of the Land, Lake and National Sovereignty; Manuel Ortega Hegg, president of the Nicaraguan Academy of Sciences; and Alejandro Aguilar, lawyer and business advisor.

The option of international arbitration

Aguilar stated that another way to annul Law 840 would be through international arbitration with Wang Jing. That is, appealing to the International Court of London to resolve this as a commercial dispute between the HKND company and the State of Nicaragua. This road, however, would be tangled and costly.

Aguilar warned that the canal project lacks a model of conflict resolution in case of controversies between the parties. Such a provision has been part of other megaprojects such as the Euro Tunnel that crosses the English Channel and joins France to the United Kingdom.

Wang Jing has all odds of winning, given that the contract awards him the “lion’s share” in his favor. The attorney noted that HKND has no obligations with the country, while Nicaragua has committed even the reserves from the Nicaraguan Central Bank if the project should fail for some reason.

“The concessioner could apply an arbitration ruling in his favor to any place in the world where Nicaragua has interests or commercial assets, Aguilar warned. With this law and contract, the country has renounced its sovereign immunity.”

Aguilar stated that there’s a political responsibility for the concession given to Wang Jing, and the responsible party is clearly Ortega’s government.  Nonetheless, he’d like to know who Nicaragua’s legal advisors were at the hour that these conditions “that left the country on its knees” were accepted.

“I’m concerned about the commitments that the country has acquired. I’d like to know where those legal advisors are, the accomplices in making this law possible. We don’t know anything other than the fact that the project’s promotor isn’t accepting responsibility,” Aguilar insisted.

Law #840 and the Concession Framework Agreement was drafted in the United States by the firm Kirkland and Ellis, with its Nicaraguan counterpart the law firm Taboada and Associates. “This law must be repealed, because you can’t live forever in this humiliating condition,” he added.

A negotiated exit with Wang?

The constitutional expert Azahalea Solis emphasized the fact that the Concession Framework Agreement is a legal tool that holds more weight than the Nicaraguan Constitution.  She believes that in moving to repeal Law 840 a “multi-disciplinary national group” should first be formed. This is critical for confronting the complexities that a future legal dispute might bring.

Manuel Ortega, president of the Academy of Sciences, underlined the fact that the repeal of the concession is the challenge set before the country.  Before arriving at the point of arbitration, he urged Ortega’s government to negotiate a possible exit with the HKND Company.

For now, Chinese concession holder Wang Jing has disappeared.  Up until this moment he hasn’t called for bidding on any project nor has he expropriated or bought any land in the Canal Zone, which runs through the departments of Rivas, Rio San Juan, Nueva Guinea and part of the territory on the South Caribbean Coast inhabited by the indigenous Rama-Kriol people.

For the experts, a negotiated solution is the most viable before becoming involved in an international arbitration with Wang Jing. Aguilar affirmed that those who supported the government’s posture in favor of this project “shouldn’t forget the responsibility” that this concession entails. “As time goes on, things will become more complicated; this will go on growing and the legal battle will be tougher,” he predicted.

Lawyer Lopez Baltodano recalled that the concession won’t last 100 years, but 116. The clock won’t actually begin ticking until the Canal has been constructed and begins operations.

The Canal project would have a cost of 50 billion dollars. Nevertheless, up until now, it’s not known who the investors might be. For the icing on the cake, the rupture of diplomatic relations between Panama and Taiwan last week and the fact that Panama then established such relations with Mainland China leaves it clear – for some analysts – that the second largest world economy has entered into a strategic agreement after the widening of the Panama Canal and has no intention of financing a work of this size in Nicaragua.

Corruption and speculative capital

Attorney Alejandro Aguilar, a business consultant, stated that “at the very least” the scheme of the canal concession involves “corruption,” because Wang Jing has been given unlimited prerogatives. In addition, the scheme of using briefcase companies creates conditions even for laundering money, for example through the free trade zones. The lawyer can’t imagine how “they could negotiate away the country’s sovereignty,” since Law 840 leaves Nicaragua on the level of a panhandler. “How can they undo this?” he asked. “It’s impossible to imagine that the authorities didn’t know what they got themselves into.”

Solis recalled that the Chinese concessioner has the power to sell or cede the concession to anyone. As a result, Nicaragua doesn’t know whose hands it’s in, because up until now the topic has been swathed in secrecy. The fact that the concession is transferable adds yet more uncertainty to the Nicaraguan State.

For his part, the economist and former deputy Enrique Saenz spoke of the official promises to the population that the government made for Law 840: “In 2014, we were already going to see 10% growth; this would later increase to 15%, and would generate half a million jobs,” he said.

In Saenz’s opinion, the contents of the canal law permit the Chinese magnate to operate as a financier without ever constructing the canal.

“All of the national territory is committed, not only the route along the Canal.  Not only can Wang Jing negotiate the rights ceded to him in any way, but also he can do it with anyone, without the government having any power to oppose it. There’s even a provision that if the financers come to operate in Nicaragua they’re not obligated to register or report themselves to the Superintendence of Banks,” the economist explained.

For Saenz, the real menace is that the platform formed by the project could become a scaffolding for the movement of capital of dubious or illicit origin, all under the shelter of this concession.

“Even though the canal doesn’t get built, the farmers and landowners would always be under the menace of dispossession,” the former deputy declared.

The rural movement and Nicaraguan sovereignty

Photo: Carlos Herrera / Confidencial

Medrardo Mairena, farmer and coordinator of the anti-canal movement, presented a review of events beginning with the conformation of the National Council, the protest marches held and the repression on the part of the police, the army and the shock troops of the Sandinista party due to their opposition to the canal project.

“As farmers, we didn’t know anything about Law 840. In fact, when we heard the talk about the canal, we thought about progress,” the rural leader related. “But when they inaugurated the Canal projects in Rivas and we understood about the expropriations, it didn’t seem right to us, because they didn’t even talk with us, the owners.”

Article 12 of Law 840 establishes that the concessioner will pay the assessed price for the lands, a price well below the market rate. The person affected won’t be able to appeal the HKND decision. This includes any portion of the national territory where the Chinese company might want to build a sub-project. It’s for this reason that Mairena issued a call to the citizens who are outside the canal route, who should realize they’re not immune either. “It’s a problem of all the Nicaraguans,” he alerted.

Attorney Lopez Baltodano noted that various organizations did groundwork that proved vital for articulating the rural movement.  She recognized the speed with which the movement grew wings and local leaders arose to demand the defense of the land, the natural resources and the national sovereignty. “They were leaders that we hadn’t known about,” he said.

According to the advisor for the National Council, the rural residents were familiar with the realities behind the rhetorical statement that in Nicaragua there’s no rule of law. “Because they’ve appealed to the Supreme Court, to the National Assembly, and to the presidency to hear their complaint, but nothing has been resolved for them,” was his example.

Mairena assured that the 89 marches held by the farmers and their many legal actions demanding the repeal of Law 840 have exacted a “political cost” from the Sandinista regime.

One of the central principles of the rural movement is not to subordinate itself under any political banner, something that has given it credibility in public opinion for standing up to an authoritarian government.

“It’s not right that the rural movement should have to be the flagbearer for the whole country,” considered Lopez Baltodano, referring to the fact that while the National Council fights to defend property and for respect for human rights, other sectors of the country – the labor unions, the youth, the trade unions and the universities – remain passive.

Ortega Hegg, president of the Academy of Science called this an opportunity to reflect and “redefine” the project for the country’s development.  We must recognize the predominance of unemployment, the informal market and the emigration that characterizes the current model, “but not put our hopes and expectations on megaprojects,” he concluded.

Translated by Habana Times

Wilfredo Miranda Aburto

Periodista. Destaca en cobertura a violaciones de derechos humanos: desplazamiento forzado, tráfico ilegal en territorios indígenas, medio ambiente, conflictos mineros y ejecuciones extrajudiciales. Premio Iberoamericano Rey de España 2018.


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