Mining, Indigenous Consultation Rights, and Investment Treaty Protection

Part One: The Developing Case Law: Bear Creek to Eco Oro in Context

Part One of a Two-Part Client Alert Series

This alert, the first in a two-part series, surveys the legal landscape at the intersection of two issues that increasingly shape the outcome of mining and natural resources disputes regarding the protections available to foreign investors under investment treaties, as enforced through investor-state dispute settlement (ISDS). The first is the prior consultation obligation imposed on states under the Indigenous and Tribal Peoples Convention, 1989 (No. 169), adopted by the International Labour Organization (ILO 169). The second is social license, the practical acceptance of a project by surrounding communities, which is distinct from but related to the formal state consultation duty. This alert examines these issues across five foundational ISDS decisions:

• Bear Creek Mining Corporation v. Republic of Peru (ICSID ARB/14/21, Bear Creek (2017))
• Copper Mesa Mining Corporation v. Republic of Ecuador (PCA Case No. 2012-2, Copper Mesa (2016))
• South American Silver Limited v. The Plurinational State of Bolivia (PCA Case No. 2013-15, South American Silver (2018))
• Eco Oro Minerals Corp. v. Republic of Colombia (ICSID ARB/16/41, Eco Oro (2021)), and
• Lupaka Gold Corp. v. Republic of Peru (ICSID ARB/20/46, Lupaka (2025)).

Part Two of this series further compares Lupaka (2025) and the December 2025 Award in Kappes, Cassiday & Associates v. Republic of Guatemala (ICSID ARB/18/43, Kappes (2025)) and shows how Kappes (2025) engages more deeply with ILO 169 than the previous cases.

1. ILO Convention No. 169: The Consultation Obligation and Its Treatment Across the Cases Surveyed

The prior consultation obligation under ILO 169 arises primarily from Articles 6 and 15. Article 6 establishes the general duty to consult Indigenous peoples through appropriate procedures and representative institutions, in good faith, and with the objective of achieving agreement or consent prior to legislative or administrative measures that may affect them directly. Article 15(2) addresses natural resource exploitation specifically, requiring governments to establish or maintain procedures to consult Indigenous peoples before permitting exploration or exploitation of subsurface or mineral resources on their lands.

Although in force in each of the host states in the cases surveyed, ILO 169 features with varying degrees of analytical depth across the five awards. Bear Creek (2017) confirmed the foundational principles: ILO 169 imposes direct obligations on states only, it does not require a specific result, and it does not confer a veto power on Indigenous communities.^[1] However, the Bear Creek tribunal’s ILO 169 analysis was framed primarily as a rejection of Peru’s defense argument rather than a structured doctrinal treatment of the Convention’s content. Of the remaining awards, South American Silver (2018) engaged with ILO 169 in the context of the expropriation lawfulness analysis — accepting Bolivia’s Indigenous-rights rationale as constituting valid public purpose — but without multi-source doctrinal elaboration. Copper Mesa (2016) addressed ILO 169 tangentially in the context of the investor’s failed community consultation processes. Eco Oro (2021) referenced ILO 169 in the regulatory background but did not treat it as a primary analytical framework. In Lupaka (2025), ILO 169 features briefly on attribution, as will be discussed further in Part Two.

Three cross-case observations emerge. First, in every case where consultation adequacy was directly at issue, no tribunal found that the respondent state had conducted fully ILO 169-compliant consultations — with the ISDS consequences varying depending on how the state subsequently addressed that inadequacy.

Importantly, an ongoing consultation process alone is not a sufficient defense to a finding of inadequacy. Where a court has ordered consultations to proceed “immediately” or “without delay,” the duration of the process becomes an independent factor. In particular, a prolonged failure to reach a conclusion may weigh against the state, even if the procedural steps taken were otherwise adequate.

Second, where states formally raised ILO 169 compliance as a defense to treaty liability, no tribunal accepted it as a complete shield. In South American Silver  and Bear Creek, the defense was rejected outright. In Eco Oro, elements of the state’s public interest arguments were partially acknowledged but still fell short of a complete defense.

Third, the depth and sophistication of ILO 169 analysis in these awards have increased over time — a trajectory that Part Two of this series will examine in the context of the Kappes (2025) award, which contains the most analytically developed ILO 169 framework in the case line to date.

2. Social License: From Reputational Consideration to Legal Scrutiny

Social license (i.e., the practical acceptance of a project by surrounding communities) is a distinct concept from the formal state duty to consult under ILO 169. However, some tribunals have treated the concept as legally material.

In Bear Creek, Peru argued that social license is measured by a standard of success, specifically of actual general acceptance, and that Bear Creek lacked a social license because relevant communities had objected.^[2] The tribunal rejected this framing as a justification for revocation of an exploration license, finding that Peru’s continuous approval and endorsement of the investor’s outreach meant it could not retroactively argue that the investor had failed to obtain a social license.^[3] Critically, the tribunal noted that Peru’s approach would effectively condition an investor’s treaty rights on community approval. In other words, this would effectively confer a veto power on communities that ILO 169 itself does not grant.

In South American Silver, the tribunal found the investor’s community relations strategy seriously flawed: it focused on obtaining majority support rather than actual consensus, which was inadequate given the Indigenous communities’ consensus-based decision-making processes.^[4] That case also establishes the broader idea that mining investors’ legitimate expectations must be tempered by their own compliance with local law, and that rights of exploration do not give rise to a legitimate expectation of a guarantee of exploitation where domestic law provides a framework for further approvals.^[5]

In these cases, culturally appropriate and consensus-oriented engagement by the investor from project inception was treated as a substantive legal factor balanced with the formal ILO 169 consultation obligation which remains a distinct state duty.

3. Attribution of Community Conduct and Full Protection and Security

When Indigenous communities physically oppose or obstruct a mining project, two related but distinct questions arise: whether the community’s conduct can be attributed to the host state under international law, and whether the state met its due diligence obligation to protect the investment. The full protection and security (FPS) due diligence standard and the attribution of community conduct to the state are the most contested and consequential issues across this line of cases.

The nature of the FPS due diligence standard is rooted in the earliest ISDS cases, such as Asian Agricultural Products (AAPL) v. Republic of Sri Lanka (1990). AAPL highlighted the distinction that FPS is not a strict liability standard for a state’s failure to protect foreign investments, but concerns “… nothing more nor less than the reasonable measures of prevention which a well-administered government could be expected to exercise under similar circumstances.”^[6]

In Copper Mesa, community opponents’ conduct could not generally be attributed to the state, but Ecuador was found to have breached FPS by actively making it legally impossible for the investor to complete its environmental impact study and community consultation processes.^[7] The breach arose not from passive failure, which is more typical in a finding of a failure of due diligence, but from active state facilitation of obstruction.

In South American Silver, the tribunal accepted the due diligence standard for FPS and found mere operational state inefficiencies insufficient to constitute breach where meaningful facilitation efforts had been made. The tribunal specifically noted that the state’s intervention against community complaints provided it with a defense to FPS liability.^[8]

In Lupaka, Peru was found to have breached FPS and committed a direct expropriation after the Rural Community of Parán (determined by the tribunal to be a state organ under ILC Articles 4 and 5) blockaded and seized the investor’s gold mine site following an armed confrontation. Peru’s response, limited to facilitating dialogue, was held to independently fall below the FPS due diligence standard.^[9] The result was a finding of both FPS breach and direct expropriation.^[10] Lupaka is analyzed in further detail in Part Two.

The primary lesson from this line of cases on community interference: the FPS due diligence obligation was engaged even where the community’s conduct was not directly attributable to the state under international law, and conversely, effective state intervention to protect investor rights, and/or to address community complaints, may provide a state with a defense to FPS liability. The nature and degree of community interference, and the character and adequacy of the state's response, are key variables in an FPS analysis.

The type of impact on the investment is also relevant to this analysis. Where the investment is suspended by judicial order rather than blocked by uninhibited community action, the FPS due diligence obligation during such suspension period is calibrated to protecting the investor’s rights, including any court-imposed obligations to advance the consultation process within a specified timeframe, rather than to restoring immediate operational access.

4. Fair and Equitable Treatment

The fair and equitable treatment (FET) standard — typically the most flexible substantive protection available to investors — has been invoked across the cases surveyed to challenge regulatory changes, procedural failures, and inconsistent state conduct affecting mining concessions. FET claims based on regulatory change affecting existing concessions are consistently subject to an investor due diligence qualification. Moreover, it is important to caution that the FET standard is not uniform across investment treaties. While the Dominican Republic–Central America–United States Free Trade Agreement, (CAFTA-DR) and similar treaties (as applicable in most of the surveyed cases) apply the customary law minimum standard to FET, other treaties with autonomous FET standards may be considered to be of broader application.

In Bear Creek, the overnight revocation of a public necessity decree without notifying or consulting the investor — Bear Creek was not contacted or given an opportunity to comment before Supreme Decree 032 was issued — was held to violate due process.^[11]

In Eco Oro, the dispute arose from Colombia’s prolonged failure to delimit the boundaries of the Santurbán Páramo, a high-altitude wetland ecosystem that serves as a critical water source and overlaps with significant gold and silver deposits, and in which Colombian law prohibits mining. That failure left Eco Oro’s concessions in a state of prolonged regulatory uncertainty as to whether they fell within the protected zone. Colombia’s conduct was found to breach the minimum standard of treatment, even against a stringent tribunal test:

Whilst the bar is a high one and the Tribunal does not expect that Colombia should have elevated unconditionally Eco Oro’s interests above its obligation to protect the páramo, … [i]t is clear from the above review of Colombia’s actions, viewed as a whole, that Colombia’s approach to the delimitation of the Santurbán Páramo was one of arbitrary vacillation and inaction which inflicted damage on Eco Oro without serving any apparent legitimate purpose.^[12]

That finding turned on the investor’s long pre-reform history, distinguishing it from a later entrant on notice of potential regulatory change.

Retroactive application of new requirements to existing concessions has in some cases been found to violate FET. That said, even an established investor who continues activity where the domestic legal framework established when they entered the market made such change foreseeable may not be found to have a legitimate expectation in non-retroactivity.^[13]

5. Expropriation and Compensation

Of the five awards surveyed, two (Bear Creek and South American Silver ) addressed expropriation claims on the merits. Both applied the four-limb lawfulness test requiring cumulative satisfaction of public purpose or social benefit, due process, non-discrimination, and compensation. In neither case was the public purpose condition seriously contested; liability turned instead on whether the remaining limbs were satisfied. In Bear Creek, the tribunal found an unlawful indirect expropriation where revocation lacked due process and compensation,^[14] and held that the FTA's general exceptions clause constitutes an exhaustive list with no additional free-standing police powers exception.^[15]

However, even findings of well-intentioned intervention may not insulate a state from a requirement to compensate: in South American Silver, Bolivia’s Indigenous-rights rationale was accepted as constituting valid social benefit satisfying the public purpose condition,^[16] but Bolivia remained liable for failure to pay compensation as its conduct was ultimately an expropriation regardless of its legitimate public purpose.^[17]

6. Legality of the Investment

Separate from the merits of the substantive claims discussed above, respondent states in Bear Creek and South American Silver also raised threshold objections based on the legality of the investment and the clean hands doctrine. Both were dismissed as bars to jurisdiction or admissibility. In Bear Creek , the tribunal held it could not import a jurisdiction-limiting legality requirement not specified in the free trade agreement text.^[18] In South American Silver, Bolivia’s clean hands defense was dismissed: the treaty contained no clean hands clause and Bolivia did not establish clean hands as a recognized general principle of international law.^[19] Similarly, the tribunal determined that any general principle of illegality of the investment must go to its establishment rather than an investor’s other conduct in managing its investment in order to create an issue of jurisdiction or admissibility.^[20] In both cases, the tribunals were skeptical of demanding a principle of denying jurisdiction to an otherwise qualifying investment without an exception grounded in the governing treaty’s text.^[21]

Looking Ahead to Part Two

The awards surveyed here established the doctrinal framework within which two 2025 decisions — Lupaka and Kappes — must be read. Those decisions reached opposite outcomes: investors prevailed on core claims in Lupaka; the state prevailed comprehensively in Kappes. Part Two of this article series examines both awards in detail, including the Kappes Tribunal’s ILO 169 analysis, and considers the significance of its denial of justice treatment and the minority view of arbitrator Townsend.

This alert is prepared for general informational purposes only and does not constitute legal advice. Please contact us if you wish to discuss any of the issues addressed in the context of your specific circumstances.