UN court allows Uruguay pulp mill project

THE HAGUE - The United Nations' highest court has ruled that Uruguay does not have to suspend building two giant pulp mills that neighbouring Argentina says will harm the environment.

"There is not enough ground for a provisional measure to suspend construction," Rosalyn Higgins, president of the International Court of Justice (ICJ) said.

Argentina had wanted the World Court to temporarily halt construction of the mills on the banks of a shared river, while it weighed its claim that the mills violated a bilateral treaty.

A judgment on whether Uruguay breached a 1975 treaty, under which all issues regarding the water of the Uruguay river must be consulted on and agreed by both countries, is expected within two years, a spokesman said.

Higgins said Uruguay bore all the risks relating to any later decision.

Uruguay may be ordered to tear down the mills, that are due to start operating in 2007 and 2008, if the court finds the country in violation of the 1975 treaty.

But she said the decision did not prejudge questions relating to the merits of the case.

The court also said it did not find any evidence that the construction of the mills would cause irrevocable damage to the environment at the time.

Argentina and Uruguay have been wrangling for months over the construction of the mills, on which Argentina said it was not consulted.

Uruguay opposed a suspension of the project, its largest industrial investment, insisting there was no danger of pollution and that halting the project would cause considerable economic damage to the small country.

The plants are being built by Finland's Metsa-Botnia and Spain's Ence.

The dispute came to a head after months of protests and blockage of international bridges by Argentine environmentalists and residents that have cost Uruguay's economy US$400 million.

In April, the World Bank's private sector arm decided to withhold approval of about US$400 million in funding for the mills until it completed studies on the project's social and environmental impact.

- REUTERS