Deep in the rainforest, the village of Sarayaku is two days by river from the nearest town. But its 1,200 Kichwa Indians are now in the spotlight. On July 25th the Inter-American Court of Human Rights ruled that Ecuador’s government had ignored the rights of Sarayaku’s residents when granting permission for an energy project—putting governments in the Americas on notice that big physical investments are not legal until the indigenous people they affect have had their say.

The dispute began in 1996 when Petroecuador, the state oil firm, signed a prospecting deal with a consortium led by Argentina’s Compañía General de Combustibles (CGC). Much of the area it covered was the ancestral land of Sarayaku’s residents, who were not consulted. CGC later offered locals medical aid for their consent. Some villages signed up, but Sarayaku held out.  Nonetheless, by early 2003 CGC had drilled 467 boreholes around the town for seismic surveying, and packed them with 1,433kg of high explosives. They were never detonated, and remain buried in the forest. As well as felling trees and destroying a sacred site, the company ruined some of Sarayaku’s water sources. Work ceased in 2003, and CGC’s contract ended in 2010.

The court found that the state had breached the villagers’ rights to prior consultation, communal property and cultural identity by approving the project, and that CGC’s tests had threatened their right to life. It ordered the government to pay damages, clear the remaining explosives and overhaul its consultation process. In future affected groups must be heard in a plan’s “first stages…not only when the need arises to obtain the approval of the community.” However, the judges did not ban prospecting on Sarayaku lands. The right to consultation does not grant a veto.

The ruling will be studied closely in the myriad Latin American countries struggling to balance big investments with local rights. A narrow reading of the decision suggests that governments must tiptoe around indigenous concerns, but can act more boldly when other groups protest, since the ruling was based partly on the International Labour Organisation’s Indigenous and Tribal Peoples Convention.

The ruling also shows that the regional justice system has not lost its mettle. In 2011 the Inter-American Commission on Human Rights, which litigates cases at the court, asked Brazil to halt work on the huge Belo Monte dam because its neighbours were not given a sufficient chance to speak up. Brazil’s government, which had authorised the dam only after a long public debate, saw this as a violation of its sovereignty. It did not comply, and stopped contributing money to the commission.  The commission was weakened by angering the region’s biggest country and by the criticism that it had exceeded its mandate. After Brazil presented new evidence in the case, the commission reversed its stance on Belo Monte. Moreover, last month the Organisation of American States voted to draft a reform plan for the commission, which some fear could strip it of important powers. Ecuador was among the commission’s loudest critics.

The Sarayaku case was not as heated as Belo Monte, since Ecuador’s government had already promised to pay damages. However, the court’s decision did strongly reassert its right to intervene in development cases. Moreover, Ecuador’s government plans to tender a big chunk of the Amazon for oil exploration later this year, despite indigenous opposition. If neither side backs down and the protesters appeal, the court’s next ruling on development in Ecuador may be far more contentious.

Indigenous rights in South America: Cowboys and Indians, Economist,July 28, 2012, at 32