While the rest of the world was dissecting the fallout from the Hutton report, the Privy Council quietly gave the go-ahead to a £20m hydroelectric dam complex on a remote stretch of the Macal River in Belize, a tiny country on the Caribbean coast of central America. It was the first time in its 500-year history that the judicial committee of the Privy Council - which remains the highest court of appeal for a dozen Caribbean states that were formerly British colonies, as well as for New Zealand and Mauritius - had ruled on an environmental case. The split decision, three-two in favour of the Canadian power conglomerate Fortis Inc and the Belizean government, was a blow to environmentalists who have been fighting the project for six years.

The 50-metre-high dam will create a reservoir that will flood 10,000 hectares of some of central America's rarest habitats, including breeding grounds for endangered species. Just as worryingly, the bedrock that will provide the foundations for the concrete structure has turned out not, as was stated in the original environmental impact assessment, to be solid granite but a mixture of sandstone and shale. This, according to a geologist who knows the area well, is unlikely to provide sufficient support either to hold the dam or to prevent water seepage. The impact assessment also failed to mention that the dam site straddles an active geological fault line. Many local people fear for their homes and livelihoods.

Although Belize promotes itself as an ecotourism paradise, its government argues that the growing electricity needs of its 250,000 people make the dam a priority. Environmentalists say that Belize should instead consider burning bagasse, a by-product of the sugar cane industry, which has suffered recently after a fall in sugar prices. It could also buy power from neighbouring Mexico. This may sound expensive, but the dam's opponents argue that the Belizean taxpayer is bearing most of the financial risk of the project and that Fortis, which just happens to own the local power utility, Becol, will be free to set electricity charges as it chooses.

Bill Rammell, the Foreign Office minister for Latin America, recently announced a £1.4m debt forgiveness programme for Belize. He added that the UK might write off debt until 2005 if there were a crackdown on corruption and improved transparency. A pity that he didn't wait to read the dissenting judgment of Lord Walker of Gestingthorpe. He expressed surprise that the Belizean government had "sacrificed the rule of law to foreign investment". Some of the official evidence, he said, was "incredible".