NAFTA ruling undermines environmental accords

by Danielle Knight

Washington, 21 Nov 2000 (IPS) -- Despite assurances from free-trade supporters that commerce will not come at the expense of ecological protection, conservation groups say that a recent ruling by an international tribunal proves that current trade rules can undermine multilateral environmental treaties.

Last week, a three-judge tribunal under the North American Free Trade Agreement (NAFTA), citing investor-protection provisions allowed in the treaty, found that a US hazardous waste company was due millions of dollars in compensation from the Canadian government for a past ban on the export of hazardous PCB waste.

Canada argued that its 1995-1997 export ban was justified under the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and Their Disposal, an international environmental protection treaty. Under the Basel Convention, about 130 member parties are obligated to reduce their exports of hazardous wastes to a minimum and instead focus on reprocessing the wastes at home.

Coming after the protests against corporate globalisation in Seattle last year, and in Washington, DC and Prague this year, and amid concerns that trade rules often trump national ecological protection measures, the decision is heightening concern that trade treaties have the ability to undermine a multilateral environmental agreement.

“The very worst fears of those that protested in Seattle have come to pass,” says Jim Puckett, director of the Basel Action Network, a Seattle-based environmental organisation that monitors trade in hazardous waste. “Three lawyers, representing a trade agreement consisting of but three nations have the arrogance to shoot down a treaty with over 130 member parties,” he says.

>From 1995 to 1997, Canada banned the export of PCBs, highly toxic carcinogenic compounds that have been widely used as coolants and lubricants in transformers and other electrical equipment. The US government then closed its borders to PCBs in 1997.

In 1998, S.D. Myers, an Ohio-based company which had hoped to expand its operations to include waste coming from Canada, filed a complaint with NAFTA, in an effort to recoup the business opportunities it says it lost during the Canadian ban.

The corporation argued that the ban violated a provision of the trade agreement, known as Chapter 11, which was designed to protect a company against expropriation of property.

On Nov. 13, the NAFTA tribunal upheld two of the company’s four claims.  While S.D. Myers originally asked for $20 million in compensation, a lawyer for the company told reporters last week that the damages could be in the range of $40 to $50 million. A decision on the amount of damages is expected in January.

Environmental groups in Canada are denouncing the ruling as a worrisome precedent that threatens both domestic environmental protection measures and international treaties.

Morag Carter, a trade campaigner with the Council of Canadians, a non-profit organisation based in Ottawa, compares the tribunal’s decision to other rulings made by the World Trade Organisation’s (WTO) dispute panel that found environmental and health protection laws in violation of international trade rules.

“For Canada to now have to pay for this is outrageous considering that the Basel Convention has been ratified by over 100 countries,” says Carter. At a press conference held in Ottawa on Tuesday, environmental groups condemned the ruling and called on the candidates currently running for election to focus on how trade policy would impact Canada.

Elizabeth May, executive director of the Canadian affiliate of the Sierra Club, warns that current international trade agreements being negotiated will likely include an investment provision similar to NAFTA’s Chapter 11.

“Can you imagine the mischief this mechanism will have if plans for similar investor protection for the 34 members of the Free Trade of the Americas Agreement goes forward in April, next year?” asks May.

Per Bakken, the head officer-in-charge at the Basel Convention Secretariat in Geneva, Switzerland told IPS in a phone interview that he could not comment on the ruling since he had not seen the actual text of the tribunal’s decision.

The S.D. Myers case is just one of several cross-border disputes that have been filed by corporations arguing that one of the three NAFTA countries violated the Chapter 11 clause.

In August, a panel ruled that Mexico violated the investment protection provision and ordered the government to pay $16.7 million to the Metalclad Corporation.

The California-based company got federal approval to open a hazardous waste treatment and disposal site in San Luis Potosi, a state in central Mexico. But the local government argued that the site lies atop an ecologically sensitive alluvial stream and prevented the project from opening. The tribunal decided that this amounted to expropriation of the company’s profits.

In another case that has yet to be decided, the Canadian-based Methanex Corporation filed against the US claiming that the state of California’s decision to phase-out the use of its gasoline additive MTBE cost the company $970 million.

California’s governor ordered the use of MTBE halted by the end of 2002 after studies revealed unusually high, and potentially harmful, levels of the substance in the state’s drinking water supply. In all of these NAFTA dispute cases, advocacy groups have long criticised the secretive nature of the tribunals.

The three-person panels, composed of judges picked by the opposing sides, operate in almost complete institutional secrecy. Based on corporate arbitration processes, the sessions are private, its actions cannot be appealed except in special circumstances, and its decisions may not be publicised unless the parties involved choose to make them public.

“The tribunal is not set up to deal with larger public policy issues,” says Steve Porter, a senior attorney with the Center for International Environmental Law (CIEL) here. CIEL and other environmental law organisations, including the Earthjustice Legal Defense Fund, are currently petitioning the NAFTA tribunal overseeing the Methanex case to be allowed to submit amicus briefs to the panel.

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