Environment groups organise against NAFTA rules

Angered by a recent international tribunal‘s ruling in favour of a multinational corporation over environmental protection, environmental groups here are demanding that the investor protection rules under the North American Free Trade Agreement (NAFTA) be changed.

by Danielle Knight

Washington, 8 Sep 2000 (IPS) -- Angered by a recent international tribunal‘s ruling in favour of a multinational corporation over environmental protection, environmental groups here are demanding that the investor protection rules under the North American Free Trade Agreement (NAFTA) be changed.

Last month, the three judge NAFTA tribunal, under the International Centre for Investment Dispute Settlement here, ordered the Mexican government to pay $16.7 million to a US company because it was prohibited from opening a hazardous waste treatment facility.

While environmentalists strongly denounced the ruling, activist group's are now taking aim at a current trial being heard by the same tribunal.

This week the tribunal started considering a claim by a Canadian company that the United States must pay almost 1 billion dollars because a state‘s water protection regulation is preventing the company from selling its product.

In both cases, multinational corporations are claiming that local or state environmental protection or health laws violate NAFTA’s investor provisions, known as Chapter 11, which were designed to protect a company against expropriation of its property.

But environmentalists argue that Chapter 11 is now being used to trump important laws designed to protect people’s health and the environment.

“Something is seriously wrong with the way the NAFTA investment chapter is working,” says David Schorr, director of the World Wildlife Fund‘s sustainable commerce programme.

The current claim being considered was brought forth by Methanax Corporation, a Vancouver-based company, that argues that a California state law to remove the chemical MTBE from gasoline violates Chapter 11.

California’s governor, Gray Davis ordered the phase-out of the gasoline additive by the end of 2002 after studies revealed that MTBE may cause cancer as well as neurological, dermatological and other health problems. Leaks of the additive from cars, boats and underground storage tanks are contaminating the state’s water supplies, according to other scientific studies.

Methanex is a major producer of methanol, a key component of MTBE.  During the past decade, the use of MTBE has accelerated because the chemical is used in order to comply with the US Clean Air Act since the chemical reduces harmful vehicle emissions into the air.

“MTBE in gasoline has made a significant contribution to improving air quality in the United States and around the world,” says a statement by Methanex. The company claims that under NAFTA, it is owed $970 million in profits it will lose if California bans the substance.

But environmentalists say less harmful alternatives to MTBE exist that do not pollute the water. They argue that governments should not be required to pay polluters not to pollute.

“Methanex’s claim is tantamount to extortion, because they are demanding almost a billion dollars if California insists on keeping its drinking water free of toxic contaminants,” says Martin Wagner, attorney for Earthjustice, an environmental law group.

Environmentalists have sent a letter to the US government, demanding that it prevent deliberations on the dispute from trumping the environmental protection law. The letter also urges the government to challenge the secrecy surrounding the tribunals.

The tribunals under NAFTA are modelled after private commercial arbitrations and are held behind closed doors with no opportunities for the public to observe the proceedings, let alone participate in them.

Environmentalists argue that not only are the NAFTA rules slanted to favour corporations, but that they shut out ordinary citizens and local communities.

“Serious questions of public policy and constitutional law are being decided in secret,” says David Waskow, trade director at Friends of the Earth.

Two environmental organisations have formally requested that the arbitrators agree to consider amicus briefs that they intend to submit to the tribunal.

When asked to comment on the growing criticisms of the tribunal’s lack of transparency, Brad Boyd, director of investor relations at Methanex told IPS that the company “does not set the rules”.

Environmentalists are worried that the tribunal will rule in favour of Methanex because late last month the three-judge panel found that a local environmental protection law in Mexico violated Chapter 11.

The California firm, Metalclad Corporation claimed that this local law prohibited it from opening a hazardous waste treatment and disposal facility in San Luis Potosi. The company said the law effectively expropriated its future expected profits and sought $90 million in damages. The tribunal agreed with Metalclad and ordered Mexico to pay the company almost $17 million.

According to Stephen Porter, senior attorney with the Center for International Environmental Law, these cases illustrate that international corporations are on the offensive against environmental and health regulations.

“They are using trade rules to advance narrow commercial interests by challenging society’s efforts to protect the environment and public health,” he says.-SUNS4737