Buck In Brief

NAFTA's Challenge to Environmental Laws

In Brief: The North American Free Trade Agreement threatens to subvert -- or override -- US environmental laws.

01/01/04

A large state bans a chemical that causes cancer in laboratory animals, is suspected of causing neurological problems in humans, and makes water undrinkable. A foreign corporation that produces one of the chemical's ingredients sues the United States for nearly $1 billion in a secretive international tribunal to force U.S. taxpayers to reimburse it for loss of its hoped-for profits. An idealistic public interest lawyer works to open the proceedings to public scrutiny and protect the state's right to protect its environment and the health of its citizens...

Movie script? No, reality. The state is California. The chemical is methyl tertiary-butyl ether, or MTBE. The corporation is a Canadian company, Methanex. The tribunal is a closed arbitration panel established under the provisions of the North American Free Trade Agreement (NAFTA), whose investment provisions require a government to pay compensation when regulations limit the profits of foreign investors.

Finally, the lawyer is Martin Wagner of Earthjustice's International Program. And what is at stake is nothing less than the ability of democratic governments at local, state, and national levels to protect the environment and human health.

If Methanex wins its case, the $1 billion payment could be a prohibitive burden to California -- a state already in financial crisis -- and make the continued ban of MTBE difficult. In addition, it would set a precedent of democratic decisions being undemocratically subverted and discourage other governments from implementing similar rules.

Earthjustice is taking action to open these secret proceedings to public scrutiny and to protect California's MTBE ban and the unrestricted right of governments to implement environmental measures. On behalf of Bluewater Network, Communities for a Better Environment, and the Center for International Environmental Law, Earthjustice petitioned the arbitration panel for permission to participate in the Methanex dispute as a friend of the court, something that would almost certainly be permitted were this case before a US court. Although international arbitration tribunals had never before permitted citizens to participate in these confidential processes, Earthjustice succeeded in convincing the tribunal to allow public submissions in the case and to give the public access to the tribunal's hearings. We presented our arguments on March 10. (Read the full text of the submission.) This is a significant step in opening this highly secretive process to public scrutiny and participation.

It's important to note, however, that this is not the only case in which international investment rules threaten to undermine U.S. environmental protections. For example, a case has recently been brought by Glamis Gold Ltd., a Canadian gold mining company, that challenges a California measure requiring open pit gold mines to be refilled with soil after they are closed. Backfilling is one of the best ways to minimize the massive environmental harm from open pit mining, as well as helping to heal the ugly scars such mines cause. Glamis is arguing that the requirement makes the mine unprofitable and that, under NAFTA investor rules, the United States must pay Glamis over $50 million to compensate for its "lost" profits.

The final thing to note is that cases like Methanex and Glamis have not convinced the Bush administration that the NAFTA rules need to be changed. To the contrary, the administration is zealously pressing countries all around the world to accept such rules in new trade and investment agreements in what looks like a ploy to give corporations even more power and to shift taxpayer money to corporate pockets. In real life it is impossible to promise a Hollywood ending, but Martin and other staff in Earthjustice's International Program will be working hard to write one here.

Vawter "Buck" Parker, Executive Director
buckparker@earthjustice.org