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A coalition of environmental groups presented arguments yesterday to a NAFTA dispute resolution panel that was hearing a foreign corporation's challenge to a California environmental regulation banning MTBE.
Methanex Corporation the Canadian parent company of a U.S. manufacturer of methanol, one component of MTBE has brought a $970 million suit under the NAFTA against the United States, demanding compensation for profits and business opportunities it claims to have lost because of California's phase-out. Such "investment protection" lawsuits are allowed under NAFTA's Chapter 11 rules.
The arguments submitted yesterday by Earthjustice on behalf of Bluewater Network, Communities for a Better Environment, and the Center for International Environmental Law represented the first time public concerns have been expressed directly in a NAFTA investment proceeding.
"The state of California has both a right and an obligation to protect public health," said Martin Wagner, an attorney for Earthjustice who represented the groups. "Methanex's claim is tantamount to extortion, undermining health protections by demanding that the government pay nearly a billion dollars to protect citizens from harm. Our submission defends the right of California and all governments to protect public health and the environment without paying a fee to a corporation."
The groups argued that international law requires the tribunal to respect the right of governments to take action to protect important public values like the right to clean water. The amicus submission was delivered to the International Centre for Settlement of Investment Disputes, administered by the World Bank in Washington, D.C.
The threat presented by the Methanex case is further aggravated by the ongoing negotiations leading to the Free Trade of the Americas, an expansion of NAFTA's rules throughout the hemisphere. The agreement contains many of the same investor provisions that undermine regional decision-making and democracy.
"This would set the stage for a complete reversal of U.S. environmental law," said Adrienne Bloch of Communities for a Better Environment. "The United States is being sued for protecting people and the environment from a chemical that is destroying our drinking water supply. This one's a no-brainer."
"The Methanex arbitral tribunal has set an important precedent by recognizing its powers to accept submissions from civil society," said Marcos Orellana, an attorney with the Center for International Environmental Law (CIEL). "The millions of dollars likely spent by the United States in defending itself from Methanex's unwarranted claims further amplify the threats posed by the NAFTA Chapter 11 model to legitimate environmental and health measures, especially in the developing world."
"Even the process for challenges under NAFTA's Chapter 11 is undemocratic. It allows foreign corporations to challenge public health laws in tribunals designed to prioritize trade over the public health," said Elisa Lynch of Bluewater.
In 1999, California decided to phase out MTBE, a gasoline additive believed to be carcinogenic. MTBE has made its way into the groundwater supplies of hundreds of communities across the state (and nationwide), making the water undrinkable. The state MTBE ban went into effect January 1, 2004.