Problem Four:  NAFTA Chapter 11 Challenges to Domestic Environmental Law

This problem is designed to be closest to the kind of issues environmental lawyers in the Pacific Northwest may see in relation to NAFTA.  I want you to examine in detail and critique on both sides the NAFTA arbitration proceedings commenced by Methanex, a Canadian corporation, as a result of California seeking to ban its gasoline additive as potentially carcinogenic.

It looks at the problem that much of NAFTA’s effects on the North American environmental scene have not arisen out of express environmental provisions in the NAFTA agreement or in the related agreement creating the North American Commission on Environmental Cooperation.  Instead, on a practical level, the greatest issues have arisen in conjunction with NAFTA investors using the NAFTA agreement’s so-called Chapter 11 or investment protection provisions (compare and ).  Chapter 11allows NAFTA investors to bring an arbitration proceeding against a NAFTA member state to challenge their environmental regulatory process as being non-transparent or because it otherwise defeats their legitimate expectations as investors enjoying the protection of the NAFTA agreement.   As a matter of public international law, the act of a US state is attributed to the US thus a claim can be brought in the NAFTA forum against California regulation.  Beyond the legal technical aspects, the issue is one of environmental governance namely who decides environmental issues and what is the effect of local versus regional or national decision-making.