Methanex & NAFTA Chapter 11 Challenges to Domestic Environmental Law

The North American Free Trade Area (NAFTA) is a regional economic community, in which the US is joined by Canada & Mexico. NAFTA law must be understood by lawyers representing businesses active anywhere in North America. Please 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.

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 http://www.enn.com/news/enn-stories/2002/02/02222002/s_46465.asp with http://www.iisd.org/pdf/2004/trade_methanex_submissions.pdf and http://www.iisd.org/pdf/trade_methanex_background.pdf ).?Chapter 11 Allows 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.? ?/span>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. You will find the Methanex arbitration fillings at http://www.state.gov/s/l/c3741.htm.

Please look at the Methanex filings, then answer the following questions:

  1. How does NAFTA's investor protection provision compare with the traditional international law on protection of aliens,

  2. Is the protection offered NAFTA investors the same or different from domestic US constitutional protection under an inverse condemnation or similar takings theory,

  3. How do you understand criticism of NAFTA and international economic law generally in terms of interfering with sovereignty,

  4. How do you understand the relationship between environmental and economic law in the Methanex setting,

  5. What is special about the NAFTA form of arbitration here, and can private individuals or enterprises normally arbitrate disputes directly against a state, and

  6. What do you think happens if the US Trade Representative, which USTR negotiates trade and investment treaties for the US, adopts NAFTA Chapter 11 provisions as its "gold standard" for insertion in all new or amended investment treaties concluded with foreign countries?