Nafta and the Debate Around Mmt

The Case of MET and Canada Introduction The North American Free Trade Agreement (NONFAT) is an agreement liberalizing trade and investment between Canada, the United States, and Mexico. From the moment it took effect on January 1, 1994, the agreement has sparked controversy and fiery debate from groups across the political spectrum regarding its benefits and costs. [I] Much of this debate revolves around Chapter 1 1, the section of the agreement that deals with investor-state relations.

Chapter 11 gives foreign investors the right to sue the host government for damages if they believe they have en treated unfairly. In 1996, the Ethyl Corporation filed a $250 million claim against Canada under Chapter 11 regarding a gasoline additive they produced called MET. Background Interdepartmentally manganese traditional (MET) MET is an octane-improving fuel additive. The chemical compound was developed in the asses by what became the Ethyl Corporation (today part of the Afoot Chemical Corporation, but hereinafter referred to as MET was widely used in the United States and Canada, during the asses and asses in leaded gasoline.

However, due to public health concerns, MET was banned in the late asses by the U. S. Environmental Protection Agency The health effects of exposure to manganese through its use in MET are under research. Manganese, the main component of MET, is a common element of our diets in low levels. However, at high levels, manganese has been shown to be a neurotic that can cause irreversible neurological damage.

[iv] For example, manganese is among the leading toxins that are linked to developmental disabilities. V] Ethyl claims "MET has demonstrated no identifiable risk to public health;"[vi] however, the EPA says, "Although it is not possible based on present information to conclude whether adverse health effects ill be associated with [MET] exposures... , neither is it possible to conclude that adverse health effects will not be associated with such exposures. "[vii] Despite this uncertainty, Ethyl was able to overturn Pea's ban on MET through court action in 1995.

[viii] Interpretation of the scientific data was crucial to the case. Ђ The Legal Context In 1997, the Canadian Parliament adopted a law banning both the import of MET into Canada and the trade of MET between provinces. [ix] While the law did not directly ban the sale of MET in Canada, it would have had this effect since Ethyl was he only source of MET, and it produced MET only in the United States. The government had two main concerns about the product: first, the public health concerns, which were still not fully known; and second, that MET caused car exhaust systems to malfunction. X] On September 10, 1996, while the Canadian Parliament was still discussing the law, Ethyl initiated a complaint against the government of Canada. Ethyl sought $250 million in damages and lost revenues due to the ban.

The legal framework under which it made this claim was Infant's Chapter 1 1 . Chapter 11: A Primer While NONFAT is called a "free trade agreement," it is also an investment agreement. While investment agreements have been around since the asses, the push for investment liberalizing in the asses greatly expanded their scope.For the first time, investment obligations began to appear in trade agreements, including the Canada-United States Free Trade Agreement, the main precursor to NONFAT.

[xi] Chapter 11 provides rights to foreign investors and their investments. A foreign investor is defined as any person or company who makes an investment into another NONFAT party. Investments are broadly defined, encompassing both traditional reign direct investment and portfolio investment (stocks, bonds, and other financial instruments).These investors and investments are protected from a range of measures taken by governments, including certain types of national, state, or local laws; regulations implemented by these laws; and policies that affect business- government relations. The issues covered range from damages suffered during wartime to expatriating profits to prohibitions on expropriation.

Many of these rights are standard and widely accepted; however, others have provoked substantial controversy. Xii] Many of these more controversial issues are at the heart of the case between Ethyl and Canada.Ethyl Corporation versus Canada: Chapter 11 in Action Ethyl posited three main arguments under Chapter 1 1: 1. National Treatment: First, Ethyl claimed the ban on imports, which did not include a ban on internal production or the sale of MET, amounted to a breach of the obligation to treat foreign and domestic investors in a "no less favorable" manner.

[xiii] This is arguably the most fundamental of the investment agreement principles. 2. Performance Requirements: Second, Ethyl argued that the import restriction was a performance requirement" that would force them to produce MET in Canada or to use other Canadian-made products instead. Xiv] Requirements which seek to regulate the operations of foreign investors by mandating, for example, that they use a certain amount of domestically-produced goods or services, are banned by Chapter 11. 3. Expropriation: Third, Ethyl claimed that the ban was a measure "tantamount to" expropriation of its business for which it should be fully compensated.

[xv] For its part, Canada responded to the claim on two grounds. 1. No Jurisdiction: First, Canada argued that the MET law was not a performance acquirement but instead a type of trade measure that fell outside the scope of Chapter 11.Therefore, it continued, the Tribunal established by Chapter 11 to hear the complaint had no Jurisdiction in the matter. [xvi] 2. No Measure in Place: Second, Canada said that since Ethyl had filed the complaint before the measure was even enacted, it had violated certain procedural requirements of the dispute resolution process.

[xvii] Outcome of the Case On June 24, 1998, the Chapter 11 Tribunal rejected Canada's arguments on both counts. [xviii] Shortly thereafter, Canada decided to settle with Ethyl.It withdrew the an on MET, paid Ethyl $13 million in damages and legal fees, and issued the corporation a letter to use in advertising saying that current scientific information failed to demonstrate Mat's health risk or impact on car exhaust systems. Ethical/Political Issues Data-spinning: All sides in this case used data in a manner that attempted to Justify their political perspective.

Critics have argued that the onus should have been on Ethyl to show that MET was safe, in accordance with the "Precautionary Principle". Xix] This principle is understood to mean that if there are public health or environmental risks hen one should err on the side of caution. This raises the issue of whether the requirement of such a burden of proof can stand up against the government regulations under NONFAT, GAIT (the General Agreement on Tariffs and Trade), and other trade agreements. Power of NONFAT over government: The Council of Canadians put forward the assertion that NONFAT placed Canadians' health secondary to corporate interests. NONFAT leaves the government powerless to protect the health of Canadians when big business interests are at stake," it wrote.

[xx] The issue of subordinating national sovereignty to a trade agreement has strong implications for the democratic process. [xi] However, owes trade officials have argued that this is a healthy innovation. [xiii] Others point out that, without the Chapter 11 legal framework, many companies would not invest in other countries, especially those that have less established institutions.In this way it can be argued that international trade agreements help to spread the ideal of legal rights to other places. [xiii] Power of corporations and accountability: The influence of corporations over government's decision-making process also has implications for the democratic process.

Xiv] Nags worry that these corporate trade challenges' have a chilling effect on public interest policies. There was concern that the case set a precedent for the legal right of corporations to be compensated when public health regulations affect a company's profits.Profits then become as important as the publics right to good health. This also raises the ethical question of utilitarianism: what is more important here, investor rights or the greatest good for the greatest number of people? [xv] Nags also argue that Ethyl's claim that the Canadian regulations "expropriated" its investment, even though Canada did not actually take any property from the company, "constitutes a significant and potentially dangerous new limit on the exercise of basic government functions...

. Governments must retain the ability to regulate... Thou having to pay a corporation..

. To exercise this normal function. "[xvi] Questions of accountability are also relevant. Democratic governments are accountable to citizens, and corporations, who have shareholders, are arguably more accountable than MONGO, who are not necessarily accountable to anyone. Therefore, one must examine their claims to speak on the behalf of the public as well.

Ђ Lack of Transparency: The dispute settlement process is initiated directly by a foreign investor against a host state.It convenes a panel of three arbitrators (one chosen by the investor, one by the government, and the third Jointly agreed to), whose decision is binding. The arbitration takes place with limited public access to documents and no access to the actual proceedings. Yet the outcome of the process can have significant public impact. [xvii] Conclusion This case was significant in that it was the first one to raise many of these political and ethical dilemmas.

It was also the first to go to arbitration under