Metalclad vs. Mexico, Toxic Waste and NAFTA | Solidarity

Metalclad vs. Mexico, Toxic Waste and NAFTA | Solidarity
Metalclad vs. Mexico, Toxic Waste and NAFTA
— Gerard Greenfield
LAST AUGUST 25 the NAFTA Tribunal for the case of Metalclad Corp vs. Mexico ruled in favor of Metalclad, ordering the Mexican government to pay US$16.7 million in compensation. It is the first ruling in an investor-to-state lawsuit under NAFTA.

In October 1996, Metalclad Corporation, a U.S. waste-disposal company, accused the Mexican government of violating NAFTA's Chapter 11 when the state of San Luis Potos<161> refused it permission to reopen a waste disposal facility.

The state governor ordered the site closed down after a geological audit showed the facility would contaminate the local water supply. The governor then declared the site part of a 600,000-acre ecological zone. Metalclad claimed that this constituted an act of expropriation and sought US$90 million in compensation.

All of these cases are based on the "rights" of investors guaranteed in NAFTA's Chapter 11, where a broad definition of "expropriation" is combined with the right of investors to directly sue governments for compensation (under "investor-to-state" dispute resolution).

A September 1 article in The Globe & Mail on the Metalclad ruling (again) drew attention to the threat posed by Chapter 11 to government regulations protecting the environment and public health. This may even add to the ongoing (though low-key) debate on whether the wording of investment rules should be revised.