SUNS 4288 Friday 25 September 1998


HEALTH: CANADIANS WORRY OVER NAFTA DISPUTE MECHANISM

Toronto, Sep 23 (IPS/Paul Weinberg) -- Trade lawyers and environmentalists in Canada are concerned over the action of private corporations using sections of the North American Free Trade Agreement (NAFTA) to undermine the country's ability to protect the health of citizens.

NAFTA, which came into force in 1994, draws Canada together with the United States and Mexico and is considered a model for other international free trade agreements being negotiated in the world.

But there is a problem in the scope of investor rights within the NAFTA "not foreseen" during the treaty negotiations, says Toronto trade lawyer Larry Herman. The original intent of the section involving the process of settling disputes within NAFTA, known as Chapter 11, apparently was to protect private parties from arbitrary and discriminatory actions by a member government, he says.

U.S. investors, however, have started to use the investor-state rights provisions to challenge Canadian government legislation or regulations deemed to involve "expropriation."

It is not an option open to Canadian companies although any member government in NAFTA can be cited for not living up to its obligations under the treaty, Herman says.

This was the argument used by the US-based Ethyl Corp., the sole manufacturer of a controversial gasoline additive, MMT (methylcyclopentadienyl manganese tricarbonyl) in successfully bringing
a 350-million dollars suit against the Ottawa government.

Canadian authorities had banned MMT in 1997 after Prime Minister Jean Chretien described it as "an insidious neurotoxin" with "truly horrific effects." But it was forced to settle with Ethyl in July and officially apologise to the company - an acknowledgement that more scientific research is required on the gasoline additive before it can be outlawed.

Nevertheless environmentalists and health workers continue to raise the alarm on MMT as a toxic pollutant. Excessive amounts of manganese have been blamed on a high rate of psychosis, severe neurological disease and premature death among miners. Also, a University of Quebec in
Montreal neuroscientist, Dr. Donna Mergler reports that manganese produces symptoms similar to Parkinson's disease in humans.

The MMT case in Canada, Herman told IPS, "has heightened the concern over the danger that all kinds of laws, regulations, changes to those regulations can now be challenged through a  proceeding that is not public, that is secretive and where broad policy measures are under
attack."

Another US company, S.D. Myers Inc, has announced a $10 million claim under NAFTA's chapter 11 against Ottawa. Its Toronto-based lawyer, Barry Appleton, says that Ottawa's 15-month ban on the export of PCBs (polychlorinated biphenyls) had caused financial hardship for his client (which had contracts to incinerate the substance for a group of Canadian companies) and was "tantamount to expropriation" under NAFTA.

"NAFTA prevents governments from picking winners and losers on the sole basis of nationality. The PCB export ban was aimed directly at S.D. Myers," according to Appleton. "The very wording of the regulation mentions the company by name. Canada hurt S.D. Myers Inc. Simply because it was an American company."

Morag Simpson, a Greenpeace Canada spokesperson, however counters that Canada simply was meeting its international obligations after signing the Basle convention, which prohibits the transport of toxic substances outside the country where they are created.

Ottawa has since rescinded the export ban on PCB but a successful legal action by the Sierra Club has halted the importing of PCBs into the United States.

Simpson says that in both the Ethyl and S.D. Myers cases the only parties allowed to participate before the NAFTA dispute settlement process under chapter II are the Canadian government and the corporation seeking a claim for damages. No one else, including environmental groups, are given a chance to make a submission, she told IPS. "The Canadian public, all of us, are completely excluded from the process." The result has been that all details surrounding the settlement between Canada and Ethyl, and the current discussion with S.D. Myers, is being kept under wraps - apart from what the parties choose to reveal publicly, adds Simpson.

Barry Appleton defends the secretive nature of the chapter 11- settlement process since it involves mediation and arbitration, where the disputing parties agree to provide a greater number of internal
documents in return for confidentiality. It means less lengthy and costly litigation through the courts, he suggests.

Nevertheless, Canada's international trade minister, Sergio Marchi, in a letter to the Toronto Globe and Mail, has staked out his preference for "more openness and transparency" in the NAFTA chapter 11 process. But Maude Barlow, chairwoman of the Council of Canadians, counters that while Marchi makes these pronouncements, "it is full steam ahead for the Multilateral Agreement on Investment (MAI) with no changes to the investor state rights."

Barlow says that investor state rights lies "at the core" of all proposed new trade arrangements, including MAI, and as part of the discipline process at the International Monetary Fund. Barlow's
organization has joined Greenpeace, the Sierra Club and the Canadian Labor Congress in seeking a probe by the North American Commission for Environmental Co-operation into NAFTA's investor-state provisions.