The Metalclad Toxic waste Site and NAFTA Chapter 11 Investments Provisions Fernando Bejarano G [email protected] (52)595-95-47744

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The Metalclad Toxic waste Site and NAFTA Chapter 11 Investments Provisions Fernando Bejarano G [email protected] (52)595-95-47744 Slide 2 Summary Metalclad case was the first lawsuit by a foreign company vs Mexico Govt under NAFTA Chap 11 Metalclad challenge the denial of a municipal construction permit to reopen a toxic dump, and the creation of a State Protected Natural Area as a unfear treatment and a measure that expropriate indirectly his investment NAFTA tribunal ruled in favor of Metalclad, Mexico asked for a revision by SC Canada. Metalclad obtained $16 million US from Mexico Negative consequences because Chapter 11 is a model for protection foreign investment in the Free Trade of Americas Initiative Slide 3 Coterin San Luis Potos Mexican enterprise, involved in business of mercury recycling, and toxic landfill. After public pressure a Coterins toxic landfill was closed in Mexquitic with 70,000 hz waste, at end 1989 Short later acquired La Pedrera in Guadalcazar municipality, SLP in 1990 and lied to the community Slide 4 Deposit of 20,000 tons of haz waste, under a provisional permit to operate a transfer station Slide 5 Community opposition to Coterin Opposition from communities and municipal authorities that demand state and federal intervention of authorities but no real answer. Direct action from local people, blockading the landfill and keeping trucks with toxic drums, until environmental authorities closed the dump, in October 1991 after a inspection National Human Rights Commission Recomndtn The 20,000 toxic waste remain on site buried. Nevertheless, Coterin obtain federal/ state permits to operate the toxic landfill, only need municipal permit Slide 6 Slide 7 Metalclad-Coterin Oct 1993, Metalclad acquired Coterin, despite warnings from SLP state authorities of the inadequate of the site Metalclad planned to expand the toxic dump to storage 30 thousand tons of haz wast in the next 25 years Offered profits of 12.5 million US dls in the first year Good location of the site near a future expanded road connected to North and Center of Mexico and with two of three legal requirements to open a toxic landfill, knowing that only would need the municipal construction permit Former Enviro State official, received a commission for La Pedrera sale, acelerated the obtention of federal permits. Later became director of Metalclad consulting company and his wife a stakeholder of Metalclad holding company. Slide 8 Construction of new cells without the municipal permit Slide 9 Metalclad pressure Attempt to bribe local opposition leaders Try to influence municipal politics Organize PR media campaigns Attempt to bribe Governor SLP Pressure from stakeholders, Senators to Mexico Ambassador and President. Pressure from USA Ambassador in Mexico to Trade Dept. SLP Governor and Fed Aut.. Slide 10 The opposition to the toxic dump Local communities and Ejidos from the municipality Independence of political parties Local opposition linked with Pro San Luis Ecologico that called Greenpeace Mexico intervention, that brings national/intnal attention. Slide 11 Masive mobilization obtains Enviro Audit Info Citizen Technical Comittee conclude that Environmental Audit was preliminar, contradictory and will need more on site studies. Slide 12 The Federal Agreement and dispute with Metalclad Agreement Metalclad-Profepa-INE to reopen toxic landfill Public opposition from Governor SLP Legal disputes from municipality Lawsuits from ENGOs to federal authorities Metalclad initiate NAFTA dispute process under chapter 11 Creation of a State Natural Protection Area in Guadalcazar Slide 13 Guadalcazar is located in the most important center of concentration of cacti species in the Grand Chihuahua Desert Region Registered 18 endemic endangered cacti species Is a habitat in transition, also includes black bear, puma, venado cola blanca Slide 14 Slide 15 Metalclad Chapter 11 lawsuit The denial of the municipal construction and later, the creation of the State Natural Reserve Area was argue as Violation art 1105 unfear and discriminatory treatment Each party shall accord to investments of investors of another Party treatment in accordance with international law, including fair and equitable treatment and full protection and security. Violation art.110: tantaoumont to expropriation invest. No Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take measure tantamount to nationalizationn or expropriation of such and investment... Slide 16 Arbitration,Appelation and final negotiation ICSID-NAFTA Tribunal accept Metalclad complaints and order Mexico to pay more 16 million dls and acumulative interests to Metalclad Mexico appealed the tribunal decission to the Supreme Court of British Columbia, (SCBC) The SCBC, threw out two of the three complaints,but mantain that state natural reserve areas was Nafta violation Mexico Govermt negotiated with Metalclad, and paid $16 million dls and liberate him for any liability for the remediation of the toxic dump. In 2003 still the place has 20,000 hz tons buried on site and a dispute with SLP state about who has to paid the clean up. Slide 17 Problems with the arbitration process under NAFTA Chapter 11 Corporations are treated as international actor and the process is consider like a private commercial dispute No Public Hearings during the arbitration process. Municipal and State can not participate directly but trough Federal Govt No transparent and democratic process No environmental or health issues are sufficient considered in the arbitration process The perversion of the Polluter-Pay Priciple: polutter did not pay, but was paid. Slide 18 Conclusions The Chapter 11 is used as a political pressure to intimidate municipal and state governments Recommendation: Chapter 11 has to be reviewed to preserve democracy and sovereignity of municipal and state governments. NAFTA chapter 11 is not a good model for future foeign protection investments for other free trade agreements in the Americas.