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Friends of the Earth and NRDC: The Threat to the Environment From the Central America Free Trade Agreement: The Case of Harken Costa Rica Holdings and Offshore Oil

By Public Citizen's Global Trade Watch

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The case of Harken Costa Rica Holdings – a firm with close corporate ties to Harken Energy of Texas, President Bush’s former oil company, and MKJ Xplorations of Meterie, LA – illustrates the intense pressure small developing countries face to compromise their environmental laws, and how the Central American Free Trade Agreement (CAFTA) would make matters worse.

CAFTA’s investor suit rules would undermine environmental and labor laws by allowing foreign companies to bring “compensation” claims before international tribunals, circumventing national courts. A multinational investor could, for example, demand “compensation” in cases where environmental laws limit offshore oil drilling or mining and impair the investor’s business interests. Even if claims do not succeed, companies can use the threat of international suits to intimidate small developing countries into settling for large sums of money or changing their laws and regulations.

Both Mexico and Canada have already lost investor suits over environmental protections under similar investor suit rules in Chapter 11 of NAFTA. The U.S. faces Chapter 11 environmental suits totaling more than $1 billion.