Another Broken NAFTA Promise: Challenge by U.S. Corporation Leads Canada to Repeal Public Health Law

Ethyl Wins $13 million Settlement and Repeal of Ban on Controversial Gasoline Additive

September 18, 2001

What Congress and U.S. consumer and environmental groups were promised could not happen just did: Canada has repealed a national public health law after it was challenged under NAFTA.

The Canadian ban on the gasoline additive MMT was challenged directly under NAFTA rules by MMT's producer, U.S.-based Ethyl Corporation. The corporation was able to bully the sovereign government of Canada into abrogating its duty to protect the health and safety of its citizens.

The case provides the latest evidence that recent international trade and investment agreements are leading to the elimination of important environmental, consumer, health and human rights laws.

In the past two years, the Clinton Administration has pushed through Congress a repeal of a successful dolphin protection after it was threatened with a WTO challenge and weakened reformulated gasoline cleanliness regulations of the Clean Air Act after they were successfully attacked by Venezuela at the WTO.

As well, the Administration has been pressuring state legislatures not to pass human rights laws that might conflict with WTO rules: in Maryland investment and trade sanctions against Nigeria's dictatorship and in Massachusetts measures against the dictatorship of Burma.

In the Ethyl case, Canada repealed its ban on MMT and agreed to pay Ethyl $13 million in order to avoid the $250 million damages Ethyl claimed in its NAFTA suit. Ethyl's challenge to the Canadian law was the first suit initiated under NAFTA provisions that allow corporations in one country to directly sue the government of another country for cash damages.

In April 1997 Canada imposed a ban on the import and interprovincial transport of the gasoline additive MMT. Some U.S. states also ban MMT, whose primary ingredient, manganese, is a known human neurotoxin. Ethyl responded to Canada's public health law with a $250 million lawsuit claiming the law violated its investor protections under NAFTA. Ethyl argued that the law was an "expropriation" of its assets or an action "tantamount to expropriation" because it would eliminate profits Ethyl expected to earn through Canadian sales of the additive.

The Canadian government settled the NAFTA suit yesterday agreeing to pay Ethyl $13 million in damages and to cover the company's legal costs. It will also proclaim publicly that MMT is "safe" in direct contradiction of the view of its national environmental protection agency.

Trade negotiators in the U.S. and Canada have generally dismissed concerns that trade and investment agreements would have a "chilling effect" on public interest laws. The outcome of the Ethyl case demonstrates that corporations can and will use the rights granted to them under trade agreements to attack and in some cases eliminate public health and environmental laws.

If a country with the economic standing of Canada can be forced to repeal its public health laws, the threat is obvious for environmental and health and safety protections worldwide, including in the U.S.

Even before Ethyl forced Canada to dump its public health law, a more potent version of the NAFTA provision Ethyl employed had become one of the most controversial elements of the proposed Multilateral Agreement on Investment.