Tribunal Signals Limited Local Authority in Trade Disputes

Article excerpt

In a week when President Bush beamed as he signed the fast-track legislation into law, an international trade panel ruled that a Canadian corporation has limited grounds to challenge a state's environmental laws.

At the time Nation's Cities Weekly went to press, a NAFTA panel voted to give a Canadian corporation 90 days to reargue why the case should proceed. In Methanex v. U.S., a Canadian corporation sought $990 million in compensation for California's law requiring the phase out of the gas additive MTBE that has been found to poison ground water.

Methanex, which manufactures methanol to companies who make MTBE, argued that the regulation to decision to ban MTBE was a governmental "takings" of the future profits of the company. Methanex also challenged that California's regulation lacked scientific basis.

Following a three-year legal battle, the tribunal issued a complicated ruling that failed to rule on the merits of the case.

Rather the three-person panel concluded that Methanex failed to show that the California regulation directly affected the company's methanol business.

In sum, the panel is providing Methanex another opportunity to demonstrate that its product was harmed by a state regulatory action. The panel noted that Methanex failed to show California intended to target foreign producers of methanol when it issued the 1999 regulation.

Environmental groups that have been closely following this case found the decision "confusing." A spokesperson for the Sierra Club added, "It's definitely not a dismissal. They could have done that and we're disappointed that they didn't do that. We thought that the case was a stretch from the beginning."

Segundo Mercado-Llorens, a government affairs consultant who has been working on international trade for over a decade, stated that this decision "is potentially a roadmap for future litigants seeking to challenge federal, state and local regulation."

Mercado-Llorens points out that had Methanex been an MTBE producer, the outcome of the ruling would have differed. …