The Metalclad Toxic waste

Site and NAFTA Chapter 11

Investments Provisions
Fernando Bejarano G
rapam@prodigy.net.mx
(52)595-95-47744

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

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

Deposit of 20,000
tons of haz waste,
under a
provisional permit
to operate a
transfer station

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

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.

Construction of new cells without

the municipal permit

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..

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.

Masive mobilization obtains

Enviro Audit Info
Citizen Technical Comittee
conclude that Environmental
Audit was preliminar,
contradictory and will need
more on site studies.

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

Creation of a State
Natural Protection
Area in
Guadalcazar
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

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...

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.

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.

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.