- The Washington Times - Thursday, August 8, 2002

An international tribunal yesterday largely dismissed a claim by a Canadian corporation that California violated free-trade rules when it banned a chemical that was polluting the state's drinking water.
The Canadian firm, Methanex of Vancouver, British Columbia, is demanding $970 million in damages in a suit filed under the rules of the North American Free Trade Agreement. The ruling was seen as a blow to the case, though the tribunal gave Methanex a final chance to argue why the case should proceed.
"It's a pretty significant victory for the United States," said Edwin Williamson, a lawyer with Sullivan and Cromwell in Washington and a former legal adviser to the State Department, which defends the United States in NAFTA cases.
If Methanex were to prevail, the federal government would have to pay the claim, or California could be forced to revoke the ban. But such a turnaround appears unlikely.
Michael Macdonald, vice president for planning and development for Methanex, said it was still assessing the 94-page decision and planning its next move.
"It's a big and complex document," he said.
The Methanex case stems from California's moves in 1999 to ban MTBE, a gasoline additive that makes fuel burn cleaner. Several California cities discovered that the chemical was seeping from underground storage tanks into groundwater, giving drinking water a bad odor and taste.
Gov. Gray Davis that same year ordered a phaseout of the chemical by 2002.
Methanex, which manufactures the key ingredient in MTBE, brought its case against California under Chapter 11 of NAFTA, a provision that allows foreign investors to file claims with governments. It argued that Mr. Davis banned the substance, not to protect public health, but to help Archer Daniels Midland, a Decatur, Ill.-based corporation that produces ethanol, a competing gasoline additive.
The Canadian firm pointed to a $200,000 campaign contribution from the American company to Mr. Davis as evidence that the governor imposed the ban to eliminate a competitor to ADM. Methanex argued that the prohibition violates NAFTA rules that guarantee equal treatment for Canadian companies.
But the three-person NAFTA tribunal, which includes former U.S. Secretary of State Warren Christopher, expressed strong skepticism that the California governor was aiming specifically at Methanex when he imposed the ban. It said that the tribunal could not "identify a single or predominant purpose," such as targeting Methanex, in what Mr. Davis did.
The tribunal offered a final chance for Methanex to prove its claim by submitting a new legal brief within 90 days. But Todd Weiler, an assistant professor at the University of Windsor in Canada who has worked on several NAFTA cases, said the company has very little to go on.
"They have thrown out an awful lot of Methanex's claim," he said.
Environmental groups and other activists that have railed against the Methanex case and other NAFTA lawsuits cheered the decision, but argued that the tribunal should have dismissed the complaint entirely.
"The panel sent a bad signal by not throwing out the entire case," said Lori Wallach, director of Global Trade Watch, a group founded by consumer advocate Ralph Nader.

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