- The Washington Times - Monday, October 7, 2002

The Bush administration plans to restrict the ability of foreign companies to sue American governments when it negotiates new free-trade agreements, U.S. trade officials say.
The North American Free Trade Agreement permits corporations to sue for monetary damages if they believe federal, state or local governments have violated NAFTA rules on foreign investment.
Congress, reacting to a string of NAFTA-inspired lawsuits against the United States, in August directed the administration to put greater restrictions on lawsuits when it granted President Bush negotiating authority for new agreements.
"The trade promotion authority act gives us very specific guidance," U.S. Trade Representative Robert B. Zoellick told reporters. "We took that as a template."
The new system, which Mr. Zoellick hopes to incorporate into free-trade deals with Chile and Singapore this year, will make impossible lawsuits similar to those brought under NAFTA, said administration officials who requested anonymity.
"We're trying to prevent [these types of cases] from being brought in the future," one official said.
The approach will include a legal procedure for dismissing frivolous claims and will hold companies to higher standards in proving that government actions have harmed their investments, U.S. officials said.
The stance has irritated industry groups that have pushed for tough investor-protection rules, including the right to sue, on grounds that they shield American investments abroad from being damaged or even expropriated by hostile governments.
"The business community believes that trade agreements currently under negotiation need to maintain the standard of investment protection provided by existing agreements, including NAFTA," said Calman Cohen, president of the Emergency Committee for American Trade, a business group.
The system, known as investor-state arbitration, was designed to protect the investments of American companies in poorer countries that have ineffective judicial systems. But after the passage of NAFTA in 1994, state and local governments became unnerved by how foreign firms used it against the United States.
Canadian companies are using the system to challenge a California ban on a water-polluting chemical, a decision by the Massachusetts Supreme Court and a Mississippi court case involving the funeral-home industry.
Montreal-based ADF Group has used the system to challenge its exclusion from the Mixing Bowl highway project in Springfield under laws that channel federal construction dollars to American companies. The company is seeking $90 million in damages.
Environmental groups have cited the investor lawsuits in their arguments against NAFTA in particular and free trade in general. David Wascow, trade policy coordinator at Friends of the Earth, said Mr. Zoellick is trying to defang the issue but that the Bush administration is not tough enough on companies that want to use the system.
"Politically, Zoellick wants to avoid a fight," Mr. Wascow said. "I don't know if this will prevent one for the long term, though."
One congressional staffer, who asked to remain anonymous, countered that Mr. Zoellick's approach went a long way toward addressing lawmakers' complaints about the NAFTA system.
"The environmentalists aren't satisfied, but that will never be the case," the staffer said.


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