Want to know how corporations are subverting our state and national laws, LEGALLY, under NAFTA, and what to expect from the FTAA? Read this report: NEW STUDY ANALYZES SEVEN YEARS OF CORPORATE INVESTOR CHALLENGES TO DEMOCRATIC GOVERNANCE UNDER NAFTA September 25, 2001 Corporations are using new rights and privileges granted under the North American Free Trade Agreement (NAFTA) to challenge a variety of national, state and local policies and decisions, a new report has found. The report, "NAFTA Chapter 11 Investor-to-State Cases: Bankrupting Democracy," was produced by Public Citizen's Global Trade Watch and Friends of the Earth. Check it out at http://www.citizen.org/pctrade/bankrupt.pdf Boasting nearly three hundred footnotes, the report reviews the track record of cases brought under NAFTA's investment chapter, which granted expansive new rights and privileges to foreign investors operating in the three NAFTA signatory nations: Mexico, Canada and the United States. Since NAFTA was implemented in 1994, corporate investors in all three countries have used these new investor rights to challenge a variety of national, state and local policies and decisions. Corporations claim that these governmental regulatory policies are "tantamount to" an expropriation of private property and therefore require compensation from the taxpayers of the country in which they are investing. Of the fifteen cases reviewed in the report, companies have claimed more than $13 billion in compensation for actions that most folk consider to be normal regulatory activity. The issue is timely because President Bush has asked Congress to delegate to him six years of constitutional authority over international trade through a process called Fast Track. Bush seeks Fast Track trade authority to expand NAFTA rules to an additional thirty-one Latin American nations by 2005 through the Free Trade Area of the Americas (FTAA). Inasmuch as certain members of Congress are trying to bring Fast Track to a floor vote this fall, analysis of the impacts of seven years of NAFTA is urgently needed. "These nefarious provisions of NAFTA undermine the basic principles of our federal system of government, where states are permitted to establish their own protections for their citizens," explained U.S. Rep. George Miller (D-Martinez) at a recent press conference in the California State House in Sacramento. "Under NAFTA Chapter 11, the U.S. government is forced to place the interests of foreign corporations over the interests of individual states in our union." The study shows how a variety of government policies and actions have been challenged by corporations as NAFTA violations, including environmental and public health policies, a state judicial decision upheld by the U.S. Supreme Court, a jury verdict in a civil suit, a U.S. federal procurement law and even a government's provision of postal services. One of the best-known NAFTA cases involves California. Methanex Corporation of Canada has filed a NAFTA case for one billion dollars over California's decision to phase out the gasoline additive MTBE, which is contaminating water supplies around the state. "The study documents a number of extraordinary attacks on normal government activities that are part of operating the civil justice system or legislative work establishing environmental or public health regulation," said California State Sen. Sheila Kuehl. "State legislators need to be aware that under NAFTA, the U.S. could be required to compensate any foreign corporation that feels that a state measure is negatively impacting its investment. Protecting the interests of the citizens of their state is the legislature's first job, not protecting the investment rights of foreign corporations." Key findings include: Foreign Investors Granted Greater Rights Than U.S. Corporations or U.S.Citizens. The cases analyzed in this report show how NAFTA's investor protections are being used by foreign investors to demand payment, not for "expropriations" or seizure of property, but more commonly for any government action that impacts an investor's expected future profits. Yet this notion of "regulatory takings" does not exist in U.S. law. Given that it would eviscerate basic government policymaking, it has been rejected byCongress and the courts. Attempts to legislate a broader definition of property rights through regulatory takings legislation has been repeatedly rejected by Congress. Private Corporate Enforcement of NAFTA Privileges. NAFTA provides foreign investors the ability to privately enforce the new rights and privileges granted by NAFTA in trade tribunals. Called "investor-to-state" dispute resolution, this extraordinary mechanism empowers private investors and corporations to sue NAFTA signatory governments for an unlimited amount of taxpayer dollars, behind closed doors and outside the nation's judicial system. Foreign Investors Could Evade Legal Liability. NAFTA's investor-to-statetribunals provide an avenue for foreign litigants to escape liability and seek government compensation for damages ordered by U.S. courts. One Canadian corporation is seeking $725 million from U.S. taxpayers because of an adverse jury verdict in a private breach-of-contract case in aMississippi court. This special right of "appeal" is a privilege enjoyed only by foreign investors; domestic companies must abide by the decisions of domestic courts. Principle of Sovereign Immunity Attacked. In addition to the implications for state sovereignty when governmental decisions are second-guessed and undermined by NAFTA panels, the long-standing common law legal principle of sovereign immunity itself has been attacked in a NAFTA case. A Canadian corporation involved in a contract dispute with the city of Boston is challenging a Massachusetts Supreme Court ruling (upheld by the U.S. SupremeCourt) that the city agency involved in the dispute was immune from liability due to sovereign immunity. Chilling Effect on Public Interest Policy. In the first NAFTA corporate case, the U.S. Ethyl corporation filed a suit challenging a Canadian environmental and public health measure restricting a gasoline additive it developed as the ban was being debated in parliament. The Canadian government caved in to pressure, revoked its law and compensated the corporation $13 million, demonstrating that the potential to bully even governments of wealthy developed countries under Chapter 11 is enormous. NAFTA Environmental Protections Meaningless. In the NAFTA corporate investor challenges decided to date, NAFTA text language purporting to protect the environment has been given such short shrift by NAFTA tribunals as to render these so-called protections meaningless. In one case involving the construction of a toxic waste treatment facility in Mexico, the environmental and health concerns of the community were given little to no consideration by the NAFTA tribunal that ruled in the company's favor. Governments Subject to Endless Second-Guessing by NAFTA Tribunals. A tribunal in one case found that Canada's temporary ban of PCB exports based on environmental concerns was reasonable. However, the tribunal also ruled that Canada's actions were a NAFTA violation and the company deserved compensation because the manner in which Canada sought to implement its environmental goal was not in the least trade restrictive manner possible. Potential Cost to the Taxpayers in the Billions. In the end, it is the taxpayers of the challenged country who must pay the compensation to a corporation if it succeeds in its NAFTA suit. In the first seven years ofNAFTA, with only a small number of cases filed, an astonishing $13 billion has been claimed by corporations in their initial filings: $1.8 billion from U.S. taxpayers, $294 million from Mexican taxpayers and a whopping $11.3 billion from Canadian taxpayers. From Defense to Offense. Although the NAFTA provisions on expropriation or actions "tantamount to" expropriation were originally supposed to protect investors against nationalization or state seizure of property, a number of corporations using NAFTA's private enforcement are not attempting to claim expropriation of their property when initiating NAFTA Chapter 11 cases. Rather, they are relying on other provisions of NAFTA to bring a privatetrade case in an effort to improve their strategic position in themarketplace. Mike Dolan Western Director Global Trade Watch Public Citizen 510-663-0888 fax 663-8569 www.tradewatch.org Join the Global Trade Watch list-server, TW-LIST, and receive regular (but not too frequent) updates and alerts on U.S trade policy and the international movement against corporate globalization. To subscribe, send an email to me: mdolan@citizen.org (message, "subscribe TW-LIST") or else visit our web-site and do it 'on-line' ---> http://www.citizen.org/pctrade/listserv2.html