On August 3, 2005, an international tribunal rejected the claims of the Canadian corporation Methanex that California’s ban on the use of MTBE in gasoline violated investor protection provisions of the North America Free Trade Agreement. The state banned MTBE after it was shown to contaminate groundwater supplies when it seeped out of gasoline storage tanks. Earthjustice, on behalf of US-based environmental groups Bluewater Network, Communities for a Better Environment and the Center for International Environmental Law filed the first third-party amicus brief ever allowed in a NAFTA trade dispute.
Earthjustice attorney Martin Wagner called the decision “good news for California’s groundwater, but no assurance against future foreign challenges to U.S. environmental measures,” warning that the case was thrown out largely on standing issues and because the claims of nearly $1 billion in damages were so extreme. Unfortunately, the decision does not settle ongoing concerns about investor-protection language in NAFTA that could still undermine environmental laws and health standards. Wagner also noted that international trade tribunals are freshly constituted for each dispute and are not bound by previous decisions. Challenges under NAFTA and other trade agreements based on investor-protection provisions, continued.