American Journal of Law & Medicine

NAFTA & the Alien Tort Claims Act: making a case for actionable offenses based on environmental harms and injuries to the public health.(Globalization of Pharmaceuticals: International Regulatory Issues)

I. INTRODUCTION

Multinational corporations often wield more power than many of the world's nations. Their immense wealth and political capital make them almost hegemonic entities. These domineering enterprises are often able to undertake profit-making endeavors, particularly involving the consumption or extraction of natural resources, in developing nations with little or no regulation, and often without meeting the social and environmental standards adhered to in the United States.

The emergence of multilateral free trade agreements, specifically within the developing world, has further enhanced the ability of multinational corporations to proliferate their business. Concomitant with the rise of free trade, political and legal barriers to multinational entry into the economy of developing nations are rapidly disappearing. In addition, many nations are unwilling and unable to protect their citizens from environmental abuses through domestic law. Therefore, finding a legal mechanism capable of checking the hegemonic power of multinational corporations is extremely important to the vitality of most developing nations.

This Note will demonstrate that some victims of environmental abuse by multinational corporations may have a cause of action under the Alien Tort Claims Act (ATCA). (1) The statute opens federal courts to civil suits by aliens for torts committed in violation of customary international law, even when the case involves acts perpetrated in another country by a non-U.S. actor. Customary international law arises out of a consistent state practice recognized out of a sense of legal obligation. (2) Evidence of customary international law can take many forms, so long as it reflects state practice and a sense of legal obligation. (3) Such laws are likely to be found in treaties. "Where there is no treaty, and no controlling executive or legislative act or judicial decision, [courts] must resort to the customs and usages of civilized nations" as evidence of customary international law. (4)

To date, no federal court has recognized the viability of ATCA suits for violations of environmental and public health norms of customary international law. (5) Since 1980, however, various jurisdictions have allowed the ATCA to remedy human rights violations by state and corporate actors. (6) Some commentators have argued that a right to a healthy environment is a component of internationally-recognized human rights. (7) It was not until recently that the Supreme Court addressed the scope of the statute in Sosa v. Alvarez-Machain. (8) This Note looks at the ATCA jurisprudence and analyzes the statute's availability as a remedy for individuals who have suffered environmental injury as a result of the North American Free Trade Agreement (NAFTA).

Part I of this Note briefly describes NAFTA and the dispute resolutions systems that enable NAFTA investors to abuse the environment and endanger the public health without repercussions. Specifically, Part I analyzes how the dispute mechanisms provide a disincentive to regulatory enforcement and therefore amplify public health concerns in Mexico and the United States. In analyzing this problem, two NAFTA cases are examined; Metalclad Corporation v. United Mexican States (9) and Methanex Corporation v. United States of America. (10) Part II discusses the Alien Tort Claims Act in general, and specifically explores the extent to which the ATCA enables federal jurisdiction for environmental degradation, especially in light of the recent United States Supreme Court decision in Sosa v. Alvarez. (11) Finally, Part III argues that the ATCA provides a cause of action for injures to the environment to the extent that they are human rights violations.

II. THE NAFTA PROBLEM

A. A BRIEF HISTORY

In 1993, the United States of America, the United States of Mexico, and Canada adopted the North American Free Trade Agreement. (12) The goals of the trade agreement included eliminating trade barriers, promoting fair competition, and increasing investment opportunities throughout the three countries. (13) In addition, the environmental side accord pledged to work toward broad improvements in the conservation, protection, and enhancement of the environment. (14) The accord, known as the North American Agreement on Environmental Cooperation (NAAEC), came as a result of heavy political pressure from a coalition of mainstream and grassroots environmental interest groups in the United States.

When NAFTA and the NAAEC became effective in 1994, many scholars labeled the multilateral agreement the "greenest" trade agreement in history. (15) NAFTA contains several provisions specifically relating to environmental matters. (16) Specifically, the NAAEC allows any individual resident or non-governmental organization of a member state to file a submission "asserting that a Party is failing to effectively enforce its environmental law." (17) These so-called "citizen submissions" are designed to bring to light environmental abuses by NAFTA investors. (18) Although NAAEC appears to be an ambitious multinational effort to curb environmental degradation, there are deficiencies that have limited the NAAEC's and NAFTA's capacity to become a major mechanism in environmental protection and public health.

First, NAFTA attempts to liberalize trade by reducing trade barriers. Often those trade barriers include domestic health and safety regulations. (19) In other words, participation in NAFTA requires member states to alter their health regulatory structures to facilitate more trade. (20) Of the three NAFTA member states, Mexico, as a developing nation with a lax enforcement regime, is the most at risk for such exposure. If a member state resists and creates barriers to foreign investment, NAFTA provides multinational corporations the political, economic, and legal leverage needed to force compliance.

NAFTA's investor protections allow multinational corporations to challenge health and safety regulations which may pose barriers to trade. Specifically, Chapter 11, discussed more fully below, stacks a seemingly insurmountable deck against those individuals who become victims of environmental degradation and the resulting effects on public health.

Since its enactment, NAFTA has spurred an unprecedented amount of foreign direct investment and industrial activity within Mexico. (21) Trade in goods has almost doubled from approximately $350 billion to over $700 billion in 2000. (22) Specifically, Mexican exports and imports have seen a four-fold increase, expanding from $40 billion to more than $170 billion. (23) The Mexican maquiladora (24) sector has more than doubled from 1,700 plants in 1990 to 3,600 in 2001 and includes more than 700,000 workers. The NAFTA region produces over $11 trillion worth of goods and services, making it the largest trading block in the world. (25)

Concurrent with all this economic growth has been extreme environmental degradation in the maquiladora communities, both along the U.S.-Mexico border and within the indigenous regions in southern Mexico. (26) As a result, the rates of communicable and infectious diseases are significantly higher in maquiladora communities. For example, along the U.S.-Mexico border, salmonella rates are 26% higher than the rest of Mexico. (27) In addition, hepatitis A infection rates are more than double the Mexican national rate. (28) The economic costs have averaged $36 billion per year, or 10% of Mexico's annual gross domestic product. (29)

The public health risks are evolving and are no longer confined to Mexico. As shown below, NAFTA's investor protections infringe upon the ability of states to regulate their environments and thus protect the public health.

B. CHAPTER 11 HIJACKS LEGITIMATE ENVIRONMENTAL AND PUBLIC HEALTH REGULATIONS

Chapter 11 of the NAFTA Charter creates broad protections for foreign investors in an effort to reduce barriers to foreign investment. (30) These barriers often include national health and safety regulations. (31) Specifically, Chapter 11 is designed to protect investors by ensuring compensation for government expropriation. (32)

What distinguishes Chapter 11 from the other NAFTA dispute mechanisms, (33) is that "private investors have direct access to arbitration" against NAFTA states. (34) In other words, sovereign immunity is not a bar to the NAFTA investor. Indeed, Chapter 11 empowers multinational corporations to sue NAFTA states for cash compensation over the state's enforcement of their own regulations. A number of Chapter 11 claims against Mexico and the United States have raised concerns that the provision could chill environmental regulation, endanger state sovereignty, and contribute to the deterioration of public health in the maquiladora sector and beyond.

As a result, Chapter 11 has effectively negated any ability of NAFTA states to protect the environment and public health from NAFTA investors.

1. How Chapter 11 Works

Chapter 11 establishes firm guidelines for government expropriation of investments covered by NAFTA. (35) Specifically, the provision covers direct, indirect, and so-called "creeping" expropriations. (36)

Article 1110 provides:

(1) No Party may directly or indirectly nationalize or expropriate an investment of an investor of another Party in its territory or take a measure tantamount to nationalization or expropriation of such an investment ("expropriation"), except: for a public purpose; on a non-discriminatory basis; in accordance with due process of law and Article 1105(1); and on payment of compensation in accordance with paragraphs 2 through 6.

(2) Compensation shall be equivalent to the fair market value of the expropriated investment immediately before the expropriation took place ("date of expropriation"), and shall not reflect any change in value occurring because the intended expropriation had become known earlier. Valuation criteria shall include going concern value, asset value including declared tax value of tangible property and other criteria, as appropriate, to determine fair market value.

(3) Compensation shall be paid without delay and be fully realized. (37)

Articles 1116 and 1117 grant NAFTA investors the right to seek arbitration, on behalf of themselves or on behalf of an enterprise, against another NAFTA state for injury or loss due to alleged violations of Chapter 11 provisions. Articles 1118 through 1137 set out the procedures for Chapter 11 dispute settlement. Complaints brought under Chapter 11 are resolved based on the arbitration rules of either the United Nations Commission of International Trade Law (UNCITRAL) (38) or the International Centre for the Settlement of Investment Disputes (ICSID). (39) The claim is heard by an arbitration tribunal which may award monetary damages, interest, restitution of property and costs for arbitration. If the losing NAFTA state does not comply with the arbitral award, the member state of the private investor may temporarily suspend NAFTA trade benefits to the non-compliant member state. (40) In addition, there is no appellate review of Chapter 11 arbitrations. (41)

2. Undermining the Public Health: Chapter 11 in Action

a. Metalclad Corp. v. United Mexican States

In 1996, Metalclad, a United States corporation, filed for Chapter 11 arbitration on behalf of Confinamiento Tecnico de Residuos Industriales (COTERIN), a Mexican waste disposal company wholly-owned by Metalclad's U.S. subsidiary. (42) The dispute arose over a Mexican municipality's refusal to issue a building permit for a hazardous waste facility, citing environmental concerns and community opposition.

i. Factual Background

La Pedrera, the site of the landfill, is located in Guadalcazar, San Luis Potosi, a sparsely populated and highly impoverished region of Central Mexico. (43) The region lacks running water and most other basic public services. (44) The local inhabitants rely mostly on "ranching and small scale, communal agricultural production" for survival. (45) "The municipal government's only phone-line is shared with a public payphone; it has one station wagon, a jail and two peace officers." (46)

Initially in 1990, the Mexican federal government authorized COTERIN to construct and operate a hazardous waste transfer station in La Pedrera. (47) However, COTERIN was found disposing untreated waste onsite rather than storing and transferring the waste, as the Mexican government had authorized. (48) Eventually, it came to light that over 20,000 tons of untreated hazardous waste was dumped onsite. (49) After eleven months of illegal dumping by COTERIN and fierce local opposition, (50) the Mexican government finally was able to close the transfer station in September 1991. (51) The damage to the community, however, was already done, as the rains carried toxic waste to the region's reservoirs, affecting livestock, crops, and drinking water. (52)

Twice after the federal closing of the transfer station, COTERIN applied for a permit from the Guadalcazar municipality to expand its La Pedrera site by constructing a hazardous waste landfill. (53) Both times the municipality rejected COTERIN's application. (54)

COTERIN persisted, however, and eventually, in 1993, Mexico's National Ecological Institute (55) (INE) issued a federal permit to COTERIN for the construction and operation of a hazardous waste landfill in Guadalcazar. …

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