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Trading Democracy

In a new PBS special, Bill Moyers exposes what may be the acme of global corporate malfeasance -- a law that penalizes governments for trying to protect their citizens.
 
 
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We all know that the U.S. is the most litigious society in the world, that there are more lawyers involved in more far-fetched lawsuits and more people working late into the night figuring out how to win more settlement cash than in any time in any place in history.

But did you know that litigation fever has stretched beyond Court TV to lawsuits in which corporations take on democratically elected governments in closed trade tribunals? Did you know, for example, that last October, Mexico paid over $16 million to an American landfill company on the grounds that the local Mexican government had "expropriated the company's investment" by turning the area into an ecological zone in order to protect its citizens from toxic pollutants?

Welcome to Chapter 11, an obscure provision of North American Free Trade Agreement and the subject of the latest Bill Moyers/Sherry Jones documentary, "Trading Democracy." In the one-hour investigation to be aired on most PBS stations the evening of Feb. 5, Moyers' team lays out what may very well be the acme of global corporate malfeasance.

Like many frightening things, this devil is in the fine print: a one-page specification (in the 555-page NAFTA document) which allows corporations to demand compensation from governments if city, state or even federal laws harm the companies financially. Basically, Chapter 11 makes the protection of corporate profit the rule of the land -- from Canada's Queen Elizabeth Islands, straight through America, to Mexico's Yucatan Peninsula.

"When the North American Free Trade Agreement became the law of the land almost a decade ago, the debate we heard was about jobs," Moyers says at the beginning of the documentary. "One provision was too obscure to stir up controversy. It was Chapter 11 ... and since NAFTA was ratified, corporations have used [it] to challenge the power of governments to protect their citizens, to undermine environmental and health laws, even attack our system of justice."

And you thought credit card agreements were bad. But the horror of NAFTA's Chapter 11 is that unlike the small print in credit card contracts, the Chapter 11 agreement is not revocable. In fact, as the Moyers documentary clearly illustrates, Chapter 11 is being exploited with vigor by multinational corporations and their teams of savvy, high-paid lawyers -- the very people who helped draft NAFTA in the first place. Says one lawyer interviewed in the film, "Lawyers are creative people ... They are hired to be creative."

In "Trading Democracy" we hear of the case of Methanex, a Canadian company that is the world's largest producer of the key ingredient in the gasoline additive MTBE, which was found to be a carcinogen. In 1995, MTBE was discovered in wells throughout California, and by 1999 had contaminated 30 public water systems and 10 ground water sites. California, reasonably enough, ordered the additive to be phased out. Methanex then filed suit under Chapter 11, even though it knew its product could pollute water systems and cause cancer. Methanex is seeking $970 million in compensation from the U.S. government for loss of market share and future profits.

As of this writing, the Methanex case has not been decided, and one can only hope the company willdrop its suit, if only for fear of bad public relations. But there is no opportunity for the public -- particularly Californians whose homes or health have been damaged by MTBE -- to present their views in a court of law. The deliberations will be secret and decided by a three-man NAFTA-appointed tribunal consisting of experts on international law. It will be a test of whether international corporate trade is more powerful than a government's mandate to protect the health of its people.

"I call [the NAFTA tribunal] an exclusive court for capital," says journalist William Greider, who appears in "Trading Democracy." He points out that "If Methanex wins its billion dollar claim over California environmental law, there ain't gonna be many states enacting that law, are there?" Greider's main argument is that Chapter 11 "hobbles the authority of government to act in the broader public interest. And, in fact, that was the idea in the first place."

Moyers builds a pretty tight case against Chapter 11. True, he interviews only one proponent of the measure -- Edmund Williamson, legal counsel to the State Department during the NAFTA negotiations, who tepidly argues that governments abiding by Chapter 11 strengthen their country's "rule of law." But the lack of pro-NAFTA voices has more to do with interviews refused than requested. Why would Carla Hills, for example, want to talk to Moyers? Hills was chief NAFTA negotiator for the U.S. government, and is now president of her own international consulting firm. Since NAFTA's passage, she has used Chapter 11 to bully the Canadian government from creating more environmentally friendly cigarette packaging -- probably not something she wanted to discuss on-camera with Moyers.

In the end, Moyers makes clear that Chapter 11's main hope -- and chance for inclusion in the 31-country Free Trade of Americas Agreement -- is public ignorance. International legal experts, trade negotiators and corporate law attorneys may know about Chapter 11, but the public certainly doesn't. Nor, probably, do most elected officials.

Among Moyers' most effective illustrations of Chapter 11's political power for corporations is a segment taped south of the border. In the Mexican state of San Luis Postosi, we are treated to the lugubrious story of an American company called Metaclad, which seeks to reopen a toxic waste dump that many citizens claim is making them sick.

Metaclad managed to get the green light from the Mexican federal government to take over the dump on the condition that it remove the toxins within five years. However, the San Luis Postosi city council demanded the cleanup happen first. Metaclad refused. Protests erupted around the site. In the end, Metaclad sued the Mexican government under Chapter 11 and won $16 million in compensation. The suit didn't argue that Mexico had taken money or property from Metaclad -- simply that Mexico's actions were "tantamount to expropriation."

Said Martin Wagner, an attorney for the Earth Justice League Defense Fund, who appears in the film: "Not only do governments have to compensate when they expropriate or take away property, but they have to do so whenever they do something that is 'tantamount to expropriation.'"

Scary, huh? But perhaps even more scary is the last case covered in "Trading Democracy," which could conceivably open the U.S. civil justice system to challenge from NAFTA law. The case takes place in Mississippi, where a Biloxi funeral home owner was awarded punitive damages in a civil suit against a large Canadian corporation called the Loewen Group. The local funeral home owner alleged that the Loewen Group had engaged in "fraudulent" and "predatory" trade practices. The jury agreed with this allegation, awarding him $500 million. Three years later, the Loewen Group filed a Chapter 11 claim against American taxpayers, arguing the jury was biased against Canadians and seeking $725 million in compensation. The NAFTA tribunal has declared it a legitimate accusation.

"Politics get very interesting if a claim like Loewen's wins," says Greider, who has called Chapter 11 "a ticking time bomb in the politics of globalization." The question now is: When will it explode, and will anyone understand how the detonation began?

Tamara Straus is senior editor of AlterNet.org.