Trading Democracy

By Tamara Straus, AlterNet. Posted January 15, 2002.

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."

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