NAFTA-Based Lawsuit Angers Activists

Under the little-used "investor rights" section of the NAFTA accord, Ethyl Corporation of Richmond, Virginia, is suing the Canadian government for $201 million, claiming that a looming ban on the importation and inter-provincial transport of methylcyclopentadienyl manganese tricarbonyl (MMT) is a disguised trade barrier.

Ethyl Corporation -- the sole supplier of MMT in Canada -- says the Canadian government was aware that the company would lose 50 percent of its Canadian business when the bill restricting MMT was brought in.

"Once Bill C-29 (the anti-MMT legislation) is proclaimed into force, the government of Canada will have ended Ethyl Canada's operation of selling MMT for use in unleaded gasoline. This constitutes a substantial interference with Ethyl Corporation's control and enjoyment of its investment in Canada," according to company legal papers.

"If the company is correct in saying that NAFTA can be interpreted this way, then the NAFTA is a bigger disaster than we thought," said Elizabeth May, executive director of the Sierra Club of Canada, a prominent environmental group.

"If they are right about this, then we have to renegotiate the deal so that we get back some sovereign right to regulate pollution," May said. "If the government can't take a neurotoxin out of gasoline, then we are in really bad shape."

The lawsuit also claims that Canada cannot use national health or environmental standards to restrict the importation of MMT because the hazards of the fuel additive have not been fully established.

"MMT does not pose a threat to either the environment or to human health and welfare," argues the company, which is being advised by Gordon Ritchie, a former top Canadian trade official who helped negotiate NAFTA.

"In fact," Ethyl Corporation adds, "Health Canada (the national health ministry) has taken the position that MMT in gasoline does not represent an added health risk to the Canadian population."

The Health Canada findings, however, are highly contentious.

Grace Wood, senior evaluator in Health Canada's environmental health directorate and author of its MMT report, said that while manganese is known to be a "neurotoxic" linked to brain disorders such as Parkinson's disease, he level of manganese released by MMT in gasoline "is unlikely to pose a risk."

Wood, however, acknowledged that Health Canada's U.S. counterpart, the Environmental Protection Agency, conducted a similar study that drew the opposite conclusion.

"I think some neurotoxicologists think that it is a danger and that the levels will go up," said Wood, who explained that the discrepancy between the EPA and Health Canada studies is likely a result of different levels of gasoline consumption in the two countries.

In a briefing paper, Environment Canada cites ongoing U.S. concern over MMT as a reason for moving against the substance. While acknowledging that the Canadian government's own study did not find any direct negative health impact from MMT, it says that the neurotoxicity issue is not the only health concern.

Claims by automobile manufacturers that MMT causes pollution control devices on new cars to malfunction were not examined by the Health Canada study, according to the environment agency.

"A properly functioning car," Environment Canada states, "emits fewer harmful emissions which can contribute to poor air quality and related respiratory disease such as chronic asthma and bronchitis."

Next to environmentalists, the government's biggest ally in its efforts to remove MMT from Canadian gasoline has been the automobile manufacturers, who fear expensive recalls if MMT gums up new anti-pollution devices.

The auto manufacturers said the government "should not be distracted from its efforts to protect the environment and the health of Canadians, and fulfill its commitment to eliminate manganese-based fuel additives like MMT."

Ethyl Corporation, however, maintains that manufacturers' claims about the effects of MMT on pollution control devises are unproven. In the company's corner are Canadian petroleum companies who fear having to spend millions of dollars adapting refineries to MMT-free gasoline.

In what is perhaps the most disturbing aspect of the suit to environmentalists, Ethyl alleges in its suit that statements by Canada's environment minister that MMT is harmful are "defamatory and reckless." It argues that the company should be compensated for "expropriation of goodwill," a concept akin to libel.

Environmentalists are alarmed that the lawsuit may set a dangerous precedent by exposing government officials to libel charges when there are grounds for concern about a product but not definitive proof.

Should Ethyl Corporation prevail in its claim that it has been defamed, they argue, it will be impossible for the government to take a pro-active approach in dealing with potentially dangerous products before the dangers are absolutely proven.

"If regulators cannot regulate without facing the threat of a libel suit, then that is a fundamental erosion of our democratic rights," says the Sierra Club's May.

The lawsuit by Ethyl Corporation, environmentalists also argue, is part of a larger, disturbing trend where environmental laws around the globe are being challenged as trade impediments.

"Under the new regime of globalized trade," May said, "we've eroded the rights of states to protect health but not replaced that with a new level of governance."