Ethyl Corporation and the NAFTA Chapter 11A Case Review in Environmental Policy
Srikanth Venugopal
Executive Summary
MMT, Methlycyclopentadienyl Manganese Tricarbonyl, is one of the gasoline additives that replaced tetra ethyl (TE) lead in the late 1970s. Like TE lead, MMT is used in gasoline to reduce "engine knock" a symptom that an internal combustion engines encounter due to a low octane content in the fuel. Eliminating this "engine knock", by increasing the octane rating, prolongs the life of an engine. Ethyl Corporation (Ethyl Corp) is a US (United Stated of America) based firm and was the prime manufacturer of the TE lead additive in gasoline. TE lead was banned as a gasoline additive in the late 1970s due to increasing evidence of negative health and environmental impacts. During this period Ethyl Corp devised a new additive to replace TE lead. This new gasoline additive was MMT. Not only did this new additive reduce engine knock but it also improved engine efficiency, reduced smog-forming pollutants such as oxides of nitrogen and other air pollutants such as carbon monoxide.
However, almost immediately after the introduction of MMT into the North American market, there were concerns raised by non-governmental lobby groups about the health impacts from manganese exposure. Manganese is a primary constituent of MMT and results in air borne manganese pollution. The US Environmental Protection Agency (EPA) banned the use of MMT due rising public concerns. However, in 1995, the US courts overturned the EPA ruling and lifted the ban on MMT. Around the same time as the US courts lifted the ban on MMT. The Minister of Environment for Canada (S. Marchi) introduced a bill in parliament that proposed to ban the use of MMT in Canada. The bill was passed by Parliament in 1996. This bill did not outright ban the use of MMT; it restricted its use by banning import and inter-provincial trade of MMT.
Ethyl Corp immediately challenged the Canadian Federal Government on this bill. It was challenged on the grounds that it breached articles found in Chapter 11 of NAFTA (North American Free Trade Act). Ethyl Corp was seeking compensation for damages it incurred for the sum of $US 251 million. The Canadian Government found that Ethyl Corp had a very strong case under the NAFTA challenge. The case was settled outside of court for a sum of $US 19 million.
This case, is a very good example of how poor environmental legislation can be challenged under international trade agreements and burden the host country's taxpayers. It also shows how much influence international trade treaties can have on domestic policy. The domestic policy maker must taken into account the repercussions of international trade treaties.