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BILL MOYERS REPORTS: TRADING DEMOCRACY
FINAL TRANSCRIPT 15 January
Broadcast 5 February 2002 on PBS
OPEN:
BILL MOYERS: Everyone's heard about NAFTA
– the North American Free Trade Agreement – and all the talk about jobs.
But almost no one heard about one obscure section
of NAFTA - Chapter 11 - except for multinational corporations who are using
it to challenge democracy.
CHARLES "CHIP" ROH: If you regulate and make me less profitable,
pay me off.
SEN. SHEIL KUEHL: There's no democracy in any of this stuff.
BILL MOYERS: Today, foreign companies
are exploiting Chapter 11 to attack public laws that protect our health
– and our environment – even to attack the American judicial system.
MARTIN WAGNER: It's sort of a like a sophisticated extortion
racket.
WILLIAM GREIDER: We're gonna hit you for half a billion dollars
if you do this.
BILL MOYERS: Secret NAFTA Tribunals can force
taxpayers to pay billions of dollars in lawsuits filed by corporations
against the United States.
BILL MOYERS: The public doesn't have a clue?
WILLIAM GREIDER: This was not in the debate at all.
MIKE ALLRED: If the American people ever find out, they are going
to be in open rebellion against this.
BILL MOYERS: NAFTA's Chapter 11 threatens
radical changes in public policy. But it's all happening out of sight.
Citizens have no seat at the table.
TITLE: Bill Moyers Reports: "Trading Democracy."
WASHINGTON, DC
BILL MOYERS: This is the story of how
a trade agreement – supported by two Presidents and ratified by the Congress
– became an end-run around the Constitution. The terms were influenced
by Washington lawyers and lobbyists – and the companies who employ them.
It is now played out in rooms like this.
Chapter 11 is only one provision in the five
hundred and fifty-five page North American Free Trade Agreement – negotiated
to promote business among the US, Canada and Mexico. It was supposedly
written to protect investors if foreign governments tried to seize their
property.
But corporations have stretched NAFTA's Chapter
11 to undermine environmental decisions – the decisions of local communities
– even the verdict of an American jury. The cases brought –
so far - total almost four billion dollars.
The claims are being decided not in open court,
but by secret tribunals – in what has become a system of private justice.
That's exactly the way the authors of Chapter 11 designed it.
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
What offends me most is that these lawyers understood that public laws
were gonna come under attack in this system, and they just walked right
past the question of where's the American public in this?
BILL MOYERS: William Greider has covered
economics and politics, both national and global, for 35 years – first
for The Washington Post and now for The Nation
magazine. But even William Greider was taken aback by the broad new
powers given foreign corporations under NAFTA's Chapter Eleven.
BILL MOYERS: They now have the right to sue governments?
WILLIAM GREIDER: Right, and sue them directly, without having
to get the approval of their own government. And that's one of the
features of NAFTA which is distinctively different from all previous trade
agreements.
BILL MOYERS: Chapter Eleven gives corporations
the right to sue for damages if they believe they have been hurt by the
action of a government. The case is treated as if it were a simple
trade dispute – and argued in this room at the World Bank in Washington
– or in others in cities like New York or Toronto.
The parties in the case – the company and
the government it is suing – choose a three-man tribunal, drawn mostly
from a select pool of experts in international law. Nothing is open
to the public.
WILLIAM GREIDER: I think of it actually as kind of an exclusive court
for capital. American citizens not admitted, even American legislators
not admitted. And if that doesn't up-end democracy, I don't know
what does.
SACRAMENTO, CALIFORNIA
BILL MOYERS: In California, a Chapter
Eleven claim may turn out to do just that – upend democracy. A billion
dollar case has been filed against the United States because of an effort
by the state government to protect the health of its citizens. It
is the first NAFTA challenge against the US because of an environmental
regulation.
SEN. SHEILA KUEHL (CHAIR, CALIFORNIA INTERNATIONAL TRADE POLICY COMMITTEE.):
First, I was astounded because I really knew nothing about Chapter Eleven.
And you know the kind of reaction that you get from people when you say,
did you know that one investor in a foreign company can sue the United
States because of an environmental protection law in California?
People are astounded once they kind of grasp it.
BILL MOYERS: Senator Sheila Kuehl chairs
a committee examining the impact of US trade agreements on California laws.
SEN. SHEILA KUEHL: I think it’s just the tip of the iceberg
because, in a way, it opens the idea to foreign investors that wherever
they might suffer, as they imagine, under some regulation, under some law,
statute passed by a state, all they have to do is file a claim and, you
know, it’s taken seriously and the United States has to defend itself and
the state has to defend itself.
BILL MOYERS: The case in California began
with a chemical – MTBE – that was added to gasoline to help the state clean
up its air. But MTBE was found to cause cancer in laboratory animals.
And in 1995, it began to show up in drinking water.
NOVATO, CALIFORNIA
BILL MOYERS: In a trailer park twenty
miles north of San Francisco, the additive was found in the community's
well.
EYVONNE WATTS: We received a notice saying that MTBE was in
the water. As I began to find out more information about it, I was
really concerned because I was like, you know, what is the long-term effect
for my children? The water that’s being used to cool the house off
is the same contaminated water. We're breathing the water.
The kids are walking around fine now, but who's to say that won't affect
them later. I’m supposed to protect them in every way. They
can’t fight for themselves. That’s why I’m here. So it’s just
kind of like okay, how do I fight against something that we don’t know
what the long-term effect is of MTBE. And no really straight answers.
SOUTH LAKE TAHOE
BILL MOYERS: The questions spread across
the state. South Lake Tahoe – whose economy is dependent on tourists
– had discovered MTBE in its drinking water.
RICK HYDRICK (MANAGER, WATER OPERATIONS, SOUTH LAKE TAHOE PUBLIC
UTILITY DISTRICT): The clarity of Lake Tahoe is legendary – or it was.
One of our board members asked me what I knew about MTBE, and I said nothing.
And he said, well I heard about it, it's a fuel additive and it may be
a problem. And maybe just a few months later, we got our first MTBE
hits to the public water supply.
BILL MOYERS: The water department traced
the source first to one gas station, then to more than half a dozen.
Even the newest, most modern station in town found an MTBE leak the size
of a pinpoint.
CASEY MOSS (CO-OWNER, CHEVRON WAY): Within this corner right
here, you have three sites that are contaminated right now. There's
one gas station, a previous gas station, and our gas station. I lived
here my whole life and the last thing I want to do is contaminate the place
where I live and my kids and my family are gonna live. So that's
why we wanted to jump on it and start cleaning it up as soon as we could.
BILL MOYERS: But MTBE spreads through
water faster than the money can be spent to clean it up. In the end,
South Lake Tahoe was forced to shut down a third of its wells.
Across California, thirty public water systems
– and another 10,000 groundwater sites – were eventually found to be contaminated.
RICK HYDRICK (MANAGER, WATER OPERATIONS): As long as it’s in
gasoline in the world that we live in, it will get into water a lot.
SEN. SHEILA KUEHL (CHAIR, CALIFORNIA INTERNATIONAL TRADE POLICY COMMITTEE.):
This was an epidemic of MTBE sort of infection. And that caused our
legislature to want to consider a total ban.
BILL MOYERS: University of California
scientists were commissioned to assess the problem. Their ten-month
study warned that the state was placing "our limited water resources at
risk.”
SEN. SHEILA KUEHL: We were not going to act precipitously.
We wanted to see the science. And having reviewed the report, I think
the governor and the legislature were both equally convinced that this
was good science, that there was harm. There were independent studies
about the health effects of MTBE. This was not political.
BILL MOYERS: On March 25, 1999, California's
governor ordered that MTBE be phased out of all gasoline sold in the state.
But that order didn't sit well with Methanex
– a Canadian company that is the world's largest producer of the key ingredient
in MTBE. Within months, Methanex invoked Chapter Eleven and claimed
that its market share, and therefore its future profits, were being taken
away – expropriated – by the governor's action. Allow us to sell
MTBE for gasoline in California, the company argued – or pay us $970 million
dollars in compensation.
MARTIN WAGNER (ATTORNEY, EARTHJUSTICE LEGAL DEFENSE FUND):
This is incredible. This is a foreign corporation coming in and saying
first of all, that a regulation that the government of California, through
normal democratic processes, has decided is important to protect health
and the environment – they’re saying that California either can’t implement
this protection or that they get a billion dollars. People should
be outraged by that.
BILL MOYERS: Martin Wagner represents
three environmental groups who lobbied for the MTBE ban. He never
expected that action to be challenged under NAFTA.
MARTIN WAGNER: One of the things this law does is give corporations
sort of a guarantee that they won't suffer from the gamble that they take
normally that they take as being part of the economic marketplace.
If they gamble that they're going to be able to sell their product, but
it turns out that their product is harmful, they're claiming that this
investment provision protects them against that gamble – that they should
get to make their profits anyway.
BILL MOYERS: While NAFTA may protect
investors like Methanex – who declined to talk to us – it does not protect
ordinary people, like Chris Christiansen and his wife, Claudia. A
decade ago, they used their life savings to buy the home where they would
retire.
CLAUDIA CHRISTIANSEN: With MTBE, it's been totally devastating
to us. The biggest devastation is everything you’ve worked for is
not worth anything now. You cannot sell this property because it
has a contaminated domestic well. You lose everything you’ve
put into a home because you can’t sell. That haunts me at night.
WASHINGTON, DC
BILL MOYERS: When the NAFTA tribunal
meets to consider the Methanex claim, citizens of California – like the
Christiansens – will not be invited. Nor will the taxpayers who will
foot the bill if the tribunal decides in favor of the Canadian company.
NAFTA makes no provisions for a full appeal to US courts – and sets no
caps on the amount of damages that can be awarded a corporation.
SACRAMENTO, CALIFORNIA
SEN. SHEILA KUEHL (CHAIR, CALIFORNIA INTERNATIONAL TRADE POLICY COMMITTEE.):
So boom, you know, United States tax money goes to Methanex and then the
United States has to decide a couple of things. Do they want to get
the money back from California, which they could? Do they want to
hold federal money back from California so that they keep a billion dollars
that California otherwise would have gotten for its welfare to work program,
healthy families, anything? Well, they could. Would they like
to call the governor and say, you know, you ought to do away with that
pesky ban because it costs us a billion dollars and now, who knows what
else is going to happen under Chapter Eleven? Perhaps you ought
to review all of your laws that might be a threat to Chapter Eleven.
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
If Methanex wins its billion-dollar claim over California environmental
law, there ain't gonna be many states enacting that law, are they?
BILL MOYERS: If I were in Colorado…
WILLIAM GREIDER: You'd be having second thoughts, wouldn't
you? And that's the bow wave of this whole subject. And many of the
critics think the really essential point is that this legal system hobbles
the authority of government to act in the broader public interest.
And, in fact, that was the idea in the first place.
OTTAWA, CANADA
BILL MOYERS: They've learned in Canada
how NAFTA can be used to hobble the authority of government. The
first Chapter Eleven case filed here also involved a gasoline additive
– this one called MMT. The Canadian parliament was considering banning
it. That's when the Ethyl Corporation – the American manufacturer
of the chemical – decided to sue under NAFTA.
Canada enacted the ban anyway – but then backed
down, lifted it, and paid Ethyl $13 million for the short time it had been
in place. And that wasn't all. Ethyl demanded – and got – a
letter to use in its advertising saying there was no new proof MMT was
harmful. This despite the fact that MMT is effectively banned from
use in most gasoline sold in the United States.
HOWARD MANN, PH.D (INTERNATIONAL INSTITUTE FOR SUSTAINABLE DEVELOPMENT):
Essentially, we've now seen a shift of the use of investment agreements
as a shield to using them as a sword against government activity.
BILL MOYERS: During NAFTA negotiations,
Howard Mann – an international lawyer - advised the Canadian government
on environmental issues.
HOWARD MANN, PH.D: We begin to see now in a number of other cases
of proposed regulations, where one of the first things that the politicians
will receive is a letter from lawyers either representing an industry association
or a specific business or other stakeholders saying, we will challenge
this through the Chapter Eleven process if you indeed go ahead and adopt
it.
They're real explicit. You know, this will be a breach of
Chapter Eleven and we're gonna sue you for x hundred million dollars.
And that's the new genie that's out of the bottle.
BILL MOYERS: Within days of Canada's
retreat on Ethyl, the same law firm initiated a second NAFTA case against
Canada on behalf of another American client.
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
Governments are already being intimidated by the mere threat of a claim
being filed against some regulatory action. If you're a civil servant,
or even a political leader, you've gotta think twice when a corporate lawyer
comes to you and says, quite forcefully, we're gonna, we're gonna hit you
for a half a billion dollars, if you do this.
BILL MOYERS: In your reporting, have you come across some
threats?
WILLIAM GREIDER: Well, the most, in some ways, the most outrageous
one, to me, was, was exercised by Carla Hills, who supervised and led the
negotiation of NAFTA, then left government and started her own international
consulting firm, and sent her chief negotiator to tell the Canadian government
that if they went ahead with a regulation on cigarette packaging, which
they were considering, her clients, big tobacco, would file a huge claim
against them. Canada backed off, and the reason they backed off is
because they could read the terms and see that, my God, they're right,
if we do this – which they regarded as a health regulation – we're gonna
get stuck with a big bill for it.
BILL MOYERS: Carla Hills' clients had deep pockets to press
a legal—
WILLIAM GREIDER: To go on and on forever, don't they?
HOWARD MANN, PH.D (INTERNATIONAL INSTITUTE FOR SUSTAINABLE DEVELOPMENT):
Clearly you’ve begun to create a situation where bureaucrats are always
looking over their shoulder now. They don’t want to be the next guy
who has to withdraw a measure because of a Chapter Eleven challenge.
And, you know, when you're in the bureaucracy, it's not easy to be the
face of the challenge to the dominant trade interest. You've gotta
feed your family, too.
BILL MOYERS: Since NAFTA was enacted,
only two new environmental regulations have been considered by Canada's
federal government – and both were challenged under Chapter Eleven.
SACRAMENTO, CALIFORNIA
SEN. SHEILA KUEHL (CHAIR, CALIFORNIA INTERNATIONAL TRADE POLICY COMMITTEE.):
There's no democracy in any of this stuff. It’s of grave concern
to us because the state is really not a party at all, not in the negotiation
of these agreements, not in the interpretation of these agreements, and
not in the defense of our own laws.
BILL MOYERS: Yet at least eighty California
laws could be at risk. State regulations that restrict development
in scenic areas or coastal zones, for example, are open to challenge by
a foreign developer. Enacting more stringent laws about what can
be added to California wine – or what can be labeled organically-grown
food – could be challenged. The authority to limit commercial fishing
when fish are scarce could provoke claims from foreign-owned fleets.
Even state support for alternative energy could come into conflict with
trade rules.
SEN. SHEILA KUEHL: We are experimenters in democracy.
We’re certainly accountable to our own people and constituents. But
I think if there is a threat to the ability of our 50 states to legislate
in these arenas it’s a very, very serious thing. And especially if
the threat is because of a single or a couple of investors in a company
who are not themselves nationals of the United States. It’s, democracy
goes out the window.
MEXICO CITY, MEXICO
BILL MOYERS: NAFTA was promoted as promoting
democracy. And in the early 1990s, democracy was a new possibility
in Mexico. NAFTA was also promoted as promoting investment.
Desperate for that investment, Mexico eventually agreed to Chapter Eleven.
The people in one Mexican community would soon discover that NAFTA might
be friendly to investment – but it was not all that friendly to democracy.
LOS AMOLES, MEXICO
BILL MOYERS: The Chapter Eleven claim had its
beginnings here – in the poorest region of the state of San Luis Potosi.
It was brought by an American investor – a company called Metalclad – and
brought against the government of Mexico. The center of the dispute
was a toxic dump.
Mexican owners had dumped more than 20,000
tons of waste here – and left it lying around, exposed – equal to what
had been buried beneath New York's Love Canal. Although Metalclad
had no experience operating toxic waste landfills, it saw a lucrative market
in helping Mexico solve a big problem. So, in 1993, the American
company bought the abandoned dump.
But the people who lived near it – like Juan
Romo – did not want the dump re-opened. They believed it had
been making them sick.
JUAN ROMO: After the landfill first opened, we began to fear
– personally – the word cancer. Because it began to appear in peoples’
bones, cancer in women's wombs, cancer in peoples’ blood. Then we
got scared.
HERMILIO MENDEZ: The number of cases in this region is not
normal. And we blame it completely on the contamination, which started
in the early 90s and continues to this day.
GUADALCAZAR, MEXICO
BILL MOYERS: The fears had led people
in the community of Guadalcazar to force the Mexican owners to shut down.
Now, with town councilor Hermilio Mendez, they demanded that Metalclad
clean up the site it had bought before it brought in more waste.
The company refused.
HERMILIO MENDEZ: There has been a lot of propaganda on Metalclad's
part. Here is how they think of us – with these caricatures.
I remember when I was a kid, we used to entertain ourselves with these
types of cute drawings. And that is how Metalclad views us.
That's how they see us – as little kids.
BILL MOYERS: Opposition to the company
spread – as was clear in the graffiti that sprouted on the streets of Guadalcazar.
But it was shrugged off by Metalclad – and the company's president.
GRANT KESLER (PRESIDENT, METALCLAD): Believe me, the natural
and expected opposition to a landfill in your backyard is no different
in Mexico than it is in the United States. We felt that the key to
the broader political support was not direct to the people. And every
adviser that I had in Mexico told me if the governor supports this project,
you don't have to worry about that local community.
SAN LUIS POTOSI, MEXICO
BILL MOYERS: But in 1993, the state of
San Luis Potosi was the hotbed of Mexico's emerging democracy – and the
candidates for governor were listening to the voters. To endorse
reopening the dump, the eventual winner said, would have been a "political
Molotov cocktail."
HON. HORACIO SANCHEZ UNZUETA (GOVERNOR, SAN LUIS POTOSI 1993-97):
I met with Mr. Grant Kesler, the owner of Metalclad. I talked very
clearly with him, saying that it was, from my point of view, virtually
impossible to open the site due to the opposition of the local community
and the local authorities. And he said, no, no, no, it will take
a lot of time, but most--more important, I have the federal permit in order
to do so. And I say, well, is not enough.
BILL MOYERS: And that would be the key.
Metalclad had managed to get a permit to operate a landfill from the federal
government in Mexico City – a permit which gave the company five years
to clean up the existing waste. But the democratically-elected Guadalcazar
town council would not give its permission unless Metalclad agreed that
the clean up would happen first.
Without the local permit – the American company
started building anyway.
Guadalcazar has only two policemen, with one
station wagon, to enforce the law. But when it was discovered that
construction had begun, town councilmen personally delivered a "stop work"
order to the site.
GRANT KESLER (PRESIDENT, METALCLAD): It was in pencil on a piece
of paper – we showed this to the federal inspector. He says,
this is a request for you to go get a local construction permit.
He says, if I were you, as a matter of comity, I would go apply for the
permit. They may charge you 500 pesos, but they can't deny you.
But by all means, go on with the construction. So we did.
HON. HORACIO SANCHEZ UNZUETA (GOVERNOR, SAN LUIS POTOSI 1993-97):
It was an illegal construction, never had the permit to build.
MEXICO CITY, MEXICO
BILL MOYERS: Assuming top down pressure would
still work in Mexico, Metalclad turned to the US Embassy. The
embassy accepted the company's claim that it had vast experience in operating
toxic landfills – and the ambassador summoned Governor Sanchez Unzueta
for a conversation.
HON. HORACIO SANCHEZ UNZUETA (GOVERNOR, SAN LUIS POTOSI 1993-97):
Since the very beginning, the position of the American ambassador was very,
very clear. I think crude. Saying that if my government didn't
open the local facility, the American embassy would put the San Luis Potosi
name in a black list in order to warn the investors in United States not
to invest in San Luis Potosi.
HON. JAMES JONES (US AMBASSADOR TO MEXICO 1993-97): If this is the
way you do business in San Luis Potosi, we're going to tell other businesses
in the United States who want to invest in Mexico, you can invest here,
but don't invest in San Luis Potosi.
HON. HORACIO SANCHEZ UNZUETA: And I clearly said to him that
it was not only a threatening against San Luis Potosi but it was a sort
of blackmailing.
HON. JAMES JONES: It was not blackmail. It was just a
– you know, one of the job of a US Ambassador is to protect the interest
of the United States, whether they're political interests, commercial interests,
or what have you. The reason we have Ambassadors in embassies is
to be able to understand on the ground what another country is like.
So when there's a problem, I think it's the US Ambassador's job to tell
US interests what the real facts are. I don't think that's blackmail.
BILL MOYERS: Even with the full weight
of the American embassy behind it, Metalclad could not get the locals to
relent. They were not going to be told what to do. And when
the company staged a "grand opening" at the landfill for its investors
and stockholders in March, 1995, the community turned out in protest.
METALCLAD REPRESENTATIVE: Let me speak, please. Let me
speak.
FIRST PROTESTER: The governor told us that if the people didn't
want them here, Metalclad would go. We don't want them here!
SECOND PROTESTER: If they want permission, they have to get
it from us.
THIRD PROTESTER: Next time, they have to respect the local
municipality.
FIRST PROTESTER: Guadalcazar wants no dump! We want
none of it!
BILL MOYERS: The town council stood firm.
And Governor Sanchez Unzueta eventually declared the entire region a protected
ecological zone. But by that time, Metalclad had filed its Chapter
Eleven claim against Mexico. The actions of the state and local government,
Metalclad argued, amounted to an "expropriation" of its investment.
WASHINGTON, DC
BILL MOYERS: It is a case that could
not have been filed in the US court system had Metalclad tried to build
a waste facility in, for example, Iowa – and moved ahead without local
approval. But under the rules set by NAFTA, Metalclad file a claim
– and the tribunal rule in its favor – just as the advocates of "investor
protection" intended.
EDWIN WILLIAMSON (SULLIVAN & CROMWELL): What you had was
some pretty egregious government action.
BILL MOYERS: Edwin Williamson was legal
counselor to the State Department when NAFTA was negotiated. He has
since headed the International Law Group of the Federalist Society, a conservative
legal organization.
EDWIN WILLIAMSON: Then the obstructionist tactics that the local
authorities took were inconsistent with the basic belief in the rule of
law.
BILL MOYERS: What we found when we went there were people
telling us, at the local level, over and over again that, well, this was
a toxic dump that they didn't want reopened until it had been cleaned up.
That's all they were asking for. And they felt that their politicians
were responding to their needs, the needs of constituents. In other
words, democracy at work.
EDWIN WILLIAMSON: Well, but we have rules within democracies,
and the rules in Mexico, according to the panel, was that the federal government
in Mexico made those decisions, and while they may have received a sympathetic
ear from the local politicians, that is not what Mexico had promised, in
effect, to Metalclad that the rules were.
BILL MOYERS: Mexico's defense against
Metalclad’s claim was led by Hugo Perezcano.
BILL MOYERS: We have talked to a number of people who say, in their
opinion, the federal permit was enough. That the community and the
local government actually had no role in this decision.
HUGO PEREZCANO (GENERAL COUNSEL, TRADE NEGOTIATIONS, MEXICO):
Let me tell you, Bill, that is a matter of Mexican domestic law.
It is a matter that Mexican courts should address. That is not why
international tribunals, that is not what they were set up to do.
International tribunals were set up to interpret and decide on international
law. And the NAFTA has not come in to replace our domestic judicial
system for the benefit of foreigners.
BILL MOYERS: But faced with the choice
between the Mexican government's – or Metalclad's – interpretation of Mexican
law, the NAFTA tribunal ignored Mexico's arguments and consistently sided
with the American company.
HOWARD MANN, PH.D (INTERNATIONAL INSTITUTE FOR SUSTAINABLE DEVELOPMENT):
The underlying principle is clearly the right of the investor. That
was clearly paramount and foremost in the decision. This is a really
key feature of the Metalclad judgment.
Essentially we see Chapter Eleven operate to reverse the globally
accepted "polluter pays" principle and we see it being turned into a "pay
the polluter" principle under Chapter Eleven. And that's a significant
risk that we now see.
BILL MOYERS: There's almost no collective action we take as
democracy that doesn't have some negative effect on a product or on a practice.
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
The distinction that the advocates make for this doctrine is that we're
not overturning any laws – we're simply making the public pay the costs
they have imposed on some private investor. And that sounds – at
least on the surface – like an attractive idea: Well, if we're gonna
hurt these people in order to protect clean water, clean air – maybe we
should compensate them in some way. The fallacy, of course, is that
the way NAFTA defines it, any firm that suffers any slight, or large, injury
from what it perceives as regulatory controls gets to collect money.
BILL MOYERS: That, say the critics, is the
Trojan horse of NAFTA. Multinational corporations have seized on
one definition in the treaty to claim compensation for unrealized profits.
It consists of three key words: "Tantamount to expropriation."
MARTIN WAGNER (ATTORNEY, EARTHJUSTICE LEGAL DEFENSE FUND): Generally,
it's been understood that governments can do what they need to protect
their people and their environment without having to pay if they diminish
the value of property. But these corporations are using NAFTA Chapter
Eleven to expand that and say governments do have to pay for every amount
by which the value of their property is reduced. And one of the bases
on which they've made that claim is the fact that NAFTA's Chapter Eleven
uses this phrase "tantamount to expropriation." 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."
BILL MOYERS: Prompted, in part, by the
Metalclad tribunal's decision, companies are attempting to stretch "tantamount
to expropriation" even further – and have mounted attacks on the ordinary
activities of all three NAFTA governments.
United Parcel Service claims that Canada's
publicly-subsidized package
delivery system is unfair competition. UPS wants 230 million
dollars in damages.
At a new interchange on Interstate Highway
95 in Virginia, the steel and cement being laid are required to be made
by American workers. But the "buy American" requirements of US highway
programs are under challenge from a Canadian steel maker as illegal under
NAFTA.
The threats, one Washington lawyer says, are
"out of control."
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
Some companies are probably gonna win huge claims on issues that will seem
utterly illegitimate to most Americans.
BILL MOYERS: I read where one of these lawyers, a Canadian
trade lawyer, said to the Canadian government, this is a direct quote:
"They could be putting liquid plutonium in children's food. If you
ban it and the company making it is an American company, you have to pay
compensation."
WILLIAM GREIDER: The boundaries on this are literally the
infinity of the legal imagination.
BILL MOYERS: How did this happen – with
no public discussion or debate? We asked the Washington attorney
who was number two on the US trade team that negotiated NAFTA.
CHARLES “CHIP” ROH (DEPUTY CHIEF NEGOTIATIOR, NAFTA): I don't
find it altogether surprising that there have been creative uses of the
mechanism because, I mean, I'm a lawyer and our profession is creative.
People use worse words for us, but they are at least creative. And
that can result in, you know, attempting to make a use of a provision that
perhaps was not in the contemplation of the drafters.
BILL MOYERS: What concerns people is that it would be a real
stretch of this whole notion of expropriation if you can get compensated
simply because the government decides to enact environmental standards.
Is that a stretch?
CHARLES “CHIP” ROH: I think it is a stretch, actually.
It would be a very big thing if instead of providing for compensation for
expropriations, you were also providing compensation for measures that
diminished the profits of business. That would be a big change.
BILL MOYERS: Chapter Eleven claims are now
being fashioned in the offices of many of the biggest New York and Washington
law firms. Pillars of the bar like Hogan & Hartson, White &
Case, Baker & Botts.
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION): These
lawyers may typically serve at the State Department or Treasury, or the
U.S. Trade Representative's Office, help negotiate the agreements,
carefully supervise the legal language that goes into those agreements,
and then they return to their firms, in private life, and represent clients
using this new language they created as legal tools, and they may even
personally become advocates and, and sort of generate a new legal boutique,
which--around the practice of, say, Chapter Eleven cases.
BILL MOYERS: A legal boutique?
WILLIAM GREIDER: Well, a specialty that, that suddenly provides
a new market for lawyers' talents. And I think that's happened with
Chapter Eleven.
BILL MOYERS: One Washington firm that
seems to be developing a Chapter Eleven specialty represents Methanex in
its billion dollar claim against the United States. Now Jones, Day,
Reavis & Pogue has brought another action – demanding almost as much
money – for a Canadian client that found itself on the losing end of a
Mississippi jury trial.
JACKSON, MISSISSIPPI
BILL MOYERS: You don't find many people
at the Mississippi state fair asking questions about obscure language in
an obscure provision of one trade agreement – especially when there was
no public debate about it in the first place. But NAFTA's Chapter
Eleven goes to the heart of some established customs and traditions here.
BILOXI, MISSISSIPPI
In Mississippi, as in most of America's small
towns, funeral homes have long been run as family dynasties.
JERRY O’KEEFE: My grandfather was an Irish farmer, came over here
in the 1840s and farmed before the civil war and right after the civil
war started this small livery and undertaking business. And a lot
of the funeral homes and undertaking establishments in the south came out
of the livery business or the furniture business. And so it’s been
in the family since 1865.
BILL MOYERS: Seventy-eight year old Jerry O'Keefe
owned eight funeral parlors, a funeral insurance business – and still found
time to serve two terms as mayor of the Gulf Coast town of Biloxi.
But in the early 1990s, he and Mississippi
were introduced to a handful of giant death-care companies competing to
buy up as many funeral homes as possible. One of the biggest was
a Vancouver-based company owned by Raymond Loewen – a multinational corporation
that had already bought hundreds of family-owned funeral homes in Canada
and the United States.
JERRY O’KEEFE: They would buy funeral homes and then they were able
to buy funeral merchandise – caskets, vaults, burial clothing, embalming
chemicals and other items like that on a, on a greatly enlarged quantitative
basis and get a much better price than an individual funeral home could.
But unlike the, the Walmarts and JC Penneys who buy in great bulk that
way, their theory is not to pass on any of that to the consumer.
BILL MOYERS: The Loewen Group quietly
bought several of O'Keefe's Mississippi rivals. But the Loewen corporate
logo never replaced the more familiar local facades.
MIKE ALLRED (O’KEEFE ATTORNEY): They hide behind the honored
names of these family businesses and they go way out of their way to keep
anyone from finding out that they have placed the Loewen golden arches
over the local business.
BILL MOYERS: One of the funeral homes
bought by Loewen had a longstanding contract with O'Keefe to sell his funeral
insurance. Instead of honoring that contract, Loewen began selling
its own.
JERRY O’KEEFE: I suggested that I go to Vancouver and sit down and
talk to Mr. Loewen, which I did.
BILL MOYERS: Raymond Loewen was known
to court funeral home owners during dinner cruises on his 110-foot yacht.
JERRY O’KEEFE: We went out on the yacht and had dinner on the
yacht and cruised around the harbor there in, in Vancouver and it was very
pleasant. And Mr. Loewen, I was amused because he had a secretary
there to serve the drinks and serve the meal and to light Mr. Loewen’s
cigars. I was really amused by that because for years, I smoked cigars
myself and one of the pleasures of smoking a cigar is actually lighting
it, you know. But I think that he went to that means to impress me
and it did impress me, but it wasn’t favorable.
BILL MOYERS: The night on the yacht did
not resolve the conflict.
MIKE ALLRED (O’KEEFE ATTORNEY): Their motive was to destroy
him as a competitor and to acquire his businesses in these key areas to
secure absolutely monopoly power.
BILL MOYERS: O'Keefe decided to sue under
Mississippi law. His legal team alleged that the Loewen Group had
engaged in "fraudulent" and "predatory” trade practices. The Bible
Belt jury was urged to view the case as a morality play - what O'Keefe's
lead trial lawyer called the "oldest known sin to anybody – greed."
MIKE ALLRED: Juries always respond with a sense of justice according
to the morality of the schoolyard. If a big mean kid on the schoolyard
is beating up the little guys, people are more offended than if a big mean
kid is beating up another big mean kid.
BILL MOYERS: Loewen argued this was a
simple contract dispute between two parties. But at the end of a
seven-week trial, the jury found for O’Keefe and awarded him damages totaling
$500 million dollars.
BOB BRUCE (JUROR): The punitive damages, of course, had to see that
the Loewen Group stopped doing what they were doing. You had to send
a message, there's no doubt about that. And that's what – that's
what we did.
BILL MOYERS: "Not one of my lawyers flagged
the danger of a Southern jury," Raymond Loewen later complained.
HON. JAMES GRAVES (PRESIDING JUDGE, O'KEEFE V. LOEWEN) It is
understandable that someone would feel aggrieved by a jury's verdict.
But if there's a judgment rendered by a trial court and if the appellate
court affirms it – and you appeal that and ultimately get to the
United States Supreme Court and they hear it, they affirm it – that’s
kind of it. And, I mean, even little kids know, United States Supreme
Court – that’s the last word.
BILL MOYERS: Instead of appealing the
jury's decision, the Loewen Group settled with O'Keefe for $175 million
– a third of the original award. But three years later – using NAFTA
– the company struck back. Contending that the Mississippi trial
was "infected" by appeals to the jury's anti-Canadian and racial bias,
the corporation filed a Chapter Eleven claim. Loewen is asking for
$725 million from American taxpayers – $550 million more than it had paid
O’Keefe.
EDWIN WILLIAMSON (SULLIVAN & CROMWELL): The Federal government
of the United States’ failure to police, in effect, the states is the cause,
is the reason the United States government is being threatened with a substantial
monetary liability.
BILL MOYERS: We talked to a number of jurors down there, we
were down there. And they told us that it wasn't the fact that Loewen
was a Canadian company. They just said it was the company's behavior
that angered them.
EDWIN WILLIAMSON: I think it's a runaway jury, and I do not think
the way our jurisprudence, I don't think fair and equitable treatment contemplates
runaway juries.
BILL MOYERS: Would all juries have to now look over their shoulder
at Loewen and this decision?
EDWIN WILLIAMSON: First, if I were in the U.S. Federal government,
I'd say wait a minute, what kind of exposure do I have to misbehavior in
the state of Mississippi. And so I would start looking around for
what I can do to make sure this doesn't happen again. And I would
find some way to impose on Mississippi that liability, and then once Mississippi
had the liability, then I think it would be incumbent upon them to do something
about it.
BILL MOYERS: To say to the juries, behave or else.
EDWIN WILLIAMSON: Exactly.
CHARLES “CHIP” ROH (DEPUTY CHIEF NEGOTIATIOR, NAFTA): By international
standards our punitive damage system is remarkable.
BILL MOYERS: In the sense of being excessive?
CHARLES “CHIP” ROH: Well, yeah, a lot of people say it's excessive.
BILL MOYERS: I understand that, but it still is troubling to me
as an American citizen—
CHARLES “CHIP” ROH: Sure.
BILL MOYERS: --that our jury system could potentially be upheld
as—
CHARLES “CHIP” ROH: Sure.
BILL MOYERS: --illegal under a NAFTA provision that was not
debated—
CHARLES “CHIP” ROH: Right.
BILL MOYERS: --which was not explored, which was not explained—
CHARLES “CHIP” ROH: Right.
BILL MOYERS: --in an open way.
CHARLES “CHIP” ROH: Right.
BILL MOYERS: That does trouble me.
CHARLES “CHIP” ROH: I mean, there was nothing hidden about
it, but no, no one sat there – because, honestly, none of us thought about
it. I mean, candidly, of course, if the government finds itself laying
out several hundred million dollars in this kind of a case, it is – you
may say, well, you're free to keep your system the way it is, but it's
sure going to be expensive to.
BILL MOYERS: In a preliminary ruling,
the Loewen tribunal declared that the Mississippi trial is a legitimate
target under NAFTA. And that could, conceivably, open the US civil
justice system to challenge – including decisions of the United States
Supreme Court.
HON. JAMES GRAVES (PRESIDING JUDGE, O'KEEFE V. LOEWEN): I know I
sound like some flag-waving patriot, but I have a profound deep-seated
belief in the ability of this system to work exactly the way it’s supposed
to work most of the time. Because if not juries, then who?
And if someone else, then why are they better than those twelve citizens?
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
The politics of this gets very interesting if a claim like Loewen wins.
Will the average American sort of shrug and say, well, that's the price
of globalization and, and if this is what it takes to spread democracy
around the world, overthrowing American jury verdicts through some, quote,
offshore legal system, that's okay with me? I don't think so.
BILL MOYERS: Most Americans do not know about
Chapter Eleven – and they do not know there is a push now in Washington
to expand NAFTA to thirty-one more countries – in another agreement called
the Free Trade Area of the Americas. Extending Chapter Eleven privileges
for corporate investors is at its core.
The giants of American business are among those
demanding it – as they made clear in a letter to the official in charge
of current US trade policy. The letter was written by their lobbyist,
Dan Price, who ten years ago was the lead US attorney shaping Chapter Eleven.
Price declined to talk to us. The deputy NAFTA negotiator agreed.
BILL MOYERS: We've been given a letter that was written to
U.S. Trade Representative Zoellick in which business says they want
"protection of assets from direct or indirect expropriation, to include
protection from regulations that diminish the value of investors' assets."
That's a pretty clear demand, isn't it?
CHARLES “CHIP” ROH (DEPUTY CHIEF NEGOTIATIOR, NAFTA): Yeah,
it is. Well,
I can see how you can take that particular set of phrasing and say,
oh, well, what business is saying is if I'm – if you regulate and make
me less profitable, pay me off. I'm not sure whether that was the
intent, um, um….
BILL MOYERS: But I can tell just--you know, you—
CHARLES “CHIP” ROH: Just by my body English.
BILL MOYERS: Yeah. Your body says there is a reason
to be concerned, that you as a former negotiator, as a former public official,
you have some concern over language like that.
CHARLES “CHIP” ROH: If you took that wording literally and said,
okay, let's make it clear or let's add a rule that says, by the way, expropriation
means anything that diminishes the value of your investment, then it seems
to me that that's probably – I, who am a huge supporter still of these
agreements, would say that's a – that's a big mistake because you get –if
you try to push it to there, the people are not going to go with you, because
that's just too greedy.
BILL MOYERS: You write that Chapter Eleven is a ticking time
bomb in the politics of globalization. Why?
WILLIAM GREIDER (NATIONAL AFFAIRS CORRESPONDENT, THE NATION):
Because I think the public ignorance will be shocked and quite confused,
if any of a number of cases, whether it's Methanex or Loewen, or some of
the others, manage to win damages against the United States. People
at first are gonna say, Huh? What is that about? And then,
as it's explained to them, they're gonna say, we didn't sign on for that.
That's not what we think about as a global trade agreement. And then
the education process is quickly gonna turn into anger, I believe.
BILL MOYERS: Will the jurors of Mississippi
– or the citizens of California – be overruled by the NAFTA tribunals?
The decisions are still pending – the deliberations secret. So we
simply do not know. But on October 25, 2001 – abiding by the order
of one tribunal – the government of Mexico paid Metalclad $16,002,433 dollars.
HERMILIO MENDEZ: Our people couldn't believe that Metalclad won compensation.
How is this possible? What will happen to the people who were hurt?
We are the lab rats and they experiment with us.
BILL MOYERS: NAFTA may have established
a private court for capital. But there is no private court for the
citizens of San Luis Potosi – who are left with 20,000 tons of toxic waste
that the Mexican government now owns and must find the money to clean up.
And there is no private court for the Christiansens,
who fear their life savings are gone.
Or for Eyvonne Watts, who does not know how
contaminated water may affect her children.
The story is not yet over. But if, through trade agreements like
NAFTA, the President and Congress continue to create one-sided privileges
for multinational corporations, the country must ask: Are they promoting
democracy – as they claim – or trading it away?
OR:
(This story does not have to be over.) Because if trade agreements
like NAFTA continue to create one-sided privileges – private justice –
for multinational corporations, we must demand the answer to one question:
Are we promoting democracy – as we claim – or trading it away?
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