Mexico Pays US$16 Million to Metalclad
In a closely watched case that
expanded corporate legal rights under the NAFTA accords, the Mexican
government paid US$16 million to the US-based Metalclad Corporation.
The payment settled a long-standing lawsuit and was widely seen as an
effort by the Fox administration to appease international investors.
In 1995, Metalclad purchased a
hazardous waster processing facility in the central Mexican state of San
Luis Potosi. Metalclad intended to clean up the site and expand the
plant to handle hazardous waste from the U.S. During the licensing
process, and environmental impact study discovered that the plant was
located directly above the local aquifer. The local government declared
the area an ecological preserve in an effort to protect the only source
of fresh water in the area, and Metalclad was unable to obtain the
necessary government permits for expansion.
Metalclad sued the Mexican
government for US$100 million under NAFTA’s chapter 11, which allows
private corporations to sue governments for loss of future potential
A secret three-member NAFTA
tribunal decided the case in favor of Metalclad, awarding the
corporation US$16 million. Initially Mexico disagreed with the decision
and refused to pay, but apparently behind-the scene pressure from
investors and US officials convinced the Fox administration to settle.
The case sets an important
precedent under Chapter 11 and expands the ability of private
corporations to challenge environmental regulation in all three NAFTA