Investment Cases

International challenges to environmental protections brought under U.S. investment treaties & trade agreements

The U.S. model for investment chapters in trade agreements and bilateral investment treaties favors corporations in the dispute resolution process before international tribunals. For example in three cases brought under U.S. investment treaties or trade agreements, communities in Mexico, El Salvador, Ecuador, and Peru fought for environmental justice against multinational corporations. The investment chapter of the Trans Pacific Partnership trade agreement would do little to prevent the replication of the Metalclad, Chevron, or Renco cases.

Renco v. Peru. The children of La Oroya, Peru live in one of ten most polluted places on earth.  In this town in the central Andes, a metallic smelter has contaminated the air, land, and water for decades. The La Oroya smelter is owned through subsidiaries by the Renco Group, a U.S. holding company.  The company has repeatedly failed to meet its contractual and legal deadlines to clean up the site, and the Peruvian authorities have demanded clean-up costs within the context of bankruptcy negotiations. In the face of this action, Renco has retaliated and sued Peru before an international investment tribunal convened under the terms of the U.S.-Peru free trade agreement. Renco is seeking $800 million in damages for the cost of complying with Peru’s environmental and mining laws.
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Chevron v. Ecuador. In a case brought under the U.S.-Ecuador bilateral investment treaty the underlying issue is who should pay to clean up what has been called the “Rainforest Chernobyl” in the Ecuadorian Amazon. The tribunal has created a major international controversy by accepting jurisdiction to consider Chevron’s claim that the U.S. BIT was violated by an Ecuadorian court decision that the oil company must pay for the clean-up. And, the tribunal has gone so far as to order the government of Ecuador to suspend enforcement of the judgment against Chevron in any court in the world.
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Metalclad v. Mexico. Mexican state and local officials used their authority over land use and environmental regulation to stop a U.S. multinational from operating a hazardous waste disposal facility located on top of an aquifer providing drinking water to a town in the state of San Luis Potosi. Metalclad then brought a suit against Mexico under NAFTA’s Chapter 11 on investment, claiming that the company’s property rights had been violated. A NAFTA tribunal agreed that Metalclad’s rights had been violated and ordered the Mexican national government to pay damages.