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 he 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 and 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.
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.
SEN. SHEILA KUEHL: 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 "its 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.