methanol produced by Methanex

Background Information on the Methanex Claim

The methanol produced by Methanex is, among other things, used as an ingredient to produce the gasoline additive MTBE. Based on findings that MTBE contaminates drinking water, California banned the use of MTBE in California gasoline. Methanex claimed that the ban violated the provisions of NAFTA’s Chapter Eleven prohibiting nationality-based discrimination against investors and their investments, requiring fair and equitable treatment of investments and prohibiting uncompensated takings of property. Methanex also alleged that the ban on the use of MTBE related to Methanex because it was adopted with the intention of harming Methanex and other foreign methanol producers in order to benefit the U.S. ethanol industry.

The United States maintained that the California measures did not relate to Methanex and therefore could not be the basis for a NAFTA Chapter Eleven claim. It also maintained that Methanex was not treated differently from U.S.-owned methanol producers, was not treated in violation of any minimum standard of treatment required by international law and did not suffer an expropriation of its property.

The Tribunal agreed with all of these arguments made by the United States. It held that Methanex did not face any nationality-based discrimination, was not treated in a manner that could be said to violate international law standards and did not suffer an expropriation of any property interest. Moreover, the Tribunal held that the California measures were not intended to harm Methanex or other foreign methanol producers and did not otherwise relate to Methanex; thus the claim was not covered by the investor-State arbitration provisions of the NAFTA.

The members of the tribunal are V.V. Veeder, Professor Michael Reisman and J. William Rowley.

The full text of the award is available on the State Department’s website at state.gov/s/l/c5818. 2005/775, Released on August 10, 2005, Media Note, Office of the Spokesman, Washington, DC, August 10, 2005

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