Case Summary No. 4

The interplay between investment law regime and environmental protection has surfaced as an interesting issue in ISDS. Therefore, we chose Methanex Corp v. the United States of America for our fourth case.  The summary is prepared based on the facts as described in the award rendered in August 2005.

The investor was a producer of methanol, a key component in the production of MTBE, a gasoline constituent. The measure at issue did not directly regulate methanol business, but concerned the ban of the use of MTBE in gasoline in California due to environmental and public health reasons.

The investor argued that the ban took away its market share in California as it no longer could sell methanol to MTBE producers. This measure, according to the investor, was tantamount to expropriation.

In introducing the ban, the government relied on a scientific report which concluded that gasoline produced with MTBE posed a significant risk of drinking water contamination when it leaked from underground tanker and pipelines.

The tribunal in the ensuing arbitration found that the legislative process in California leading to the ban had been transparent, subject to due process and based on scientific report which was subjected to a peer review.

Further, the tribunal concluded that the ban was a non-discriminatory regulation for public purpose. As such, it did not constitute an expropriation and therefore non-compensable.

In conclusion, the claim by the investor was dismissed in its entirety.

It is also worth noting that the tribunal allowed submissions of amicus curiae from two organizations since, in the view of the tribunal, there was undoubtedly public interest in this arbitration.