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Publication Date

2006

Abstract

In August, 2005, a NAFTA dispute-resolution panel handed down its decision in Methanex Corp. v. United States, holding that, inter alia, California's regulatory ban on the gasoline additive MTBE was not a regulatory expropriation under NAFTA's Article 1110. Many of NAFTA's supporters reacted jubilantly to the decision, claiming that it proved--contrary to the "doomsday predictions" of anti-NAFTA "Chicken Littles"--that the agreement's investment chapter does not interfere with states' ability to enact regulations designed to protect the public interest. Such elation, however, is premature. This Note explains how, far from having "consigned to the garbage heap" the idea that the regulatory expropriation provision can be used to undermine states' regulatory authority, the lack of precedent among NAFTA dispute- settlement bodies and the unresolved question of how international regulatory expropriations rules should be interpreted mean there is no guarantee that Methanex will be NAFTA's final word on the subject. What is needed is an official definition of the scope of NAFTA's expropriations... clause, coupled with the explicit exemption of non- discriminatory, non-arbitrary regulations adopted for legitimate police power purposes from the reach of Article 1110, and a reinterpretation of the MFN clause to prevent its use as a loophole. States' ability to regulate in the public interest may have "dodged a bullet" in Methanex, but action must be taken to ensure that states' regulatory authority is not compromised by the decisions of future tribunals

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