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Ethyl vs. Canada: Toxic fuel additive

CC BY 2.0
  • Amount demanded: US$251 million
  • Outcome: case settled (investor received US$13 million, ban reversed)
  • Treaty invoked: NAFTA
  • Sector: energy
  • Issue: environment, health

by Public Citizen

Ethyl Corporation, a U.S. chemical company, launched a NAFTA investor-state case in 1997 over a Canadian ban of MMT, a toxic gasoline additive used to improve engine performance. MMT contains manganese – a known human neurotoxin. Canadian legislators, concerned about MMT’s public health and environmental risks, including its interference with emission-control systems, banned MMT’s intra-provincial transport and importation in 1997. Given that Canadian provinces have jurisdiction over most environmental matters, such actions are how a national ban of a substance could be enacted in Canada. When the law was being considered, Ethyl explicitly threatened that it would respond with a NAFTA challenge. MMT is not used in most countries outside Canada. It is banned by the U.S. Environmental Protection Agency in reformulated gasoline. Making good on its threat, Ethyl initiated a NAFTA claim against the toxics ban, arguing that it constituted a NAFTA-forbidden “indirect” expropriation of its assets.

Though Canada argued that Ethyl did not have standing under NAFTA to bring the challenge, a NAFTA tribunal rejected Canada’s objections in a June 1998 jurisdictional decision that paved the way for a ruling on the substance of the case. Less than a month after losing the jurisdictional ruling, the Canadian government announced that it would settle with Ethyl. The terms of that settlement required the government to pay the firm $13 million in damages and legal fees, post advertising saying MMT was safe, and reverse the ban on MMT. As a result, today Canada depends largely on voluntary restrictions to reduce the presence of MMT in gas.

Last update: April 2021

 source: ISDS Corporate Attacks