Canada's PCB Export Ban Could Cost Taxpayer Dear

By Neville Judd

OTTAWA, Ontario, Canada, November 14, 2000 (ENS) - A Canadian government ban on exports of polychlorinated biphenyl waste breached international investment rules and could cost the country US$20 million, according to a tribunal's decision this week.


S.D. Myers' work on transformers led to its PCB equipment recycling technologies. (Photo courtesy S.D. Myers Inc.)
That is the amount of damages Ohio based S.D. Myers Inc. is claiming under the North American Free Trade Agreement's (NAFTA) Chapter 11 dispute resolution process. The company specializes in environmental testing of wastes for polychlorinated biphenyl (PCB) content and has technology that it claims will eliminate PCBs from the environment via "recycling."

PCBs are highly toxic, persistent carcinogenic compounds. They have been used widely as coolants and lubricants in transformers, capacitors, and other electrical equipment. S.D. Myers believes its method of PCB disposal via recycling and total thermal destruction is environmentally preferable to management methods in Mexico and Canada, the two other signatories to NAFTA.

On Monday, a NAFTA tribunal upheld two of S.D. Myers' four claims that Canada had broken NAFTA rules by banning PCB waste exports between November 1995 and February 1997. Now the tribunal must decide the amount of damages S.D Myers suffered, if any. That decision is expected in January.

In the meantime, the Canadian government is considering a judicial review of the case. "NAFTA doesn't have an appeal process in the same way that the World Trade Organization has," explained Andre Lemay, Department of Foreign Affairs and International Trade spokesman.

"But there are some avenues of recourse, particularly when it comes down to discussing damages, if indeed the arbitration tribunal decides that damages are owed."

Foremost among Canadian lawyers' arguments against damages will be the fact that the U.S. has since imposed an identical ban, said Lemay. "Even if S.D. Myers wanted to import PCB waste now it couldn't because America has closed its borders to PCB waste," he added.

According to Lemay, the Canadian government imposed the ban on PCB waste exports because it was not convinced that the U.S. would dispose of the waste in accordance with the Basel Convention on the Control of Transboundary Movements of Hazardous Wastes and their Disposal.


The Alberta Special Waste Treatment Centre at Swan Hills. (Photo courtesy Bovar Waste Management)
Canada is a signatory to the 1989 agreement, which was set up in response to a growing problem of hazardous waste trafficking. The U.S. has not signed the convention.

"Since the U.S. could not guarantee it would eliminate PCBs in accordance with Basel, Canada imposed the ban on exports," said Lemay.

Canada has one facility equipped to handle high level PCB waste, the Alberta Special Waste Treatment Centre at Swan Hills, northern Alberta. Since opening in 1987, it has processed more than 180 million kilograms and 2,000 types of hazardous waste, including PCBs.

Monday's NAFTA tribunal decision made clear that Canada does not have to change its environmental laws, including its regulations to control PCBs. Its decision referred only to the temporary ban, which was rescinded in February 1997.

"NAFTA members have a right to establish high levels of environmental protection," said the tribunal in its decision. "They are not obliged to compromise their standards merely to satisfy the political or economic interests of other states."

The tribunal upheld S.D. Myers' claims that Canada breached its obligations under NAFTA Chapter 11 with respect to National Treatment, and Minimum Standard of Treatment. But it held that Canada did not breach Chapter 11 with respect to Performance Requirements and Expropriation.

Signed in 1992, NAFTA was designed to gradually eliminate most tariffs and other trade barriers on products and services passing between the U.S., Canada, and Mexico, effectively creating a free trade bloc among the three largest countries of North America.

Chapter 11 of the agreement establishes a mechanism to settle investment disputes before an impartial tribunal.